<PAGE> 1
As filed with the Securities and Exchange Commission on March 30, 1995
1933 Act File No. 2-14677
1940 Act File No. 811-859
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 59
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
(Exact Name of Registrant as Specified in Charter)
500 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 617-954-5000
Stephen E. Cavan, Massachusetts Financial Services Company,
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on March 30, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on [date] pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
its Shares of Beneficial Interest, (without par value), under the Securities
Act of 1933. The Registrant filed a Rule 24f-2 Notice for its fiscal year ended
November 30, 1994 on January 30, 1995.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------------------------------
NUMBER PROPOSED PROPOSED
OF SHARES MAXIMUM MAXIMUM
TITLE OF SECURITIES BEING OFFERING AGGREGATE AMOUNT OF
REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION
<S> <C> <C> <C> <C>
Shares of Beneficial
Interest (without par value) 5,529,450 $9.77 $290,000 $100
------------------------------------------------------------------------------------------------------
</TABLE>
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 16,973,660 shares were redeemed during the fiscal year ended
November 30, 1994. 11,473,893 shares were used for reductions pursuant to
paragraph (c) of Rule 24f-2 during the current fiscal year. 5,499,767 shares is
the amount of redeemed shares used for reduction in this Amendment. Pursuant to
Rule 457(d) under the Securities Act of 1933, the maximum public offering price
of $9.77 per share on March 20, 1995 is the price used as the basis for
calculating the registration fee. While no fee is required for the 11,473,893
shares, Registrant has elected to register, for $100, an additional $290,000 of
shares (29,683 shares at $9.77 per share).
================================================================================
<PAGE> 2
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
CROSS REFERENCE SHEET
---------------------
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1 A)
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -----------------------
<S> <C> <C> <C>
1 (a),(b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Condensed Financial Information *
(b) * *
(c) Information Concerning Shares *
of the Fund - Performance
Information
(d) Condensed Financial Information *
4 (a) The Fund; Investment Objectives *
and Policies
(b),(c) Investment Objectives and *
Policies
5 (a) The Fund; Management of the *
Fund - Investment Adviser
(b) Front Cover Page; Management *
of the Fund - Investment
Adviser; Back Cover Page
(c), (d) Management of the Fund - Investment *
Adviser
(e) Management of the Fund - Shareholder *
Servicing Agent; Back Cover Page
(f) Expense Summary; Condensed *
Financial Information
(g) Information Concerning Shares *
of the Fund - Purchases
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -----------------------
<S> <C> <C> <C>
5A (a), (b), (c) ** **
6 (a) Information Concerning Shares *
of the Fund - Description of
Shares, Voting Rights and
Liabilities, Information Concerning
Shares of the Fund - Redemptions
and Repurchases; Information
Concerning Shares of the Fund -
Purchases; Information Concerning
Shares of the Fund - Exchanges
(b), (c), (d) * *
(e) Shareholder Services *
(f) Information Concerning Shares *
of the Fund - Distributions;
Shareholder Services -
Distribution Options
(g) Information Concerning Shares *
of the Fund - Tax Status;
Information Concerning Shares
of the Fund - Distributions
7 (a) Front Cover Page; Management *
of the Fund - Distributor;
Back Cover Page
(b) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Net Asset Value
(c) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Exchanges;
Shareholder Services
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases
(e) Information Concerning Shares *
of the Fund - Distribution Plans;
Expense Summary
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -----------------------
<S> <C> <C> <C>
(f) Information Concerning Shares *
of the Fund - Distribution Plans
8 (a) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases; Information
Concerning Shares of the Fund -
Purchases
(b), (c), (d) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases
9 * *
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -----------------------
<S> <C> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * Definitions
13 (a), (b), (c) * Investment Objectives; Policies and
Restrictions
(d) * *
14 (a), (b) * Management of the Fund -
Trustees and Officers
(c) * Management of the Fund -
Trustees and Officers;
Appendix A
15 (a) * *
(b), (c) * Management of the Fund -
Trustees and Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser; Management
of the Fund - Trustees and Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
(c) * *
(d) * Management of the Fund-
Investment Adviser
(e) * Portfolio Transactions and Brokerage
Commissions
(f) Information Concerning Shares Distribution Plans
of the Fund - Distribution Plans
(g) * *
(h) * Management of the Fund- Custodian;
Independent Accountants and
Financial Statements; Back Cover Page
(i) * Management of the Fund - Shareholder
Servicing Agent
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -----------------------
<S> <C> <C> <C>
17 (a), (b), (c), * Portfolio Transactions and Brokerage
(d), (e) Commissions
18 (a) Information Concerning Shares Description of Shares, Voting Rights and
of the Fund - Description of Liabilities
Shares, Voting Rights and
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Services
of the Fund - Purchases;
Shareholder Services
(b) Information Concerning Shares Management of the Fund - Distributor;
of the Fund - Net Asset Determination of Net Asset Value
Value; Information Concerning and Performance - Net Asset Value
Shares of the Fund - Purchases
(c) * *
20 * Tax Status
21 (a), (b) * Management of the Fund - Distributor;
Distribution Plans
(c) * *
22 (a) * *
(b) * Determination of Net Asset Value and
Performance
23 * Independent Accountants and Financial
Statements
-----------------------------
</TABLE>
* Not Applicable
** Contained in Annual Report
<PAGE> 7
<TABLE>
<S> <C>
MASSACHUSETTS INVESTORS PROSPECTUS
GROWTH STOCK FUND April 1, 1995
(A member of the MFS Family of Funds(R)) Class A Shares of Beneficial Interest
Organized November 22, 1932 Class B Shares of Beneficial Interest
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Expense Summary..................................................................... 2
2. The Fund............................................................................ 3
3. Condensed Financial Information..................................................... 4
4. Investment Objective and Policies................................................... 4
5. Management of the Fund.............................................................. 9
6. Information Concerning Shares of the Fund........................................... 10
Purchases........................................................................ 10
Exchanges........................................................................ 16
Redemptions and Repurchases...................................................... 16
Distribution Plans............................................................... 18
Distributions.................................................................... 20
Tax Status....................................................................... 20
Net Asset Value.................................................................. 20
Description of Shares, Voting Rights and Liabilities............................. 21
Performance Information.......................................................... 21
7. Shareholder Services................................................................ 21
</TABLE>
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.
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
The investment objective of Massachusetts Investors Growth Stock Fund (the
"Fund") is to provide long-term growth of capital and future income rather than
current income (see "Investment Objective and Policies"). The minimum initial
investment is generally $1,000 per account (see "Purchases").
The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information, dated April 1, 1995, which contains more detailed information about
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> 8
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS
SHAREHOLDER TRANSACTION EXPENSES: CLASS A B
----------------------------------------------------------------- ---------- ----
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price)................ 5.75% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable)............................................... See Below1 4.00%
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)2:
Management Fees............................................. 0.31% 0.31%
Rule 12b-1 Fees (after applicable fee reduction)............ 0.23%3 1.00%4
Other Expenses.............................................. 0.22% 0.31%
Total Operating Expenses.................................... 0.76% 1.62%
</TABLE>
---------------
1 Purchases of $1 million or more are not subject to an initial sales charge;
however, a contingent deferred sales charge ("CDSC") of 1% will be imposed on
such purchases in the event of certain redemption transactions within 12
months following such purchases (see "Purchases").
2 For Class A and Class B shares, percentages are based on fees incurred during
the fiscal year ended November 30, 1994.
3 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 Class A shares (see "Distribution Plans.")
Currently, 0.10% of the distribution fee is being waived. After a substantial
period of time, distribution expenses paid under this plan, together with the
initial sales charge, may total more than the maximum sales charge that would
have been permissible if imposed entirely as an initial sales charge.
4 The Fund has adopted a Distribution Plan for its Class B shares in accordance
with Rule 12b-1 under the 1940 Act, which provides that it will pay
distribution/service fees aggregating up to 1.00% per annum of the average
daily net assets attributable to Class B shares (see "Distribution Plans").
After a substantial period of time, distribution expenses paid under this
plan, together with any CDSC, may total more than the maximum sales charge
that would have been permissible if imposed entirely as an initial sales
charge.
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):
<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B
----------------------------------------------------- ------- -------------
<S> <C> <C> <C>
(1)
1 year.............................................. $ 65 $ 56 $ 16
3 years............................................. 80 81 51
5 years............................................. 97 108 88
10 Years............................................. 146 169(2) 169(2)
</TABLE>
---------------
(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.
2
<PAGE> 9
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 of the Fund
are set forth in the following sections of this Prospectus: (i) varying sales
charges on share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases";
(iii) management fees -- "Investment Adviser"; and (iv) Rule 12b-1 (i.e.,
distribution plan) fees -- "Distribution Plans."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
2. THE FUND
The Fund is an open-end, diversified management investment company which was
organized as a business trust under the laws of The Commonwealth of
Massachusetts in 1985. The Fund is the successor to the business of
Massachusetts Investors Growth Stock Fund, Inc. (the "Trust"), incorporated in
Massachusetts in 1958 to continue the business of a Delaware corporation
organized in 1932. All references in this Prospectus to the Fund's past
activities are intended to include those of the Trust, unless the context
indicates otherwise. Shares of the Fund are sold continuously to the public and
the Fund uses the proceeds to buy securities (common stocks and other
instruments) for its portfolio. Two 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 (a CDSC in the case of certain purchases of $1
million or more) and subject to a Distribution Plan providing for an annual
distribution 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 and service fee which are greater than the
Class A distribution fee and service fee; Class B shares will convert to Class A
shares approximately eight years after purchase.
The Fund's Board of Trustees provides broad supervision over its affairs. MFS is
responsible for the management of the Fund's assets and the officers of the Fund
are responsible for its operations. The Adviser manages the portfolio from day
to day in accordance with the Fund's investment objective. The selection of
investments and the way they are managed depend on the conditions and trends in
the economy and the financial marketplace. The Fund also offers to buy back
(redeem) its shares from its shareholders at any time at net asset value less
any applicable CDSC.
3
<PAGE> 10
3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which are
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------- ------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1994 1993+
------ ------- ------ ------ -------- ------ ------ ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
DATA (FOR A
SHARE
OUTSTANDING
THROUGHOUT
EACH
PERIOD):
Net asset
value -- beginning
of period... $12.97 $ 12.15 $10.87 $ 8.48 $ 10.70 $ 8.39 $ 9.05 $ 9.69 $10.68 $10.04 $ 12.93 $ 12.91
------ ------- ------ ------ -------- ------ ------ ------- ------ ------ ------- -------
Income from
investment
operations --
Net
investment
income
(loss).... $(0.01) $ (0.01)++ $(0.03) $ 0.01 $ 0.05 $ 0.09 $ 0.12 $ 0.18 $ 0.20 $ 0.28 $ (0.09) $ (0.01)
Net realized
and
unrealized
gain
(loss) on
investments... (0.49) 1.55 2.07 2.93 (1.02) 3.14 0.64 (0.68) 1.99 2.10 (0.50) 0.03
------ ------- ------ ------ -------- ------ ------ ------- ------ ------ ------- -------
Total from
investment
operations... $(0.50) $ 1.54 $ 2.04 $ 2.94 $ (0.97) $ 3.23 $ 0.76 $ (0.50) $ 2.19 $ 2.38 $ (0.59) $ 0.02
------ ------- ------ ------ -------- ------ ------ ------- ------ ------ ------- -------
Less
distributions
declared to
shareholders --
From net
investment
income.... $ -- $ -- $ -- $(0.03) $ (0.05) $(0.08) $(0.15) $ (0.14) $(0.20) $(0.28) $ -- $ --
From
realized
gains..... (1.99) (0.72) (0.76) (0.52) (1.20) (0.84) (1.27) -- (2.98) (1.46) (1.99) --
------ ------- ------ ------ -------- ------ ------ ------- ------ ------ ------- -------
Total
distributions
declared
to
shareholders... $(1.99) $ (0.72) $(0.76) $(0.55) $ (1.25) $(0.92) $(1.42) $ (0.14) $(3.18) $(1.74) $ (1.99) $ (0.00)
------ ------- ------ ------ -------- ------ ------ ------- ------ ------ ------- -------
Net asset
value -- end
of period... $10.48 $ 12.97 $12.15 $10.87 $ 8.48 $10.70 $ 8.39 $ 9.05 $ 9.69 $10.68 $ 10.35 $ 12.93
======= ======== ======= ======= ========== ======= ======= ======== ======= ======= ======== ========
Total
return#..... (5.00)% 13.43% 19.35% 36.56% (10.27)% 42.14% 8.21% (5.57)% 20.30% 23.52% (5.82)% 0.70 %*
RATIOS (TO
AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA:
Expenses.... 0.72%++ 0.71% 0.67 % 0.63% 0.53% 0.54% 0.58% 0.50 % 0.50% 0.56% 1.60% 1.49 %*
Net
investment
income
(loss).... (0.06)% (0.19)% (0.24)% 0.14% 0.55 % 0.91% 1.27% 1.60% 1.62% 2.47% (0.87)% (0.99)%*
PORTFOLIO
TURNOVER.... 56% 52% 16 % 39% 44% 32% 75% 66% 77% 66% 56% 52 %
NET ASSETS AT
END OF
PERIOD
($000,000'S)... 977 1,132 1,070 950 749 907 735 774 899 878 9 2
</TABLE>
* Annualized.
+ For the period from date of issue of Class B shares, September 7, 1993 to
November 30, 1993.
++ The distributor did not impose a portion of its fee for the period indicated.
If this fee had been incurred by the Fund the ratios of expenses and net
investment loss to average net assets would have been 0.82% and (0.16)%,
respectively. The net investment loss per share would have been $(0.03).
# Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the sales charge
had been included, the results would have been lower.
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to provide long-term
growth of capital and future income rather than current income. Any investment
involves risk and there can be no assurance that the Fund will achieve its
investment objective; the Fund's name does not imply any assurance that an
investor's capital will increase.
INVESTMENT POLICIES -- The Fund's policy is to keep its assets invested, except
for working cash balances, in the common stocks, or securities convertible into
common stocks, of companies believed to possess better than average prospects
for long-
4
<PAGE> 11
term growth. This policy is fundamental and may not be changed without a
shareholder vote. Emphasis is placed on the selection of progressive,
well-managed companies.
Since shares of the Fund represent an investment in securities with fluctuating
market prices, shareholders should understand that the value of shares of the
Fund will vary as the aggregate value of the Fund's portfolio securities
increases or decreases. Moreover, any dividends paid by the Fund will increase
or decrease in relation to the income received by the Fund from its investments.
FOREIGN SECURITIES: The Fund may invest up to 50% (and generally expects to
invest between 10% and 30%) of its total assets in foreign securities (not
including American Depositary Receipts). Investing in securities of foreign
issuers generally involves risks not ordinarily associated with investing in
securities of domestic issuers. These include changes in currency rates,
exchange control regulations, governmental administration or economic or
monetary policy (in the United States or abroad) or circumstances in dealings
between nations. Costs may be incurred in connection with conversions between
various currencies. Special considerations may also include more limited
information about foreign issuers, higher brokerage costs, different accounting
standards and thinner trading markets. Foreign securities markets may also be
less liquid, more volatile and less subject to government supervision than in
the United States. Investments in foreign countries could be affected by other
factors including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations and could be subject to
extended settlement periods. The Fund may hold foreign currency received in
connection with investments in foreign securities when, in the judgment of the
Adviser, it would be beneficial to convert such currency into U.S. dollars at a
later date, based on anticipated changes in the relevant exchange rate. The Fund
may also hold foreign currency in anticipation of purchasing foreign securities.
See the Statement of Additional Information for further discussion of foreign
securities and the holding of foreign currency, as well as the associated risks.
EMERGING MARKET SECURITIES: The Fund may invest in countries or regions with
relatively low gross national product per capita compared to the world's major
economies, and in countries or regions with the potential for rapid economic
growth (emerging markets). Emerging markets will include any country not listed
by the Organization for Economic Cooperation and Development ("OECD") or
determined by the Adviser to be an emerging market as defined above. The Fund
may invest in securities of: (i) companies the principal securities trading
market for which is an emerging market country; (ii) companies organized under
the laws of, and with a principal office in, an emerging market country; (iii)
companies whose principal activities are located in emerging market countries;
(iv) companies traded in any market that derive 50% or more of their total
revenue from either goods or services produced in an emerging market or sold in
an emerging market or; (v) emerging market governments or any of their political
subdivisions, agencies, authorities or instrumentalities.
In addition to the general risks of investing in foreign securities, investments
in emerging markets involve special risks. Securities of many issuers in
emerging markets may be less liquid and more volatile than securities of
comparable domestic issuers. These securities may be considered speculative and,
while generally offering higher income and the potential for capital
appreciation, may present significantly greater risk. Emerging markets may have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of the Fund is uninvested and no return is earned thereon. The inability
of the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result in losses to the
Fund due to subsequent declines in values of the portfolio securities or, if the
Fund has entered into a contract to sell the security, possible liability to the
purchaser. Certain markets may require payment for securities before delivery.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected
5
<PAGE> 12
by delays in, or a refusal to grant, any required governmental approval for
repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the expenses of the Fund.
AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in American Depositary
Receipts ("ADRs"), which are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. Because ADRs trade on
United States securities exchanges, the Adviser does not treat them as foreign
securities. However, they are subject to many of the risks of foreign
securities, such as changes in exchange rates and more limited information about
foreign issuers.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order
to earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Fund's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize any risk.
LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. Such loans will usually be made only to member firms (and
subsidiaries thereof) of the New York Stock Exchange and to member banks of the
Federal Reserve System, and would be required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government Securities maintained on
a current basis at an amount at least equal to the market value of the
securities loaned. The Fund will continue to collect the equivalent of interest
on the securities loaned and will also receive either interest (through
investment of cash collateral) or a fee (if the collateral is U.S. Government
securities).
"WHEN-ISSUED" SECURITIES: In order to help ensure the availability of suitable
securities for its portfolio, the Fund may purchase securities on a "when
issued" or on a "forward delivery" basis, which means that the securities will
be delivered to the Fund at a future date usually beyond customary settlement
time. The Fund does not pay for such securities until received and does not
start earning interest on the securities until the contractual settlement date.
In order to invest its assets immediately, while awaiting delivery of securities
purchased on such bases, the Fund will normally invest in cash, short-term money
market instruments or high quality debt securities. See the Statement of
Additional Information for a further discussion of the nature of such
transactions and risks associated therewith.
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 Fund's Board of Trustees determines, based upon a continuing
review of the trading markets for a specific Rule 144A security, whether such
security is illiquid and thus subject to the Fund's limitations 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. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities held in
the Fund's portfolio. Subject to the Fund's 15% limitation on investments in
illiquid investments, the Fund may also invest in restricted securities that may
not be sold under Rule 144A, which represents 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, the judgment of the Adviser
may at times play a greater role in valuing these securities than in the case of
unrestricted securities.
6
<PAGE> 13
OPTIONS ON SECURITIES: The Fund may write (sell) covered put and call options
on securities and purchase put and call options on securities. The Fund will
write such options for the purpose of increasing its return and/or to protect
the value of its portfolio. In particular, where the Fund writes an option which
expires unexercised or is closed out by the Fund at a profit, it will retain the
premium paid for the option, which will increase its gross income and will
offset in part the reduced value of a portfolio security in connection with
which the option may have been written or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the security
underlying the option moves adversely to the Fund's position, the option may be
exercised and the Fund will be required to purchase or sell the security at a
disadvantageous price, resulting in losses which may only be partially offset by
the amount of the premium. The Fund may also write combinations of put and call
options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.
The Fund may purchase put or call options in anticipation of declines in the
value of portfolio securities or increases in the value of securities to be
acquired. In the event that such declines or increases occur, the Fund may be
able to offset the resulting adverse effect on its portfolio, in whole or in
part, through the options purchased. The risk assumed by the Fund in connection
with such transactions is limited to the amount of the premium and related
transaction costs associated with the option, although the Fund may be required
to forfeit such amounts in the event that the prices of securities underlying
the options do not move in the direction or to the extent anticipated.
The Fund may also enter into options on the yield "spread," or yield
differential, between two securities, a transaction referred to as a "yield
curve" option, for hedging and non-hedging (an effort to increase current
income) purposes. In contrast to other types of options, a yield curve option is
based on the difference between the yields of designated securities rather than
the actual prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease. Yield curve options written by the Fund will be covered as described
in the Statement of Additional Information. The trading of yield curve options
is subject to all the risks associated with trading other types of options, as
discussed below under "Risk Factors" and in the Statement of Additional
Information. In addition, such options present risks of loss even if the yield
on one of the underlying securities remains constant if the spread moves in a
direction or to an extent which was not anticipated.
OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put
options and purchase call and put options on stock indices. The Fund may write
options on stock indices for the purpose of increasing its gross income and to
protect its portfolio against declines in the value of securities it owns or
increases in the value of securities to be acquired. When the Fund writes an
option on a stock index, and the value of the index moves adversely to the
holder's position, the option will not be exercised, and the Fund will either
close out the option at a profit or allow it to expire unexercised. The Fund
will thereby retain the amount of the premium, which will increase its gross
income and offset part of the reduced value of portfolio securities or the
increased cost of securities to be acquired. Such transactions, however, will
constitute only partial hedges against adverse price fluctuations, since any
such fluctuations will be offset only to the extent of the premium received by
the Fund for the writing of the option. In addition, if the value of an
underlying index moves adversely to the Fund's option position, the option may
be exercised, and the Fund will experience a loss which may only be partially
offset by the amount of the premium received.
The Fund may also purchase put or call options on stock indices in order to
hedge its investments against a decline in value or to attempt to reduce the
risk of missing a market or industry segment advance. The Fund's possible loss
in either case will be limited to the premium paid for the option, plus related
transaction costs.
OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write options on
foreign currencies ("Options on Foreign Currencies") for the purpose of
protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. As in the
case of other types of options, however, the writing of an Option on Foreign
Currency will constitute only a partial hedge, up to the amount of the premium
received, and the Fund may be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
Option on Foreign Currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate
7
<PAGE> 14
movements adverse to the Fund's position, it may forfeit the entire amount of
the premium paid for the option plus related transaction costs. The Fund may
also be required or elect to receive delivery of the foreign currencies
underlying Options on Foreign Currencies into which it has entered. Under
certain circumstances, such as where the Adviser believes that the applicable
exchange rate is unfavorable at the time the currencies are received or the
Adviser anticipates, for any other reason, that the exchange rate will improve,
the Fund may hold such currencies for an indefinite period of time. See the
Statement of Additional Information for information on the risks associated with
holding foreign currency.
FUTURES CONTRACTS: The Fund may enter into stock index and foreign currency
futures contracts (collectively "Futures Contracts"). Such transactions will be
entered into for hedging purposes, in order to protect the Fund's current or
intended investments from the effects of changes in exchange rates or declines
in the stock market, as well as for non-hedging purposes, to the extent
permitted by applicable law. The Fund will incur brokerage fees when it
purchases and sells Futures Contracts, and will be required to maintain margin
deposits. In addition, Futures Contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Fund, if its investment
judgment about the general direction of exchange rates or the stock market is
incorrect, the Fund's overall performance may be poorer than if it had not
entered into any such contract and the Fund may realize a loss. The Fund will
not enter into any Futures Contract if immediately thereafter the value of
securities and other underlying obligations, all such Futures Contracts would
exceed 50% of the value of its total assets.
OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and write options on
Futures Contracts ("Options on Futures Contracts") in order to protect against
declines in the values of portfolio securities or against increases in the cost
of securities to be acquired. Purchases of Options on Futures Contracts may
present less risk in hedging the Fund's portfolio than the purchase or sale of
the underlying Futures Contracts since the potential loss is limited to the
amount of the premium plus related transaction costs, although it may be
necessary to exercise the option to realize any profit, which results in the
establishment of a futures position. The writing of Options on Futures
Contracts, however, does not present less risk than the trading of Futures
Contracts and will constitute only a partial hedge, up to the amount of the
premium received. In addition, if an option is exercised, the Fund may suffer a
loss on the transaction. The Fund may also purchase and write Options on Futures
Contracts for non-hedging purposes, to the extent permitted by applicable law.
FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a fixed quantity of a foreign currency at
a future date ("Forward Contracts"). The Fund may enter into Forward Contracts
for hedging purposes as well as for non-hedging purposes (i.e., speculative
purposes). By entering into transactions in Forward Contracts for hedging
purposes, the Fund may be required to forego the benefits of advantageous
changes in exchange rates and, in the case of Forward Contracts entered into for
non-hedging purposes, the Fund may sustain losses which will reduce its gross
income. Such transactions, therefore, are considered speculative. Forward
Contracts are traded over-the-counter and not on organized commodities or
securities exchanges. As a result, Forward Contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in Futures Contracts or options traded
on exchanges. The Fund may be required or elect to receive delivery of the
foreign currencies underlying Forward Contracts into which it has entered. Under
certain circumstances, such as where the Adviser believes that the applicable
exchange rate is unfavorable at the time the currencies are received or the
Adviser anticipates, for any other reason, that the exchange rate will improve,
the Fund may hold such currencies for an indefinite period of time. The Fund may
also enter into a Forward Contract on one currency to hedge against risk of loss
arising from fluctuations in the value of a second currency (referred to as a
"cross hedge") if, in the judgment of the Adviser, a reasonable degree of
correlation can be expected between movements in the values of the two
currencies. The Fund has established procedures consistent with statements of
the Securities and Exchange Commission (the "SEC") and its staff regarding the
use of Forward Contracts by registered investment companies, which require use
of segregated assets or "cover" in connection with the purchase and sale of such
contracts. See the Statement of Additional Information for information on the
risks associated with holding foreign currency.
RISKS OF OPTIONS AND FUTURES: Although the Fund will enter into Futures
Contracts, Options on Futures Contracts, Forward Contracts, Options on Foreign
Currencies and other option transactions in part for hedging purposes, such
transactions
8
<PAGE> 15
nevertheless involve risks. For example, a lack of correlation between the index
or instrument underlying an option or Futures Contract and the assets being
hedged, or unexpected adverse price movements, could render the Fund's hedging
strategy unsuccessful and could result in losses. The Fund also may enter into
transactions in such investments for other than hedging purposes, to the extent
permitted by applicable law, which involves greater risk and may result in
losses. In addition, there can be no assurance that a liquid secondary market
will exist for any contract purchased or sold, and the Fund may be required to
maintain a position until exercise or expiration, which could result in losses.
The Fund may also be required or may elect to receive delivery of the foreign
currencies underlying Forward Contracts, which may involve certain risks.
Further, Forward Contracts and Options on Foreign Currencies entail particular
risks related to conditions affecting the underlying currency. Over-the-counter
transactions in options on securities, Options on Foreign Currencies and Forward
Contracts also involve risks arising from the lack of an organized exchange
trading environment. Transactions in Futures Contracts, Options on Futures
Contracts, Forward Contracts Options on Foreign Currencies and other options are
subject to other risks as well.
See the Statement of Additional Information which includes a discussion of the
risks related to transactions in options, Futures Contracts, Options on Futures
Contracts, Options on Foreign Currencies and Forward Contracts.
PORTFOLIO TRADING: While it is not generally the Fund's policy to invest or
trade for short-term profits, the Fund may dispose of a portfolio security
whenever the Adviser is of the opinion that that security no longer has an
appropriate appreciation potential or when another security appears to offer
relatively greater appreciation potential. Portfolio changes are made without
regard to the length of time a security has been held, or whether a sale would
result in a profit or loss, subject to tax restrictions for qualification as a
regulated investment company. Therefore, the rate of portfolio turnover is not a
limiting factor when a change in the portfolio is otherwise appropriate.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (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 clients of MFD, as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions. From time to time, the Adviser may direct certain portfolio
transactions to broker-dealer firms which, in turn, have agreed to pay a portion
of the Fund's operating expenses (e.g., fees charged by the custodian of the
Fund's assets). For a further discussion of portfolio transactions, see
"Portfolio Transactions and Brokerage Commissions" in the Statement of
Additional Information.
------------------------
The policies described above are not fundamental except for the one policy
specifically noted as fundamental, and may be changed without shareholder
approval. 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 July 19, 1985 (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative services,
as well as general office facilities. George F. Bennett, Jr., a Senior Vice
President of the Adviser, has been the Fund's portfolio manager since July of
1993. Mr. Bennett has been employed by the Adviser since 1969. Subject to such
policies as the Trustees may determine, the Adviser makes investment decisions
for the Fund. For these services and facilities, the Adviser receives a
management fee, computed and paid monthly, in an amount equal to 0.5% of the
first $200 million of the Fund's average daily net assets, 0.4% of the next $300
million of the Fund's average daily net assets and 0.2% of its average daily
assets in excess of $500 million, in each case on an annualized basis for the
Fund's current fiscal year. For the fiscal year ended November 30, 1994,
9
<PAGE> 16
MFS received management fees under the Advisory Agreement of $3,277,285,
equivalent on an annualized basis to 0.31% of the Fund's average daily net
assets.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS Union
Standard Trust, MFS Institutional Trust, MFS Variable Insurance Trust, Sun
Growth Variable Annuity Fund, Inc., MFS/Sun Life Series Trust and seven variable
accounts, each of which is a registered investment company established by Sun
Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)") in
connection with the sale of Compass-2 and Compass-3 combination fixed/variable
annuity contracts. MFS and its wholly owned subsidiary, MFS Asset Management,
Inc., provide investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of MFS were approximately $34.5 billion
on behalf of over 1.6 million investor accounts as of February 28, 1995. MFS is
a wholly owned subsidiary of Sun Life of Canada (U.S.), which in turn is a
wholly owned subsidiary of Sun Life Assurance Company of Canada ("Sun Life").
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold D. Scott,
John R. Gardner and John D. McNeil. Mr. Brodkin is the Chairman of MFS, Mr.
Shames is the President of MFS and Mr. Scott is the Secretary and a Senior
Executive Vice President of MFS; Messrs. McNeil and Gardner are the Chairman and
President, respectively, of Sun Life. Sun Life, a mutual life insurance company,
is one of the largest international life insurance companies and has been
operating in the United States since 1895, establishing a headquarters office
here in 1973. The executive officers of MFS report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is the Chairman, President
and a Trustee of the Fund. W. Thomas London, Stephen E. Cavan, James R.
Bordewick, Jr. and James O. Yost, all of whom are officers of MFS, are officers
of the Fund.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency,
certain dividend disbursing agency and other services for the Fund.
6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased at the public offering price through any
securities dealer, certain banks and other financial institutions having selling
agreements with MFD. Non-securities dealer financial institutions will receive
transaction fees that are the same as commission fees to dealers. Securities
dealers and other financial institutions may also charge their customers fees
relating to investments in the Fund.
10
<PAGE> 17
The Fund offers two classes of shares which bear sales charges and distribution
fees in different forms and amounts:
CLASS A SHARES: Class A shares are offered at net asset value plus an initial
sales charge (or CDSC in the case of certain purchases of $1 million or more) as
follows:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE* AS
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................................................ 5.75% 6.10% 5.00%
$50,000 but less than $100,000................................... 4.75 4.99 4.00
$100,000 but less than $250,000.................................. 4.00 4.17 3.20
$250,000 but less than $500,000.................................. 2.95 3.04 2.25
$500,000 but less than $1,000,000................................ 2.20 2.25 1.70
$1,000,000 or more............................................... None** None** See Below**
</TABLE>
--------------------------------------------------------------------------------
* Because of rounding in the calculation of offering price, actual sales
charges may be more or less than those calculated using the percentages
above.
** A CDSC may apply in certain instances. MFD will pay a commission on purchases
of $1 million or more.
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC may be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% on the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.
In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment 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 a plan; (iii) distributions from
a 403(b) plan or an Individual Retirement Account ("IRA"), due to death,
disability or attainment of age 59 1/2; (iv) tax-free returns of excess
contributions to an IRA; (v) distributions by other employee benefit plans to
pay benefits; and (vi) certain involuntary redemptions and redemptions in
connection with certain automatic withdrawals from a qualified Retirement Plan.
The CDSC on Class A shares will not be waived, however, if the Retirement Plan
withdraws from the Fund except if the Retirement Plan has invested its assets in
Class A shares of one or more of the MFS Funds for more than 10 years from the
later to occur of (i) January 1, 1993 or (ii) the date such Retirement Plan
first invests its assets in Class A shares of one or more of the MFS Funds, the
CDSC on Class A shares will be waived in the case of a redemption of all of the
Retirement Plan's shares (including shares of any other class) in all MFS Funds
(i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), 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. The CDSC on Class A shares will be
waived upon redemption by a Retirement Plan where the redemption proceeds are
used to pay expenses of the Retirement Plan or certain expenses of participants
under the Retirement Plan (e.g., participant account fees), provided that the
Retirement Plan's sponsor subscribes to the MFS Fundamental 401(k) Plan SM or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. The CDSC on Class A shares will be waived upon the transfer of
registration
11
<PAGE> 18
from shares held by a Retirement Plan through a single account maintained by the
Shareholder Servicing Agent to multiple Class A share accounts maintained by the
Shareholder Servicing Agent on behalf of individual participants in the
Retirement Plan, provided that the Retirement Plan's sponsor subscribes to the
MFS Fundamental 401(k) Plan SM or another similar recordkeeping system made
available by the Shareholder Servicing Agent. Any applicable CDSC will be
deferred upon an exchange of Class A shares of the Fund for units of
participation of the MFS Fixed Fund (a bank collective investment fund) (the
"Units"), and the CDSC will be deducted from the redemption proceeds when such
Units are subsequently redeemed (assuming the CDSC is then payable). No CDSC
will be assessed upon an exchange of Units for Class A shares of the Fund. For
purposes of calculating the CDSC payable upon redemption of Class A shares of
the Fund or Units acquired pursuant to one or more exchanges, the period during
which the Units are held will be aggregated with the period during which the
Class A shares are held. MFD shall receive all CDSCs which it intends to apply
for the benefit of the Fund.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 5% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain 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 also be reduced is set forth in the Statement of Additional
Information. In addition, MFD 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 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 also be sold at their net asset value to the
officers of the Fund, to any of the subsidiary companies of Sun Life, to
eligible Directors, officers, employees (including retired employees) and agents
of MFS, Sun Life or any of their subsidiary companies, to any fund, pension,
profit-sharing or any other benefit plan for such persons, to any trustees and
retired trustees of any investment company for which MFD serves as distributor
or principal underwriter, and to certain family members of such individuals and
their spouses, provided such shares will not be resold except to the Fund. Class
A shares of the Fund may be sold at net asset value to any employee, partner,
officer or trustee of any sub-adviser to any MFS Fund and to certain family
members of such individuals and their spouses, or to any trust, pension,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative, provided such shares will not be resold except to the Fund.
Class A shares of the Fund may also be sold at their net asset value to any
employee or registered representative of any dealer or other financial
institution which has a sales agreement with MFD or its affiliates, to certain
family members of such employees or representatives or other financial
institution, and their spouses, or to any trust, pension, profit-sharing or
other retirement plan for the sole benefit of such employee or representative,
as well as to clients of the MFS Asset Management, Inc.
Class A shares may be sold at net asset value, subject to appropriate
documentation, through a dealer where the amount invested represents redemption
proceeds from a registered open-end management investment company not
distributed or managed by MFD or its affiliates if: (i) the redeemed shares were
subject to an initial sales charge or a deferred sales charge (whether or not
actually imposed); (ii) such redemption has occurred no more than 90 days prior
to the purchase of Class A shares of the Fund; and (iii) the Fund, MFD or its
affiliates have not agreed with such company or its affiliates, formally or
informally, to sell Class A shares at net asset value or provide any other
incentive with respect to such redmeption and sale. Class A shares of the Fund
may also be sold at net asset value where the amount invested represents
redemption proceeds from the MFS Fixed Fund. In addition, Class A shares of the
Fund may be sold at net asset value in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies. Insurance company separate accounts may purchase Class A shares of
the Fund at their net asset value. 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
12
<PAGE> 19
its affiliates. Class A shares of the Fund may be purchased at net asset value
through certain broker-dealers and other financial institutions which have
entered into an agreement with MFD which includes a requirement that such shares
be sold for the benefit of clients participating in a "wrap account" or a
similar program under which such clients pay a fee to such broker-dealer or
other financial institution.
Class A shares of the Fund may be purchased at net asset value by certain
retirement plans subject to the Employee Retirement Income Security Act of 1974,
as amended, subject to the following:
(i) The sponsoring organization must demonstrate to the satisfaction of MFD
that either (a) the employer has at least 25 employees or (b) the aggregate
purchases by the retirement plan of Class A shares of the MFS Funds will be
in an amount of at least $250,000 within a reasonable period of time, as
determined by MFD in its sole discretion; and
(ii) a CDSC of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.
Dealers who initiate and are responsible for purchases of Class A shares of the
Fund in this manner will be paid a commission by MFD, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, that MFD may pay a commission, on sales in excess of $5 million to
certain retirement plans, of 1.00% to certain dealers which, at MFD's
invitation, enter into an agreement with MFD in which the dealer agrees to
return any commission paid to it on the sale (or on a pro rata portion thereof)
if the shareholder redeems its shares within a period of time after purchase as
specified by MFD. Purchases of $1 million or more for each shareholder account
will be aggregated over a 12-month period (commencing from the date of the first
such purchase) for purposes of determining the level of commissions to be paid
during that period with respect to such account.
Class A shares of the Fund may be purchased at net asset value by retirement
plans 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. 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. Furthermore, Class A
shares of the Fund may be sold at net asset value through the automatic
reinvestment of distributions of dividends and capital gains of Class A shares
of other MFS Funds pursuant to the Distribution Investment Program (see
"Shareholder Services" in the Statement of Additional Information).
CLASS B SHARES: Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC as follows:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
--------------------------------------------------- -------------------
<S> <C>
First.............................................. 4 %
Second............................................. 4 %
Third.............................................. 3 %
Fourth............................................. 3 %
Fifth.............................................. 2 %
Sixth.............................................. 1 %
Seventh and following.............................. 0 %
</TABLE>
For Class B shares purchased prior to January 1, 1993, the Fund imposes a CDSC
as a percentage of redemption proceeds as follows:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
--------------------------------------------------- -------------------
<S> <C>
First.............................................. 6 %
Second............................................. 5 %
Third.............................................. 4 %
Fourth............................................. 3 %
Fifth.............................................. 2 %
Sixth.............................................. 1 %
Seventh and following.............................. 0 %
</TABLE>
13
<PAGE> 20
No CDSC is paid upon an exchange of shares. For purposes of calculating the CDSC
upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. See "Redemptions and
Repurchases -- Contingent Deferred Sales Charge" for further discussion of the
CDSC.
The CDSC on Class B shares will be waived upon the death or disability (as
defined in section 72(m)(7) of the Code) of any investor, provided the account
is registered (i) in the case of a deceased individual, solely in the deceased
individual's name, (ii) in the case of a disabled individual, solely or jointly
in the disabled individual's name or (iii) in the name of a living trust for the
benefit of the deceased or disabled individual. The CDSC on Class B shares will
also be waived in the case of redemptions of shares of the Fund pursuant to a
systematic withdrawal plan. In addition, the CDSC on Class B shares will be
waived in the case of distributions from an IRA, SAR-SEP or any other retirement
plan qualified under sections 401(a) or 403(b) of the Code, due to death or
disability, or in the case of required minimum distributions from any such
Retirement Plan due to attainment of age 70 1/2. The CDSC on Class B shares will
be waived in the case of distributions from a Retirement Plan due to (i) returns
of excess contribution to the plan, (ii) retirement of a participant in the
plan, (iii) a loan from the plan (repayments of loans, however, will constitute
new sales for purposes of assessing the CDSC), (iv) "financial hardship" of the
participant in the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time, and (v) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the plan). The CDSC on Class B shares will also be waived
upon redemption by (i) officers of the Fund, (ii) any of the subsidiary
companies of Sun Life, (iii) eligible Directors, officers, employees (including
retired employees) and agents of MFS, Sun Life or any of their subsidiary
companies, (iv) any trust, pension, profit-sharing or any other benefit plan for
such persons, (v) any trustees and retired trustees of any investment company
for which MFD serves as distributor or principal underwriter, and (vi) certain
family members of such individuals and their spouses, provided in each case that
the shares will not be resold except to the Fund. The CDSC on Class B shares
will also be waived in the case of redemptions by any employee or registered
representative of any dealer or other financial institution which has a sales
agreement with MFD, by certain family members of such employee or representative
and their spouses, by any trust, pension, profit-sharing or other retirement
plan for the sole benefit of such employee or representative and by clients of
the MFS Asset Management, Inc. A Retirement Plan that has invested its assets in
Class B shares of one or more of the MFS Funds for more than 10 years from the
later to occur of (i) January 1, 1993 or (ii) the date the Retirement Plan first
invests its assets in Class B shares of one or more of the funds in the MFS
Funds will have the CDSC on Class B shares waived in the case of a redemption of
all the Retirement Plan's shares (including shares of any other class) in all
MFS Funds (i.e., all the assets of the Retirement Plan invested in the MFS Funds
are withdrawn), except that if, immediately prior to the redemption, the
aggregate amount invested by the Retirement Plan in Class B shares of the MFS
Funds (excluding the reinvestment of distributions) during the prior four year
period equals 50% or more of the total value of the Retirement Plan's assets in
the MFS Funds, then the CDSC will not be waived. The CDSC on Class B shares will
be waived upon redemption by a Retirement Plan where the redemption proceeds are
used to pay expenses of the Retirement Plan or certain expenses of participants
under the Retirement Plan (e.g., participant accounts fees), provided that the
Retirement Plan's sponsor subscribes to the MFS Fundamental 401(k) Plansm or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. The CDSC on Class B shares will be waived upon the transfer of
registration from shares held by a Retirement Plan through a single account
maintained by the Shareholder Servicing Agent to multiple Class B share accounts
provided that the Retirement Plan's sponsor subscribes to the MFS Fundamental
401(k) Plansm or another similar recordkeeping system made available by the
Shareholder Servicing Agent. The CDSC on Class B shares may also be waived in
connection with the acquisition or liquidation of the assets of other investment
companies or personal holding companies.
CONVERSION OF CLASS B SHARES: Class B shares of the Fund will convert to Class
A shares of the Fund approximately eight years after the purchase date. 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
14
<PAGE> 21
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 conversions will not
constitute a taxable event for federal tax purposes. There can be no assurance
that such a ruling or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be subject to higher
expenses than Class A shares for an indefinite period.
GENERAL: Except as described below, the minimum initial investment is $1,000
per account and the minimum additional investment is $50 per account. Accounts
being established for monthly automatic investments and under payroll savings
programs and tax-deferred retirement programs (other than IRAs) involving the
submission of investments by means of group remittal statements are subject to a
$50 minimum on initial and additional investments per account. The minimum
initial investment for IRAs is $250 per account and the minimum additional
investment is $50 per account. Accounts being established for participation in
the Automatic Exchange Plan are subject to a $50 minimum on initial and
additional investments per account. There are also other limited exceptions to
these minimums for certain tax-deferred retirement programs. Any minimums may be
changed at any time at the discretion of MFD. The Fund reserves the right to
cease offering its shares at any time.
For shareholders who elect to participate in certain investment programs (e.g.,
the Automatic Investment Plan) or other shareholder services, MFD or its
affiliates may either (i) give a gift of nominal value, such as a hand-held
calculator, or (ii) make a nominal charitable contribution on their behalf.
A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from the
Fund (such as Right of Accumulation, Letter of Intent and certain record-keeping
services) that the Fund ordinarily provides.
Purchases and exchanges should be made for investment purposes only. The Fund
and MFD each reserve the right to reject any specific purchase order or to
restrict purchases by a particular purchaser (or group of related purchasers).
The Fund or MFD may reject or restrict any purchases by a particular purchaser
or group, for example, when such purchase is contrary to the best interests of
the Fund's other shareholders or otherwise would disrupt the management of the
Fund.
MFD may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by MFD) which follow a
timing pattern, and with individuals or entities acting on such shareholders'
behalf (collectively, "market timers"), setting forth the terms, procedures and
restrictions with respect to such exchanges. In the absence of such an
agreement, it is the policy of the Fund and MFD to reject or restrict purchases
by market timers if (i) more than two exchange purchases are effected in a timed
account in the same calendar quarter or (ii) a purchase would result in shares
being held in timed accounts by market timers representing more than (x) one
percent of the Fund's net assets or (y) specified dollar amounts in the case of
certain MFS Funds which may include the Fund and which may change from time to
time. The Fund and MFD each reserve the right to request market timers to redeem
their shares at net asset value, less any applicable CDSC, if either of these
restrictions is violated.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares. In some
instances, promotional incentives to dealers may be offered only to certain
dealers who have sold or may sell significant amounts of Fund shares. For time
to time, MFD may pay dealers 100% of the applicable sales charge on sales of
Class A shares of certain specified MFS Funds sold by such dealer during a
specified sales period. In addition, MFD or its affiliates may, from time to
time, pay dealers an additional commission equal to 0.50% of the net asset value
of all of the Class B shares of certain specified MFS Funds sold by such dealer
during a specified sales period. In addition, from time to time MFD, at its
expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell
15
<PAGE> 22
shares of the Fund. The staff of the SEC has indicated that dealers who receive
more than 90% of the sales charge may be considered underwriters. Such
concessions provided by MFD may include financial assistance to dealers in
connection with preapproved conferences or seminars, sales or training programs
for invited registered representatives, payment for travel expenses, including
lodging, incurred by registered representatives and members of their families or
other invited guests to various locations for such seminars or training
programs, seminars for the public, advertising and sales campaigns regarding one
or more MFS Funds, and/or other dealer-sponsored events. In some instances,
these concessions may be offered to dealers or only to certain dealers who have
sold or may sell, during specified periods, certain minimum amounts of shares of
the Fund. Other concessions may be offered to the extent not prohibited by the
laws of any state or any self-regulatory agency, such as the NASD.
The Glass-Steagall Act prohibits national banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of the
prohibition has not been clearly defined, MFD believes that such Act should not
preclude banks from entering into agency agreements with MFD (as described
above). If, however, a bank were prohibited from so acting, the Trustees would
consider what actions if any, would be necessary to continue to provide
efficient and effective shareholder services. It is not expected that
shareholders would suffer any adverse financial consequence as a result of these
occurrences. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as broker-dealers pursuant to state
law.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged at net asset value for shares of the same
class of any of the other MFS Funds (if available for sale). Shares of one class
may not be exchanged for shares of any other class. Exchanges will be made only
after instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Shareholder Servicing Agent in proper
form (i.e., if in writing -- signed by the record owner(s) exactly as the shares
are registered; if by telephone -- proper account identification is given by the
dealer or shareholder of record) and each exchange must involve either shares
having an aggregate value of at least $1,000 ($50 in the case of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by the
Shareholder Servicing Agent) or all the shares in the account. If an Exchange
Request is received by the Shareholder Servicing Agent on any business day prior
to the close of regular trading on the Exchange, the exchange usually will occur
on that day if all the requirements set forth above have been complied with at
that time. No more than five exchanges may be made in any one Exchange Request
by telephone. Additional information concerning this exchange privilege and
prospectuses for any of the other MFS Funds may be obtained from investment
dealers or the Shareholder Servicing Agent. A shareholder should read the
prospectus of the other MFS Fund and consider the differences in objectives and
policies before making any exchange. For federal and (generally) state income
tax purposes, an exchange is treated as a sale of the shares exchanged and,
therefore, an exchange could result in a gain or loss to the shareholder making
the exchange. Exchanges by telephone are automatically available to most
non-retirement plan accounts and certain retirement plan accounts. For further
information regarding exchanges by telephone see "Redemptions By Telephone." The
exchange privilege (or any aspect of it) may be changed or discontinued and is
subject to certain limitations, including certain restrictions on purchases by
market timers. Special procedures, privileges and restrictions with respect to
exchanges may apply to market timers who enter into an agreement with MFD, as
set forth in such agreement (see "Purchases").
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which the Fund is open for business by redeeming shares at their net
asset value or by selling such shares to the Fund through a dealer (a
repurchase). Since the net asset value of shares of the account fluctuates,
redemptions or repurchases, which are taxable transactions, are likely to result
in gains or losses to the shareholder. When a shareholder withdraws an amount
from his account, the shareholder is deemed to have tendered for redemption a
sufficient number of full and fractional shares in his account to cover the
amount withdrawn. The
16
<PAGE> 23
proceeds of a redemption or repurchase will normally be available within seven
days, except for shares purchased or received in exchange for shares purchased
by check (including certified checks or cashier's checks); payment of redemption
proceeds may be delayed for up to 15 days from the purchase date in an effort to
assure that such check has cleared. Payment of redemption proceeds may be
delayed for up to seven days from the redemption date if the Fund determines
that such a delay would be in the best interest of all its shareholders.
A. REDEMPTION BY MAIL -- Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption, or letter of instruction, together with his share
certificates (if any were issued) all in "good order" for transfer. "Good order"
generally means that the stock power, written request for redemption, letter of
instruction or certificate must be endorsed by the record owner(s) exactly as
the shares are registered and the signature(s) must be guaranteed in the manner
set forth below under the caption "Signature Guarantee." In addition, in some
cases, "good order" may require the furnishing of additional documents. The
Shareholder Servicing Agent may make certain de minimis exceptions to the above
requirements for redemption. Within seven days after receipt of a redemption
request in "good order" by the Shareholder Servicing Agent, the Fund will make
payment in cash of the net asset value of the shares next determined after such
redemption request was received, reduced by the amount of any applicable CDSC
described above and the amount of any income tax required to be withheld, except
during any period in which the right of redemption is suspended or date of
payment is postponed because the Exchange is closed or trading on such Exchange
is restricted, or, to the extent otherwise permitted by the 1940 Act, if an
emergency exists (see "Tax Status").
B. REDEMPTION BY TELEPHONE -- Each shareholder may redeem an amount from his
account by telephoning the Shareholder Servicing Agent toll-free at (800)
225-2606. Shareholders wishing to avail themselves of this telephone redemption
privilege must so elect on their Account Application, designate thereon a
commercial bank and account number to receive the proceeds of such redemption,
and sign the Account Application Form with the signature(s) guaranteed in the
manner set forth below under the caption "Signature Guarantee." The proceeds of
such a redemption, reduced by the amount of any applicable CDSC described above
and the amount of any income tax required to be withheld, are mailed by check to
the designated account, without charge. As a special service, investors may
arrange to have proceeds in excess of $1,000 wired in federal funds to the
designated account. If a telephone redemption request is received by the
Shareholder Servicing Agent by the close of regular trading on the Exchange on
any business day, shares will be redeemed at the closing net asset value of the
Fund on that day. Subject to the conditions described in this section, proceeds
of a redemption are normally mailed or wired on the next business day following
the date of receipt of the order for redemption. The Shareholder Servicing Agent
will not be responsible for any losses resulting from unauthorized telephone
transactions if it follows reasonable procedures designed to verify the identity
of the caller. The Shareholder Servicing Agent will request personal or other
information from the caller, and will normally also record calls. Shareholders
should verify the accuracy of confirmation statements immediately after their
receipt.
C. REPURCHASE THROUGH A DEALER -- If a shareholder desires to sell his shares
at their net asset value through his securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. IF THE DEALER RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE
CLOSE OF REGULAR TRADING ON THE EXCHANGE AND COMMUNICATES IT TO MFD BEFORE THE
CLOSE OF BUSINESS ON THE SAME DAY THE SHAREHOLDER WILL RECEIVE THE NET ASSET
VALUE CALCULATED ON THAT DAY.
GENERAL: Shareholders of the Fund who have redeemed their shares have a
one-time right to reinvest the redemption proceeds at net asset value (with a
credit for any CDSC paid) in the same class of shares of any of the MFS Funds
(if shares of such Fund are available for sale) within 90 days of the redemption
pursuant to the Reinstatement Privilege. If the shares credited for any CDSC
paid are then redeemed within six years of the initial purchase in the case of
Class B shares, or within 12 months of the initial purchase for certain Class A
share purchases, a CDSC will be imposed upon redemption. Such purchases under
the Reinstatement Privilege are subject to all limitations in the Statement of
Additional Information regarding this privilege.
Subject to the Fund's compliance with applicable regulations, the Fund has
reserved the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The
17
<PAGE> 24
securities so distributed would be valued at the same amount as that assigned to
them in calculating the net asset value for the shares being sold. If a
shareholder received a distribution in kind, the shareholder could incur
brokerage or transaction charges in converting the securities to cash.
Due to the relatively high cost of maintaining small accounts, the Fund reserves
the right to redeem shares in any account for their then-current value (which
will be promptly paid to the shareholder) if at any time the total investment in
such account drops below $500 because of redemptions, except in the case of
accounts established for monthly automatic investments, certain payroll savings
programs, Automatic Exchange Plan accounts and tax-deferred retirement plans,
for which there is a lower minimum investment requirement (see "Purchases").
Shareholders will be notified that the value of their account is less than the
minimum investment requirement and allowed 60 days to make an additional
investment before the redemption is processed. No CDSC will be imposed with
respect to such involuntary redemptions.
SIGNATURE GUARANTEE: In order to protect shareholders to the greatest extent
possible against fraud, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent.
CONTINGENT DEFERRED SALES CHARGE -- Investments ("Direct Purchases") will be
subject to a CDSC for a period of 12 months (in the case of purchases of $1
million or more of Class A shares) or six years (in the case of purchases of
Class B shares). Purchases of Class A shares made during a calendar month,
regardless of when during the month the investment occurred, will age one month
on the last day of the month and each subsequent month. Class B shares purchased
on or after January 1, 1993 will be aggregated on a calendar month basis -- all
transactions made during a calendar month, regardless of when during the month
they have occurred, will age one year at the close of business on the last day
of such month in the following calendar year and each subsequent year. For Class
B shares of the Fund purchased prior to January 1, 1993, transactions will be
aggregated on a calendar year basis -- all transactions made during a calendar
year, regardless of when during the year they have occurred, will age one year
at the close of business on December 31 of that year and each subsequent year.
At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class represented by Direct Purchases exceeds the sum
of the six calendar year aggregations (12 months in the case of purchases of $1
million or more of Class A shares) of Direct Purchases may be redeemed without
charge ("Free Amount"). Moreover, no CDSC is ever assessed on additional shares
acquired through the automatic reinvestment of dividends or capital gain
distributions ("Reinvested Shares").
Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC, and (ii) the amount of the redemption
equal to the then-current value of Reinvested Shares is not subject to the CDSC,
but (iii) any amount of the redemption in excess of the aggregate of the
then-current value of Reinvested Shares and the Free Amount is subject to a
CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible rate.
The CDSC to be imposed upon redemptions will be calculated as set forth in
"Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except that, with respect to transfers of registration to an IRA
rollover account, the CDSC will be waived if the shares being reregistered would
have been eligible for a CDSC waiver had they been redeemed.
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A and Class B
shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Rule"), after having concluded that there is a reasonable likelihood that the
plans would benefit the Fund and its shareholders.
CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the
Fund will pay MFD a distribution/service fee aggregating up to (but not
necessarily all of) 0.35% of the average daily net assets attributable to Class
A shares annually in order that MFD may pay expenses on behalf of the Fund
related to the distribution and servicing of Class A shares. The expenses
18
<PAGE> 25
to be paid by MFD on behalf of the Fund include a service fee to securities
dealers which enter into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares that are
owned by investors for whom the securities dealer is the holder or dealer of
record. This fee is intended to be partial consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to Class A shares. MFD may from time to time reduce the amount of the service
fee paid for shares sold prior to a certain date. Currently, the service fee is
reduced to 0.15% for shares sold prior to March 1, 1991. MFD may also retain a
distribution fee of 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares as partial consideration for services performed
and expenses incurred in the performance of MFD's obligations under its
distribution agreement with the Fund. MFD, however, is currently waiving this
0.10% distribution fee and will not accept payment of this fee in the future
unless it first obtains the approval of the Fund's Board of Trustees. In
addition, to the extent that the aggregate of the foregoing fees does not exceed
0.35% per annum of the average daily net assets of the Fund attributable to
Class A shares, the Fund is permitted to pay other distribution-related
expenses, including commissions to dealers and payments to wholesalers employed
by MFD for sales at or above a certain dollar level. Fees payable under the
Class A Distribution Plan are charged to, and therefore reduce, income allocated
to Class A shares. Service fees may be reduced for a securities dealer that is
the holder or dealer of record for an investor who owns shares of the Fund
having an aggregate net asset value at or above a certain dollar level. Dealers
may from time to time be required to meet certain criteria in order to receive
service fees. MFD or its affiliates are entitled to retain all service fees
payable under the Class A Distribution Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts. Certain banks and
other financial institutions that have agency agreements with MFD will receive
service fees that are the same as service fees to dealers.
CLASS B DISTRIBUTION PLAN. The Class B Distribution Plan provides that the
Fund will pay MFD a daily distribution fee equal on an annual basis to 0.75% of
the Fund's average daily net assets attributable to Class B shares and will pay
MFD a service fee of up to 0.25% per annum of the Fund's average daily net
assets attributable to Class B shares (which MFD will in turn pay to securities
dealers which enter into a sales agreement with MFD at a rate of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be additional consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to Class B shares. Fees payable under the Class B Distribution Plan
are charged to, and therefore reduce, income allocated to Class B shares. The
Class B Distribution Plan also provides that MFD will receive all CDSCs
attributable to Class B shares (see "Redemptions and Repurchases of Shares"
above), which do not reduce the distribution fee. MFD will pay commissions to
dealers of 3.75% of the purchase price of Class B shares purchased through
dealers. MFD will also advance to dealers the first year service fee at a rate
equal to 0.25% of the purchase price of such shares and as compensation
therefor, MFD may retain the service fee paid by the Fund with respect to such
shares for the first year after purchase. Therefore, the total amount paid to a
dealer upon the sale of shares is 4.00% of the purchase price of the shares
(commission rate of 3.75% plus service fee equal to 0.25% of the purchase
price). Dealers will become eligible for additional service fees with respect to
such shares commencing in the thirteenth month following purchase. Dealers may
from time to time be required to meet certain criteria in order to receive
service fees. MFD or its affiliates shall be 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 MFD or its affiliates for shareholder accounts. The
purpose of the distribution payments of MFD under the Class B Distribution Plan
is to compensate MFD for its distribution services to the Fund. Since MFD's
compensation is not directly tied to its expenses, the amount of compensation
received by MFD during any year may be more or less than its actual expenses.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the SEC as being of the "compensation" variety. However, the Fund
is not liable for any expenses incurred by MFD in excess of the amount of
compensation it receives. The expenses incurred by MFD, including commissions to
dealers, are likely to be greater than the distribution fees for the next
several years, but thereafter such expenses may be less than the amount of the
distribution fees. Certain banks and other financial institutions that have
agency
19
<PAGE> 26
agreements with MFD will receive agency transaction and service fees that are
the same as commissions and service fees to dealers.
DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income to its
shareholders as dividends on an annual basis. In determining the net investment
income available for distributions, the Fund may rely on projections of its
anticipated net investment income over a longer term, rather than its actual net
investment income for the period. The Fund may 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 shares because expenses attributable to Class B
shares will generally be higher.
TAX STATUS
In order to minimize the taxes the Fund would otherwise be required to pay, the
Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Code, and to make distributions to its shareholders in
accordance with the timing requirements imposed by the Code. It is expected that
the Fund will not be required to pay entity level federal income or excise
taxes, although foreign-source income received by the Fund may be subject to
foreign withholding taxes. Shareholders of the Fund normally will have to pay
federal income taxes (and any state or local taxes) on the dividends and capital
gain distributions they receive from the Fund, whether paid in cash or
additional shares. A portion of the dividends received from the Fund (but none
of the Fund's capital gain distributions) may qualify for the dividends-received
deduction for corporations.
A statement setting forth the federal income tax status of all dividends and
distributions for each calendar year, including the portion 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 will
be sent to each shareholder promptly after the end of such year.
Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before the Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
The Fund intends to withhold U.S. federal income tax at a rate of 30% on
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 law or
treaty. The Fund is also required in certain circumstances to apply backup
withholding of 31% on taxable dividends and redemption proceeds paid to any
shareholder (including a shareholder who is neither a citizen nor a resident of
the U.S.) who does not furnish to the Fund certain information and
certifications or who is otherwise subject to backup withholding. However,
backup withholding will not be applied to payments which have had 30%
withholding taken. Prospective shareholders should read the Account Application
for information regarding backup withholding of federal income tax and should
consult their own tax advisers as to the tax consequences of an investment in
the Fund.
NET ASSET VALUE
The net asset value per share of each class of the Fund is determined each day
during which the Exchange is open for trading. This determination is made once
each day as of the close of regular trading on the Exchange by deducting the
amount of the liabilities attributable to the class from the value of the assets
attributable to that class and dividing the difference by the number of shares
of the class outstanding. Values of equity securities in the Fund's portfolio
are determined on the basis of their market values while values of other assets
in the Fund's portfolio are determined on the basis of their fair values, as
described in the Statement of Additional Information. The net asset value per
share of each class of shares is effective for orders received by the dealer
prior to its calculation and received by MFD prior to the close of that business
day.
20
<PAGE> 27
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has two classes of shares, entitled Class A and Class B Shares of
Beneficial Interest (without par value). The Fund has reserved the right to
create and issue additional classes and series of shares, in which case each
class of shares of a series would participate equally in the earnings, dividends
and assets attributable to that class of that particular series. Shareholders
are entitled to one vote for each share held and shares of each series would be
entitled to vote separately to approve investment advisory agreements or changes
in investment restrictions, but shares of all series would vote together in the
election of Trustees and 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 Fund does not intend to hold
annual shareholder meetings. The Fund's Declaration of Trust provides that a
Trustee may be removed from office in certain instances (see "Description of
Shares, Voting Rights and Liabilities" in the Statement of Additional
Information).
Each share of a class of the Fund represents an equal proportionate interest in
the Fund with each other class share, subject to the liabilities of the
particular class. Shares have no pre-emptive or conversion rights (except as set
forth in "Purchases -- Conversion of Class B Shares"). Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
The Fund 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 existed (e.g., fidelity bonding and omission insurance) and the Fund
itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, the Fund will provide total rate of return quotations for
each class of shares and may also quote fund rankings in the relevant fund
category from various sources, such as Lipper Analytical Services, Inc. and
Wiesenberger Investment Companies Service. Total rate of return quotations will
reflect the average annual percentage change over stated periods in the value of
an investment in a class of 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 a CDSC, and which will thus be higher. Total rate of return
reflects all components of investment return over a stated period of time. The
Fund's total rate of return quotations are based on historical performance and
are not intended to indicate future performance. The Fund's quotations may from
time to time be used in advertisements, shareholder reports or other
communications to shareholders. For a discussion of the manner in which the Fund
will calculate its total rate of return, see the Statement of Additional
Information. For further information about the Fund's performance for the fiscal
year ended November 30, 1994, please see the Fund's Annual Report. A copy of the
Annual Report may be obtained without charge by contacting the Shareholder
Servicing Agent (see back cover for address and phone number). In addition to
information provided in shareholder reports, the Fund may, in its discretion,
from time to time, make a list of all or a portion of its holdings available to
investors upon request.
7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund should contact the Shareholder Servicing
Agent (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account. At the
end of each calendar year, each shareholder will receive information regarding
the tax status of all reportable dividends and distributions for that year (see
"Tax Status").
21
<PAGE> 28
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified;
-- Dividends in cash; capital gain distributions reinvested in additional
shares;
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gain
distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividends and other distributions reinvested in additional shares. Any request
to change a distribution option must be received by the Shareholder Servicing
Agent by the record date for a dividend or distribution in order to be effective
for that dividend or distribution. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the Statement of Additional Information) anticipates purchasing
$50,000 or more of Class A shares of the Fund alone or in combination with
shares of any class of other MFS Funds or MFS Fixed Fund within a 13-month
period (or 36-month period for purchases of $1 million or more), the shareholder
may obtain such shares at the same reduced sales charge as though the total
quantity were invested in one lump sum, subject to escrow agreements and the
appointment of an attorney for redemptions from the escrow amount if the
intended purchases are not completed, by completing the Letter of Intent section
of the Account Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of all classes of all Funds of
that shareholder in the MFS Funds or MFS Fixed Fund (a bank collective
investment fund), reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic payments,
as designated on the Account Application and based upon the value of his
account. Each payment under a Systematic Withdrawal Plan (a "SWP") must be at
least $100, except in certain limited circumstances. The aggregate withdrawals
of Class B shares in any year pursuant to a SWP will not be subject to a CDSC
and are generally limited to 10% of the value of the account at the time of the
establishment of the SWP. The CDSC will not be waived in the case of a SWP
redemption of Class A shares which are subject to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may participate in the Automatic Exchange Plan, a dollar
cost averaging program. The Automatic Exchange Plan provides for automatic
monthly or
22
<PAGE> 29
quarterly exchanges of funds from the shareholder's account in a MFS Fund for
investment in the same class of shares of other MFS Funds selected by the
shareholder. Under the Automatic Exchange Plan, exchanges of at least $50 each
may be made to up to four different funds. A shareholder should consider the
objectives and policies of a fund and review its prospectus before electing to
exchange money into such fund through the Automatic Exchange Plan. No
transaction fee is imposed in connection with exchange transactions under the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund or Class A shares of MFS Cash Reserve Fund will
be subject to any applicable sales charge. For federal and (generally) state
income tax purposes, an exchange is treated as a sale of the shares exchanged
and, therefore, could result in a capital gain or loss to the shareholder making
the exchange. See the Statement of Additional Information for further
information concerning the Automatic Exchange Plan. Investors should consult
their tax advisers for information regarding the potential capital gain and loss
consequences of transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of shares
regardless of fluctuating share offering prices, a shareholder should consider
his financial ability to continue his purchases through periods of low price
levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund may be purchased by all
types of tax-deferred retirement plans, including IRAs, SEP-IRA plans, 401(k)
plans, 403(b) plans and certain other qualified 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 April 1, 1995, contains
more detailed information about the Fund, including, but not limited to,
information related to (i) investment objective policies and restrictions, (ii)
its Trustees, officers and investment adviser, (iii) portfolio transactions and
brokerage commissions, (iv) the Class A and Class B Distribution Plans, (v) the
method used to calculate total rate of return quotations of the Fund 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.
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<PAGE> 30
[MFS LOGO]
THE FIRST NAME IN MUTUAL FUNDS
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000 MFS[trademark] MASSACHUSETTS INVESTORS
GROWTH STOCK FUND
Distributor
MFS Fund Distributors, Inc. Prospectus
500 Boylston Street April 1, 1995
Boston, MA 02116
(617) 954-5000
Custodian and Dividend Disbursing Agent
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Shareholder Servicing Agent
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll-free: (800) 225-2606
Mailing Address:
P.O. Box 2281
Boston, MA 02107-9906
Independent Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
[MFS LOGO]
THE FIRST NAME IN MUTUAL FUNDS
MFS MASSACHUSETTS INVESTORS
GROWTH STOCK FUND
500 Boylston Street
Boston, MA 02116 MIG-4/95 137.5M 13/213
<PAGE> 31
MASSACHUSETTS INVESTORS
STATEMENT OF
GROWTH STOCK FUND
ADDITIONAL INFORMATION
(A member of the MFS Family of Funds(R))
April 1, 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. Definitions........................................................................... 2
2. The Fund.............................................................................. 2
3. Investment Objective, Policies and Restrictions....................................... 2
4. Management of the Fund................................................................ 10
Trustees.............................................................................. 10
Officers.............................................................................. 11
Investment Adviser.................................................................... 12
Custodian............................................................................. 12
Shareholder Servicing Agent........................................................... 13
Distributor........................................................................... 13
5. Portfolio Transactions and Brokerage Commissions...................................... 14
6. Shareholder Services.................................................................. 15
Investment and Withdrawal Programs.................................................... 15
Exchange Privilege.................................................................... 17
Tax-Deferred Retirement Plans......................................................... 18
7. Tax Status............................................................................ 18
8. Determination of Net Asset Value and Performance...................................... 19
9. Description of Shares, Voting Rights and Liabilities.................................. 21
10. Distribution Plans.................................................................... 22
11. Independent Accountants and Financial Statements...................................... 24
Appendix A............................................................................ 25
</TABLE>
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information (the "SAI") sets forth information
which may be of interest to investors but which is not necessarily included in
the Fund's Prospectus, dated April 1, 1995. This SAI should be read in
conjunction with the Prospectus, a copy of which may be obtained without charge
by contacting the Shareholder Servicing Agent (see back cover for address and
phone number).
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE> 32
1. DEFINITIONS
<TABLE>
<S> <C> <C>
"Fund" -- Massachusetts Investors
Growth Stock Fund, a
Massachusetts business
trust.
"MFS" or the "Adviser" -- Massachusetts Financial
Services Company, a
Delaware corporation.
"MFD" -- MFS Fund Distributors,
Inc., a Delaware
corporation.
"Prospectus" -- The Prospectus, dated
April 1, 1995, of the
Fund.
</TABLE>
2. THE FUND
The predecessor of the Fund-- Massachusetts Investors Growth Stock Fund, Inc.
(the "Trust")-- was incorporated under the laws of Massachusetts in 1958 to
continue the business of a Delaware corporation organized in 1932. The Fund was
reorganized as a trust on July 29, 1985. All references in this Statement of
Additional Information to the Fund's past activities are intended to include
those of the Trust, unless the context indicates otherwise.
3. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE: The Fund's investment objective is to provide long-term
growth of capital and future income rather than current income. Any investment
involves risk and there can be no assurance that the Fund will achieve its
investment objective; the Fund's name does not imply any assurance that an
investor's capital will increase.
INVESTMENT POLICIES: The Fund's policy is to keep its assets invested, except
for working cash balances, in the common stocks, or securities convertible into
common stocks, of companies believed to possess better than average prospects
for long-term growth. This is a fundamental policy and may not be changed
without a shareholder vote. Emphasis is placed on the selection of progressive,
well-managed companies.
Since shares of the Fund represent an investment in securities with fluctuating
market prices, shareholders should understand that the value of shares of the
Fund will vary as the aggregate value of the Fund's portfolio securities
increases or decreases. Moreover, any dividends paid by the Fund will increase
or decrease in relation to the income received by the Fund from its investments.
FOREIGN SECURITIES: The Fund may invest up to 50% (and generally expects to
invest between 10% and 30%) of its total assets in foreign securities (not
including American Depositary Receipts discussed below). As discussed in the
Prospectus, investing in foreign securities generally represents a greater
degree of risk than investing in domestic securities, due to possible exchange
rate fluctuations, less publicly available information, more volatile markets,
less securities regulation, less favorable tax provisions, war or expropriation.
As a result of its investments in foreign securities, the Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in the foreign currencies in which such securities are denominated.
Under certain circumstances, such as where the Adviser believes that the
applicable exchange rate is unfavorable at the time the currencies are received
or the Adviser anticipates, for any other reason, that the exchange rate will
improve, the Fund may hold such currencies for an indefinite period of time.
While the holding of currencies will permit the Fund to take advantage of
favorable movements in the applicable exchange rate, this strategy also exposes
the Fund to risk of loss if exchange rates move in a direction adverse to the
Fund's position. Such losses could reduce any profits or increase any losses
sustained by the Fund from the sale or redemption of securities and could reduce
the dollar value of interest or dividend payments received.
AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in American Depositary
Receipts ("ADRs") which are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. ADRs may be sponsored or
unsponsored. A sponsored ADR is issued by a depository which has an exclusive
relationship with the issuer of the underlying security. An unsponsored ADR may
be issued by any number of U.S. depositories. The Fund may invest in either type
of ADR. Although the U.S. investor holds a substitute receipt of ownership
rather than direct stock certificates, the use of the depository receipts in the
United States can reduce costs and delays as well as potential currency exchange
and other difficulties. The Fund may purchase securities in local markets and
direct delivery of these ordinary shares to the local depository of an ADR agent
bank in the foreign country. Simultaneously, the ADR agents create a certificate
which settles at the Fund's custodian in five days. The Fund may also execute
trades on the U.S. markets using existing ADRs. A foreign issuer of the security
underlying an ADR is generally not subject to the same reporting requirements in
the United States as a domestic issuer. Accordingly the information available to
a U.S. investor will be limited to the information the foreign issuer is
required to disclose in its own country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying
security. ADRs may also be subject to exchange rate risks if the underlying
foreign securities are denominated in foreign currency.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements with
sellers who are member firms (or a subsidiary thereof) of the New York Stock
Exchange (the "Exchange"), members of the Federal Reserve System, recognized
primary U.S. Government securities dealers or institutions which the Adviser has
determined to be of comparable creditworthiness. The securities that the Fund
purchases and holds through its agent are U.S. Government securities, the values
of which are equal to or greater than the repurchase price agreed to be paid by
the seller. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest
2
<PAGE> 33
at a standard rate due to the Fund together with the repurchase price on
repurchase. In either case, the income to the Fund is unrelated to the interest
rate on the U.S. Government securities.
The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, the Fund will have the right to liquidate the securities. If at the time
the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
"WHEN-ISSUED" SECURITIES: The Fund may purchase securities on a "when-issued" or
on a "forward delivery" basis. It is expected that, under normal circumstances,
the Fund will take delivery of such securities. When the Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it will
set up procedures consistent with policies promulgated by the Securities and
Exchange Commission (the "SEC") policies concerning such purchases. Since those
policies currently recommend that an amount of the Fund's assets equal to the
amount of the purchase be held aside or segregated to be used to pay for the
commitment, the Fund will always have cash, short-term money market instruments
or high quality debt securities to cover any commitments or to limit any
potential risk. However, although the Fund does not intend to make such
purchases for speculative purposes and the Fund does intend to adhere to the
provisions of SEC policies, purchases of securities on such bases may involve
more risk than other types of purchases. For example, the Fund may have to sell
assets which have been set aside in order to meet redemptions. Also, if the Fund
determines it necessary to sell the "when-issued" or "forward delivery"
securities before delivery, the Fund may incur a loss because of market
fluctuations since the time the commitment to purchase such securities was made.
SECURITIES LENDING: The Fund may seek to increase its income by lending fixed
income portfolio securities. Such loans will usually be made only to member
banks of the Federal Reserve System and to member firms (or subsidiaries
thereof) of the Exchange and would be required to be secured continuously by
collateral in cash, cash equivalents, or U.S. Government securities maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. The Fund would have the right to call a loan and obtain the
securities loaned at any time on customary industry settlement notice (which
will usually not exceed five days). During the existence of a loan, the Fund
would continue to receive the equivalent of the interest paid by the issuer on
the securities loaned and would also receive compensation based on investment of
the collateral. The Fund would not, however, have the right to vote any
securities having voting rights during the existence of the loan, but would call
the loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. However, the loans would be made only to
firms deemed by the Adviser to be of good standing, and when, in the judgment of
the Adviser, the consideration which could be earned currently from securities
loans of this type justifies the attendant risk. If the Adviser determines to
lend securities, it is not intended that the value of the securities loaned
would exceed 30% of the value of the Fund's total assets. The Fund did not lend
any of its portfolio securities during its fiscal year ended November 30, 1994.
OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options on
securities and purchase call and put options on securities. The Fund may write
options on securities for the purpose of increasing its return on such
securities and for hedging purposes.
A call option written by the Fund is covered if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire such
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if a Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash or high grade government securities in a segregated account
with its custodian. A put option written by the Fund is covered if the Fund
maintains cash or high grade government securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds a put
on the same security and in the same principal amount as the put written where
the exercise price of the put held (i) is equal to or greater than the exercise
price of the put written or (ii) is less than the exercise price of the put
written if the difference is maintained by the Fund in cash or high grade
government securities in a segregated account with its custodian. Put and call
options written by the Fund may also be covered in such other manner as may be
in accordance with the requirements of the exchange on which, or the
counterparty with which, the option is traded, and applicable laws and
regulations.
Effecting a closing transaction in the case of a written call option will permit
the Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both, or in the case of a written
put option will permit the Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-term
3
<PAGE> 34
securities. Such transactions permit the Fund to generate additional premium
income, which will partially offset declines in the value of portfolio
securities or increases in the cost of securities to be acquired. Also,
effecting a closing transaction will permit the proceeds from the concurrent
sale of any securities subject to the option to be used for other investments of
the Fund, provided that another option on such security is not written. If the
Fund desires to sell a particular security from its portfolio on which it has
written a call option, it will effect a closing transaction in connection with
the option prior to or concurrent with the sale of the security.
The Fund will realize a profit from a closing transaction if the premium paid in
connection with the closing of an option written by the Fund is less than the
premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, the Fund will suffer a loss
if the premium paid or received in connection with a closing transaction is more
or less, respectively, than the premium received or paid in establishing the
option position. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the closing out of a call option previously written by the
Fund is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.
The Fund may write options in connection with buy-and-write transactions; that
is, the Fund may purchase a security and then write a call option against that
security. The exercise price of the call option the Fund determines to write
will depend upon the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"), equal to
("at-the-money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. If the call options are
exercised in such transactions, the Fund's maximum gain will be the premium
received by it for writing the option, adjusted upwards or downwards by the
difference between the Fund's purchase price of the security and the exercise
price, less related transaction costs. If the options are not exercised and the
price of the underlying security declines, the amount of such decline will be
offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options could be used by the
Fund in the same market environments that call options would be used in
equivalent buy-and-write transactions.
The Fund may write combinations of put and call options on the same security, a
practice known as a "straddle." By writing a straddle, the Fund undertakes a
simultaneous obligation to sell and purchase the same security in the event that
one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and
transaction costs, the call will likely be exercised and the Fund will be
required to sell the underlying security at a below market price. This loss may
be offset, however, in whole or in part, by the premiums received on the writing
of the two options. Conversely, if the price of the security declines by a
sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of a security remains
stable and neither the call nor the put is exercised. In an instance where one
of the options is exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
By writing a call option, the Fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise price
of the option. By writing a put option, the Fund assumes the risk that it may be
required to purchase the underlying security for an exercise price above its
then current market value, resulting in a capital loss unless the security
subsequently appreciates in value. The writing of options on securities will be
undertaken by the Fund for purposes in addition to hedging, and could involve
certain risks which are not present in the case of hedging transactions.
Moreover, even where options are written for hedging purposes, such transactions
will constitute only a partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be acquired, up to
the amount of the premium.
The Fund also may purchase put and call options on securities. Put options also
purchased to hedge against a decline in the value of securities held in the
Fund's portfolio. If such a decline occurs, the put options will permit the Fund
to sell the underlying securities at the exercise price, or to close out the
options at a profit. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and related transaction costs. The Fund
may purchase call options to hedge against an increase in the price of
securities that the Fund anticipates purchasing in the future. If such an
increase occurs, the call option will permit the Fund to purchase the securities
at the exercise price or to close out the option at a profit. The premium paid
for a call or put option plus any transaction costs will reduce the benefit, if
any, realized by the Fund upon exercise of the option, and, unless the price of
the underlying security rose or declined sufficiently, the option may expire
worthless to the Fund.
OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put options
on stock indices and purchase call and put options on stock indexes for the
purpose of increasing its gross income and to protect its portfolio against
declines in the value of securities it owns or increases in the value of
securities to be acquired.
The Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of the Adviser, are expected to be similar to
those of the index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities in its portfolio.
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<PAGE> 35
Nevertheless, where the Fund covers a call option on a stock index through
ownership of securities, such securities may not match the composition of the
index and, in that event, the Fund will not be fully covered and could be
subject to risk of loss in the event of adverse changes in the value of the
index. A Fund may also cover call options on stock indices by holding a call on
the same index and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or high grade
government securities in a segregated account with its custodian. The Fund may
cover put options on stock indices by maintaining cash or high grade government
securities with a value equal to the exercise price in a segregated account with
its custodian, or else by holding a put on the same stock index and in the same
principal amount as the put written where the exercise price of the put held (a)
is equal to or greater than the exercise price of the put written or (b) is less
than the exercise price of the put written if the difference is maintained by
the Fund in cash or high grade government securities in a segregated account
with its custodian. Put and call options on stock indices written by the Fund
may also be covered in such other manner as may be in accordance with the rules
of the exchange on which, or the counterparty with which, the option is traded,
and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
the Fund's stock investments. By writing a put option, the Fund assumes the risk
of a decline in the index. To the extent that the price changes of securities
owned by a Fund correlate with changes in the value of the index, writing
covered put options on indices will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The purchase of call options on stock indices may be used by the Fund to attempt
to reduce the risk of missing a broad market advance, or an advance in an
industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, the Fund will also bear the risk of losing all or a portion of the
premium paid, and related transaction costs, if the value of the index does not
rise. The purchase of call options on stock indices when the Fund is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing calls on securities
the Fund owns.
The Fund also may purchase put options on stock indices to hedge its investments
against a decline in value. By purchasing a put option on a stock index, the
Fund will seek to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option, plus related
transaction costs. The success of this strategy will largely depend on the
accuracy of the correlation between the changes in value of the index and the
changes in value of the Fund's security holdings.
OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write put and call
options on foreign currencies ("Options on Foreign Currencies") for the purpose
of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to be
acquired. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put Options on the Foreign Currency. If the value of the
currency did decline, the Fund would have the right to sell such currency for a
fixed amount in dollars and would thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Fund deriving from purchases of Options on Foreign Currencies
would be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Fund could sustain losses on transactions in Options on
Foreign Currencies which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
The Fund may write Options on Foreign Currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates
it may, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurred, the option would most likely not be
exercised, and the diminution in value of portfolio securities would be offset
by the amount of the premium received less related transaction costs. As in the
case of other types of options, therefore, the writing of Options on Foreign
Currencies will constitute only a partial hedge.
FUTURES CONTRACTS: The Fund may enter into stock index and foreign currency
futures contracts ("Futures Contracts"). A Futures Contract is a bilateral
agreement providing for the purchase and sale of a specified type and amount of
a financial
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<PAGE> 36
instrument, or foreign currency, or for the making and acceptance of a cash
settlement, at a stated time in the future for a fixed price. By its terms, a
Futures Contract provides for a specified settlement date on which, in the case
of the majority of foreign currency futures contracts, the currency or the
contract are delivered by the seller and paid for by the purchaser, or on which,
in the case of stock index futures contracts and certain foreign currency
futures contracts, the difference between the price at which the contract was
entered into and the contract's closing value is settled between the purchaser
and seller in cash. Futures contracts differ from options in that they are
bilateral agreements, with both the purchaser and the seller equally obligated
to complete the transaction. Futures Contracts call for settlement only on the
expiration date and cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract differs from the purchase or sale of
a security or the purchase of an option in that no purchase price is paid or
received. Instead, an amount of cash or cash equivalents, which varies but may
be as low as 5% or less of the value of the contract, must be deposited with the
broker as "initial margin." Subsequent payments to and from the broker, referred
to as "variation margin," are made on a daily basis as the value of the index or
instrument underlying the Futures Contract fluctuates, making positions in the
Futures Contract more or less valuable -- a process known as "marking to the
market."
Purchases or sales of stock index futures contracts may be used to attempt to
protect a Fund's current or intended stock investments from broad fluctuations
in stock prices. For example, a Fund may sell stock index futures contracts in
anticipation of or during a market decline to attempt to offset the decrease in
market value of the Fund's securities portfolio that might otherwise result. If
such decline occurs, the loss in value of portfolio securities may be offset, in
whole or part, by gains on the futures position. When a Fund is not fully
invested in the securities market and anticipates a significant market advance,
it may purchase stock index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Fund intends to purchase. As such purchases are made, the
corresponding positions in stock index futures contracts will be closed out. In
a substantial majority of these transactions, the Fund will purchase such
securities upon termination of the futures position, but under unusual market
conditions, a long futures position may be terminated without a related purchase
of securities.
As noted in the Prospectus, a Fund may purchase and sell foreign currency
futures contracts for hedging purposes, to attempt to protect its current or
intended investments from fluctuations in currency exchange rates. Such
fluctuations could reduce the dollar value of portfolio securities denominated
in foreign currencies, or increase the cost of foreign-denominated securities to
be acquired, even if the value of such securities in the currencies in which
they are denominated remains constant. A Fund may sell futures contracts on a
foreign currency, for example, where it holds securities denominated in such
currency and it anticipates a decline in the value of such currency relative to
the dollar. In the event such decline occurs, the resulting adverse effect on
the value of foreign-denominated securities may be offset, in whole or in part,
by gains on the futures contracts.
Conversely, a Fund could protect against a rise in the dollar cost of foreign
denominated securities to be acquired by purchasing futures contracts on the
relevant currency, which could offset, in whole or in part, the increased cost
of such securities resulting from a rise in the dollar value of the underlying
currencies. Where a Fund purchases futures contracts under such circumstances,
however, and the prices of securities to be acquired instead decline, the Fund
will sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired. The Fund
may also enter into Futures Contracts for non-hedging purposes, to the extent
permitted by applicable law.
OPTIONS ON FUTURES CONTRACTS: The Fund may write or purchase options to buy or
sell Futures Contracts ("Options on Futures Contracts"). The writing of a call
Option on a Futures Contract may constitute a partial hedge against declining
prices of the securities or other instruments required to be delivered under the
terms of the Futures Contract. If the futures price at expiration of the option
is below the exercise price, the Fund will retain the full amount of the option
premium, less related transaction costs, which provides a partial hedge against
any decline that may have occurred in the Fund's portfolio holdings. The writing
of a put Option on a Futures Contract may constitute a partial hedge against
increasing prices of the securities or other instruments required to be
delivered under the terms of the Futures Contract. If the futures price at
expiration of the option is higher than the exercise price, the Fund will retain
the full amount of the option premium, less related transaction costs, which
provides a partial hedge against any increase in the price of securities which
the Fund intends to purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing Options on Futures Contracts may to
some extent be reduced or increased by changes in the value of portfolio
securities.
The Fund may cover the writing of call Options on Futures Contracts (a) through
purchases of the underlying Futures Contract, (b) through ownership of the
instrument, or instruments included in the index, underlying the Futures
Contract, or (c) through the holding of a call on the same Futures Contract and
in the same principal amount as the call written where the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash and high grade government securities in a
segregated account with its custodian. The Fund may cover the writing of put
Options on Futures Contracts (a) through sales of the underlying Futures
Contract, (b) through segregation of
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<PAGE> 37
cash or cash equivalents in an amount equal to the value of the security or
index underlying the Futures Contract, or (c) through the holding of a put on
the same Futures Contract and in the same principal amount as the put written
where the exercise price of the put held (i) is equal to or greater than the
exercise price of the put written or (ii) is less than the exercise price of the
put written if the difference is maintained by the Fund in cash or high grade
government securities in a segregated account with its custodian. Put and Call
Options on Futures Contracts written by the Fund may also be covered in such
other manner as may be in accordance with the rules of the exchange on which, or
the counterparty with which, the option is traded, and applicable laws and
regulations. Upon the exercise of a call Option on a Futures Contract written by
the Fund, the Fund will be required to sell the underlying Futures Contract
which, if the Fund has covered its obligation through the purchase of such
Contract, will serve to liquidate its futures position. Similarly, where a put
Option on a Futures Contract written by the Fund is exercised, the Fund will be
required to purchase the underlying Futures Contract which, if the Fund has
covered its obligation through the sale of such Contract, will close out its
futures position.
The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or changes in interest or exchange
rates, the Fund could, in lieu of selling Futures Contracts, purchase put
options thereon. In the event that such decrease occurs, it may be offset, in
whole or part, by a profit on the option. Conversely, where it is projected that
the value of securities to be acquired by the Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call Options on Futures Contracts, rather than
purchasing the underlying Futures Contracts. The Fund may also enter into
Options on Futures Contracts for non-hedging purposes, to the extent permitted
by applicable law.
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 Commodities Futures
Trading Commission (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 Trust's
assets. In addition, the Fund must comply with the requirements of various state
securities laws in connection with such transactions.
FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a specific currency at a future date at a
price set at the time of the contract (a "Forward Contract"). The Fund may enter
into Forward Contracts for hedging purposes as well as for non-hedging purposes.
The Fund may also enter into Forward Contracts for "cross-hedging" as noted in
the Prospectus. Transactions in Forward Contracts entered into for hedging
purposes will include forward purchases or sales of foreign currencies for the
purpose of protecting the dollar value of securities denominated in a foreign
currency or protecting the dollar equivalent of interest or dividends to be paid
on such securities. By entering into such transactions, however, the Fund may be
required to forego the benefits of advantageous changes in exchange rates. The
Fund may also enter into transactions in Forward Contracts for other than
hedging purposes which presents greater profit potential but also involves
increased risk. For example, if the Adviser believes that the value of a
particular foreign currency will increase or decrease relative to the value of
the U.S. dollar, the Fund may purchase or sell such currency, respectively,
through a Forward Contract. If the expected changes in the value of the currency
occur, the Fund will realize profits which will increase its gross income. Where
exchange rates do not move in the direction or to the extent anticipated,
however, the Fund may sustain losses which will reduce its gross income. Such
transactions, therefore, will be considered speculative.
The Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such contracts. In those instances in which the
Fund satisfies this requirement through segregation of assets, it will maintain,
in a segregated account, cash, cash equivalents or high grade debt securities,
which will be marked to market on a daily basis, in an amount equal to the value
of its commitments under Forward Contracts.
RISK FACTORS:
IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S PORTFOLIO -- The
Fund's ability effectively to hedge all or a portion of its portfolio through
transactions in options, Futures Contracts, and Forward Contracts will depend on
the degree to which price movements in the underlying index or instrument
correlate with price movements in the relevant portion of the Fund's portfolio.
Because the securities in the Fund's portfolio will most likely not be the same
as those securities underlying a stock index, the correlation between movements
in the portfolio and in the securities underlying the index will not be perfect.
The trading of Futures Contracts and options entails the additional risk of
imperfect correlation between movements in the futures or option price and the
price of the underlying index or obligation. The anticipated spread between the
prices may be distorted due to the differences in the nature of the markets,
such as differences in margin requirements, the liquidity of such markets and
the participation of speculators in such markets. In this regard, trading by
speculators in options and Futures Contracts has in the past occasionally
resulted in market distortions, which may be difficult or impossible to predict,
particularly near the expiration of such contracts. It should be noted that
Futures Contracts or options based upon a narrower index of securities, such as
those of a particular industry group, may present greater
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<PAGE> 38
risk than options or Futures Contracts based on a broad market index, because a
narrower index is more susceptible to rapid and extreme fluctuations as a result
of changes in the value of a small number of securities. The trading of Options
on Futures Contracts also entails the risk that changes in the value of the
underlying Futures Contracts will not be fully reflected in the value of the
option. Further, with respect to options on securities, options on stock indices
and Options on Futures Contracts, the Fund is subject to the risk of market
movements between the time that the option is exercised and the time of
performance thereunder. In writing a covered call option on a security, index or
Futures Contract, the Fund also incurs the risk that changes in the value of the
instruments used to cover the position will not correlate closely with changes
in the value of the option or underlying index or instrument.
The Fund will invest in a hedging instrument only if, in the judgment of its
Adviser, there would be expected to be a sufficient degree of correlation
between movements in the value of the instrument and movements in the value of
the relevant portion of the Fund's portfolio for such hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.
It should also be noted that the Fund may purchase and sell options, Futures
Contracts, Options on Futures Contracts and Forward Contracts not only for
hedging purposes, but also for non-hedging purposes, to the extent permitted by
applicable law, including for the purpose of increasing its return on portfolio
securities. As a result, in the event of adverse market movements, the Fund
might be subject to losses, which would not be offset by increases in the value
of portfolio securities or declines in the cost of securities to be acquired. In
addition, the method of covering an option employed by the Fund may not fully
protect it against risk of loss and, in any event, the Fund could suffer losses
on the option position which might not be offset by corresponding portfolio
gains.
With respect to the writing of straddles on securities, the Fund incurs the risk
that the price of the underlying security will not remain stable, that one of
the options written will be exercised and that the resulting loss will not be
offset by the amount of the premiums received.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET -- Prior to exercise or expiration,
a futures or option position can only be terminated by entering into a closing
purchase or sale transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was entered. While
the Fund will enter into options or futures positions only if there appears to
be a liquid secondary market, there can be no assurance that such a market will
exist for any particular contracts at any specific time. In that event, it may
not be possible to close out a position held by the Fund, and the Fund could be
required to purchase or sell the instrument underlying an option, make or
receive a cash settlement or meet ongoing variation margin requirements. Under
such circumstances, if the Fund had insufficient cash available to meet margin
requirements, it might be necessary to liquidate portfolio securities at a time
when it would be disadvantageous to do so. The inability to close out options
and futures positions, therefore, could have an adverse impact on the Fund's
ability effectively to hedge its portfolios, and could result in trading losses.
The liquidity of a secondary market in a Futures Contract or options thereon may
also be adversely affected by "daily price fluctuation limits," established by
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day. The trading of Futures Contracts and options is
also subject to the risk of trading halts, suspensions, exchange or clearing
house equipment failures, government intervention, insolvency of a brokerage
firm or clearing house or other disruptions of normal trading activity, which
could at times make it difficult or impossible to liquidate existing positions
or to recover excess variation margin payments.
MARGIN -- Because of low initial margin deposits made upon the opening of a
futures position and the writing of an option, such transactions involve
substantial leverage. As a result, relatively small movements in the price of
the contract can result in substantial unrealized gains or losses. Where the
Fund engages in the purchase or sale of Options, Futures Contracts, Options on
Futures Contracts and Forward Contracts for hedging purposes, however, any
losses incurred in connection therewith should, if the hedging strategy is
successful, be offset, in whole or in part, by increases in the value of
securities held by the Fund or decreases in the prices of securities the Fund
intends to acquire. Where the Fund enters into transactions on such instruments
for non-hedging purposes, the margin requirements associated with such
transactions could expose the Fund to greater risk.
TRADING AND POSITION LIMITS -- The exchanges on which Futures Contracts and
options are traded may impose limitations governing the maximum number of
positions on the same side of the market and involving the same underlying
instrument which may be held by a single investor, whether acting alone or in
concert with others (regardless of whether such contracts are held on the same
or different exchanges or held or written in one or more accounts or through one
or more brokers). In addition, the Commodity Futures Trading Commission ("CFTC")
and the various contract markets have established limits referred to as
"speculative position limits" on the maximum net long or net short position
which any person may hold or control in a particular futures or option contract.
An exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. The Adviser does
not believe that these trading and position limits will have any adverse impact
on the strategies for hedging the portfolio of the Fund.
RISK OF OPTIONS ON FUTURES CONTRACTS -- The amount of risk the Fund assumes when
it purchases an Option on a Futures Contract is the premium paid for the option,
plus related transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the
underlying Futures Contract, subject to the risks of the availability of a
liquid offset market described herein. The writer of an Option on a Futures
Contract is subject to the risks
8
<PAGE> 39
of commodity futures trading, including the requirement of initial and variation
margin payments, as well as the additional risk that movements in the price of
the option may not correlate with movements in the price of the underlying index
or Futures Contract.
ADDITIONAL RISKS OF TRANSACTIONS NOT CONDUCTED ON EXCHANGES -- Transactions in
Forward Contracts are subject to all of the correlation, liquidity and other
risks outlined above. In addition, such transactions are subject to the risk of
governmental actions affecting trading in or the prices of currencies underlying
such contracts, which could restrict or eliminate trading and could have a
substantial adverse effect on the value of positions held by the Fund. In
addition, the value of such positions could be adversely affected by a number of
other complex political and economic factors applicable to the countries issuing
the underlying currencies. Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale information with
respect to the foreign currencies underlying contracts thereon. As a result, the
available information on which trading systems will be based may not be as
complete as the comparable data on which the Fund makes investment and trading
decisions in connection with other transactions. Moreover, because the foreign
currency market is a global, twenty-four hour market, events could occur on that
market which would not be reflected in the forward markets until the following
day, thereby preventing the Fund from responding to such events in a timely
manner. Settlements of exercises of Forward Contracts generally must occur
within the country issuing the underlying currency, which in turn requires
traders to accept or make delivery of such currencies in conformity with any
United States or foreign restrictions and regulations regarding the maintenance
of foreign banking relationships, fees, taxes or other charges.
Forward Contracts, and over-the-counter options on securities, are not traded on
exchanges regulated by the CFTC or the SEC, but through financial institutions
acting as market-makers. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. In
addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Fund's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund. Where
no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of over-the-counter contracts, and the Fund could be required to retain options
purchased or written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's ability to profit
from open positions or to reduce losses experienced, and could result in greater
losses. Further, over-the-counter transactions are not subject to the
performance guarantee of an exchange clearing house, and the Fund will therefore
be subject to the risk of default by, or the bankruptcy of, the financial
institution serving as its counterparty.
While Forward Contracts are not presently subject to regulation by the CFTC, the
CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, the Fund's ability to utilize Forward Contracts in
the manner set forth above could be restricted.
RESTRICTIONS 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 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 if, as a result, more than 5% of its total assets would be invested in
such options.
When the Fund purchases a Futures Contract, an amount of cash and cash
equivalents will be deposited in a segregated account with the Fund's custodian
so that the amount so segregated will at all times equal the value of the
Futures Contract, thereby insuring that the use of such Futures Contract is
unleveraged.
INVESTMENT RESTRICTIONS: The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of its
shares (which, as used in this Statement of Additional Information, means the
lesser of (i) more than 50% of the outstanding shares of the Fund (or a class,
as applicable) or (ii) 67% or more of its outstanding shares of the Fund (or a
class, as applicable) present at a meeting if holders of more than 50% of the
outstanding shares of the Fund (or a class, as applicable) are represented at
such meeting in person or by proxy):
The Fund may not:
(1) borrow amounts in excess of 10% of its gross assets, and then only as a
temporary measure for extraordinary or emergency purposes, and subject to a
300% asset coverage requirement, or pledge, mortgage or hypothecate an amount
of its assets taken at market value which would exceed 15% of its gross
assets, in each case taken at cost. For the purpose of this restriction,
collateral arrangements with respect to options, Futures Contracts, Options on
Futures Contracts, Forward Contracts, and payments of initial and variation
margin in connection therewith are not considered a pledge of assets;
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<PAGE> 40
(2) underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;
(3) concentrate investments in any particular industry, but if it is deemed
appropriate for the attainment of the Fund's investment objective, up to 25%
of the Fund's assets, at market value at the time of each investment, may be
invested in any one industry;
(4) purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein), mineral leases, commodities
or commodity contracts (except for options, Futures Contracts, Options on
Futures Contracts and Forward Contracts) in the ordinary course of its
business. The Fund reserves the freedom of action to hold and to sell real
estate, mineral leases, commodities or commodity contracts acquired as a
result of the ownership of securities. The Fund will not purchase securities
for the purpose of acquiring real estate, mineral leases, commodities or
commodity contracts; (except for options, Futures Contracts, Options on
Futures Contracts and Forward Contracts);
(5) make loans to other persons. For these purposes, the purchase of
short-term commercial paper, the purchase of a portion or all of an issue of
debt securities in accordance with its investment objectives and policies, the
lending of portfolio securities, or the investment of the Fund's assets in
repurchase agreements, shall not be considered the making of a loan;
(6) purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of the Fund's total assets, taken at market
value, to be invested in the securities of such issuer, other than U.S.
Government securities;
(7) purchase securities of any issuer if such purchase, at the time thereof,
would cause more than 10% of any class of securities of such issuer to be held
by the Fund. For this purpose all indebtedness of an issuer shall be deemed a
single class and all preferred stock of an issuer shall be deemed a single
class;
(8) invest for the purpose of exercising control or management;
(9) purchase securities issued by any other registered investment company
except by purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market,
is part of a plan of merger or consolidation; provided, however, that the Fund
shall not purchase the securities of any registered investment company if such
purchase at the time thereof would cause more than 10% of the Fund's total
assets, taken at market value, to be invested in the securities of such
issuer; and provided, further, that the Fund shall not purchase securities
issued by any open-end investment company;
(10) purchase or retain any securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the Fund,
or is a member, officer or Director of the Adviser, if after the purchase of
the securities of such issuer by the Fund one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, all
taken at market value, of such issuer, and such persons owning more than 1/2
of 1% of such shares or securities together own beneficially more than 5% of
such shares or securities, or both, all taken at market value;
(11) purchase any securities or evidences of interest therein on margin,
except that the Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of securities and except that the Fund
may make margin deposits in connection with options, Futures Contracts,
Options on Futures Contracts and Forward Contracts;
(12) sell any security which the Fund does not own unless by virtue of its
ownership of other securities the Fund has at the time of sale a right to
obtain securities without payment of further consideration equivalent in kind
and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions;
(13) purchase or sell any put or call option or any combination thereof;
provided, that this shall not prevent the purchase, ownership, holding or sale
of warrants where the grantor of the warrants is the issuer of the underlying
securities or the writing, purchasing and selling of puts, calls or
combinations thereof with respect to securities, indexes of securities,
foreign currencies and Futures Contracts; or
(14) invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years' continuous operation.
As a non-fundamental policy, the Fund will not knowingly invest in securities
which are subject to legal or contractual restrictions on resale (other than
repurchase agreements), unless the Board of Trustees of the Fund has determined
that such securities are liquid based upon trading markets for the specific
security, if, as a result thereof, more than 15% of the Fund's total assets
(taken at market value) would be so invested.
These investment restrictions are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy.
4. MANAGEMENT OF THE FUND
The Board of Trustees provides broad supervision over the affairs of the Fund.
The Adviser is responsible for the investment management, and the officers of
the Fund are responsible for its operations. The Trustees and officers are
listed below, together with their principal occupations during the past five
years. (Their titles may have varied during that period.)
TRUSTEES
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman
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<PAGE> 41
RICHARD B. BAILEY*
Private investor; Massachusetts Financial Services Company, former Chairman and
Director (until September 30, 1991)
PETER G. HARWOOD
Loomis, Sayles & Co., Inc., (investment counsel firm) Financial Vice President
Treasurer and Director (retired October 1988)
Address: 211 Lindsay Pond Road, Concord, Massachusetts
J. ATWOOD IVES
Eastern Enterprises (diversified holding company), Chairman and Chief Executive
Officer (since December 1991); General Cinema Corporation, Vice Chairman and
Chief Financial Officer (until December 1991); The Neiman Marcus Group, Inc.,
Vice Chairman and Chief Financial Officer (from August 1987 to December 1991);
United States Filter Corporation, Director
Address: 9 Riverside Road, Weston, Massachusetts
LAWRENCE T. PERERA
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts
WILLIAM J. POORVU
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (a real estate investment trust),
Director; The Baupost Fund (a registered investment company), Vice Chairman
(since November 1993), Chairman and Trustee (from June 1990 until November
1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge, Massachusetts
CHARLES W. SCHMIDT
Private investor; Raytheon Company (diversified electronics manufacturer),
Senior Vice President and Group Executive (until December 1990); OHM
Corporation, Director; The Boston Company, Director; Boston Safe Deposit and
Trust Company, Director
Address: 30 Colpitts Road, Weston, Massachusetts
ARNOLD D. SCOTT*
Massachusetts Financial Services Company, Senior Executive Vice President and
Secretary
JEFFREY L. SHAMES*
Massachusetts Financial Services Company, President
ELAINE R. SMITH
Independent Consultant; Brigham and Women's Hospital, Executive Vice President
and Chief Operating Officer (from August 1990 to September 1992); Ernst &
Young (accountants), Consultant (from February to July 1990)
Address: Weston, Massachusetts
DAVID B. STONE
North American Management Corp. (investment advisers), Chairman
Address: 10 Post Office Square, Suite 300, Boston, Massachusetts
OFFICERS
W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President
STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, Assistant
Secretary and General Counsel
JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel (since September 1990) associated with major law firm (prior to August
1990)
JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President
---------------
* "Interested persons" (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Adviser, whose address is 500 Boylston
Street, Boston, Massachusetts 02116.
Each Trustee and officer holds comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor. Mr. Brodkin, the Chairman of MFD, Messrs.
Shames and Scott, Directors of MFD, and Mr. Cavan, the Secretary of MFD hold
similar positions with certain other MFS affiliates. Mr. Bailey is a Director of
Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)"), the
corporate parent of MFS.
The Fund pays the compensation of non-interested Trustees (who currently receive
a fee of $2,500 per year plus $100 per committee meeting and $135 for attendance
at each meeting, plus certain out-of-pocket expenses, as incurred) and has
adopted a retirement plan for non-interested Trustees. Under this plan, a
Trustee will retire upon reaching age 73 and if the Trustee has completed at
least five years of service, he would be entitled to annual payments during his
lifetime of up to 50% of such Trustee's average annual compensation (based on
the three years prior to his retirement) depending on his length of service. A
Trustee may also retire prior to age 73 and receive reduced payments if he has
completed at least five years of service. Under the plan, a Trustee (or his
beneficiaries) will also receive benefits for a period of time in the event the
Trustee is disabled or dies. These benefits will also be based on the Trustee's
average annual compensation and length of service. There is no retirement plan
provided by the Fund for the interested Trustees. The Fund will accrue
compensation expenses each year to cover current year's service and amortize
past service cost.
Set forth in Appendix A hereto is certain information concerning cash
compensation paid to non-interested Trustees and benefits accrued, and estimated
benefits payable, under the retirement plan. As of February 28, 1995, all
Trustees and officers as a group owned less than 1% of the outstanding shares of
the Fund.
As of February 28, 1995, Mike Lawless TTEE, Kerlan-Jobe Orthopedic Clinic, 301
John St., Manhattan Beach, CA 90266-6655 was the record owner of approximately
5.63% of the outstanding Class B shares of the Fund.
The Fund's Declaration of Trust provides that it will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Fund, unless, as
to liabilities to the Fund or its shareholders, it is finally adjudicated that
they engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or with respect to any
matter, unless it is adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interest of the Fund. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition or by a reasonable determination based upon a review of readily
available facts by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not engaged
in willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
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<PAGE> 42
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.) which
in turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life").
The Adviser manages the Fund pursuant to an Investment Advisory Agreement dated
July 19, 1985 (the "Advisory Agreement"). The Adviser provides the Fund with
overall investment advisory and administrative services, as well as general
office facilities. Subject to such policies as the Trustees may determine, the
Adviser makes investment decisions for the Fund. For these services and
facilities, the Adviser receives a management fee computed and paid monthly at
an annual rate equivalent to 0.5% of the first $200 million of the Fund's
average daily net assets for the Fund's current fiscal year, 0.4% of the next
$300 million of the Fund's average daily net assets for the Fund's current
fiscal year and 0.2% of its average daily net assets for the Fund's current
fiscal year in excess of $500 million, in each case on an annualized basis.
Under the Advisory Agreement, MFS received management fees of $3,277,285,
$3,338,147 and $3,191,804 for the fiscal years ended November 30, 1994, 1993 and
1992, respectively. In order to comply with the expense limitations of certain
state securities commissions, the Adviser will reduce its management fee or
otherwise reimburse the Fund for any expenses, exclusive of interest, taxes and
brokerage commissions, incurred by the Fund in any fiscal year to the extent
such expenses exceed the most restrictive of such state expense limitations. The
Adviser will make appropriate adjustments to such reimbursements in response to
any amendment or rescission of the various state requirements.
The Advisory Agreement provides that the compensation of the Adviser will be
reduced by an annual sum representing the Fund's share of the fair value of the
use of office furniture, furnishings and equipment purchased over the years with
funds furnished by the Fund and Massachusetts Investors Trust as part of shared
expenses. The total annual use value of this property for the period ending
November 30, 1994, has been determined pursuant to a formula devised by an
independent appraiser to be $124,379, and the calculation for this determination
has been approved by the Trustees who are not officers of the Adviser. This
amount and amounts so determined and approved in subsequent years will be
credited 24% to the Fund and 76% to Massachusetts Investors Trust, being the
average of their proportionate contributions to shared expenses over the ten
years ended December 31, 1968.
The Fund pays all of its expenses (other than those assumed by MFS or MFD),
including: Trustee fees discussed above; governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the
Fund; fees and expenses of independent auditors, of legal counsel, and of any
transfer agent, registrar or dividend disbursing agent of the Fund; expenses of
repurchasing and redeeming shares; expenses of preparing, printing and mailing
share certificates, shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of State Street Bank and Trust Company,
the Fund's custodian, for all services to the Fund, including safekeeping of
funds and securities and maintaining required books and accounts; expenses of
calculating the net asset value of the Fund's shares; and expenses of
shareholder meetings. Expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes are borne by the Fund except that its
Distribution Agreement with MFD requires MFD to pay for prospectuses that are to
be used for sales purposes and for the qualification of the Fund's shares for
sale in the various states. For a list of the Fund's expenses, including the
compensation paid to the Trustees who are not officers of MFS, during its fiscal
year ended November 30, 1994, see "Financial Statements -- Statement of
Operations" in the Annual Report. Payment by the Fund of brokerage commissions
for brokerage and research services of value to the Adviser in serving its
clients is discussed under the caption "Portfolio Transactions and Brokerage
Commissions."
MFS pays the compensation of the Fund's officers and of any Trustee who is an
officer of MFS. The Adviser also furnishes at its own expense all necessary
administrative services, including office space, equipment, clerical personnel,
investment advisory facilities, and all executive and supervisory personnel
necessary for managing the Fund's investments, effecting the Fund's portfolio
transactions and, in general, administering the Fund's affairs.
The Advisory Agreement will remain in effect until August 1, 1995, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's outstanding voting securities and, in either case, by a majority of the
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party. The Advisory Agreement terminates automatically if it is
assigned and may be terminated without penalty by vote of a majority of the
Fund's outstanding voting securities or by either party on not more than 60
days' nor less than 30 days' written notice. The Advisory Agreement further
provides that MFS may render services to others and that neither MFS nor its
personnel shall be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in the execution
and management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its or their duties or by reason of reckless
disregard of its or their obligations and duties under the Advisory Agreement.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safe-keeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest and dividends on the
Fund's
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<PAGE> 43
investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as principal in securities transactions. The Custodian also acts as the dividend
disbursing agent of the Fund.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, dated August 1, 1985 (the "Agency Agreement"),
with the Fund. The Shareholder Servicing Agent's responsibilities under the
Agency Agreement include administering and performing transfer agent functions
and keeping records in connection with the issuance, transfer and redemption of
each class of the shares of the Fund. For these services, the Shareholder
Servicing Agent will receive a fee based on the net assets of each class of
shares of the Fund, computed and paid monthly. In addition, the Shareholder
Servicing Agent will be reimbursed by the Fund for certain expenses incurred by
the Shareholder Servicing Agent on behalf of the Fund. State Street Bank and
Trust Company, the dividend disbursing agent of the Fund, has contracted with
the Shareholder Servicing Agent to administer and perform certain dividend and
distribution disbursing functions for the Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the continuous
offering of shares of the Fund pursuant to a Distribution Agreement, dated
January 1, 1995 (the "Distribution Agreement"), with the Fund. Prior to January
1, 1995, MFS Financial Services, Inc. ("FSI"), another wholly owned subsidiary
of MFS, was the Fund's distributor. Where this SAI refers to MFD in relation to
the receipt or payment of money with respect to a period or periods prior to
January 1, 1995, such reference shall be deemed to include FSI as the
predecessor in interest to MFD.
CLASS A SHARES: MFD acts as agent in selling shares of the Fund to dealers. The
public offering price of Class A shares of the Fund is their net asset value
next computed after the sale plus a sales charge which varies based upon the
quantity purchased. The public offering price of Class A shares of the Fund is
calculated by dividing the net asset value of a Class A share by the difference
(expressed as a decimal) between 100% and the sales charge percentage of
offering price applicable to the purchase (see "Purchases" in the Prospectus).
The sales charge scale set forth in the Prospectus applies to purchases of Class
A shares of the Fund alone or in combination with shares of all classes of
certain other funds in the MFS Family of Funds (the "MFS Funds") and other funds
(as noted under Right of Accumulation) by any person, including members of a
family unit (e.g., husband, wife and minor children) and bona fide trustees, and
also applies to purchases made under the Right of Accumulation or a Letter of
Intent (see "Investment and Withdrawal Programs" below). A group might qualify
to obtain quantity sales charge discounts (see "Investment and Withdrawal
Programs" in this Statement of Additional Information).
Class A shares of the Fund may be sold at their net asset value to certain
persons and in certain instances, as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others with
whom MFS, MFD and/or the Fund have business relationships, and because the sales
effort, if any, involved in making such sales is negligible.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The commission paid
to the underwriter is the difference between the total amount invested and the
sum of (a) the net proceeds to the Fund and (b) the dealer commission. Because
of rounding in the computation of offering price, the portion of the sales
charge paid to the distributor may vary and the total sales charge may be more
or less than the sales charge calculated using the sales charge expressed as a
percentage of offering price or as a percentage of the net amount invested as
listed in the Prospectus. In the case of the maximum sales charge, the dealer
retains 5% and MFD, on behalf of the Fund, retains approximately 3/4 of 1% of
the public offering price. MFD pays commissions to dealers who initiate and are
responsible for purchases of $1 million or more as described in the Prospectus.
CLASS B SHARES: MFD acts as agent in selling Class B shares of the Fund to
dealers. The public offering price of Class B shares is their net asset value
next computed after the sale (see "Purchases" in the Prospectus).
GENERAL: Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change. On occasion, MFD may obtain brokers loans
from various banks, including the custodian bank for the MFS Funds, to
facilitate the settlement of sales of shares of the Fund to dealers. MFD may
benefit from its temporary holding of funds paid to it by investment dealers for
the purchase of Fund shares.
During the Fund's fiscal year ended November 30, 1994, MFD received sales
charges of $57,130 and dealers received sales charges of $366,448 (as their
concession on gross sales charges of $423,578) for selling Class A shares of the
Fund; the Fund received $38,782,131 representing the aggregate net asset value
of such shares. During the Fund's fiscal year ended November 30, 1993, MFD
received sales charges of $65,741 and dealers received sales charges of $377,623
(as their concession on gross sales charges of $443,364) for selling Class A
shares of the Fund; the Fund received $39,927,804 representing the aggregate net
asset value of such shares. During the Fund's fiscal year ended November 30,
1992, MFD received sales charges of $95,632 and dealers received sales charges
of $534,981 (as their concession on gross sales
13
<PAGE> 44
charges of $630,613) for selling Class A shares of the Fund; the Fund received
$49,638,096 representing the aggregate net asset value of such shares.
During the Fund's fiscal year ended November 30, 1994, the CDSC imposed on
redemption of Class A and Class B shares was $299 and $11,593, respectively.
During the period September 7, 1993 through November 30, 1993, the CDSC imposed
on redemption of Class B shares was $417.
The Distribution Agreement will remain in effect until August 1, 1995 and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.
5. PORTFOLIO TRANSACTIONS AND
BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by the
Fund's portfolio manager who is an employee of the Adviser and who is appointed
and supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. The portfolio manager may serve other clients
of the Adviser or any subsidiary of the Adviser in a similar capacity.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services and the general level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time soliciting dealer fees are available to the Adviser on the tender of the
Fund's portfolio securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser. At
present no other recapture arrangements are in effect.
Consistent with the foregoing primary consideration, the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (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 MFD as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
Under the Advisory Agreement and as permitted by Section 28(e) of the Securities
Exchange Act of 1934, the Adviser may cause the Fund to pay a broker-dealer
which provides brokerage and research services to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of the
amount other broker-dealers would have charged for the transaction if the
Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
the Adviser's overall responsibilities to the Fund or to its other clients. Not
all of such services are useful or of value in advising the Fund.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to the
availability of securities or of purchasers or sellers of securities and
services in effecting securities transactions and performing functions
incidental thereto such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other factual
information or services ("Research") to the Adviser for no consideration other
than brokerage or underwriting commissions and securities may be bought or sold
through such broker-dealers. The Trustees of the Fund (together with the
Trustees of the other MFS Funds) have directed the Adviser to allocate a total
of $20,000 of commission business from the MFS Funds to the Pershing Division of
Donaldson, Lufkin and Jenrette as consideration for the annual renewal of the
Lipper Directors' Analytical Data Service (which provides information useful to
the Trustees in reviewing the relationship between the Fund and the Adviser).
The Adviser's investment management personnel attempt to evaluate the quality of
Research provided by brokers. Results of this effort are sometimes used by the
Adviser as a consideration in the selection of brokers to execute portfolio
transactions. However, the Adviser is unable to quantify the amount of
commissions set forth below which were paid as a result of such Research because
a substantial number of transactions were effected through brokers which provide
Research but which were selected principally because of their execution
capabilities.
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<PAGE> 45
The management fee that the Fund pays to the Adviser will not be reduced as a
consequence of the Adviser's receipt of brokerage and research services. To the
extent the Fund's portfolio transactions are used to obtain brokerage and
research services, the brokerage commissions paid by the Fund will exceed those
that might otherwise be paid for such portfolio transactions or for such
portfolio transactions and research by an amount which cannot be presently
determined. Such services would be useful and of value to the Adviser in serving
both the Fund and other clients and, conversely, such services obtained by the
placement of brokerage business of other clients would be useful to the Adviser
in carrying out its obligations to the Fund. While such services are not
expected to reduce the expenses of the Adviser, the Adviser would, through use
of the services, avoid the additional expenses which would be incurred if it
should attempt to develop comparable information through its own staff.
For the fiscal year ended November 30, 1994, the Fund paid total brokerage
commissions of $1,258,201 on total transactions (other than short-term
obligations and U.S. Government Securities) of $1,173,694,214. For the fiscal
year ended November 30, 1993, the Fund paid total brokerage commissions of
$2,000,511, on total transactions (other than short-term obligations and U.S.
Government securities) of $1,267,484,516. For the fiscal year ended November 30,
1992, the Fund paid total brokerage commissions of $609,047 on total
transactions (other than short-term obligations and U.S. Government securities)
of $321,472,071.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for that of one or more of the other clients of the Adviser
or any subsidiary of the Adviser. Investment decisions for the Fund and for such
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Fund is concerned.
In other cases, however, the Fund believes that its ability to participate in
volume transactions will produce better executions for the Fund.
6. SHAREHOLDER SERVICES
INVESTMENT AND WITHDRAWAL PROGRAMS -- The Fund makes available the following
programs designed to enable shareholders to add to their investment or withdraw
from it with a minimum of paper work. These are described below and, in certain
cases, in the Prospectus. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $50,000 or more of Class A shares of the Fund
alone or in combination with shares of all classes of other MFS Funds or MFS
Fixed Income Fund (a bank collective investment fund) within a 13-month period
(or 36-month period, in the case of purchases of $1 million or more), the
shareholder may obtain Class A shares of the Fund at the same reduced sales
charge as though the total quantity were invested in one lump sum by completing
the Letter of Intent section of the Fund's Account Application, or filing a
separate Letter of Intent application (available from the Shareholder Servicing
Agent) within 90 days of the commencement of purchases. Subject to acceptance by
MFD and the conditions mentioned below, each purchase will be made at a public
offering price applicable to a single transaction of the dollar amount specified
in the Letter of Intent application. The shareholder or his dealer must inform
MFD that the Letter of Intent is in effect each time shares are purchased. The
shareholder makes no commitment to purchase additional shares, but if his
purchases within 13-months (or 36-months, in the case of purchases of $1 million
or more), plus the value of shares credited toward completion of the Letter of
Intent do not total the sum specified, he will pay the increased amount of the
sales charge as described below. Instructions for issuance of shares in the name
of a person other than the person signing the Letter of Intent application must
be accompanied by a written statement from the dealer stating that the shares
were paid for by the person signing such Letter. Neither income dividends nor
capital gain distributions taken in additional shares will apply toward the
completion of the Letter of Intent. Dividends and distributions of other MFS
Funds automatically reinvested in shares of the Fund pursuant to the
Distribution Investment Program will also not apply toward completion of the
Letter of Intent.
Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder or
to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month period or 36-month period, as
applicable), the shareholder will be notified and the escrowed shares will be
released.
If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released by
the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in the
premises.
15
<PAGE> 46
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity discounts
on the purchase of Class A shares when his new investment, together with the
current offering price value of all holdings of all classes of shares of that
shareholder in the MFS Funds or MFS Fixed Income Fund (a bank collective
investment fund)reaches a discount level. See "Purchases" in the Prospectus for
the sales charges on quantity discounts. For example, if a shareholder owns
shares valued at $37,500 and purchases an additional $12,500 of Class A shares
of the Fund, the sales charge for the $12,500 purchase would be at the rate of
4.75% (the rate applicable to single transactions of $50,000). A shareholder
must provide the Shareholder Servicing Agent (or his investment dealer must
provide MFD) with information to verify that the quantity sales charge discount
is applicable at the time the investment is made.
DISTRIBUTION INVESTMENT PROGRAM: Distributions of dividends and capital gains
made by the Fund with respect to a particular class of shares may be
automatically invested in shares of the same class of one of the other MFS
Funds, if shares of the fund are available for sale. Such investments will be
subject to additional purchase minimums. Distributions will be invested at net
asset value (exclusive of any sales charge) and not subject to any CDSC.
Distributions will be invested at the close of business on the payable date for
the distribution. A shareholder considering the Distribution Investment Program
should obtain and read the prospectus of the other fund and consider the
differences in objectives and policies before making any investment.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder Servicing
Agent to send him (or anyone he designates) regular periodic payments, as
designated on the Account Application and based upon the value of his account.
Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $100,
except in certain limited circumstances. The aggregate withdrawals of Class B
shares in any year pursuant to a SWP generally are limited to 10% of the value
of the account at the time of the establishment of the SWP. SWP payments are
drawn from the proceeds of share redemptions (which would be a return of
principal and, if reflecting a gain, would be taxable). Redemptions of Class B
shares will be made in the following order: (i) any "Free Amount"; (ii) to the
extent necessary, any "Reinvested Shares"; and (iii) to the extent necessary,
the "Direct Purchase" subject to the lowest CDSC (as such terms are defined in
"Contingent Deferred Sales Charge" in the Prospectus). The CDSC will be waived
in the case of redemptions of Class B shares pursuant to a SWP, but will not be
waived in the case of SWP redemptions of Class A shares which are subject to a
CDSC. To the extent that redemptions for such periodic withdrawals exceed
dividend income reinvested in the account, such redemptions will reduce and may
eventually exhaust the number of shares in the shareholder's account. All
dividend and capital gain distributions for an account with a SWP will be
reinvested in additional full and fractional shares of the Fund at the net asset
value in effect at the close of business on the record date for such
distributions. To initiate this service, shares having an aggregate value of at
least $10,000 either must be held on deposit by, or certificates for such shares
must be deposited with, the Shareholder Servicing Agent. With respect to Class A
shares, maintaining a withdrawal plan concurrently with an investment program
would be disadvantageous because of the sales charges included in share
purchases and the imposition of a CDSC on certain redemptions. The shareholder
by written instruction to the Shareholder Servicing Agent may deposit into the
account additional shares of the Fund, change the payee or change the dollar
amount of each payment. The Shareholder Servicing Agent may charge the account
for services rendered and expenses incurred beyond those normally assumed by the
Fund with respect to the liquidation of shares. No charge is currently assessed
against the account, but one could be instituted by the Shareholder Servicing
Agent on 60 days' notice in writing to the shareholder in the event that the
Fund ceases to assume the cost of these services. The Fund may terminate any SWP
for an account if the value of the account falls below $5,000 as a result of
share redemptions (other than as a result of a SWP) or an exchange of shares of
the Fund for shares of another MFS Fund. Any SWP may be terminated at any time
by either the shareholder or the Fund.
INVEST BY MAIL: Additional investments of $50 or more may be made at any time by
mailing a check payable to the Fund directly to the Shareholder Servicing Agent.
The shareholder's account number and the name of his investment dealer must be
included with each investment.
GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent) obtain quantity sales charge discounts on the purchase of Class A shares
if the group (1) gives its endorsement or authorization to the investment
program so it may be used by the investment dealer to facilitate solicitation of
the membership, thus effecting economies of sales effort; (2) has been in
existence for at least six months and has a legitimate purpose other than to
purchase mutual fund shares at a discount; (3) is not a group of individuals
whose sole organizational nexus is as credit cardholders of a company,
policyholders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar groups; and (4) agrees to
provide certification of membership of those members investing money in the MFS
Funds upon the request of MFD.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may participate in the Automatic Exchange Plan. The
Automatic Exchange Plan provides for automatic exchanges of funds from the
shareholder's account in an MFS Fund for investment in the same class of shares
of other MFS Funds selected by the shareholder provided such shares are
available for sale. Under the Automatic Exchange Plan, exchanges of at least $50
each may be made to up to four different funds effective on the seventh day of
each month or of every third month, depending whether monthly or quarterly
exchanges are elected by the shareholder. If the seventh day of the month is not
a business day, the transaction will be processed on the next business day.
Generally, the initial
16
<PAGE> 47
exchange will occur after receipt and processing by the Shareholder Servicing
Agent of an application in good order. Exchanges will continue to be made from a
shareholder's account in any MFS Fund, as long as the balance of the account is
sufficient to complete the exchanges. Additional payments made to a
shareholder's account will extend the period that exchanges will continue to be
made under the Automatic Exchange Plan. However, if additional payments are
added to an account subject to the Automatic Exchange Plan shortly before an
exchange is scheduled, such funds may not be available for exchanges until the
following month; therefore, care should be used to avoid inadvertently
terminating the Automatic Exchange Plan through exhaustion of the account
balance.
No transaction fee for exchanges will be charged in connection with the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund and Class A shares of MFS Cash Reserve Fund
will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions in
writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by the
record owner(s) exactly as shares are registered; if by telephone -- proper
account identification is given by the dealer or shareholder of record). Each
Exchange Change Request (other than termination of participation in the program)
must involve at least $50. Generally, if an Exchange Change Request is received
by telephone or in writing before the close of business on the last business day
of a month, the Exchange Change Request will be effective for the following
month's exchange.
A shareholder's right to make additional investments in any of the MFS Funds, to
make exchanges of shares from one MFS Fund to another and to withdraw from an
MFS Fund, as well as a shareholder's other rights and privileges are not
affected by a shareholder's participation in the Automatic Exchange Plan.
The Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding the Automatic Exchange Plan, including the treatment of
any CDSC, see "Exchange Privilege" below.
REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the other
MFS Funds (except MFS Money Market Fund, MFS Government Money Market Fund and
holders of Class A shares of MFS Cash Reserve Fund in the case where the shares
are acquired through direct purchase or reinvested dividends) who have redeemed
their shares have a one-time right
to reinvest the redemption proceeds in the same class of shares of any of the
MFS Funds (if shares of the fund are available for sale) at net asset value
(without a sales charge) and, if applicable, with credit for any CDSC paid. In
the case of proceeds reinvested in shares of MFS Money Market Fund, MFS
Government Money Market Fund and Class A shares of MFS Cash Reserve Fund, the
shareholder has the right to exchange the acquired shares for shares of another
MFS Fund at net asset value pursuant to the exchange privilege described below.
Such a reinvestment must be made within 90 days of the redemption and is limited
to the amount of the redemption proceeds. If the shares credited for any CDSC
paid are then redeemed within six years of the initial purchase in the case of
Class B shares or 12 months of the initial purchase in the case of certain Class
A shares, a CDSC will be imposed upon redemption. Although redemptions and
repurchases of shares are taxable events, a reinvestment within such 90-day
period of time in the same fund may be considered a "wash sale" and may result
in the inability to recognize currently all or a portion of any loss realized on
the original redemption for federal income tax purposes. Please see your tax
adviser for further information.
EXCHANGE PRIVILEGE: Subject to the requirements set forth below, some or all of
the shares of the same class in an account with the Fund for which payment has
been received by the Fund (i.e., an established account) may be exchanged for
shares of the same class of any of the other MFS Funds (if available for sale)
at net asset value. Exchanges will be made only after instructions in writing or
by telephone (an "Exchange Request") are received for an established account by
the Shareholder Servicing Agent.
Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least $1,000 ($50 in the case of retirement plan participants whose sponsoring
organizations subscribe to the MFS FUNDamental 401(k) Plan or another similar
401(k) recordkeeping system made available by the Shareholder Servicing Agent)
or all the shares in the account. Each exchange involves the redemption of the
shares of the Fund to be exchanged and the purchase at net asset value (i.e.,
without a sales charge) of shares of the same class of the other MFS Fund. Any
gain or loss on the redemption of the shares exchanged is reportable on the
shareholder's federal income tax return, unless both the shares received and the
shares surrendered in the exchange are held in a tax-deferred retirement plan or
other tax-exempt account. No more than five exchanges may be made in any one
Exchange Request by telephone. If an Exchange Request is received by the
Shareholder Servicing Agent prior to the close of regular trading on the
Exchange, the exchange usually will occur on that day if all of the requirements
set forth above have been complied with at that time. However, payment of the
redemption proceeds by the Fund, and thus purchase of shares of the other MFS
Fund, may be delayed for up to seven days if the Fund determines that such a
delay would be in the best interest of all of its shareholders. Investment
dealers which have satisfied criteria established by MFD may also communicate a
shareholder's exchange instruction to MFD by facsimile subject to the
requirements set forth above.
No CDSC is imposed on exchanges among the MFS Funds, although liability for the
CDSC is carried forward to the exchanged shares. For purposes of calculating the
CDSC upon
17
<PAGE> 48
redemption of shares acquired in an exchange, the purchase of shares acquired in
one or more exchanges is deemed to have occurred at the time of the original
purchase of the exchanged shares.
Additional information with respect to any of the MFS Funds, including a copy of
its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should obtain
and read the prospectus of the other fund and consider the differences in
objectives and policies before making any exchange. Shareholders in the other
MFS Funds (except shares of MFS Money Market Fund, MFS Government Money Market
Fund and Class A shares of MFS Cash Reserve Fund, acquired through direct
purchase and dividends reinvested prior to June 1, 1992) have the right to
exchange their shares for shares of the MFS Funds, subject to the conditions, if
any, set forth in their respective prospectuses. In addition, unitholders of the
MFS Fixed Fund have the right to exchange their units (except units acquired
through direct purchases) for shares of the Fund, subject to the conditions, if
any, imposed upon such unitholders by the MFS Fixed Fund.
Any state income tax advantages for investment in shares of each state-specific
series of MFS Municipal Series Trust may only benefit residents of such states.
Investors should consult with their own tax advisers to be sure this is an
appropriate investment, based on their residency and each state's income tax
laws.
The exchange privilege (or any aspect of it) may be changed or discontinued and
is subject to certain limitations (see "Purchases" in the Prospectus).
TAX-DEFERRED RETIREMENT PLANS: Shares of the Fund may be purchased by all types
of tax-deferred retirement plans. MFD makes available through investment dealers
plans and/or custody agreements for the following:
Individual Retirement Accounts (IRAs) (for individuals and their non-employed
spouses who desire to make limited contributions to a tax-deferred retirement
program and, if eligible, to receive a federal income tax deduction for
amounts contributed);
Simplified Employee Pension (SEP-IRA) Plans;
Retirement Plans Qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended;
403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and
Certain other qualified pension and profit-sharing plans.
The plan documents provided by MFD designate a trustee or custodian (unless
another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested automatically.
For further details with respect to any plan, including fees charged by the
trustee, custodian or MFD, tax consequences and redemption information, see the
specific documents for that plan. Plan documents other than those provided by
MFD may be used to establish any of the plans described above. Third party
administrative services, available for some corporate plans, may limit or delay
the processing of transactions.
Investors should consult with their tax advisers before establishing any of the
tax-deferred retirement plans described above.
7. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing requirements imposed by the Code, it is not expected
that the Fund will be required to pay any federal income or excise taxes,
although the Fund's foreign-source income may be subject to foreign withholding
taxes. If the Fund should fail to qualify as a "regulated investment company" in
any year, the Fund would incur a regular corporate federal income tax upon its
taxable income and Fund distributions would generally be taxable as ordinary
dividend income to shareholders.
Shareholders of the Fund normally will have to pay federal income taxes, and any
state and local taxes, on the dividends and capital gain distributions they
receive from the Fund. Dividends from income, including certain foreign currency
gains, and any distributions from net short-term capital gains, whether received
in cash or reinvested in additional shares, are taxable to shareholders as
ordinary income for federal income tax purposes. A portion of the Fund's
ordinary income dividends (but none of its capital gains) is eligible for the
dividends-received deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Fund shares.
Availability of the deduction for particular shareholders is subject to certain
limitations, and deducted amounts may be subject to the alternative minimum tax
or result in certain basis adjustments. Distributions of net capital gains
(i.e., the excess of the net long-term capital gains over the short-term capital
losses), whether received in cash or invested in additional shares, are taxable
to the Fund's shareholders as long-term capital gains for federal income tax
purposes regardless of how long they have owned shares in the Fund. Fund
dividends declared in October, November or December and paid the following
January, will be taxable to shareholders as if received on December 31 of the
year in which they are declared.
Any dividend or distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the dividend or distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay
18
<PAGE> 49
the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. In
general, any gain or loss realized upon a taxable disposition of shares of the
Fund by a shareholder that holds such shares as a capital asset will be treated
as long-term capital gain or loss if the shares have been held for more than
twelve months and otherwise as a short-term capital gain or loss. However, any
loss realized upon a disposition of shares in the Fund held for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a redemption of shares may also be disallowed under rules relating
to wash sales. Gain may be increased (or loss reduced) upon a redemption of
Class A shares of the Fund within ninety days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) of the Fund or
of another MFS Fund (or any other shares of an MFS Fund generally sold subject
to a sales charge) without payment of an additional sales charge of Class A
shares.
The Fund's investment in zero coupon bonds and certain securities purchased at a
market discount will cause it to realize income prior to the receipt of cash
payments with respect to those securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially resulting
in additional taxable gain or loss to the Fund.
The Fund's transactions in options, Futures Contracts, and Forward Contracts
will be subject to special tax rules that may affect the amount, timing, and
character of Fund income and distributions to shareholders. For example, certain
positions held by the Fund on the last business day of each taxable year will be
marked to market (i.e., treated as if closed out) on such day, and any gain or
loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund will limit its activities in options, Futures Contracts, and
Forward Contracts to the extent necessary to meet the requirements of Subchapter
M of the Code.
Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses. The holding of foreign currencies for
non-hedging purposes and investment by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid a tax on the Fund. The
Fund may elect to mark to market any investments in "passive foreign investment
companies" on the last day of each year. This election may cause the Fund to
recognize income prior to the receipt of cash payments with respect to those
investments; in order to distribute this income and avoid a tax on the Fund, the
Fund may be required to liquidate portfolio securities that it might otherwise
have continued to hold.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source; the Fund does not
expect to be able to pass through to shareholders foreign tax credits with
respect to such foreign taxes. The United States has entered into tax treaties
with many foreign countries that may entitle the Fund to a reduced rate of tax
or an exemption from tax on such income; the Fund intends to qualify for treaty
reduced rates where available. It is impossible to determine the effective rate
of foreign tax in advance since the amount of the Fund's assets to be invested
within various countries is not known.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at a rate of 30%. The Fund intends to
withhold U.S. federal income tax at the rate of 30% on taxable dividends and
other payments to Non-U.S. Persons that are subject to such withholding,
regardless of whether a lower treaty rate may be permitted. Any amounts
overwithheld may be recovered by such persons by filing a claim for refund with
the U.S. Internal Revenue Service within the time period appropriate to such
claims.
The Fund is also required in certain circumstances to apply backup withholding
of 31% on taxable dividends and redemption proceeds paid to any shareholder who
does not furnish to the Fund certain information and certifications or who is
otherwise subject to backup withholding. Backup withholding will not, however,
be applied to payments that have been subject to 30% withholding. Distributions
received from the Fund by Non-U.S. Persons may also be subject to tax under the
laws of their own jurisdiction.
As long as it qualifies as a regulated investment company under the Code, the
Fund will not be required to pay Massachusetts income or excise taxes.
8. DETERMINATION OF NET ASSET VALUE
AND PERFORMANCE
NET ASSET VALUE
The net asset value per share of each class of the Fund is determined each day
during which the Exchange is open for trading. As of the date of this SAI, the
Exchange is open for trading every weekday except for the following holidays (or
the days on which they are observed New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.) This determination is made once during each such day as of the
close of regular trading on the Exchange by deducting the amount of the
liabilities attributable to the class from the value of the assets
19
<PAGE> 50
attributable to the class and dividing the difference by the number of shares of
the class outstanding. Forward Contracts will be valued using a pricing model
taking into consideration market data from an external pricing source. Use of
the pricing services has been approved by the Fund's Board of Trustees. All
other securities, futures contracts and options in the Fund's portfolio (other
than short-term obligations) for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign) will be valued
at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available, be
valued at current bid prices, unless such securities are reported on the NASDAQ
system, in which case they are valued at the last sale price or, if no sales
occurred during the day, at the last quoted bid price. Short-term obligations
with a remaining maturity in excess of 60 days will be valued upon dealer
supplied valuations. Other short-term obligations are valued at amortized cost,
which constitutes fair value as determined by the Board of Trustees. Portfolio
securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Board of
Trustees.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for each
class of shares for certain periods by determining the average annual compounded
rates of return over those periods that would cause an investment of $1,000
(made with all distributions reinvested and reflecting the CDSC or the maximum
public offering price) to reach the value of that investment at the end of the
periods. The Fund may also calculate (i) a total rate of return, which is not
reduced with respect to Class B shares by the CDSC (4% maximum for shares
purchased on and after September 1, 1993) and therefore may result in a higher
rate of return, (ii) a total rate of return assuming an initial account value of
$1,000, which will result in a higher rate of return with respect to Class A
shares since the value of the initial account will not be reduced by the maximum
sales charge (currently 5.75%) and/or (iii) total rates of return which
represent aggregate performance over a period or year-by-year performance, and
which may or may not reflect the effect of the maximum or other sales charge or
CDSC. The Fund's average annual total rate of return for Class A shares,
reflecting the initial investment at the current maximum public offering price
for the one-year, five-year and ten-year periods ended November 30, 1994 was,
respectively, -10.45%, 8.25% and 12.43%. The Fund's average annual total rate of
return for Class A shares not giving effect to the sales charge on the initial
investment for the one-year, five-year and ten-year periods ended November 30,
1994 was, respectively, -5.00%, 9.54% and 13.10%. The Fund's average annual
total rate of return for Class B shares, reflecting the CDSC, for the one-year
period ended November 30, 1994 and for the period September 7, 1993 to November
30, 1994 was -9.08% and -7.24%, respectively. The Fund's average annual total
rate of return for Class B shares, not giving effect to the CDSC, for the
one-year period ended November 30, 1994 and for the period September 7, 1993 to
November 30, 1994 was -5.82% and -4.64%, respectively.
PERFORMANCE RESULTS: The performance results for Class A shares below, based on
an assumed initial investment of $10,000 in Class A shares, cover the period
from January 1, 1985 through December 31, 1994. It has been assumed that
dividends and capital gain distributions were reinvested in additional shares.
These performance results, as well as any total rate of return quotations
provided by the Fund, should not be considered as representative of the
performance of the Fund in the future since the net asset value and public
offering price of shares of the Fund will vary based not only on the type,
quality and maturities of the securities held in the Fund's portfolio, but also
on changes in the current value of such securities and on changes in the
expenses of the Fund. These factors and possible differences in the methods used
to calculate total rates of return should be considered when comparing the total
rate of return of the Fund to total rates of return published for other
investment companies or other investment vehicles. Total rate of return reflects
the performance of both principal and income. Current net asset value of shares
and account balance information may be obtained by calling 1-800-MFS-TALK
(637-8255).
<TABLE>
<CAPTION>
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
VALUE OF
YEAR ENDED VALUE OF REINVESTED VALUE OF
DECEMBER INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
31 INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
---------- --------------- ------------- ---------- -------
<S> <C> <C> <C> <C>
1985 8,730 2,110 510 11,350
1986 7,398 4,776 594 12,768
1987 6,700 6,082 732 13,514
1988 6,222 6,995 851 14,068
1989 7,421 10,494 1,179 19,094
1990 6,622 10,418 1,149 18,189
1991 9,161 16,119 1,588 26,868
1992 9,177 17,832 1,591 28,600
1993 8,934 22,253 1,549 32,736
1994 7,484 21,752 1,297 30,533
</TABLE>
EXPLANATORY NOTES: The results in the table assume that the initial investment
on January 1, 1985 has been reduced by the current maximum applicable sales
charge of 5.75%. No adjustment has been made for any income taxes payable by
shareholders.
From time to time the Fund may, as appropriate, quote Fund rankings or reprint
all or a portion of evaluations of fund performance and operations appearing in
various independent publications, including but not limited to the following:
Money, Fortune, U.S. News and World Report, Kiplinger's Personal Finance, The
Wall Street Journal, Barron's, Investors Business Daily, Newsweek, Financial
World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Salomon Bros. Indi-
20
<PAGE> 51
ces, Ibbotson, Business Week, Lowry Associates, Media General, Investment
Company Data, The New York Times, Your Money, Strangers Investment Advisor,
Financial Planning on Wall Street, Standard and Poor's, Individual Investor, The
100 Best Mutual Funds You Can Buy, by Gordon K. Williamson, Consumer Price
Index, and Sanford C. Bernstein & Co. Fund performance may also be compared to
the performance of other mutual funds tracked by financial or business
publications or periodicals.
The Fund may also quote evaluations mentioned in independent radio or television
broadcasts.
From time to time the Fund may use charts and graphs to illustrate the past
performance of various indices such as those mentioned above and illustrations
using hypothetical rates of return to illustrate the effects of compounding and
tax-deferral.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established as the first mutual
fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make
full public disclosure of its operations in shareholder reports.
-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to register
under the Securities Act of 1933. ("Truth in Securities Act" or "Full
Disclosure Act".)
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional
shares or cash.
-- 1976 -- MFS Municipal Bond Fund is among the first municipal bond funds
established.
-- 1977 -- Spectrum becomes the first combination fixed/variable annuity with
no initial sales charge.
-- 1981 -- MFS World Governments Fund is established as America's first
globally diversified fixed-income mutual fund.
-- 1984 -- MFS Municipal High Income Fund is the first open-end mutual fund
to seek high tax-free income from lower-rated municipal securities.
-- 1986 -- MFS Managed Sectors Fund becomes the first mutual fund to target
and shift investments among industry sectors for shareholders.
-- 1986 -- MFS Municipal Income Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.
-- 1987 -- MFS Multimarket Income Trust is the first closed-end, multimarket
high income fund listed on the New York Stock Exchange.
-- 1989 -- MFS Regatta becomes America's first non-qualified
market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS World Total Return Fund is the first global balanced fund.
-- 1993 -- MFS World Growth Fund is the first global emerging markets fund to
offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes money manager of MFS Union Standard Trust, the first
trust to invest in companies deemed to be union-friendly by an advisory
board of senior labor officials, senior managers of companies with
significant labor contracts, academics and other national labor leaders or
experts.
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial Interest (without par value)
of one or more separate series and to divide or combine the shares of any series
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in that series. The Declaration of Trust
further authorizes the Trustees to classify or reclassify any series of shares
into one or more classes. Pursuant thereto, the Trustees have authorized the
issuance of two classes of shares of the Fund, Class A shares and Class B
shares. Each share of a class of the Fund represents an equal proportionate
interest in the assets of the Fund allocable to that class. Upon liquidation of
the Fund, shareholders of each class of the Fund are entitled to share pro rata
in the Fund's net assets allocable to such class available for distribution to
shareholders. The Fund reserves the right to create and issue a number of series
and additional classes of shares, in which case the shares of each class of a
series would participate equally in the earnings, dividends and assets allocable
to that class of the particular series.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Although Trustees are not elected annually by the shareholders, the Declaration
of Trust provides that a Trustee may be removed from office at a meeting of
shareholders by a vote of two-thirds of the outstanding shares of the Fund. A
meeting of shareholders will be called
21
<PAGE> 52
upon the request of shareholders of record holding in the aggregate not less
than 10% of the outstanding voting securities of the Fund. No material amendment
may be made to the Fund's Declaration of Trust without the affirmative vote of a
majority of the Fund's outstanding shares (as defined in "Investment
Restrictions"). The Fund may be terminated (i) upon the merger or consolidation
of the Fund with another organization or upon the sale of all or substantially
all of its assets, if approved by the vote of the holders of two-thirds of the
Fund's outstanding shares, except that if the Trustees recommend such merger,
consolidation or sale, the approval by vote of the holders of a majority of the
Fund's outstanding shares will be sufficient, or (ii) upon liquidation and
distribution of the assets of the Fund, if approved by the vote of the holders
of two-thirds of the outstanding shares of the Fund, or (iii) by the Trustees by
written notice to its shareholders. If not so terminated the Fund will continue
indefinitely.
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Fund and provides for indemnification
and reimbursement of expenses out of the Fund property for any shareholder held
personally liable for the obligations of the Fund. The Declaration of Trust also
provides that the Fund shall maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Fund, its shareholders, Trustees, officers, employees and agents covering
possible tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Fund itself was unable to
meet its obligations.
The Declaration of Trust further provides that obligations of the Fund are not
binding upon the Trustees individually but only upon the property of the Fund
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office.
10. DISTRIBUTION PLANS
CLASS A DISTRIBUTION PLAN: The Trustees have adopted a Distribution Plan
relating to Class A shares (the "Class A Distribution Plan") pursuant to Section
12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Rule") after having
concluded that there is a reasonable likelihood that the Class A Distribution
Plan would benefit the Fund and its Class A shareholders. The Class A
Distribution Plan is designed to promote sales, thereby increasing the net
assets of the Fund. Such an increase may reduce the expense ratio to the extent
the Fund's fixed costs are spread over a larger net asset base. Also, an
increase in net assets may lessen the adverse effects that could result were the
Fund required to liquidate portfolio securities to meet redemptions. There is,
however, no assurance that the net assets of the Fund will increase or that the
other benefits referred to above will be realized.
The Class A Distribution Plan provides that the Fund will pay MFD up to (but not
necessarily all of) an aggregate of 0.35% per annum of the average daily net
assets attributable to the Class A shares annually in order that MFD may pay
expenses on behalf of the Fund related to the distribution and servicing of its
Class A shares. The expenses to be paid by MFD on behalf of the Fund include a
service fee to securities dealers which enter into a sales agreement with MFD of
up to 0.25% per annum of the portion of the Fund's average daily net assets
attributable to the Class A shares owned by investors for whom that securities
dealer is the holder or dealer of record. These payments are partial
consideration for personal services and/or account maintenance performed by such
dealers with respect to Class A shares. MFD may from time to time reduce the
amount of the service fee paid for shares sold prior to a certain date.
Currently the service fee is reduced to 0.15% per annum for shares sold prior to
March 1, 1991. MFD may also retain a distribution fee of 0.10% per annum of the
Fund's average daily net assets attributable to Class A shares as partial
consideration for services performed and expenses incurred in the performance of
MFD's obligations as to Class A shares under the Distribution Agreement with the
Fund. MFD, however, is currently waiving this 0.10% per annum distribution fee
and will not accept payment of this fee in the future unless it first obtains
the approval of the Fund's Board of Trustees. Any remaining funds may be used to
pay for other distribution related expenses as described in the Prospectus.
Service fees may be reduced for a securities dealer that is the holder or dealer
of record for an investor who owns shares of the Fund having an aggregate net
asset value at or above a certain dollar level. No service fee will be paid (i)
to any securities dealer who is the holder or dealer of record for investors who
own Class A shares having an aggregate net asset value less than $750,000, or
such other amount as may be determined from time to time by MFD (MFD, however,
may waive this minimum amount requirement from time to time if the dealer
satisfies certain criteria), or (ii) to any insurance company which has entered
into an agreement with the Fund and MFD that permits such insurance company to
purchase shares from the Fund at their net asset value in connection with
annuity agreements issued in connection with the insurance company's separate
accounts. Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. MFD or its affiliates are entitled to
retain all service fees payable under the Class A Distribution Plan for which
there is no dealer of record or for which qualification standards have not been
met as partial consideration for personal services and/or account maintenance
services performed by MFD or its affiliates for shareholder accounts. Certain
banks and other financial institutions that have agency agreements with MFD will
receive agency transaction and service fees that are the same as commissions and
service fees to dealers. During the fiscal year ended November 30, 1994, the
Fund incurred expenses of $2,986,881 (equal to 0.29% of its average daily net
assets) relating to the distribution of its Class A shares, of
22
<PAGE> 53
which MFD waived $1,042,249 (0.10% of its average daily net assets attributable
to Class A shares) and securities dealers of the Fund and certain banks and
other financial institutions received $1,944,632 (0.19% of its average daily net
assets attributable to Class A shares), and MFD retained $577,538 (0.06% of its
average daily net assets attributable to Class A shares).
The Class A Distribution Plan will remain in effect until August 1, 1995, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by vote of both the Trustees and a majority of the
Trustees who are not "interested persons" or financially interested parties to
the Plan ("Class A Distribution Plan Qualified Trustees"). The Class A
Distribution Plan requires that the Fund and MFD each shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under such Plan. The Class A
Distribution Plan may be terminated at any time by vote of a majority of the
Class A Distribution Plan Qualified Trustees or by vote of the holders of a
majority of the Fund's Class A shares (as defined in "Investment Restrictions").
Agreements under the Class A Distribution Plan must be in writing, will be
terminated automatically if assigned, and may be terminated at any time without
payment of any penalty, by vote of a majority of the Class A Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the Fund's Class A
shares (as defined in "Investment Restrictions"). The Class A Distribution Plan
may not be amended to increase materially the amount of permitted distribution
expenses without the approval of a majority of the Fund's Class A shareholders
(as defined in "Investment Restrictions") and may not be materially amended in
any case without a vote of the Trustees and a majority of the Class A
Distribution Plan Qualified Trustees. No Trustee who is not an "interested
person" has any financial interest in the Class A Distribution Plan or in any
related agreement.
CLASS B DISTRIBUTION PLAN: The Trustees of the Fund have adopted a Distribution
Plan relating to Class B shares (the "Class B Distribution Plan") pursuant to
Section 12(b) of the 1940 Act and the Rule, after having concluded that there
was a reasonable likelihood that the Class B Distribution Plan would benefit the
Fund and its Class B shareholders. The Class B Distribution Plan is designed to
promote sales, thereby increasing the net assets of the Fund. Such an increase
may reduce the expense ratio to the extent the Fund's fixed costs are spread
over a larger net asset base. Also, an increase in net assets may lessen the
adverse effects that could result were the Fund required to liquidate portfolio
securities to meet redemptions. There is, however, no assurance that the net
assets of the Fund will increase or that the other benefits referred to above
will be realized.
The Class B Distribution Plan provides that the Fund shall pay MFD, as the
Fund's distributor for its Class B shares, a daily distribution fee equal on an
annual basis to 0.75% of the Fund's average daily net assets attributable to
Class B shares and will pay MFD a service fee of up to 0.25% per annum of the
Fund's average daily net assets attributable to Class B shares (which MFD will
in turn pay to securities dealers which enter into a sales agreement with MFD at
a rate of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class B shares owned by investors for whom that securities
dealer is the holder or dealer of record). This service fee is intended to be
additional consideration for all personal services and/or account maintenance
services rendered by the dealer with respect to Class B shares. MFD will advance
to dealers the first-year service fee at a rate equal to 0.25% of the amount
invested. As compensation therefor, MFD may retain the service fee paid by the
Fund with respect to such shares for the first year after purchase. Dealers will
become eligible for additional service fees with respect to such shares
commencing in the thirteenth month following purchase. Except in the case of the
first year service fee, no service fee will be paid to any securities dealer who
is the holder or dealer of record for investors who own Class B shares having an
aggregate net asset value of less than $750,000 or such other amount as may be
determined from time to time by MFD. MFD, however, may waive this minimum amount
requirement from time to time if the dealer satisfies certain criteria. Dealers
may from time to time be required to meet certain other criteria in order to
receive service fees. MFD or its affiliates are entitled to retain all service
fees payable under the Class B Distribution Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts.
The purpose of distribution payments to MFD under the Class B Distribution Plan
is to compensate MFD for its distribution services to the Fund. MFD pays
commissions to dealers as well as expenses of printing prospectuses and reports
used for sales purposes, expenses with respect to the preparation and printing
of sales literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution-related services, or
personnel, travel office expenses and equipment. The Class B Distribution Plan
also provides that MFD will receive all CDSCs attributable to Class B Shares
(see "Distribution Plans" and "Purchases" in the Prospectus).
In accordance with the Rule, all agreements relating to the Class B Distribution
Plan entered into between the Fund or MFD and other organizations must be
approved by the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Class B Distribution Plan or
in any agreement related to such Plan ("Class B Distribution Plan Qualified
Trustees"). The Class B Distribution Plan further provides that the selection
and nomination of Class B Distribution Plan Qualified Trustees shall be
committed to the discretion of the non-interested Trustees then in office.
During the fiscal year ended November 30, 1994, the Fund incurred expenses of
$73,994 (equal to 1.00% of its average daily net assets) relating to the
distribution and servicing of its Class B shares, of which MFD received $55,914
(0.75% of its average daily net assets attributable to Class B shares) and
securities dealers of the Fund and certain banks
23
<PAGE> 54
and other financial institutions received $18,080 (0.25% of its average daily
net assets attributable to Class B shares).
The Class B Distribution Plan will remain in effect until August 1, 1995, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by vote of the Trustees and a majority of the Class B
Distribution Plan Qualified Trustees. The Class B Distribution Plan requires
that the Fund and MFD shall provide to the Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts expended (and
purposes therefor) under such Plan. The Class B Distribution Plan may be
terminated at any time by vote of a majority of the Class B Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the Class B shares
of the Fund (as defined in "Investment Restrictions" above). The Class B
Distribution Plan may not be amended to increase materially the amount of
permitted distribution expenses without the approval of Class B shareholders and
may not be materially amended in any case without a vote of the majority of both
the Trustees and the Class B Distribution Plan Qualified Trustees. No Trustee
who is not an interested person of the Fund has any financial interest in the
Class B Distribution Plan or in any related agreement.
11. INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's independent certified public accountants.
The Portfolio of Investments at November 30, 1994, the Statement of Assets and
Liabilities at November 30, 1994, the Statement of Operations for the year ended
November 30, 1994, the Statement of Changes in Net Assets for each of the years
in the two year period ended November 30, 1994, the Financial Highlights for
each of the years in the ten year period ended November 30, 1994, the Notes to
Financial Statements and the Independent Auditors' Report, each of which is
included in the Annual Report to shareholders of the Fund, are incorporated by
reference into this SAI and have been so incorporated in reliance upon the
report of Deloitte & Touche LLP, independent certified public accountants, as
experts in accounting and auditing. A copy of the Annual Report accompanies this
SAI.
24
<PAGE> 55
APPENDIX A
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
RETIREMENT BENEFIT TOTAL TRUSTEE
TRUSTEE FEES ACCRUED AS ESTIMATED FEES FROM
FROM PART OF FUND CREDITED YEARS FUND AND
TRUSTEE FUND(1) EXPENSE(1) OF SERVICE(2) FUND COMPLEX(3)
----------------------------------------------------- ------------ ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Richard B. Bailey.................................... $5,193 $1,074 8 $ 226,221
Lawrence T. Perera................................... 5,093 2,864 23 96,592
William Poorvu....................................... 5,388 2,848 23 106,482
Charles W. Schmidt................................... 5,193 2,702 16 98,397
David B. Stone....................................... 5,453 2,485 14 104,007
Elaine R. Smith...................................... 5,193 1,045 27 98,397
J. Atwood Ives....................................... 5,553 1,037 17 106,482
Peter G. Harwood..................................... 5,553 546 5 105,812
</TABLE>
---------------
(1) For fiscal year ended November 30, 1994.
(2) Based on normal retirement age of 73.
(3) Information provided is for calendar year 1994. All Trustees served as
Trustees of 20 funds within the MFS fund complex (having aggregate net
assets at December 31, 1994, of approximately $14,727,659,069) except Mr.
Bailey, who served as Trustee of 56 funds within the MFS fund complex
(having aggregate net assets at December 31, 1994, of approximately
$24,474,119,825).
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(4)
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE -------------------------------------------
TRUSTEE 10 OR
FEES 3 5 7 MORE
------ ---- ------ ------ ------
<C> <S> <C> <C> <C> <C>
$4,600 ................................................ $690 $1,150 $1,610 $2,300
4,900 ................................................ 735 1,225 1,715 2,450
5,200 ................................................ 780 1,300 1,820 2,600
5,500 ................................................ 825 1,375 1,925 2,750
5,800 ................................................ 870 1,450 2,030 2,900
6,100 ................................................ 915 1,525 2,135 3,050
</TABLE>
---------------
(4) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
25
<PAGE> 56
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606
Mailing Address:
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
MASSACHUSETTS
INVESTORS GROWTH
STOCK FUND
500 BOYLSTON STREET
BOSTON, MA 02116
MIG-13 4/95 500 13/213
<PAGE> 57
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS - November 30, 1994
Common Stocks - 94.1%
------------------------------------------------------------------------------
<CAPTION>
Issuer Shares Value
------------------------------------------------------------------------------
<S> <C> <C>
Business Machines - 3.9%
Motorola, Inc. 675,000 $ 38,053,125
-----------------------------------------------------------------------------
Business Services - 5.2%
CUC International, Inc.<F1> 1,668,750 $ 51,314,062
-----------------------------------------------------------------------------
Cellular Phones - 12.1%
AirTouch Communications, Inc.<F1> 975,000 $ 26,446,875
Cellular Communications of Puerto Rico, Inc.<F1> 195,832 6,511,414
LIN Broadcasting Corp.<F1> 454,500 65,220,750
Telephone & Data Systems, Inc. 500,000 21,687,500
------------
$119,866,539
-----------------------------------------------------------------------------
Computer Software - Personal Computers - 5.8%
Electronic Arts, Inc.<F1> 500,000 $ 9,937,500
Microsoft Corp.<F1> 627,000 39,422,625
Powersoft Corp.<F1> 100,000 7,537,500
------------
$ 56,897,625
-----------------------------------------------------------------------------
Computer Software - Systems - 7.3%
Compuware Corp.<F1> 438,000 $ 16,206,000
EMC Corp.<F1> 100,000 2,250,000
Informix Corp.<F1> 534,600 15,369,750
Oracle Systems Corp.<F1> 693,600 28,611,000
Sybase, Inc.<F1> 200,000 9,750,000
------------
$ 72,186,750
-----------------------------------------------------------------------------
Consumer Goods and Services - 1.3%
Duracell International, Inc. 278,900 $ 12,550,500
-----------------------------------------------------------------------------
Electronics - 5.1%
Intel Corp. 650,000 $ 41,031,250
Sensormatic Electronics Corp. 300,000 9,675,000
------------
$ 50,706,250
-----------------------------------------------------------------------------
Entertainment - 10.4%
Comcast Corp., Special "A" 1,350,000 $ 21,431,250
International Game Technology 503,900 8,377,337
Promus Cos., Inc.<F1> 1,200,000 33,300,000
Viacom, Inc., "A"<F1> 120,000 4,785,000
Viacom, Inc., "B"<F1> 909,225 35,005,162
------------
$102,898,749
-----------------------------------------------------------------------------
Financial Institutions - 2.3%
Advanta Corp., "B" 200,000 $ 5,250,000
Franklin Resources, Inc. 81,400 3,093,200
MBNA Corp. 600,000 14,175,000
------------
$ 22,518,200
-----------------------------------------------------------------------------
Insurance - 2.4%
General Re Corp. 200,000 $ 23,475,000
-----------------------------------------------------------------------------
Medical and Health Products - 1.0%
Alza Corp.<F1> 500,000 $ 9,625,000
-----------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
------------------------------------------------------------------------------
Issuer Shares Value
------------------------------------------------------------------------------
Medical and Health Technology and Services - 3.6%
Columbia HCA Healthcare Corp. 377,000 $ 14,278,875
United Healthcare Corp. 450,000 21,375,000
------------
$ 35,653,875
-----------------------------------------------------------------------------
Pollution Control - 1.6%
WMX Technologies, Inc. 600,000 $ 15,450,000
-----------------------------------------------------------------------------
Restaurants and Lodging - 2.4%
Brinker International, Inc.<F1> 1,387,500 $ 23,587,500
-----------------------------------------------------------------------------
Stores - 11.8%
AutoZone, Inc.<F1> 500,000 $ 12,812,500
Best Buy Co., Inc.<F1> 391,100 17,257,287
Home Depot, Inc. 1,057,800 48,923,250
Office Depot, Inc. 1,121,250 26,629,687
OfficeMax, Inc.<F1> 57,200 1,408,550
PetSmart, Inc.<F1> 326,000 9,698,500
Phar-Mor, Inc.<F1><F2><F3><F4> 70,000 188,300
------------
$116,918,074
-----------------------------------------------------------------------------
Telecommunications - 4.1%
Bay Networks, Inc.<F1> 451,530 $ 11,626,897
Cisco Systems, Inc.<F1> 300,000 9,675,000
Paging Network, Inc.<F1> 600,000 18,900,000
------------
$ 40,201,897
-----------------------------------------------------------------------------
Utilities - Telephone - 1.8%
MCI Communications Corp. 923,500 $ 18,008,250
-----------------------------------------------------------------------------
Foreign - 12.0%
Canada - 5.4%
Cott Corp. (Food and Beverage Products) 440,000 $ 4,400,000
Four Seasons Hotels, Inc. (Restaurants
and Lodging) 30,000 326,916
Rogers Communications, Inc.
(Telecommunications)<F1> 3,500,000 48,318,900
------------
$ 53,045,816
-----------------------------------------------------------------------------
Finland - 0.7%
Nokia Corp. (Electronics) 100,000 $ 6,987,500
-----------------------------------------------------------------------------
Hong Kong - 0.7%
Peregrine Investment Holdings (Financial
Institutions) 4,500,000 $ 6,517,017
-----------------------------------------------------------------------------
Mexico - 3.2%
Telefonos de Mexico, "A", ADR
(Utilities) 600,000 $ 31,800,000
-----------------------------------------------------------------------------
Sweden - 2.0%
Astra, "B", Free (Medical and Health
Products)<F1> 748,330 $ 20,037,733
-----------------------------------------------------------------------------
Total Foreign Stocks $118,388,066
-----------------------------------------------------------------------------
Total Common Stocks (Identified Costs, $724,249,120) $928,299,462
-----------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Convertible Preferred Stock - 2.0%
------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
Cellular Telephones - 2.0%
Cellular Communications<F2>,
(Identified Cost, $9,447,866) 400,000 $ 20,000,000
-----------------------------------------------------------------------------
Short-Term Obligations - 4.6%
------------------------------------------------------------------------------
Federal Home Loan Bank, 5.38s, 12/08/94 $ 2,150 $ 2,147,751
Federal Home Loan Bank, 5.42s, 12/12/94 7,700 7,687,248
Federal Home Loan Bank, 5.4s, 12/13/95 7,700 7,686,140
Federal Home Loan Mortgage Co., 5.02s, 12/02/94 11,800 11,798,355
Federal Home Loan Mortgage Co., 5.38s, 12/07/94 4,500 4,495,965
Wal-Mart Stores, 5.45s, 12/01/94 7,100 7,100,000
Wal-Mart Stores, 5.45s, 12/05/95 4,350 4,347,370
-----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized
Cost and Value $ 45,262,828
-----------------------------------------------------------------------------
Total Investments (Identified Cost, $778,959,814) $993,562,290
Other Assets, Less Liabilities - (0.7)% (6,846,277)
-----------------------------------------------------------------------------
Net Assets - 100.0% $986,716,013
-----------------------------------------------------------------------------
<FN>
<F1> Non-income producing security.
<F2> Security valued by or at the direction of the Trustees.
<F3> Restricted security.
<F4> SEC rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
------------------------------------------------------------------------------
November 30, 1994
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $778,959,814) $ 993,562,290
Cash 377,927
Receivable for investments sold 9,010,372
Receivable for Fund shares sold 249,315
Dividends receivable 678,330
Other assets 14,958
--------------
Total assets $1,003,893,192
--------------
Liabilities:
Payable for investments purchased $ 15,876,292
Payable for Fund shares reacquired 693,642
Payable to affiliates -
Management fee 8,740
Shareholder servicing agent fee 3,708
Distribution fee 307,604
Accrued expenses and other liabilities 287,193
--------------
Total liabilities $ 17,177,179
--------------
Net assets $ 986,716,013
--------------
Net assets consist of:
Paid-in capital $ 671,268,899
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 214,605,316
Accumulated undistributed net realized gain on investments
and foreign currency transactions 100,892,641
Accumulated net investment loss (50,843)
--------------
Total $ 986,716,013
--------------
Shares of beneficial interest outstanding 94,171,639
--------------
Class A shares:
Net asset value and redemption price per share
(net assets of $977,407,929 / 93,272,283 shares of
beneficial interest outstanding) $10.48
------
Offering price per share (100/94.25) $11.12
------
Class B shares:
Net asset value, redemption price and offering price per share
(net assets of $9,308,084 / 899,356 shares of beneficial
interest outstanding) $10.35
------
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
------------------------------------------------------------------------------
Year Ended November 30, 1994
------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 4,358,864
Interest 2,516,072
-------------
Total investment income $ 6,874,936
-------------
Expenses -
Management fee $ 3,277,285
Trustees' compensation 62,201
Shareholder servicing agent fee (Class A) 1,392,283
Shareholder servicing agent fee (Class B) 16,402
Distribution and service fee (Class A) 2,986,881
Distribution and service fee (Class B) 73,994
Custodian fee 210,285
Postage 116,810
Printing 67,069
Legal fees 46,211
Auditing fees 39,032
Miscellaneous 353,673
-------------
Total expenses $ 8,642,126
Reduction of expenses by distributor (1,042,249)
-------------
Net expenses $ 7,599,877
-------------
Net investment loss $ (724,941)
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 104,019,275
Foreign currency transactions (2,484,279)
-------------
Net realized gain on investments and foreign
currency transactions $ 101,534,996
-------------
Change in unrealized appreciation (depreciation) -
Investments $(153,485,534)
Translation of assets and liabilities in foreign
currencies 8,636
-------------
Net unrealized loss on investments and foreign currency $(153,476,898)
-------------
Net realized and unrealized loss on investments and
foreign currency $ (51,941,902)
-------------
Decrease in net assets from operations $ (52,666,843)
-------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENT - continued
Statement of Changes in Net Assets
------------------------------------------------------------------------------
Year Ended November 30, 1994 1993
------------------------------------------------------------------------------
Increase (decrease) in net
assets:
From operations -
Net investment loss $ (724,941) $ (2,031,499)
Net realized gain on
investments and foreign
currency transactions 101,534,996 176,184,342
Net unrealized loss on
investments and foreign
currency (153,476,898) (37,857,784)
-------------- --------------
Increase (decrease) in net
assets from operations $ (52,666,843) $ 136,295,059
-------------- --------------
Distributions declared to
shareholders -
From net realized gain on
investments and foreign
currency transactions (Class A) $ (173,544,772) $ (63,515,522)
From net realized gain on
investments and foreign
currency transactions (Class B) (311,145) --
-------------- --------------
Total distributions declared
to shareholders $ (173,855,917) $ (63,515,522)
-------------- --------------
Fund share (principal) transactions -
Net proceeds from sale of
shares $ 123,072,342 $ 60,969,937
Net asset value of shares
issued to shareholders in
reinvestment of distributions 138,766,670 50,908,854
Cost of shares reacquired (182,859,857) (120,786,024)
-------------- --------------
Increase (decrease) in net
assets from Fund share $
transactions $ 78,979,155 (8,907,233)
-------------- --------------
Total increase (decrease)
in net assets $ (147,543,605) $ 63,872,304
Net assets:
At beginning of period 1,134,259,618 1,070,387,314
-------------- --------------
At end of period (including
accumulated net investment
loss of $50,843 and
$4,517,967, respectively). $ 986,716,013 $1,134,259,618
-------------- --------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -continued
<TABLE>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended November 30, 1994 1993 1992 1991 1990 1989
-----------------------------------------------------------------------------------------------------------------------------------
Class A
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.97 $12.15 $10.87 $ 8.48 $10.70 $ 8.39
------ ------ ------ ------ ------ ------
Income from investment operations<F4> -
Net investment income (loss) $(0.01) $(0.01) $(0.03) $ 0.01 $ 0.05 $ 0.09
Net realized and unrealized gain
(loss) on investments (0.49) 1.55 2.07 2.93 (1.02) 3.14
------ ------ ------ ------ ------ ------
Total from investment operations $(0.50) $ 1.54 $ 2.04 $ 2.94 $ (0.97) $ 3.23
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $(0.03) $(0.05) $(0.08)
From net realized gain on investments (1.99) (0.72) (0.76) (0.52) (1.20) (0.84)
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.99) $(0.72) $(0.76) $(0.55) $(1.25) $(0.92)
------ ------ ------ ------ ------ ------
Net asset value - end of period $10.48 $12.97 $12.15 $10.87 $ 8.48 $10.70
------ ------ ------ ------ ------ ------
Total return<F5> (5.00)% 13.43% 19.35% 36.56% (10.27)% 42.14%
Ratios (to average net assets)/Supplemental data:
Expenses 0.72%<F3> 0.71%<F3> 0.67% 0.63% 0.53% 0.54%
Net investment income (loss) (0.06)%<F3> (0.19)%<F3> (0.24)% 0.14% 0.55% 0.91%
Portfolio turnover 56% 52% 16% 39% 44% 32%
Net assets at end of period ($ millions omitted) 977 1,132 1,070 950 749 907
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended November 30, 1988 1987 1986 1985 1994 1993<F1>
-----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.05 $ 9.69 $10.68 $10.04 $12.93 $12.91
------ ------ ------ ------ ------ ------
Income from investment operations -
Net investment income (loss) $ 0.12 $ 0.18 $ 0.20 $ 0.28 $(0.09) $(0.01)
Net realized and unrealized gain
(loss) on investments 0.64 (0.68) 1.99 2.10 (0.50) 0.03
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.76 $(0.50) $ 2.19 $ 2.38 $(0.59) $ 0.02
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.15) $(0.14) $(0.20) $(0.28) $ -- $ --
From net realized gain on investments (1.27) -- (2.98) (1.46) (1.99) --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.42) $(0.14) $(3.18) $(1.74) $(1.99) $(0.00)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 8.39 $ 9.05 $ 9.69 $10.68 $10.35 $12.93
------ ------ ------ ------ ------ ------
Total return<F5> 8.21% (5.57)% 20.30% 23.52% (5.82)% 0.70%
Ratios (to average net assets)/Supplemental data:
Expenses 0.58% 0.50% 0.50% 0.56% 1.60% 1.49%<F2>
Net investment income (loss) 1.27% 1.60% 1.62% 2.47% (0.87)% (0.99)%<F2>
Portfolio turnover 75% 66% 77% 66% 56% 52%
Net assets at end of period ($ millions omitted) 735 774 899 878 9 2
<FN>
<F1> For the period from the date of issue of Class B shares, September 7, 1993
to November 30, 1993.
<F2> Annualized.
<F3> The distributor did not impose a portion of its Class A distribution fee
for the periods indicated. If this fee had been incurred by the Fund, the
net investment loss per share and rating, would have been:
Net investment loss $ (0.03) $(0.02)
Ratios (to average net assets):
Expenses 0.82% 0.74%
Net investment income loss (0.16)% (0.21)%
<F4> Per share data for the period subsequent to November 30, 1992 is based on
average shares outstanding.
<F5> Total returns for Class A shares do not include the sales charge (except
for reinvestment dividends prior to March 1, 1991). If the charge had been
included, the results would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Massachusetts Investors Growth Stock Fund (the Fund) is a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
(2) Significant Accounting Policies Investment Valuations - Equity securities
listed on securities exchanges or reported through the NASDAQ system are valued
at last sale prices. Unlisted equity securities or listed equity securities for
which last sale prices are not available are valued at last quoted bid prices.
Debt securities (other than short-term obligations which mature in 60 days or
less), including listed issues and forward contracts, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates value. Non-U.S. dollar
denominated short-term obligations are valued at amortized cost as calculated in
the base currency and translated into U.S. dollars at the closing daily exchange
rate. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices. Over-the- counter
options are valued by brokers through the use of a pricing model which takes
into account closing bond valuations, implied volatility and short-term
repurchase rates. Securities for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the Fund to obtain those securities in the
event of a default under the repurchase agreement. The Fund monitors, on a daily
basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange on
sales of securities are recorded for financial statement purposes as net
realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option.
Futures Contracts - The Fund may enter into financial futures contracts for the
delayed delivery of foreign currency or contracts based on stock indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit either in cash or securities an amount equal to a certain percentage
of the contract amount. Subsequent payments are made or received by the Fund
each day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. The Fund's investment in futures contracts is designed to
hedge against anticipated future changes in exchange rates or securities prices.
The Fund will invest in futures contracts for hedging and non-hedging purposes,
to the extent permitted by applicable law. Should exchange rates or securities
prices move unexpectedly, the Fund may not achieve the anticipated benefits of
the financial futures contracts and may realize a loss.
Security Loans - The Fund may lend its securities to member banks of the Federal
Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of securities
loaned. As with other extensions of credit, the Fund may bear the risk of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fees or from all or a portion of the income from
investment of the collateral. The Fund would also continue to earn income on the
securities loaned. At November 30, 1994 the Fund had no securities on loan.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the contract settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividends received in additional securities are recorded on the
ex-dividend in an amount equal to the value of the security on such date.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return, and consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex- dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended November 30, 1994, $5,192,065 was reclassified from
accumulated undistributed net investment loss to accumulated net realized gain
on investments and paid-in capital for $1,614,905 and $3,577,160, respectively,
due to differences between book and tax accounting for net investment losses,
short-term capital gains, and foreign currency transactions. This change had no
effect on the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A and
Class B shares. The two classes of shares differ in their respective shareholder
servicing agent, distribution and service fees. Shareholders of each class also
bear certain expenses that pertain only to that particular class. All
shareholders bear the common expenses of the Fund pro rata, based on the average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses, including distribution and shareholder
servicing fees.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee, computed daily and paid monthly at an effective annual rate of
0.31% of average daily net assets, amounted to $3,277,285. The Fund pays no
compensation directly to its Trustees who are officers of the investment
adviser, or to officers of the Fund, all of whom receive remuneration for their
services to the Fund from MFS. Certain of the officers and Trustees of the Fund
are officers or directors of MFS, MFS Financial Services, Inc. (FSI) and MFS
Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan for
all of its independent Trustees. Included in Trustees' compensation is a net
periodic pension expense of $19,150 for the year ended November 30, 1994.
Distributor - FSI, a wholly owned subsidiary of MFS, as distributor, received
$57,130 as its portion of the sales charge on sales of Class A shares of the
Fund. The Trustees have adopted a separate Distribution Plan for Class A and
Class B shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A Distribution Plan provides that the Fund will pay FSI up to 0.35% of
its 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 its shares. These expenses include a service fee to each securities
dealer that enters 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 which are
attributable to that securities dealer, a distribution fee to FSI of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to FSI wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. FSI is not imposing the 0.10% distribution fee (amounting
to $1,042,249 for the year ended November 30, 1994) for an indefinite period.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
Fees incurred under the Distribution Plan during the year ended November 30,
1994 were 0.35% of average daily net assets attributable to Class A shares on an
annualized basis and amounted to $2,986,881 (of which FSI retained $577,538).
The Class B Distribution Plan provides that the Fund will pay FSI a monthly
distribution fee, equal to 0.75% per annum, and a quarterly service fee of up to
0.25%, of the Fund's average daily net assets attributable to Class B shares
which FSI will pay to each securities dealer that enters into a sales agreement
with FSI at a rate of up to 0.25% of the Fund's average daily net assets
attributable to Class B shares. The service fee is intended to be additional
consideration for services rendered by the dealer with respect to Class B
shares. Fees incurred under the Distribution Plans during 1994 were 1.00% of
average daily net assets attributable to Class B shares on an annualized basis
and amounted to $73,994 (of which FSI retained $631).
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a share
redemption within twelve months following the share purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B shares in
the event of a share redemption within six years of purchase. FSI receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended November 30, 1994 were $299 and $11,593 for Class A shares
and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$1,392,283 and $16,402 for Class A and Class B shares, respectively, for its
services as shareholder servicing agent. The fee is calculated as a percentage
of the average daily net assets of each class of shares at an annual rate of up
to 0.15% and 0.22% attributable to Class A and Class B shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$557,464,871 and $616,229,343, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $780,047,469
------------
Gross unrealized appreciation $270,072,662
Gross unrealized depreciation (56,557,841)
------------
Net unrealized appreciation $213,514,821
-----------
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Class A Shares 1994 1993
--------------------------- ---------------------------
Year Ended
November 30, Shares Amount Shares Amount
----------------------------------------------------------------------------
Shares sold 9,138,166 $ 98,219,747 4,874,929 $ 58,654,891
Shares issued to
shareholders in
reinvestment of
distributions 12,196,320 138,428,629 4,411,461 50,908,854
Shares reacquired (15,368,839) (165,721,705) (10,053,808) (120,297,966)
----------- ------------- ----------- -------------
Net increase
(decrease) 5,965,647 $ 70,926,671 (767,418) $ (10,734,221)
----------- ------------- ----------- -------------
Class B Shares 1994 1993<F1>
--------------------------- ---------------------------
Year Ended
November 30, Shares Amount Shares Amount
----------------------------------------------------------------------------
Shares sold 2,335,727 $ 24,852,595 175,464 $ 2,315,046
Shares issued to
shareholders in
reinvestment of
distributions 29,894 338,041 -- --
Shares reacquired (1,604,821) (17,138,152) (36,908) (488,058)
----------- ------------- ----------- -------------
Net increase 760,800 $ 8,052,484 138,556 $ 1,826,988
----------- ------------- ----------- -------------
<F1> For the period from commencement of offering of Class B shares, September
7, 1993 to November 30, 1994.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $300 million, collectively.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended November 30, 1994 was $15,842.
(7) Restricted Securities
The Fund may invest not more than 15% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At November 30,
1994, the Fund owned the following restricted security (constituting 0.02% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Fund does not have the right to demand that this
security be registered. The value of this security is determined in good faith
at the direction of the Trustees.
Date of
Description Acquisition Shares Cost Value
------------------------------------------------------------------------------
Phar-Mor, Inc. 04/22/92 70,000 $2,030,000 $ 188,300
---------
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of Massachusetts Investors Growth Stock Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Massachusetts Investors Growth Stock Fund as of
November 30, 1994, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended November 30, 1994 and
November 30, 1993, and the financial highlights for each of the years in the
ten-year period ended November 30, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
November 30, 1994 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Massachusetts
Investors Growth Stock Fund at November 30, 1994, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 3, 1995
---------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE> 58
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Included in Part A:
For the ten years ended November 30, 1994:
Financial Highlights
Financial Statements Included in Part B:
At November 30, 1994:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the two years ended November 30, 1994:
Statement of Changes in Net Assets*
For the year ended November 30, 1994:
Statement of Operations*
____________________
* Incorporated herein by reference to the Fund's Annual Report to
Shareholders dated November 30, 1994, filed with the SEC on January 27,
1995.
(b) Exhibits
1 Amended & Restated Declaration of Trust,
dated January 19, 1995; filed herewith.
2 Amended & Restated By-Laws, dated December
21, 1994; filed herewith.
3 Not Applicable.
4 (a) Form of Share Certificate. (3)
(b) Form of Share Certificate - Class A Shares. (8)
(c) Form of Share Certificate - Class B Shares. (8)
(d) Form of Share Certificate - Class C Shares. (8)
5 (a) Investment Advisory Agreement, dated
July 19,1985. (5)
6 (a) Distribution Agreement, dated January 1, 1995;
filed herewith.
(b) Dealer Agreement between MFS Fund
Distributors, Inc. ("MFD"), and a dealer
dated December 28, 1994 and the Mutual
Fund Agreement between MFD and a bank or
NASD affiliate, dated December 28, 1994 (10)
7 Retirement Plan for Non-Interested Person
Trustees; filed herewith.
8 (a) Custodian Agreement between the Trust and
State Street Bank and Trust Company, dated
May 24,1988. (2)
<PAGE> 59
(b) Amendment No.1 to Custodian Agreement, dated May 24, 1988. (5)
(c) Amendment No. 2 to Custodian Agreement, dated September 20,
1989. (1)
(d) Amendment No. 3 to Custodian Agreement, dated December 28,
1990. (6)
(e) Amendment No. 4 to Custodian Agreement, dated September 17,
1991. (6)
9 (a) Shareholder Servicing Agent Agreement, dated August 1, 1985.(4)
(b) Amendment to Shareholder Servicing Agent Agreement, dated
December 31, 1992. (7)
(c) Amendment to Shareholder Servicing Agent Agreement dated
September 7, 1993. (8)
(d) Form of Amendment to Shareholder Servicing Agent Agreement. (8)
(e) Exchange Privilege Agreement, dated September 1, 1993. (9)
(f) Loan Agreement by and among the Banks named therein, the MFS
Funds named therein, and The First National Bank of Boston,
dated as of February 21, 1995. (11)
(g) Dividend Disbursing Agency Agreement, dated February 1, 1986.
(5)
10 Consent and Opinion of Counsel; filed herewith.
11 Consent of Deloitte & Touche; filed herewith.
12 Not Applicable.
13 Investment Representation Letter.
14 (a) Forms for Individual Retirement Account Disclosure Statement
as currently in effect. (5)
(b) Forms for MFS 403(b) Custodial Account Agreement as currently
in effect. (5)
(c) Forms for MFS Prototype Paired Defined Contribution Plans and
Trust Agreement as currently in effect. (5)
15 (a) Amended & Restated Distribution Plan for Class A Shares, dated
December 21, 1994; filed herewith.
(b) Amended & Restated Distribution Plan for Class B Shares, dated
December 21, 1994; filed herewith.
(c) Form of Distribution Plan for Class C Shares, dated December 28,
1993. (8)
<PAGE> 60
16 Schedule of Computation for Performance
Quotations - Average Annual Total Return;
filed herewith.
17 Financial Data Schedules for each class;
filed herewith.
Power of Attorney, dated September 21, 1994;
filed herewith.
---------------------------------------------
(1) Incorporated by reference to Post-Effective Amendment No. 52 filed with
the SEC on January 29, 1990.
(2) Incorporated by reference to Post-Effective Amendment No. 51 filed we SEC
on January 27, 1989.
(3) Incorporated by reference to Post-Effective Amendment No. 48 filed with
the SEC on January 27, 1986.
(4) Incorporated by reference to Post-Effective Amendment No. 47 filed with
the SEC on July 29, 1985.
(5) Incorporated by reference to Post-Effective Amendment No 53 filed with
the SEC on January 28 1991.
(6) Incorporated by reference to Post-Effective Amendment No 54 filed with
the SEC on March 27 1992.
(7) Incorporated by reference to Post-Effective Amendment No. 56 filed with
the SEC on June 2, 1993.
(8) Incorporated by reference to Post-Effective Amendment No. 57 filed with
the SEC on October 29, 1993.
(9) Incorporated by reference to Post-Effective Amendment No. 58 filed with
the SEC on January 28, 1994.
(10) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the SEC
on February 22, 1995.
(11) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS
Municipal Income Trust (File No. 811-4841) filed with the SEC on February
28, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C>
Class A Shares of Beneficial Interest 38,361
(without part value) (as of February 28, 1995)
Class B Shares of Beneficial Interest 1,864
(without part value) (as of February 28, 1995)
</TABLE>
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Article V of Registrant s
Declaration of Trust, filed herewith as Exhibit 1 to this Post-Effective
Amendment No. 59 to the Registrant's Registration Statement on Form N-1A and
(b) Section 4 of the Distribution Agreement between the Fund and MFS Fund
Distributors, Inc., filed herewith as Exhibit 6(a) to this Post-Effective
Amendment No. 59 to the Registrant's Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel
of the Registrant's investment adviser and principal underwriter are insured
under an errors and omissions liability insurance policy. The Registrant and
its officers are also insured under the fidelity bond required by Rule 179-1
under the Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Massachusetts Financial Services Company ("MFS") serves as
investment adviser to the following open-end funds comprising the MFS Family of
Funds: Massachusetts Investors Trust, Massachusetts Investors Growth Stock
Fund, MFS Growth Opportunities Fund, MFS Government Securities Fund, MFS
Government Mortgage Fund, MFS Government Limited Maturity Fund, MFS
<PAGE> 61
Series Trust I (which has three series: MFS Managed Sectors Fund, MFS Cash
Reserve Fund and MFS World Asset Allocation Fund), MFS Series Trust II (which
has four series: MFS Emerging Growth Fund, MFS Capital Growth Fund, MFS
Intermediate Income Fund and MFS Gold & Natural Resources Fund), MFS Series
Trust III (which has two series: MFS High Income Fund and MFS Municipal High
Income Fund), MFS Series Trust IV (which has four series: MFS Money Market
Fund, MFS Government Money Market Fund, MFS Municipal Bond Fund and MFS OTC
Fund), MFS Series Trust V (which has two series: MFS Total Return Fund and MFS
Research Fund), MFS Series Trust VI (which has three series: MFS World Total
Return Fund, MFS Utilities Fund and MFS World Equity Fund), MFS Series Trust
VII (which has two series: MFS World Governments Fund and MFS Value Fund), MFS
Series Trust VIII (which has two series: MFS Strategic Income Fund and MFS
World Growth Fund), MFS Municipal Series Trust (which has 19 series: MFS
Alabama Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California
Municipal Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal
Bond Fund, MFS Louisiana Municipal Bond Fund, MFS Maryland Municipal
Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi Municipal
Bond Fund, MFS New York Municipal Bond Fund, MFS North Carolina Municipal Bond
Fund, MFS Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond
Fund, MFS Tennessee Municipal Bond Fund, MFS Texas Municipal Bond Fund, MFS
Virginia Municipal Bond Fund, MFS Washington Municipal Bond Fund, MFS West
Virginia Municipal Bond Fund and MFS Municipal Income Fund) and MFS Series
Trust IX (which has three series: MFS Bond Fund, MFS Limited Maturity Fund and
MFS Municipal Limited Maturity Fund) (the "MFS Funds"). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
MFS also serves as investment adviser of the following
no-load, open-end funds: MFS Institutional Trust ("MFSIT") (which has two
series), MFS Variable Insurance Trust ("MVI") (which has twelve series) and MFS
Union Standard Trust ("UST") (which has two series). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust,
MFS Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the aforementioned funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life
Series Trust ("MFS/SL"), Sun Growth Variable Annuity Fund, Inc. ("SGVAF"),
Money Market Variable Account, High Yield Variable Account, Capital
Appreciation Variable Account, Government Securities Variable Account, World
Governments Variable Account, Total Return Variable Account and Managed Sectors
Variable Account. The principal business address of each is One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company
organized under the laws of the Republic of Ireland and a subsidiary of MFS,
whose principal business address is 41-45 St. Stephen's Green, Dublin 2,
Ireland, serves as investment adviser to and distributor for MFS International
Funds (which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Governments Fund and MFS International Fund- Charter Income
Fund) (the "MIL Funds"). The MIL Funds are organized in Luxembourg and qualify
as an undertaking for collective investments in transferable securities
(UCITS). The principal business address of the MIL Funds is 47, Boulevard
Royal, L-2449 Luxembourg.
MIL also serves as investment adviser to and distributor for
MFS Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited
<PAGE> 62
Maturity Fund, MFS Meridian World Growth Fund, MFS Meridian Money Market Fund
and MFS Meridian U.S. Equity Fund (collectively the "MFS Meridian Funds").
Each of the MFS Meridian Funds is organized as an exempt company under the laws
of the Cayman Islands. The principal business address of each of the MFS
Meridian Funds is P.O. Box 309, Grand Cayman, Cayman Islands, British West
Indies.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary
of MFS, serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned
subsidiary of MFS, serves as distributor for certain life insurance and annuity
contracts issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary
of MFS, serves as shareholder servicing agent to the MFS Funds, the MFS
Closed-End Funds, MFS Institutional Trust, MFS Variable Insurance Trust and MFS
Union Standard Trust.
MFS Asset Management, Inc. ("AMI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned
subsidiary of MFS, markets MFS products to retirement plans and provides
administrative and record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames,
Arnold D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the
Chairman, Mr. Shames is the President, Mr. Scott is a Senior Executive Vice
President and Secretary, James E. Russell is a Senior Vice President and the
Treasurer, Stephen E. Cavan is a Senior Vice President, General Counsel and an
Assistant Secretary, and Robert T. Burns is a Vice President and an Assistant
Secretary of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS GOVERNMENT MORTGAGE FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS GOVERNMENT LIMITED MATURITY FUND
MFS SERIES TRUST VI
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer, James R. Bordewick, Jr., Vice
President and Associate General Counsel of MFS, is Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J.
Nanberg, Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer, and James R. Bordewick, Jr., is Assistant Secretary.
<PAGE> 63
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice
President of MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost is Assistant Treasurer, and James
R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T.
Swanson, Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior
Vice Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R.
Bordewick, Jr., is Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A.
Dennis and Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice
Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J.
Nanberg and Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice
Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D.
Laupheimer, Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L.
Schechter and David R. King, Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is Assistant Treasurer and James R. Bordewick, Jr., is Assistant
Secretary.
MFS VARIABLE INSURANCE TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
<PAGE> 64
MFS UNION STANDARD TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost and
Karen C. Jordan are Assistant Treasurers and James R. Bordewick, Jr., is the
Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert J. Manning are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, and James O.
Yost, is Assistant Treasurer and James R. Bordewick, Jr., is Assistant
Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the President, Arnold D.
Scott, Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of
MFS, is a Senior Vice President and Managing Director, Thomas J. Cashman, Jr.,
a Vice President of MFS, is a Senior Vice President, Stanley T. Kwok is a Vice
President, Anthony F. Clarizio is an Assistant Vice President, Stephen E. Cavan
is a Director, Senior Vice President and the Clerk, James R. Bordewick, Jr. is
a Director, Senior Vice President and an Assistant Clerk, Robert T. Burns is an
Assistant Clerk and James E. Russell is the Treasurer.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary, and Ziad
Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James R. Bordewick, Jr., is the
Assistant Secretary and Ziad Malek is a Senior Vice President.
<PAGE> 65
MFD
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, William W. Scott, Jr., an Executive Vice President of
MFS, is the President, Stephen E. Cavan is the Secretary, Robert T. Burns is
the Assistant Secretary, and James E. Russell is the Treasurer.
CIAI
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery, Executive
Vice President of MFS, is the Vice President, James E. Russell is the
Treasurer, Stephen E. Cavan is the Secretary, and Robert T. Burns is the
Assistant Secretary.
MFSC
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Joseph A. Recomendes, Senior Vice President of MFS, is
the President, James E. Russell is the Treasurer, Stephen E. Cavan is the
Secretary, and Robert T. Burns is the Assistant Secretary.
AMI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L.
Shames, Leslie J. Nanberg and Arnold D. Scott are Directors, Thomas J. Cashman
is the President and a Director, James E. Russell is the Treasurer and Robert
T. Burns is the Secretary.
RSI
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery
are Directors, Arnold D. Scott is the Chairman, Douglas C. Grip, a Senior Vice
President of MFS, is the President, James E. Russell is the Treasurer, Stephen
E. Cavan is the Secretary, Robert T. Burns is the Assistant Secretary and Henry
A. Shea is an Executive Vice President.
In addition, the following persons, Directors or officers of
MFS, have the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company
of Canada (U.S.), One Sun Life
Executive Park, Wellesley Hills,
Massachusetts
Director, Sun Life Insurance and
Annuity Company of New York,
67 Broad Street, New York,
New York
John R. Gardner President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West,
Toronto, Ontario, Canada (Mr.
Gardner is also an officer and/or
Director of various subsidiaries and
affiliates of Sun Life)
John D. McNeil Chairman, Sun Life Assurance Company
of Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada
(Mr. McNeil is also an officer
<PAGE> 66
and/or Director of various subsidiaries
and affiliates of Sun Life)
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in
whole or in part, at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Massachusetts Financial 500 Boylston Street
Services Company (investment Boston, MA 02116
(adviser)
MFS Fund Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116
State Street Bank and Trust State Street South
Company (custodian) 5 - West
North Quincy, MA 02171
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116
</TABLE>
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
upon request and without charge.
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
----------- ---------------------- --------
<S> <C> <C>
1 Amended & Restated Declaration of Trust, dated January 19, 1995.
2 Amended & Restated By-Laws, dated December 21, 1994.
6 (a) Distribution Agreement, dated January 1, 1995.
7 Retirement Plan for Non-Interested Person Trustees.
10 Consent and Opinion of Counsel.
11 Consent of Deloitte & Touche.
15 (a) Amended & Restated Distribution Plan for Class A Shares, dated December 21,1994.
(b) Amended & Restated Distribution Plan for Class B Shares, dated December 21, 1994.
16 Schedule of Computation for Performance Quotations - Average Annual Total Return.
27 Financial Data Schedules.
</TABLE>
<PAGE> 68
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 27th day of March, 1995.
MASSACHUSETTS INVESTORS
GROWTH STOCK FUND
By: JAMES R. BORDEWICK, JR.
-------------------------------
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on March 27, 1995.
SIGNATURE TITLE
--------- -----
A. KEITH BRODKIN* Chairman, President (Principal
--------------------------------- Executive Officer) and Trustee
A. Keith Brodkin
W. THOMAS LONDON* Treasurer (Principal Financial
--------------------------------- Officer and Principal Accounting
W. Thomas London Officer)
RICHARD B. BAILEY* Trustee
---------------------------------
Richard B. Bailey
PETER G. HARWOOD* Trustee
---------------------------------
Peter G. Harwood
J. ATWOOD IVES* Trustee
---------------------------------
J. Atwood Ives
LAWRENCE T. PERERA* Trustee
---------------------------------
Lawrence T. Perera
<PAGE> 69
WILLIAM J. POORVU* Trustee
-------------------------
William J. Poorvu
CHARLES W. SCHMIDT* Trustee
-------------------------
Charles W. Schmidt
ARNOLD D. SCOTT* Trustee
-------------------------
Arnold D. Scott
JEFFREY L. SHAMES* Trustee
--------------------------
Jeffrey L. Shames
ELAINE R. SMITH* Trustee
--------------------------
Elaine R. Smith
DAVID B. STONE* Trustee
--------------------------
David B. Stone
* By: JAMES R. BORDEWICK, JR.
------------------------------
Name: James R. Bordewick, Jr.
as Attorney-in-fact
Executed by James R. Bordewick, Jr.
on behalf of those indicated pursuant
to a Power of Attorney dated
September 21, 1994; filed herewith.
<PAGE> 70
POWER OF ATTORNEY
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
The undersigned, Trustees and officers of Massachusetts Investors
Growth Stock Fund (the "Registrant"), hereby severally constitute and appoint
A. Keith Brodkin, W. Thomas London, Stephen E. Cavan and James R. Bordewick,
Jr., and each of them singly, as true and lawful attorneys, with full power to
them and each of them to sign for each of the undersigned, in the names of, and
in the capacities indicated below, any Registration Statement and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
for the purpose of registering the Registrant as a management investment
company under the Investment Company Act of 1940 and/or the shares issued by
the Registrant under the Securities Act of 1933 granting unto our said
attorneys, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary or desirable to be
done in the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys
or any of them may lawfully do or cause to be done by virtue thereof.
In WITNESS WHEREOF, the undersigned have hereunto set their hand on
this 21st day of September, 1994.
Signatures Title(s)
---------- --------
A. KEITH BRODKIN Chairman of the Board; Trustee; and
---------------------- Principal Executive Officer
A. Keith Brodkin
RICHARD B. BAILEY Trustee
----------------------
Richard B. Bailey
PETER G. HARWOOD Trustee
----------------------
Peter G. Harwood
J. ATWOOD IVES Trustee
----------------------
J. Atwood Ives
LAWRENCE T. PERERA Trustee
----------------------
Lawrence T. Perera
<PAGE> 71
WILLIAM J. POORVU Trustee
-------------------------
William J. Poorvu
CHARLES W. SCHMIDT Trustee
-------------------------
Charles W. Schmidt
ARNOLD D. SCOTT Trustee
-------------------------
Arnold D. Scott
JEFFREY L. SHAMES Trustee
-------------------------
Jeffrey L. Shames
ELAINE R. SMITH Trustee
-------------------------
Elaine R. Smith
DAVID B. STONE Trustee
-------------------------
David B. Stone
W. THOMAS LONDON Principal Financial and
------------------------- Accounting Officer
W. Thomas London
<PAGE> 1
--------------------------------------------------------------------------------
EXHIBIT NO. 1
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
_____________________
AMENDED AND RESTATED
DECLARATION OF TRUST
JANUARY 18, 1995
--------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I -- NAME AND DEFINITIONS
--------------------
Section 1.1 Name 1
Section 1.2 Definitions 2
ARTICLE II -- TRUSTEES
--------
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 4
Section 2.4 Vacancies 5
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III -- POWERS OF TRUSTEES
------------------
Section 3.1 General 5
Section 3.2 Investments 6
Section 3.3 Legal Title 7
Section 3.4 Issuance and Repurchase of Securities 7
Section 3.5 Borrowing Money; Lending Trust Property 7
Section 3.6 Delegation; Committees 8
Section 3.7 Collection and Payment 8
Section 3.8 Expenses 8
Section 3.9 Manner of Acting; By-Laws 8
Section 3.10 Miscellaneous Powers 8
Section 3.11 Principal Transactions 9
Section 3.12 Trustees and Officers as Shareholders 10
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
--------------------------------------------------
Section 4.1 Investment Adviser 10
Section 4.2 Distributor 11
Section 4.3 Transfer Agent 11
Section 4.4 Parties to Contract 11
</TABLE>
I
<PAGE> 3
TABLE OF CONTENTS (CONTINUED)
-----------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
-------------------------------------------------------------
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. 12
Section 5.2 Non-Liability of Trustees, etc. 12
Section 5.3 Mandatory Indemnification 13
Section 5.4 No Bond Required of Trustees 14
Section 5.5 No Duty of Investigation; Notice in Trust Instruments, etc. 15
Section 5.6 Reliance on Experts, etc. 15
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 6.1 Beneficial Interest 15
Section 6.2 Rights of Shareholders 16
Section 6.3 Trust only 16
Section 6.4 Issuance of Shares 16
Section 6.5 Register of Shares 17
Section 6.6 Transfer of Shares 17
Section 6.7 Notices 17
Section 6.8 Voting Powers 18
Section 6.9 Series Designation 18
Section 6.10 Class Designation 21
ARTICLE VII -- REDEMPTIONS
-----------
Section 7.1 Redemption of Shares 21
Section 7.2 Price 21
Section 7.3 Payment 21
Section 7.4 Effect of Suspension of Determination of Net Asset Value 22
Section 7.5 Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding 22
Section 7.6 Suspension of Right of Redemption 22
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME
--------------------------------------------
AND DISTRIBUTIONS 23
-----------------
</TABLE>
II
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX -- DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
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Section 9.1 Duration 23
Section 9.2 Termination of Trust 24
Section 9.3 Amendment Procedure 25
Section 9.4 Merger, Consolidation and Sale of Assets 26
Section 9.5 Incorporation, Reorganization 26
Section 9.6 Incorporation or Reorganization of Series 27
ARTICLE X -- REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 27
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ARTICLE XI -- MISCELLANEOUS
-------------
Section 11.1 Filing 28
Section 11.2 Governing Law 28
Section 11.3 Counterparts 28
Section 11.4 Reliance by Third Parties 28
Section 11.5 Provisions in Conflict with Law or Regulations 29
ANNEX A 30
SIGNATURE PAGE 31
</TABLE>
III
<PAGE> 5
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
500 Boylston Street
Boston, Massachusetts 02116
AMENDED AND RESTATED DECLARATION OF TRUST, made as of this 18th day of
January, 1995 by the Trustees hereunder.
WHEREAS, the Trust was established pursuant to a Declaration of Trust
dated March 4, 1985 for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets continue to be divided into transferable Shares of Beneficial Interest
(without par value) issued in one or more series, as hereinafter provided; and
WHEREAS, the Declaration of Trust has been, from time to time, amended
in accordance with the provisions of the Declaration; and
WHEREAS, the Trustees now desire further to amend and to restate the
Declaration of Trust and hereby certify, as provided in Section 11.1 of the
Declaration, that this Amended and Restated Declaration of Trust has been
further amended and restated in accordance with the provisions of the
Declaration;
NOW THEREFORE, the Trustees hereby confirm that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares of
Beneficial Interest (without par value) issued hereunder and subject to the
provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
--------------------
SECTION 1.1 - NAME. The name of the trust created hereby is the
Massachusetts Investors Growth Stock Fund.
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SECTION 1.2 - DEFINITIONS. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) "COMMISSION" has the meaning given that term in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from
time to time. Reference in this Declaration of Trust to "DECLARATION,"
"HEREOF," "HEREIN," and "HEREUNDER" shall be deemed to refer to this
Declaration rather than the article or section in which such words appear.
(d) "DISTRIBUTOR" means the party, other than the Trust, to the
contract described in Section 4.2 hereof.
(e) "INTERESTED PERSON" has the meaning given that term in the 1940
Act.
(f) "INVESTMENT ADVISER" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.1 hereof.
(g) "MAJORITY SHAREHOLDER VOTE" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the
1940 Act, except that such term may be used herein with respect to the Shares
of the Trust as a whole or the Shares of any particular series, as the context
may require.
(h) "1940 ACT" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(i) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign.
(j) "SHAREHOLDER" means a record owner of outstanding Shares.
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<PAGE> 7
(k) "SHARES" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series or Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(l) "TRANSFER AGENT" means the party, other than the Trust, to a
contract described in Section 4.3 hereof.
(m) "TRUST" means the trust created hereby.
(n) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(o) "TRUSTEES" means the persons who signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
--------
SECTION 2.1 - NUMBER OF TRUSTEES. The number of Trustees shall be
such number as shall be fixed from time to time by a written instrument signed
by a majority of the Trustees, provided, however, that the number of Trustees,
shall in no event be less than three (3) nor more than fifteen (15).
SECTION 2.2 - TERM OF OFFICE OF TRUSTEE. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided;
except:
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<PAGE> 8
(a) that any Trustee may resign his trust (without need for prior or
subsequent accounting) by an instrument in writing signed by him and delivered
to the other Trustees, which shall take effect upon such delivery or upon such
later date as is specified therein;
(b) that any Trustee may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) with cause, at any time by written instrument, signed by at
least two-thirds of the remaining Trustees, specifying the date when such
removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has
become incapacitated by illness or injury may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; and
(d) a Trustee may be removed at any meeting of Shareholders by a vote
of two-thirds of the outstanding Shares.
Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.3 - RESIGNATION AND APPOINTMENT OF TRUSTEE. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or
for any other reason exist, the remaining Trustees shall fill such vacancy by
appointing such other person as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each
Shareholder at his address as recorded on the books of the Trustees. An
appointment of a Trustee may be made by the Trustees then in office and notice
thereof mailed to Shareholders as aforesaid in anticipation of a vacancy to
occur by reason of retirement, resignation or increase in number of Trustees
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<PAGE> 9
effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement, resignation
or increase in number of Trustees. The power of appointment is subject to the
provisions of Section 16(a) of the 1940 Act.
SECTION 2.4 - VACANCIES. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall
not operate to annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in Section 2.3,
the Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
SECTION 2.5 - DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six months
at any one time to any other Trustee or Trustees; provided that in no case
shall less than two Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
------------------
SECTION 3.1 - GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without The Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do all such other
things and execute all such instruments as the Trustees deem necessary, proper
or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
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<PAGE> 10
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without the order of or resort to any court.
SECTION 3.2 - INVESTMENTS.
(a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an
investment company;
(ii) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange,
distribute, lend or otherwise deal in or dispose of U.S. and foreign
currencies, any form of gold and other precious metals, commodity contracts,
contracts for the future acquisition or delivery of fixed income or other
securities, and securities of every nature and kind, including, without
limitation, all types of bonds, debentures, stocks, negotiable or non-
negotiable instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements, bankers'
acceptances, and other securities of any kind, issued, created, guaranteed or
sponsored by any and all Persons, including, without limitation, states,
territories and possessions of the United States and the District of Columbia
and any political subdivision, agency or instrumentality of any such Person, or
by the U.S. Government, any foreign government, any political subdivision or
any agency or instrumentality of the U.S. Government, any foreign government or
any political subdivision of any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation
or organization organized under the laws of the United States or of any state,
territory or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to retain Trust assets in cash and from time to time change the
investments of the assets of the Trust; and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or corporations to exercise
any of said rights, powers and privileges in respect of any of said
instruments; and
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<PAGE> 11
(iii) to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, and to do every other
act or thing incidental or appurtenant to or connected with the aforesaid
purposes, objects or powers.
(b) The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees
be limited by any law limiting the investments which may be made by
fiduciaries.
SECTION 3.3 - LEGAL TITLE. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name of
any other Person or nominee, on such terms as the Trustees may determine. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
SECTION 3.4 - ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares and, subject to the provisions set forth in Articles VII, VIII and IX
and Section 6.9 hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds of the Trust or
other Trust Property whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by laws of The Commonwealth of Massachusetts
governing business corporations.
SECTION 3.5 - BORROWING MONEY; LENDING TRUST PROPERTY. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any
obligation, contract or engagement of any other Person and to lend Trust
Property.
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<PAGE> 12
SECTION 3.6 - DELEGATION; COMMITTEES. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
SECTION 3.7 - COLLECTION AND PAYMENT. Subject to Section 6.9 hereof,
the Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
SECTION 3.8 - EXPENSES. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
SECTION 3.9 - MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken
by a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of all the Trustees.
The Trustees may adopt By-Laws not inconsistent with this Declaration to
provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not reserved to the Shareholders.
SECTION 3.10 - MISCELLANEOUS POWERS. The Trustees shall have the power
to:
(a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust;
(b) enter into joint ventures, partnerships and any other
combinations or associations;
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(c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property, insurance policies
insuring the Shareholders, Trustees, officers, employees, agents, investment
advisers, distributors, selected dealers or independent contractors of the
Trust against all claims arising by reason of holding any such position or by
reason of any action taken or omitted by any such Person in such capacity,
whether or not constituting negligence, or whether or not the Trust would have
the power to indemnify such Person against such liability;
(e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
or agents of the Trust;
(f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent, and any dealer, to such extent as the Trustees shall determine;
(g) determine and change the fiscal year of the Trust and the method
by which its accounts shall be kept; and
(h) adopt a seal for the Trust, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.
SECTION 3.11 - PRINCIPAL TRANSACTIONS. Except in transactions
permitted by the 1940 Act, or any order of exemption issued by the Commission,
the Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor, or Transfer Agent or with
any Interested Person of such Person; but the Trust may employ any such Person,
or firm or company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing agent or
custodian upon customary terms.
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SECTION 3.12 - TRUSTEES AND OFFICERS AS SHAREHOLDERS. Except as
hereinafter provided, no officer, Trustee or member of the Advisory Board of
the Trust, and no member, partner, officer, director or trustee of the
Investment Adviser or of the Distributor and no Investment Adviser or
Distributor of the Trust, shall take long or short positions in the securities
issued by the Trust. The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customers;
(b) The Distributor from purchasing Shares as agent for the account
of the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, Trustee or member of the Advisory Board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the Trust's current prospectus; or
(d) The Investment Adviser, the Distributor or any of their officers,
partners, directors or trustees from purchasing Shares prior to the effective
date of the Registration Statement relating to the Shares under the Securities
Act of 1933, as amended.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
--------------------------------------------------
SECTION 4.1 - INVESTMENT ADVISER. Subject to a Majority Shareholder
Vote of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby a party to such contract shall undertake to
furnish the Trust such management, investment advisory, statistical and
research facilities and services, promotional activities, and such other
facilities and services, if any, with respect to one or more series of Shares,
as the Trustees shall from time to time consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
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<PAGE> 15
Notwithstanding any provision of the Declaration, the Trustees may delegate to
the Investment Adviser authority (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of assets of the Trust on behalf of the Trustees or
may authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Investment Adviser (and
all without further action by the Trustees). Any such purchases, sales, loans
or exchanges shall be deemed to have been authorized by all the Trustees.
SECTION 4.2 - DISTRIBUTOR. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of Shares whereby
the Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In
either case, the contract shall be on such terms and conditions as the Trustees
may in their discretion determine not inconsistent with the provisions of this
Article IV or the By-Laws; and such contract may also provide for the
repurchase or sale of Shares by such other party as principal or as agent of
the Trust and may provide that such other party may enter into selected dealer
agreements with registered securities dealers to further the purpose of the
distribution or repurchase of the Shares.
SECTION 4.3 - TRANSFER AGENT. The Trustees may in their discretion
from time to time enter into a transfer agency and shareholder service contract
or contracts whereby the other party or parties to such contract or contracts
shall undertake to furnish transfer agency and/or shareholder services. The
contract or contracts shall have such terms and conditions as the Trustees may
in their discretion determine not inconsistent with the Declaration or the
By-Laws. Such services may be provided by one or more Persons.
SECTION 4.4 - PARTIES TO CONTRACT. Any contract of the character
described in Sections 4.1, 4.2 or 4.3 of this Article IV or any custodian
contract, as described in the By-Laws, may be entered into with any Person,
although one or more of the Trustees or officers of the Trust may be an
officer, partner, director, trustee, shareholder, or member of such other party
to the contract, and no such contract shall be invalidated or rendered voidable
by reason of the existence of any such relationship; nor shall any Person
holding such relationship be liable merely by reason of such relationship for
any loss or expense to the Trust under or by reason of said contract or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract when entered into was not inconsistent with the provisions of
this Article IV or the
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By-Laws. The same Person may be the other party to contracts entered into
pursuant to Sections 4.1, 4.2 and 4.3 above or custodian contracts, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all of the contracts mentioned in this Section 4.4.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
-------------------------------------------------------------
SECTION 5.1 - NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC.
No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with Trust Property or the affairs of
the Trust, save only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard for his duty to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability, he shall
not, on account thereof, be held to any personal liability. The Trust shall
indemnify and hold each Shareholder harmless from and against all claims and
liabilities to which such Shareholder may become subject by reason of his being
or having been a Shareholder, and shall reimburse such Shareholder for all
legal and other expenses reasonably incurred by him in connection with any such
claim or liability. The rights accruing to a Shareholder under this Section
5.1 shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust
to indemnify or reimburse a Shareholder in any appropriate situation even
though not specifically provided herein. Notwithstanding any other provision
of this Declaration to the contrary, no Trust Property shall be used to
indemnify or reimburse any Shareholder of any Shares of any series other than
Trust Property allocated or belonging to such series.
SECTION 5.2 - NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
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SECTION 5.3 - MANDATORY INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is or has been a Trustee or officer of the
Trust shall be indemnified by the Trust against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a
Trustee or officer or other disposition not involving a final adjudication as
provided in paragraph (b)(i) or (b)(ii) above resulting in a payment by a
Trustee or officer, unless there has been either a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition
or by a reasonable determination, based upon a review of readily available
facts (as opposed to a full trial-type inquiry) that he did not engage in such
conduct:
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(A) by vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a Person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such Person. Nothing contained herein shall affect any
rights to indemnification to which personnel other than Trustees and officers
may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit, or proceeding of the character described in paragraph (a)
of this Section 5.3 shall be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient to
repay such amount if it is ultimately determined that he is not entitled to
indemnification under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out
of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one (i) who
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
SECTION 5.4 - NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
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SECTION 5.5 - NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, Transfer Agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection
with the Trust shall be conclusively presumed to have been executed or done by
the executors thereof only in their capacity as Trustees under the Declaration
or in their capacity as officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate, Share, other security of
the Trust or undertaking made or issued by the Trustees shall recite that the
same is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the Trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind any of
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, the Trust's
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
SECTION 5.6 - RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by the Investment Adviser, the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 6.1 - BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of Beneficial Interest
(without par value) which shall be divided into one or more series or classes
as provided in Sections 6.9 and 6.10 hereof. The number of
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Shares authorized hereunder is unlimited. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split of Shares, shall be fully paid and non-assessable.
SECTION 6.2 - RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the
Trust nor can they be called upon to assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights specifically set forth in the
Declaration. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights, except as the Trustees
may determine with respect to any series or class of Shares.
SECTION 6.3 - TRUST ONLY. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the Trustees
and each Shareholder from time to time. It is not the intention of the
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other than
a trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
SECTION 6.4 - ISSUANCE OF SHARES. The Trustees, in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares. The Trustees may from
time to time divide or combine the Shares of any series into a greater or
lesser number without thereby changing their proportionate beneficial interests
in Trust Property allocated or belonging to such series. Contributions to the
Trust may be accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000ths of a Share or integral multiples thereof.
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SECTION 6.5 - REGISTER OF SHARES. A register shall be kept at the
principal office of the Trust or at an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him as
herein or in the By-Laws provided, until he has given his address to the
Transfer Agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. It is not contemplated that certificates will
be issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
SECTION 6.6 - TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with any
certificate or certificates (if issued) for such Shares and such evidence of
the genuineness of each such execution and authorization and of other matters
as may reasonably be required. Upon such delivery the transfer shall be
recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or
the Transfer Agent; but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
SECTION 6.7 - NOTICES. Any and all notices to which any Shareholder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust.
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SECTION 6.8 - VOTING POWERS. The Shareholders shall have power to
vote only (i) for the removal of Trustees as provided in Section 2.2 hereof,
(ii) with respect to any investment advisory or management contract as provided
in Section 4.1 hereof, (iii) with respect to termination of the Trust as
provided in Section 9.2 hereof, (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 9.3 hereof, (v) with
respect to any merger, consolidation or sale of assets as provided in Sections
9.4 and 9.6 hereof, (vi) with respect to incorporation of the Trust or any
series to the extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to
the same extent as the stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (viii) with respect to such additional matters
relating to the Trust as may be required by the Declaration, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Each whole
Share shall be entitled to one vote as to any matter on which it is entitled to
vote and each fractional Share shall be entitled to a proportionate fractional
vote, except that Shares held in the treasury of the Trust shall not be voted.
There shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholder votes
and meetings and related matters.
Section 6.9 - Series Designatio. Shares of the Trust may be divided
into series, the number and relative rights, privileges and preferences of
which shall be established and designated by the Trustees, in their discretion,
in accordance with the terms of this Section 6.9. The Trustees may from time
to time exercise their power to authorize the division of Shares into one or
more series by establishing and designating one or more series of Shares upon
and subject to the following provisions:
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption and the price, terms and
manner of redemption, and special and relative rights as to dividends and on
liquidation.
(b) The number of authorized Shares and the number of Shares of
each series that may be issued shall be unlimited. The Trustees may classify
or reclassify any unissued Shares or any Shares previously issued and
reacquired of any series into one or more series that may be
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established and designated from time to time. The Trustees may hold as
treasury shares (of the same or some other series), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any series reacquired by the Trust at their discretion from time to time.
(c) All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series, the Trustees shall allocate
them among any one or more of the series established and designated from time
to time in such a manner and on such basis as they, in their sole discretion,
deem fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all series for all purposes.
No holder of Shares of any particular series shall have any claim on or right
to any assets allocated or belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be
charged with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as belonging to any particular series shall be
allocated and charged by the Trustees to and among any one or more of the
series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the holders of all series for all
purposes. The Trustees shall have full discretion to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders. Under no circumstances
shall the assets allocated or belonging to any particular series be charged
with liabilities attributable to any other series. All Persons who have
extended credit which has been allocated to a particular series, or who have a
claim or contract which has been allocated to any particular series, shall look
only to the assets of that particular series for payment of such credit, claim
or contract.
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(e) The power of the Trustees to invest and reinvest the Trust
Property allocated or belonging to any particular series shall be governed by
Section 3.2 hereof unless otherwise provided in the instrument of the Trustees
establishing such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest
in the net assets allocated or belonging to such series only, and such interest
shall not extend to the assets of the Trust generally. Dividends and
distributions on Shares of a particular series may be paid with such frequency
as the Trustees may determine, which may be daily or otherwise, pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, to the holders of Shares of that series, only from
such of the income and capital gains, accrued or realized, from the assets
belonging to that series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that series. All dividends and
distributions on Shares of a particular series shall be distributed pro rata to
the holders of that series in proportion to the number of Shares of that series
held by such holders at the date and time of record established for the payment
of such dividends or distributions. Shares of any particular series of the
Trust may be redeemed solely out of Trust Property allocated or belonging to
that series. Upon liquidation or termination of a series of the Trust,
Shareholders of such series shall be entitled to receive a pro rata share of
the net assets of such series only. A Shareholder of a particular series of
the Trust shall not be entitled to participate in a derivative or class action
on behalf of any other series or the Shareholders of any other series of the
Trust.
(g) Notwithstanding any provision hereof to the contrary, on any
matter submitted to a vote of the Shareholders of the Trust, all Shares then
entitled to vote shall be voted in the aggregate, except that (i) when required
by the 1940 Act to be voted by individual series, Shares shall not be voted in
the aggregate, and (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such series, or as otherwise provided in such
instrument. At any time that there are no Shares outstanding of any particular
series previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that series and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
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SECTION 6.10 - CLASS DESIGNATION. The Trustees may, in their
discretion, authorize the division of Shares of the Trust (or any series of the
Trust) into one or more classes. All Shares of a class shall be identical with
each other and with the Shares of each other class of the Trust or the same
series of the Trust (as applicable), except for such variations between classes
as may be approved by the Board of Trustees and permitted by the 1940 Act or
pursuant to any exemptive order issued by the Securities and Exchange
Commission. The classes of Shares established pursuant to this Section 6.10
and existing as of the date hereof are set forth in Annex A hereto.
ARTICLE VII
REDEMPTIONS
-----------
SECTION 7.1 - REDEMPTION OF SHARES. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose in the Trust's then effective prospectus under the Securities
Act of 1933. The Trustees may from time to time specify additional conditions,
not inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of 1933.
SECTION 7.2 - PRICE. Shares shall be redeemed at their net asset value
determined as set forth in Article VIII hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Article VIII hereof after
receipt of such application.
SECTION 7.3 - PAYMENT. Payment of the redemption price of Shares of
any series shall be made in cash or in property out of the assets of such
series to the Shareholder of record at such time and in the manner, not
inconsistent with the 1940 Act or other applicable laws, as may be specified
from time to time in the Trust's then effective prospectus under the Securities
Act of 1933, subject to the provisions of Section 7.4 hereof.
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SECTION 7.4 - EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 7.6 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 7.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for
by the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on
deposits. The redemption price of Shares for which redemption applications
have not been revoked shall be the net asset value of such Shares next
determined as set forth in Article VIII after the termination of such
suspension, and payment shall be made within seven days after the date upon
which the application was made plus the period after such applications during
which the determination of net asset value was suspended.
SECTION 7.5 - REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY; DISCLOSURE OF HOLDING. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any series of the Trust
as a regulated investment company under the Internal Revenue Code, as amended,
then the Trustees shall have the power by lot or other means deemed equitable
by them (i) to call for redemption by any such Person a number, or principal
amount, of Shares or other securities of the Trust sufficient to maintain or
bring the direct or indirect ownership of Shares or other securities of the
Trust into conformity with the requirements for such qualification and (ii) to
refuse to transfer or issue Shares or other securities of the Trust to any
Person whose acquisition of the Shares or other securities of the Trust in
question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in Section 7.1
hereof.
The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
SECTION 7.6 - SUSPENSION OF RIGHT OF REDEMPTION. The Trust may
declare a suspension of the right of redemption or postpone the date of payment
or redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary
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weekend and holiday closings, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as a result of
which disposal by the Trust of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Trust fairly to
determine the value of its net assets, or (iv) during any other period when the
Commission may for the protection of security holders of the Trust by order
permit suspension of the right of redemption or postponement of the date of
payment or redemption; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (ii), (iii),
or (iv) exist. Such suspension shall take effect at such time as the Trust
shall specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the period
specified in (ii) or (iii) shall have expired (as to which in the absence of an
official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of the suspension
as provided in Section 7.4 hereof.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
--------------------------------------------------------------
Subject to Section 6.9 hereof, the Trustees, in their absolute
discretion, may prescribe and shall set forth in the By-Laws or in a duly
adopted vote of the Trustees such bases and times for determining the per Share
net asset value of the Shares of any series, or net income attributable to the
Shares of any series, or the declaration and payment of dividends and
distributions on the Shares of any series, as they may deem necessary or
desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
--------------------------------------------------------
SECTION 9.1 - DURATION. The Trust shall continue without limitation
of time but subject to the provisions of this Article IX.
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SECTION 9.2 - TERMINATION OF TRUST.
-----------------------------------
(a) The Trust may be terminated (i) by a Majority Shareholder Vote of
the holder of its Shares, or (ii) by the Trustees by written notice to the
Shareholders. Any series of the Trust may be terminated (i) by the affirmative
vote of the holders of not less than two-thirds of the Shares outstanding and
entitled to vote of that series, or (ii) by the Trustees by written notice to
the Shareholders of that series. Upon the termination of the Trust or any
series of the Trust:
(i) The Trust or series of the Trust shall carry on no business
except for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or series of the Trust and all the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or series of the
Trust shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust or series of the Trust, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part of
the remaining Trust Property or Trust Property of the series to one or more
persons at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind, discharge or pay
its liabilities, and to do all other acts appropriate to liquidate its
business; provided, that any sale, conveyance, assignment, exchange, transfer
or other disposition of all or substantially all the Trust Property shall
require Shareholder approval in accordance with Section 9.4 hereof, and any
sale, conveyance, assignment, exchange, transfer or other disposition of all or
substantially all of the Trust Property allocated or belonging to any series
shall require the approval of the Shareholders of such series as provided in
Section 9.6 hereof; and
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the Trustees
may distribute the remaining Trust Property or Trust Property of the series, in
cash or in kind or partly in cash and partly in kind, among the Shareholders of
the Trust or the series according to their respective rights.
(b) After termination of the Trust or series and distribution to the
Shareholders of the Trust or series as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument
in writing setting forth the fact of such termination, and the
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Trustees shall thereupon be discharged from all further liabilities and duties
hereunder with respect to the Trust or series, and the rights and interests of
all Shareholders of the Trust or series shall thereupon cease.
Section 9.3 - Amendment Procedure.
----------------------------------
(a) This Declaration may be amended by a Majority Shareholder Vote of
the Shareholders of the Trust or by any instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by the holders
of not less than a majority of the Shares of the Trust. The Trustees may also
amend this Declaration without the vote or consent of Shareholders to designate
series in accordance with Section 6.9 hereof, to change the name of the Trust,
to supply any omission, to cure, correct or supplement any ambiguous, defective
or inconsistent provision hereof, or if they deem it necessary or advisable to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code, as amended, but the Trustees shall not be liable
for failing so to do.
(b) No amendment which the Trustees shall have determined shall
affect the rights, privileges or interests of holders of a particular series of
Shares, but not the rights, privileges or interests of holders of Shares of the
Trust generally, may be made except with the vote or consent by a Majority
Shareholder Vote of such series.
(c) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series or class of Shares, by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with a Majority Shareholder Vote of
Shares or series of Shares. Nothing contained in this Declaration shall permit
the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(d) A certificate signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Shareholders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust.
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(e) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
SECTION 9.4 - MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for such purpose by the Majority Shareholder Vote of the Trust, or by an
instrument or instruments in writing without a meeting, consented to by the
Majority Shareholder Vote of the Trust; provided, however, that if such merger,
consolidation, sale, lease or exchange is recommended by the Trustees, the vote
or written consent of the holders of a majority of Shares outstanding shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of The Commonwealth of Massachusetts. Nothing
contained herein shall be construed as requiring approval of Shareholders for
any sale of assets in the ordinary course of the business of the Trust.
SECTION 9.5 - INCORPORATION AND REORGANIZATION. With the approval of
the holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any
other interest. Subject to Section 9.4 hereof, the Trustees may also cause a
merger or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to
the extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
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SECTION 9.6 - INCORPORATION OR REORGANIZATION OF SERIES. With the
approval of a Majority Shareholder Vote of any series, the Trustees may sell,
lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
------------------------------------------------------
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
Whenever ten or more Shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least $25,000 or at
least l% of the Shares outstanding, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with other
Shareholders with a view to obtaining signatures to a request for a meeting of
Shareholders for the purpose of removing one or more Trustees pursuant to
Section 2.2 hereof and accompany such application with a form of communication
and request which they wish to transmit, the Trustees shall within five
business days after receipt of such application either:
(a) afford to such applicants access to a list of the names and
addresses of all Shareholders as recorded on the books of the Trust; or
(b) inform such applicants as to the approximate number of
Shareholders of record, and the approximate cost of mailing to them the
proposed communication and form of request. If the Trustees elect to follow
the course specified in (b) above, the Trustees, upon the written request of
such applicants, accompanied by a tender of the material to be mailed and of
the reasonable expenses of mailing, shall, with reasonable promptness, mail
such material to all Shareholders of record, unless within five business days
after such tender the Trustees mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement
27
<PAGE> 32
signed by at least a majority of the Trustees to the effect that in their
opinion either such material contains untrue statements of fact or omits to
state facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of such
opinion.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1 - FILING. This Declaration, as amended, and any
subsequent amendment hereto shall be filed in the office of the Secretary of
The Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of The Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, integrating into a single
instrument all of the provisions of the Declaration which are then in effect
and operative, may be executed from time to time by a majority of the Trustees
and shall, upon filing with the Secretary of The Commonwealth of Massachusetts,
be conclusive evidence of all amendments contained therein and may thereafter
be referred to in lieu of the original Declaration and the various amendments
thereto.
SECTION 11.2 - GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
SECTION 11.3 - COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 11.4 - RELIANCE BY THIRD PARTIES. Any certificate executed by
an individual who, according to the records of the Trust appears to be a
Trustee hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders,
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<PAGE> 33
(iv) the fact that the number of Trustees or Shareholders present at any
meeting or executing any written instrument satisfies the requirements of this
Declaration, (v) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (vi) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 11.5 - Provisions in Conflict with Law or Regulations.
--------------------------------------------------------------
(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code, as amended, or with other applicable
laws and regulations, the conflicting provision shall be deemed never to have
constituted a part of the Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
29
<PAGE> 34
ANNEX A
Pursuant to Section 6.10 of the Declaration of Trust, the Trustees
have divided the shares of Massachusetts Investors Growth Stock Fund (the
"Trust"), to create two classes of shares, within the meaning of Section 6.10,
as follows:
1. The two classes of shares are designated "Class A Shares" and
"Class B Shares";
2. Class A Shares and Class B Shares shall be entitled to all the
rights and preferences accorded to shares under the Declaration;
3. The purchase price of Class A Shares and Class B Shares, the
method of determination of the net asset value of Class A Shares
and Class B Shares, the price, terms and manner of redemption of
Class A Shares and Class B Shares, any conversion feature of the
Class B Shares, and the relative dividend rights of holders of
Class A Shares and Class B Shares shall be established by the
Trustees of the Trust in accordance with the Declaration and shall
be set forth in the current prospectus and statement of additional
information of the Trust or any series thereof, as amended from
time to time, contained in the Trust's registration statement
under the Securities Act of 1933, as amended.
4. Class A Shares and Class B Shares shall vote together as a single
class except that Shares of a class may vote separately on matters
affecting only that class and Shares of a class not affected by a
matter will not vote on that matter.
5. A class of Shares of the Trust may be terminated by the Trustees
by written notice to the Shareholders of the class.
30
<PAGE> 35
IN WITNESS WHEREOF, the undersigned have executed this instrument this
18th day of January, 1995.
A. KEITH BRODKIN CHARLES W. SCHMIDT
---------------- ------------------
A. Keith Brodkin Charles W. Schmidt
76 Farm Road 63 Claypit Hill Road
Sherborn, MA 01770 Wayland, MA 01778
RICHARD B. BAILEY ARNOLD D. SCOTT
----------------- ---------------
Richard B. Bailey Arnold D. Scott
63 Atlantic Avenue 20 Rowes Wharf
Boston, MA 02110 Boston, MA 02110
PETER G. HARWOOD JEFFREY L. SHAMES
---------------- -----------------
Peter G. Harwood Jeffrey L. Shames
211 Lindsay Pond Road 60 Brookside Road
Concord, MA 01742 Needham, MA 02192
J. ATWOOD IVES ELAINE R. SMITH
-------------- ---------------
J. Atwood Ives Elaine R. Smith
1 Bennington Road 75 Scotch Pine Road
Lexington, MA 02173 Weston, MA 02193
LAWRENCE T. PERERA DAVID B. STONE
------------------ --------------
Lawrence T. Perera David B. Stone
18 Marlborough Street 50 Delano Road
Boston, MA 02116 Marion, MA 02736
WILLIAM J. POORVU
-----------------
William J. Poorvu
975 Memorial Drive
Cambridge, MA 02138
31
<PAGE> 1
EXHIBIT NO. 2
AMENDED AND RESTATED
BY-LAWS
OF
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
DECEMBER 21, 1994
<PAGE> 2
AMENDED AND RESTATED
BY-LAWS
OF
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY" and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Massachusetts
Investors Growth Stock Fund, dated March 4, 1985 as amended from time to time.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in The Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other
places without as well as within the Commonwealth as the Trustees may from time
to time determine.
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ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. Meetings of the Shareholders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Shareholders holding in the aggregate not less than ten
percent (10%) of the outstanding Shares of the Trust having voting rights, if
shareholders of all series are required under the Declaration to vote in the
aggregate and not by individual series at such meeting, or of any series or
class if shareholders of such series or class are entitled under the
Declaration to vote by individual series or class, such request specifying the
purpose or purposes for which such meeting is to be called. Any such meeting
shall be held within or without The Commonwealth of Massachusetts on such day
and at such time as the Trustees shall designate.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder entitled to vote at such
meeting at his address as recorded on the register of the Trust, mailed at
least (ten) 10 days and not more than (sixty) 60 days before the meeting. Only
the business stated in the notice of the meeting shall be considered at such
meeting. Any adjourned meeting may be held as adjourned without further
notice. No notice need be given to any Shareholder who shall have failed to
inform the Trust of his current address or if a written waiver of notice,
executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining
the Shareholders who are entitled to notice of and to vote at any meeting, or
to participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than sixty (60) days
prior to the date of any meeting of Shareholders or distribution or other
action as a record date for the determination of the persons to be treated as
Shareholders of record for such purpose.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Clerk, or with such other officer or agent of the Trust as the Clerk may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a vote of a majority of the Trustees, proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust.
When any Share is held jointly by several persons, any one of them may vote at
any meeting in person or by proxy in respect of such Share, but if more than
one of them shall be present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such Share. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. The placing of a Shareholder's name on
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a proxy pursuant to telephonic or electronically transmitted instructions
obtained pursuant to procedures reasonably designed to verify that such
instructions have been authorized by such Shareholder shall constitute
execution of such proxy by or on behalf of such Shareholder. If the holder of
any such Share is a minor or a person of unsound mind, and subject to
guardianship or to the legal control of any other person as regards the charge
or management of such Share, he may vote by his guardian or such other
person appointed or having such control, and such vote may be given in person
or by proxy. Any copy, facsimile telecommunication or other reliable
reproduction of a proxy may be substituted for or used in lieu of the original
proxy for any and all purposes for which the original proxy could be used,
provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original proxy or the portion
thereof to be returned by the Shareholder.
SECTION 5. QUORUM, ADJOURNMENT AND REQUIRED VOTE. A majority of
outstanding Shares entitled to vote shall constitute a quorum at any meeting of
Shareholders, except that where any provision of law, the Declaration or these
By-laws permits or requires that holders of any series or class shall vote as a
series or class, then a majority of the aggregate number of Shares of that
series or class entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series or class. In the absence of a
quorum, a majority of outstanding Shares entitled to vote present in person or
by proxy, or, where any provision of law, the Declaration or these By-laws
permits or requires that holders of any series or class shall vote as a series
or class, a majority of outstanding Shares of that series or class entitled to
vote present in person or by proxy, may adjourn the meeting from time to time
until a quorum shall be present. Only Shareholders of record shall be entitled
to vote on any matter. Each full Share shall be entitled to one vote and
fractional Shares shall be entitled to a vote of such fraction. Except as
otherwise provided any provision of law, the Declaration or these By-laws,
Shares representing a majority of the votes cast shall decide any matter (i.e.,
abstentions and broker non-votes shall not be counted) and a plurality shall
elect a Trustee, provided that where any provision of law, the Declaration or
these By-Laws permits or requires that holders of any series or class shall
vote as a series or class, then a majority of the Shares of that series or
class cast on the matter shall decide the matter (i.e., abstentions and broker
non-votes shall not be counted) insofar as that series or class is concerned.
SECTION 6. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
SECTION 7. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
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<PAGE> 5
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairman
or by any one of the Trustees at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary, or the Clerk or an Assistant Clerk
or by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be telegraphed, cabled,
or wirelessed or sent by facsimile or other electronic means to each Trustee at
his business address, or personally delivered to him at least one day before
the meeting. Such notice may, however, be waived by any Trustee. Notice of a
meeting need not be given to any Trustee if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver
of notice need not specify the purpose of any meeting. Except as provided by
law the Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, which telephone conference meeting shall be deemed
to have been held at a place designated by the Trustees at the meeting.
Participation in a telephone conference meeting shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of the Trustees may be taken by the Trustees without a meeting if all
the Trustees consent to the action in writing and the written consents are
filed with the records of the Trustees' meetings. Such consents shall be
treated as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees
shall be present at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration or these By-Laws) the act of a
majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time
until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) Trustees to hold office at the
pleasure of the Trustees which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees
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<PAGE> 6
are not in session, including the purchase and sale of securities and the
designation of securities to be delivered upon redemption of Shares of the
Trust, and such other powers of the Trustees as the Trustees may, from time to
time, delegate to the Executive Committee except those powers which by law, the
Declaration or these By-Laws they are prohibited from delegating. The Trustees
may also elect from their own number other Committees from time to time, the
number composing such Committees, the powers conferred upon the same (subject
to the same limitations as with respect to the Executive Committee) and the
term of membership on such Committees to be determined by the Trustees. The
Trustees may designate a chairman of any such Committee. In the absence of
such designation a Committee may elect its own Chairman.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may:
(i) provide for stated meetings of any Committee,
(ii) specify the manner of calling and notice required for
special meetings of any Committee,
(iii) specify the number of members of a Committee required
to constitute a quorum and the number of members of a
Committee required to exercise specified powers
delegated to such Committee,
(iv) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of
members of a Committee without a meeting, and
(v) authorize the members of a Committee to meet by means of a
telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records
of decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
SECTION 3. ADVISORY BOARD. The Trustees may appoint an Advisory Board
to consist in the first instance of not less than three (3) members. Members
of such Advisory Board shall not be Trustees or officers and need not be
Shareholders. A member of such Advisory Board shall hold office for such
period as the Trustees may by resolution provide. Any member of such board may
resign therefrom by a written instrument signed by him which shall take effect
upon delivery to the Trustees. The Advisory Board shall have no legal powers
and shall not perform the functions of Trustees in any manner, such Advisory
Board being intended merely to act in an advisory capacity. Such Advisory
Board shall meet at such times and upon such notice as the Trustees may by
resolution provide.
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ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
Chairman, a President, a Treasurer and a Clerk, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or more Vice Presidents, a
Secretary and one or more Assistant Secretaries, one or more Assistant
Treasurers, and one or more Assistant Clerks. The Trustees may delegate to any
officer or Committee the power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise
provided by law, the Declaration or these By-Laws, the Chairman, the President,
the Treasurer and the Clerk shall hold office until his resignation has been
accepted by the Trustees or until his respective successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. Any two or more offices may be held by the same person. Any
officer may be, but none need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting
of the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any officer or agent appointed by any officer or
Committee may be removed with or without cause by such appointing officer or
Committee.
SECTION 4. POWERS AND DUTIES OF THE CHAIRMAN. The Chairman may call
meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to
the control of the Trustees and any Committees of the Trustees, the Chairman
shall at all times exercise a general supervision and direction over the
affairs of the Trust. The Chairman shall have the power to employ attorneys
and counsel for the Trust and to employ such subordinate officers, agents,
clerks and employees as he may find necessary to transact the business of the
Trust. The Chairman shall also have the power to grant, issue, execute or sign
such powers of attorney, proxies or other documents as may be deemed advisable
or necessary in furtherance of the interests of the Trust. The Chairman shall
have such other powers and duties as, from time to time, may be conferred upon
or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF THE PRESIDENT. In the absence or
disability of the Chairman, the President shall perform all the duties and may
exercise any of the powers of the Chairman, subject to the control of the
Trustees. The President shall perform such other duties as may be assigned to
him from time to time by the Trustees or the Chairman.
SECTION 6. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of
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the powers of the President, subject to the control of the Trustees. Each Vice
President shall perform such other duties as may be assigned to him from
time to time by the Trustees or the President.
SECTION 7. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer
shall deliver all funds of the Trust which may come into his hands to such
custodian as the Trustees may employ pursuant to Article X hereof. The
Treasurer shall render a statement of condition of the finances of the Trust to
the Trustees as often as they shall require the same and shall in general
perform all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Trustees. The
Treasurer shall give a bond for the faithful discharge of his duties, if
required to do so by the Trustees, in such sum and with such surety or sureties
as the Trustees shall require.
SECTION 8. POWERS AND DUTIES OF THE CLERK. The Clerk shall keep the
minutes of all meetings of the Shareholders in proper books provided for that
purpose; he shall have custody of the seal of the Trust; he shall have charge
of the Share transfer books, lists and records unless the same are in the
charge of the Transfer Agent. He or the Secretary shall attend to the giving
and serving of all notices by the Trust in accordance with the provisions of
these By-Laws and as required by law; and subject to these By-Laws, he shall
in general perform all duties incident to the office of Clerk and such other
duties as from time to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF THE SECRETARY. The Secretary, if any,
shall keep the minutes of all meetings of the Trustees. He shall perform such
other duties and have such other powers in addition to those specified in these
By-Laws as the Trustees shall from time to time designate. If there be no
Secretary or Assistant Secretary, the Clerk shall perform the duties of
Secretary.
SECTION 10. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence
or disability of the Treasurer, any Assistant Treasurer designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Treasurer. Each Assistant Treasurer shall perform such other duties as from
time to time may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if required to do
so by the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
SECTION 11. POWERS AND DUTIES OF ASSISTANT CLERKS. In the absence or
disability of the Clerk, any Assistant Clerk designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Clerk. The
Assistant Clerks shall perform such other duties as from time to time may be
assigned to them by the Trustees.
SECTION 12. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall
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perform all of the duties, and may exercise any of the powers, of the
Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them by the Trustees.
SECTION 13. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE
ADVISORY BOARD. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers,
by any Committee or officer upon whom such power may be conferred by the
Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of December
in each year and shall end on the last day of November in that year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been
telegraphed, cabled or wirelessed or sent by facsimile or other electronic
means for the purposes of these By-Laws when it has been delivered to a
representative of any telegraph, cable or wireless company with instruction
that it be telegraphed, cabled or wirelessed or when a confirmation of such
facsimile having been sent, or a confirmation that such electronic means has
sent the notice being transmitted, is generated. Any notice shall be deemed to
be given at the time when the same shall be mailed, telegraphed, cabled or
wirelessed or when sent by facsimile or other electronic means.
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ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank or trust company having a capital, surplus and undivided profits
of at least five million dollars ($5,000,000.00) as custodian with authority as
its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Declaration, these By-Laws and
the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the
same upon written order;
(ii) to receive and issue receipts for any monies due to the
Trust and deposit the same in its own banking department
or elsewhere as the Trustees may direct;
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting
services; and
(v) if authorized to do so by the Trustees, to compute the net
income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the
custodian shall deliver and pay over all Trust Property held by it as specified
in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon between
the custodian and such sub-custodian and approved by the Trustees, provided
that in every case such sub-custodian shall be a bank or trust company
organized under the laws of the United States or one of the states thereof and
having capital, surplus and undivided profits of at least five million dollars
($5,000,000.00) or such foreign banks and securities depositories as meet the
requirements of applicable provisions of the 1940 Act or the rules and
regulations thereunder.
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person
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as may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodian.
SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The substance of the
following provisions shall apply to the employment of a custodian pursuant to
this Article X and to any contract entered into with the custodian so employed:
(i) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled,
and shall order the same to be delivered by the custodian only
upon completion of a sale, exchange, transfer, pledge, or other
disposition thereof, and upon receipt by the custodian of the
consideration therefor or a certificate of deposit or a
receipt of an issuer or of its Transfer Agent, all as the
Trustees may generally or from time to time require or approve,
or to a successor custodian; and the Trustees shall cause all
funds owned by the Trust or to which it may become entitled to be
paid to the custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in
payment of expenses, including management compensation, and
liabilities of the Trust, including distributions to
Shareholders, or to a successor custodian; provided, however,
that nothing herein shall prevent the custodian from paying
for securities before such securities are received by the
custodian or the custodian from delivering securities prior to
receiving payment therefor in accordance with the payment and
delivery customs of the market in which such securities are being
purchased or sold.
(ii) In case of the resignation, removal or inability to serve of any
such custodian, the Trust shall promptly appoint another bank or
trust company meeting the requirements of this Article X as
successor custodian. The agreement with the custodian shall
provide that the retiring custodian shall, upon receipt of notice
of such appointment, deliver the funds and property of the Trust
in its possession to and only to such successor, and that pending
appointment of a successor custodian, or a vote of the
Shareholders to function without a custodian, the custodian shall
not
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<PAGE> 12
deliver funds and property of the Trust to the Trust, but may
deliver all or any part of them to a bank or trust company doing
business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least $5,000,000, as the
property of the Trust to be held under terms similar to those on
which they were held by the retiring custodian.
ARTICLE XI
SALE OF SHARES OF THE TRUST
The Trustees may from time to time issue and sell or cause to be issued
and sold Shares for cash or other property, which shall in every case be paid
or delivered to the Custodian as agent of the Trust before the delivery of any
certificate for such shares. The Shares, including additional Shares which may
have been repurchased by the Trust (herein sometimes referred to as "treasury
shares"), may not be sold at a price less than the net asset value thereof (as
defined in Article XII hereof) determined by or on behalf of the Trustees next
after the sale is made or at some later time after such sale.
No Shares need be offered to existing Shareholders before being offered
to others. No Shares shall be sold by the Trust (although Shares previously
contracted to be sold may be issued upon payment therefor) during any period
when the determination of net asset value is suspended by declaration of the
Trustees pursuant to the provisions of Article XII hereof. In connection with
the acquisition by merger or otherwise of all or substantially all the assets
of an investment company (whether a regulated or private investment company or
a personal holding company), the Trustees may issue or cause to be issued
Shares and accept in payment therefor such assets valued at not more than
market value thereof in lieu of cash, notwithstanding that the federal income
tax basis to the Trust of any assets so acquired may be less than the market
value, provided that such assets are of the character in which the Trustees are
permitted to invest the funds of the Trust.
The Trustees, in their sole discretion, may cause the Trust to redeem
all of the Shares of the Trust held by any Shareholder if the value of such
Shares is less than a minimum amount established from time to time by the
Trustees.
ARTICLE XII
NET ASSET VALUE OF SHARES
The term "net asset value" per Share of any class or series of Shares
shall mean: (i) the value of all assets of that series or class; (ii) less
total liabilities of such series or class; (iii) divided by the number of
Shares of such series or class outstanding, in each case at the time of
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<PAGE> 13
such determination, all as determine by or under the direction of the Trustees.
Such value shall be determined on such days and at such time as the Trustees
may determine. Such determination shall be made with respect to securities for
which market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair value
as determined in good faith by or pursuant to the direction of the Trustees,
provided, however, that the Trustees, without shareholder approval, may alter
the method of appraising portfolio securities insofar as permitted under the
1940 Act, and the rules, regulations and interpretations thereof promulgated or
issued by the Securities and Exchange Commission or insofar as permitted by any
order of the Securities and Exchange commission. The Trustees may delegate any
powers and duties under this Article XII with respect to appraisal of assets
and liabilities. At any time the Trustees may cause the value per share last
determined to be determined again in a similar manner and may fix the time when
such predetermined value shall become effective.
ARTICLE XIII
DIVIDENDS AND DISTRIBUTIONS
SECTION 1. LIMITATIONS ON DISTRIBUTIONS. The total of distributions
to Shareholders of a particular series or class paid in respect of any one
fiscal year, subject to the exceptions noted below, shall, when and as declared
by the Trustees, be approximately equal to the sum of:
(i) the net income, exclusive of the profits or losses realized upon
the sale of securities or other property, of such series or class
for such fiscal year, determined in accordance with generally
accepted accounting principles (which, if the Trustees so
determine, may be adjusted for net amounts included as such
accrued net income in the price of Shares of such series or class
issued or repurchased), but if the net income of such series or
class exceeds the amount distributed by less than one cent per
share outstanding at the record date for the final dividend, the
excess shall be treated as distributable income of such series or
class for the following fiscal year; and
(ii) in the discretion of the Trustees, an additional amount which
shall not substantially exceed the excess of profits over losses
on sales of securities or other property allocated or belonging to
such series or class for such fiscal year.
The decision of the Trustees as to what, in accordance with generally accepted
accounting principles, is income and what is principal shall be final, and
except as specifically provided herein the decision of the Trustees as to what
expenses and charges of the Trust shall be charged against principal and what
against income shall be final, all subject to any applicable provisions of the
1940 Act and rules, regulations and orders of the Commission promulgated
thereunder.
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<PAGE> 14
For the purposes of the limitation imposed by this Section 1, Shares issued
pursuant to Section 2 of this Article XIII shall be valued at the amount of
cash which the Shareholders would have received if they had elected to receive
cash in lieu of such Shares.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give to the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes. Any payment made to
Shareholders pursuant to clause (ii) of this Section 1 shall be accompanied by a
written statement showing the source or sources of such payment, and the basis
of computation thereof.
SECTION 2. DISTRIBUTIONS PAYABLE IN CASH OR SHARES. The Trustees shall
have power, to the fullest extent permitted by the laws of The Commonwealth of
Massachusetts but subject to the limitation as to cash distributions imposed by
Section 1 of this Article XIII, at any time or from time to time to declare and
cause to be paid distributions payable at the election of any Shareholder of any
series or class (whether exercised before or after the declaration of the
distribution) either in cash or in Shares of such series, provided that the sum
of:
(i) the cash distribution actually paid to any Shareholder, and
(ii) the net asset value of the Shares which that Shareholder elects
to receive, in effect at such time at or after the election as the
Trustees may specify, shall not exceed the full amount of cash to
which that Shareholder would be entitled if he elected to receive
only cash.
In the case of a distribution payable in cash or Shares at the election of a
Shareholder, the Trustees may prescribe whether a Shareholder, failing to
express his election before a given time shall be deemed to have elected to take
Shares rather than cash, or to take cash rather then Shares, or to take Shares
with cash adjustment of fractions.
The Trustees, in their sole discretion, may cause the Trust to require
that all distributions payable to a shareholder in amounts less than such amount
or amounts determined from time to time by the Trustees be reinvested in
additional shares of the Trust rather than paid in cash, unless a shareholder
who, after notification that his distributions will be reinvested in additional
shares in accordance with the preceding phrase, elects to receive such
distributions in cash. Where a shareholder has elected to receive distributions
in cash and the postal or other delivery service is unable to deliver checks to
the shareholder's address of record, the Trustees, in their sole discretion, may
cause the Trust to require that such Shareholder's distribution option will be
converted to having all distributions reinvested in additional shares.
SECTION 3. STOCK DIVIDENDS. Anything in these By-Laws to the contrary
notwithstanding, the Trustees may at any time declare and distribute pro rata
among the
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<PAGE> 15
Shareholders of any series or class a "stock dividend" out of either
authorized but unissued Shares of such series or class or treasury Shares of
such series or class or both.
ARTICLE XIV
DERIVATIVE CLAIMS
No Shareholder shall have the right to bring or maintain any court
action, proceeding or claim on behalf of the Trust or any series or class
thereof without first making demand on the Trustees requesting the Trustees to
bring or maintain such action, proceeding or claim. Such demand shall be
excused only when the plaintiff makes a specific showing that irreparable injury
to the Trust or any series or class thereof would otherwise result. Such demand
shall be mailed to the Clerk of the Trust at the Trust's principal office and
shall set forth in reasonable detail the nature of the proposed court action,
proceeding or claim and the essential facts relied upon by the Shareholder to
support the allegations made in the demand. The Trustees shall consider such
demand within 45 days of its receipt by the Trust. In their sole discretion,
the Trustees may submit the matter to a vote of Shareholders of the Trust or any
series or class thereof, as appropriate. Any decision by the Trustees to bring,
maintain or settle (or not to bring, maintain or settle) such court action,
proceeding or claim, or to submit the matter to a vote of Shareholders, shall be
made by the Trustees in their business judgment and shall be binding upon the
Shareholders. Any decision by the Trustees to bring or maintain a court action,
proceeding or suit on behalf of the Trust or any series or class thereof shall
be subject to the right of the Shareholders under Article VI, Section 6.8 of the
Declaration to vote on whether or not such court action, proceeding or suit
should or should not be brought or maintained.
ARTICLE XV
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed,
restated, or new By-Laws may be adopted:
(i) by Majority Shareholder Vote, or
(ii) by the Trustees,
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration or these By-Laws, a vote of the Shareholders.
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<PAGE> 1
EXHIBIT NO. 6(a)
DISTRIBUTION AGREEMENT
----------------------
DISTRIBUTION AGREEMENT, made this first day of January, 1995, by and
between MASSACHUSETTS INVESTORS GROWTH STOCK FUND, a Massachusetts business
trust (the "Trust"), and MFS FUND DISTRIBUTORS, INC., a Delaware corporation
(the "Distributor");
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties hereto agree as follows:
1. The Trust grants to the Distributor the right, as agent of the
Trust, to sell Shares of Beneficial Interest, without par value, of the Trust
(the "Shares") upon the terms herein below set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use its
best efforts to find purchasers for Shares.
The Distributor shall have the right, as agent of the Trust, to order
from the Trust the Shares needed, but not more than the Shares needed (except
for clerical errors and errors of transmission) to fill unconditional orders
for Shares placed with the Distributor by dealers, banks or other financial
institutions or investors as set forth in the current Prospectus and Statement
of Additional Information (collectively, the "Prospectus") relating to the
Shares. The price which shall be paid to the Trust for the Shares so purchased
shall be the net asset value used in determining the public offering price on
which such orders were based. The Distributor shall notify the Custodian of
the Trust, at the end of each business day, or as soon thereafter as the orders
placed with it have been compiled, of the number of Shares and the prices
thereof which have been ordered through the Distributor since the end of the
previous day.
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<PAGE> 2
The right granted to the Distributor to place orders for Shares with
the Trust shall be exclusive, except that said exclusive right shall not apply
to Shares issued in the event that an investment company (whether a regulated
or private investment company or a personal holding company) is merged or
consolidated with the Trust or in the event that the Trust acquires by purchase
or otherwise, all (or substantially all) the assets or the outstanding shares
of any such company; nor shall it apply to Shares issued by the Trust as a
stock dividend or a stock split. The exclusive right to place orders for
Shares granted to the Distributor may be waived by the Distributor by notice to
the Trust in writing, either unconditionally or subject to such conditions and
limitations as may be set forth in the notice to the Trust. The Trust hereby
acknowledges that the Distributor may render distribution and other services to
other parties, including other investment companies. In connection with its
duties hereunder, the Distributor shall also arrange for computation of
performance statistics with respect to the Trust and arrange for publication of
current price information in newspapers and other publications.
2. The Shares may be sold through the Distributor to dealers, banks and
other financial institutions having sales agreements with the Distributor, upon
the following terms and conditions:
The public offering price, i.e., the price per Share at which the
Distributor or dealers, banks or other financial institutions purchasing Shares
through the Distributor may sell Shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to the Shares,
including a sales charge (where applicable) not to exceed the amount permitted
by Article III, Section 26 of the National Association of Securities Dealers,
Inc.'s Rule of Fair Practice, as amended from time to time. The Distributor
shall retain the sales charge (where applicable) less any applicable dealer or
comparable discount. If the resulting public offering price does not come out
to an even cent, the public offering price shall be adjusted to the nearer
cent. In addition, the Trust agrees that the Distributor may impose certain
contingent deferred
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<PAGE> 3
sales charges (where applicable) in connection with the redemption of Shares,
not to exceed 6% of the net asset value of Shares, and the Distributor shall
retain (or receive from the Trust, as the case may be) all such contingent
deferred sales charges.
The Distributor may place orders for Shares at the net asset value for
such Shares (as established pursuant to paragraph l above) on behalf of such
purchasers and under such circumstances as the Prospectus describes, provided
that such sales comply with Rule 22d-1 under the Investment Company Act of 1940
or any exemptive order granted by the Securities and Exchange Commission. The
Distributor may also place orders for Shares at net asset value on behalf of
persons reinvesting the proceeds of the redemption or resale of Shares or
shares of other investment companies for which the Distributor acts as
Distributor or as otherwise provided in the current Prospectus.
The net asset value of Shares shall be determined by the Trust or by an
agent of the Trust, as of the close of regular trading of the New York Stock
Exchange on each business day on which said Exchange is open, in accordance
with the method set forth in the governing instruments (as hereinafter defined)
of the Trust. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
hour or hours as may from time to time be agreed upon in writing by the Trust
and Distributor. The Trust shall have the right to suspend the sale of Shares
if, because of some extraordinary condition, the New York Stock Exchange shall
be closed, or if conditions obtaining during the hours when the Exchange is
open render such action advisable, or for any other reasons deemed adequate by
the Trust.
3. The Trust agrees that it will, from time to time, take all necessary
action to register the offering and sale of Shares under the Securities Act of
l933, as amended (the "Act"), and applicable state securities laws.
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<PAGE> 4
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or
shall be an employee of the Trust. It is understood that Trustees, officers
and shareholders of the Trust are or may become interested in the Distributor,
as Directors, officers and employees, or otherwise and that Directors, officers
and employees of the Distributor are or may become similarly interested in the
Trust and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct
and the employment, control and conduct of its agents and employees and for
injury to such agents or employees or to others through its agents or
employees. The Distributor assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all employer taxes
thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it
will use its best efforts in all respects duly to conform with the requirements
of all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
Shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any
alleged loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith), arising by reason of any person's acquiring
any Shares, which may be based upon the Act or any other statute or common law,
on account of any wrongful act of the Distributor or any of its employees
(including any failure to conform with any requirement of any state or federal
law or the Rules of Fair Practice of the NASD relating to the sale of Shares)
or on the ground that the registration statement or Prospectus as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless any such act,
statement or omission was made in reliance upon information furnished to the
Distributor by or on behalf of the Trust, provided,
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<PAGE> 5
however, that in no case (i) is the indemnity of the Distributor in favor
of any person indemnified to be deemed to protect the Trust or any such person
against any liability to which the Trust or any such person would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its or his duties or by reason of its or his reckless disregard
of its obligations and duties under this Agreement, or (ii) is the Distributor
to be liable under its indemnity agreement contained in this paragraph with
respect to any claim made against the Trust or any person indemnified unless
the Trust or such person, as the case may be, shall have notified the
Distributor in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Trust or upon such person (or after the Trust or such
person shall have received notice of such service on any designated agent), but
failure to notify the Distributor of any such claim shall not relieve it from
any liability which it may have to the Trust or any person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Distributor shall be entitled to participate,
at its own expense, in the defense, or, if it so elects, to assume the defense
of any suit brought to enforce any such liability, but, if the Distributor
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Trust, or to its officers or Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the
event that the Distributor elects to assume the defense of any such suit and
retain such counsel, the Trust or such officers or Trustees or controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the
Distributor does not elect to assume the defense of any such suit, it shall
reimburse the Trust and such officers and Trustees or controlling person or
persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees promptly to
notify the Trust of the commencement of any litigation or proceedings against
it in connection with the issue and sale of any Shares.
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<PAGE> 6
Neither the Distributor nor any other person is authorized to give any
information or to make any representation on behalf of the Trust, other than
those contained in the registration statement or Prospectus filed with the
Securities and Exchange Commission under the Act (as said registration
statement or Prospectus may be amended or supplemented from time to time),
covering the Shares or other than those contained in periodic reports to
shareholders of the Trust.
5. The Trust will pay, or cause to be paid -
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required registration statement or Prospectus under the Act covering Shares
and all amendments and supplements thereto and any notices regarding the
registration of shares, and preparing and mailing to shareholders Prospectuses,
statements and confirmations and periodic reports (including the expense of
setting up in type any such registration statement, Prospectus or periodic
report);
(ii) the expenses (including auditing expenses) of qualification
of the Shares for sale, and, if necessary or advisable in connection therewith,
of qualifying the Trust as a dealer or broker, in such states as shall be
selected by the Distributor and the fees payable to each such state with
respect to shares sold and for continuing the qualification therein until the
Distributor notifies the Trust that it does not wish such qualification
continued;
(iii) the cost of preparing temporary or permanent certificates for
Shares;
(iv) all fees and disbursements of the transfer agent of the Trust;
(v) the cost and expenses of delivering to the Distributor at its
office in Boston, Massachusetts, all Shares sold through it as Distributor
hereunder; and
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<PAGE> 7
(vi) all the federal and state issue and/or transfer taxes payable
upon the issue by or (in the case of treasury Shares) transfer from the Trust
of any and all Shares purchased through the Distributor hereunder.
The Distributor agrees that, after the Prospectus and periodic reports
have been set up in type, it will bear the expense (other than the cost of
mailing to shareholders of the Trust of printing and distributing any copies
thereof which are to be used in connection with the offering of Shares to
dealers, banks or other financial institutions or investors. The Distributor
further agrees that it will bear the expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it
for use by dealers, banks or other financial institutions in connection with
the offering of the Shares for sale to the public and expenses of advertising
in connection with such offering. The Distributor will also bear the expense
of sending confirmations and statements to dealers, banks and other financial
institutions having sales agreements with the Distributor. Nothing in this
paragraph 5 shall be deemed to prohibit or conflict with any payment by the
Trust to the Distributor pursuant to any Distribution Plan adopted as in effect
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
6. The Trust hereby authorizes the Distributor to repurchase, upon the
terms and conditions set forth in written instructions given by the Trust to
the Distributor from time to time, as agent of the Trust and for its account,
such Shares as may be offered for sale to the Trust from time to time; provided
the Distributor shall have the right, as stated above in paragraph 2 of this
Agreement, to retain (or to receive from the Trust, as the case may be) a
deferred sales charge not to exceed 6% of the net asset value of the Shares so
repurchased.
(a) The Distributor shall notify in writing the Custodian of the Trust,
at the end of each business day, or as soon thereafter as the repurchases have
been compiled, of the
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<PAGE> 8
number of Shares repurchased for the account of the Trust since the last
previous report, together with the prices at which such repurchases were made,
and upon the request of any Officer or Trustee of the Trust shall furnish
similar information with respect to all repurchases made up to the time of the
request on any day.
(b) The Trust reserves the right to suspend or revoke the
foregoing authorization at any time. Unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by an officer of the Distributor, by telegraph or by written notice
from the Trust. In the event that the authorization of the Distributor is, by
the terms of such notice, suspended for more than twenty-four hours or until
further notice, the authorization given by this paragraph 6 shall not be
revived except by action of a majority of the members of the Board of Trustees
of the Trust.
(c) The Distributor shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty days' written
notice thereof.
(d) The Trust agrees to authorize and direct the Custodian to pay,
for the account of the Trust, the purchase price of any Shares so repurchased
against delivery of the certificates, if any, in proper form for transfer to
the Trust or for cancellation by the Trust.
(e) The Distributor shall receive no commission in respect of any
repurchase of Shares under the foregoing authorization and appointment as
agent, except in connection with contingent deferred sales charge as provided
in the current Prospectus relating to the Shares.
(f) The Trust agrees to reimburse the Distributor, from time to
time upon demand, for any reasonable expenses incurred in connection with the
repurchase of Shares pursuant to this paragraph 6.
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<PAGE> 9
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Trust that
any amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission or
other governmental authority or to obtain any advantage under Massachusetts,
any state or federal tax laws, it shall notify the Distributor of the form of
amendment which it deems necessary or advisable and the reasons therefore. If
the Distributor declines to assent to such amendment, the Trust may terminate
this Agreement forthwith by written notice to the Distributor without payment
of any penalty. If, at any time during the existence of this Agreement,
upon request by the Distributor, the Trust fails (after a reasonable time) to
make any changes in its governing instruments or in its methods of doing
business which are necessary in order to comply with any requirements of
federal or state laws or regulations, laws or regulations of the Securities and
Exchange Commission or of a national securities association of which the
Distributor is or may be a member, relating to the sale of Shares, the
Distributor may terminate this Agreement forthwith by written notice to the
Trust without payment of any penalty.
8. The Distributor agrees that it will not take any long or short
positions in the Shares except as permitted by paragraphs l and 6 hereof.
Whenever used in this Agreement, the term "governing instruments" shall mean
the Declaration of Trust and the By-Laws of the Trust, as from time to time
amended.
9. This Agreement shall become effective on January 1, 1995 and shall
continue in force until August 1, 1996 on which date it will terminate unless
its continuance after August 1, 1996, is specifically approved at least
annually (i) by the vote of a majority of the Board of Trustees of the Trust
who are not interested persons of the Trust or of the Distributor at a meeting
specifically called for the purpose of voting on such approval, and (ii) by the
Board of Trustees
<PAGE> 10
of the Trust or by vote of a majority of the outstanding voting securities of
that Fund. The aforesaid requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a manner
consistent with the Investment Company Act of l940 and the Rules and
Regulations thereunder.
This Agreement may be terminated as to any Fund at any time by either
party without payment of any penalty on not more than sixty days' or less
than thirty days' written notice to the other party.
l0. This Agreement shall automatically terminate in the event of its
assignment.
11. The terms "vote of a majority of the outstanding voting securities",
"interested person" and "assignment" shall have the respective meanings
specified in the Investment Company Act of l940 and the Rules and Regulations
thereunder, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act.
12. This Agreement shall be governed by the laws of The Commonwealth
of Massachusetts.
13. A copy of the Declaration of Trust of the Trust is on file with
the Secretary of State of The Commonwealth of Massachusetts. The Distributor
acknowledges that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust. If this instrument is executed by the Trust on behalf of one
or more series of the Trust, the Distributor further acknowledges that the
assets and liabilities of each series of the Trust are separate and distinct
and that the obligations of or arising out of this instrument are binding
solely upon the assets or property of the series on whose behalf the Trust has
executed
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<PAGE> 11
this instrument. If the Trust has executed this instrument on behalf of more
than one series of the Trust, the Distributor also agrees that the obligations
of each series hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Distributor agrees not to proceed
against any series for the obligations of another series.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above.
MASSACHUSETTS INVESTORS GROWTH
STOCK FUND
By: W. THOMAS LONDON
----------------------------
W. Thomas London as officer
and not individually
MFS FUND DISTRIBUTORS, INC.
By: WILLIAM W. SCOTT, JR.
----------------------------
William W. Scott, Jr.
President
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<PAGE> 1
EXHIBIT NO. 7
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
-----------------------------------------
RETIREMENT PLAN FOR NON-INTERESTED PERSON TRUSTEES
--------------------------------------------------
Massachusetts Investors Growth Stock Fund (the "Fund") has adopted this
Retirement Plan for Non-Interested Person Trustees (the "Plan"). The Plan has
been established for the purpose of providing certain benefits to eligible
Independent Trustees of the Fund, or their beneficiaries, after termination of
the Independent Trustees' services as such.
1. DEFINITIONS
-----------
The following terms shall have the following meanings:
ACCRUED BENEFIT: A benefit which is equal to the Normal
Retirement Benefit calculated using an Independent Trustee's
Years of Service and Annual Compensation as of the determination
date.
ACTUARIAL EQUIVALENT: A benefit equal in value, based on (a) an
interest rate equal to the immediate annuity rate published by
the Pension Guaranty Corporation for the January of the Plan Year
of calculation and (b) the 1983 Individual Annuity Mortality
Tables for Males.
ANNUAL COMPENSATION: The average of the total compensation
(retainer and meeting fees) received by an Independent Trustee
during each of the last three Plan Years preceding his
termination of services as such for which he served either as an
Independent Trustee or a Nonaffiliated Trustee for the entire
year; provided, that if an Independent Trustee served as an
Independent Trustee and/or a Nonaffiliated Trustee for fewer than
three full Plan Years prior to his termination of services, there
shall be taken into account his annualized compensation for the
one or more most recent partial Plan Years (if any) for which he
served as an Independent Trustee or a Nonaffiliated Trustee that,
when aggregated with his full Plan Years, does not exceed three
Plan Years.
DISABILITY: Disability as defined in #22(e)(3) of the Internal
Revenue Code of 1986, as amended.
INDEPENDENT TRUSTEE: A Trustee of the Fund who is not an
"interested person" (as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended) of the Fund,
Lifetime Advisers, Inc. ("Lifetime"), Massachusetts Financial
Services Company ("MFS") or MFS Financial Services, Inc. ("FSI").
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<PAGE> 2
NONAFFILIATED TRUSTEE: A Trustee of the Fund who has no material
business or professional relationship with the Fund, Lifetime, MFS
or FSI and who is subject to being declared an "interested
person" solely by reason of his relationship with the Fund,
Lifetime, MFS or FSI during the two most recently completed fiscal
years of the Fund.
NORMAL RETIREMENT BENEFIT: An annual benefit at Normal
Retirement Date equal to 5% of an Independent Trustee's Annual
Compensation multiplied by the Independent Trustee's whole Years of
Service, up to a maximum of ten Years of Service, payable in the
Normal Form of Benefit, as defined in #3(g).
NORMAL RETIREMENT DATE: December 31 of the Plan Year in which
an Independent Trustee attains age 73.
PLAN YEAR: January 1 through December 31.
RETIREMENT: Termination of service of an Independent Trustee
after having completed at least Five Years of Service and
having attained age 62, other than: (1) any termination by
reason of death; (ii) any termination by reason of Disability,
PROVIDED that any Independent Trustee who suffers a Disability and
who has otherwise satisfied the requirements for Retirement shall
have the right to elect whether his termination is by reason of
Retirement or by reason of Disability; or (iii) any termination
resulting from the Independent Trustee's willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Independent Trustee
("Misconduct").
YEAR OF SERVICE: A Plan Year during which an Independent Trustee
completed at least six months of service as either a Nonaffiliated
Trustee or an Independent Trustee.
2. ELIGIBILITY
-----------
No Trustee of the Fund shall be eligible to participate in the
Plan or be entitled to any rights or benefits hereunder until the Trustee
becomes an Independent Trustee. Each individual who completes any service as an
Independent Trustee on or after the Effective Date of this Plan, and who so
elects in such manner as the Committee determines from time to time, will be
eligible to participate in the Plan.
3. RETIREMENT DATE; AMOUNT OF BENEFIT
----------------------------------
(a) RETIREMENT. Each Independent Trustee shall retire on that
Independent Trustee's Normal Retirement Date, if he has not
previously ceased to perform services as an Independent
Trustee. Each retired Independent Trustee is referred to
as a "Retired Trustee".
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<PAGE> 3
(b) NORMAL RETIREMENT BENEFIT. Upon an Independent Trustee's
Retirement on his Normal Retirement Date, the Independent Trustee
shall receive, commencing on his Normal Retirement Date, his
Normal Retirement Benefit.
(c) EARLY RETIREMENT BENEFIT. Upon an Independent Trustee's
Retirement prior to his Normal Retirement Date, the Independent
Trustee shall receive an Early Retirement Benefit commencing on
the Independent Trustee's date of Retirement. The benefit payable
on an Independent Trustee's early Retirement shall be his Accrued
Benefit reduced by 5% for every year that payment of an Early
Retirement Benefit precedes that Trustee's Normal Retirement Date.
(d) DEFERRED TERMINATION BENEFIT. If an Independent Trustee's
service as such terminates, other than (i) termination as a result
of his Misconduct or (ii) termination that constitutes
termination by reason of his Retirement, Disability or death,
after he has completed at least five Years of Service, he shall
receive, commencing on the date he attains age 62, his Accrued
Benefit reduced by 55%.
(e) DISABILITY BENEFIT. If an Independent Trustee's service as
such terminates by reason of his Disability and, if the
Independent Trustee is eligible for Retirement, he elects that his
termination be treated as being by reason of Disability, he shall
receive his Accrued Benefit paid for the one hundred twenty (120)
months immediately following the month in which his service so
terminates. In the event the Independent Trustee dies before he
has received one hundred twenty (120) payments, monthly payments
in the same amount shall be paid to his beneficiary until the
number of payments to the Independent Trustee plus the number of
payments to the beneficiary equal one hundred twenty (120)
payments.
(f) DEATH BENEFIT. Each Independent Trustee who elects to
participate in this Plan shall designate a beneficiary in such
form as the Committee approves from time to time to receive any
benefits payable under this Plan in the event of his death. In
the event there is no validly designated beneficiary in existence
on the date of an Independent Trustee's death, his beneficiary
shall be his surviving spouse, if any, or if none, his estate.
The beneficiary of an Independent Trustee who dies during service,
and with respect to whom benefit payments have not commenced,
shall be entitled to that Independent Trustee's Accrued Benefit
paid for the one hundred twenty (120) months immediately
following death.
(g) FORM OF BENEFIT. Except as otherwise provided in this #3, benefits
payable under this #3 shall be payable in the form of a monthly
annuity for the life of the Independent Trustee, and, if the
Independent Trustee dies before he has received one hundred twenty
(120) payments, monthly payments in the same amount shall be
payable to his beneficiary until the number of payments to the
Independent Trustee plus the number of payments to the beneficiary
equal one hundred twenty (120) payments (the "Normal Form of
Benefit"). However,
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<PAGE> 4
notwithstanding any other provision of this Section 3 to the
contrary, if an Independent Trustee's beneficiary is entitled
to payments under this Plan upon the Independent Trustee's
death, then (i) if the Independent Trustee's beneficiary
is his estate, the lump sum Actuarial Equivalent present value
of those payments shall be paid to the estate in a single lump
sum as soon as administratively reasonable following the
Independent Trustee's death, and (ii) if the Independent
Trustee's beneficiary is other than his estate, the Committee
in its sole discretion may direct that the Actuarial
Equivalent value of those payments be paid in such form other
than the Normal Form of Benefit (including without limitation
a lump sum) as it determines.
4. PAYMENT OF BENEFIT; ALLOCATION OF COSTS
---------------------------------------
The Fund is responsible for the payment of the benefits, as well as all
expenses of administration of the Plan, including without limitation all
accounting, legal and actuarial fees and expenses. The obligations of the Fund
to pay such benefits and expenses will not be secured or funded in any manner,
and the obligations will not have any preference over the lawful claims of the
Fund's creditors and shareholders. The Fund shall be under no obligation to
segregate any assets for the purpose of providing retirement benefits pursuant
to this Plan, and to the extent that any Independent Trustee or beneficiary
acquires a right to receive a benefit under the Plan, such right shall be
limited to that of a recipient of an unfunded, unsecured promise to pay amounts
in the future and such person's position with respect to such amounts shall be
that of a general unsecured creditor of the Fund. To the extent that the Fund
consists of one or more separate portfolios, costs and expenses will be
allocated among the portfolios by the Board of Trustees of the Fund (the
"Board") in a manner that is determined by the Board to be fair and equitable
under the circumstances.
5. ADMINISTRATION
--------------
(a) THE COMMITTEE. Any question involving entitlement to payments
under or the interpretation or administration of the Plan will
be referred to a committee (the "Committee") of Independent
Trustees designated by the Board. Except as otherwise
provided herein, the Committee will make all interpretations
and determinations necessary or desirable for the Plan's
administration, and such interpretations and determinations
will be final and conclusive.
(b) POWERS OF THE COMMITTEE. The Committee will represent and act
on behalf of the Fund in respect of the Plan and, subject to
the other provisions of the Plan, the Committee may adopt, amend
or repeal by-laws or other regulations, relating to the
administration of the Plan, the conduct of the Committee's
affairs, its rights or powers or the rights or powers of its
members or of the Board. The Committee will report to the Board
from time to time on its activities in respect of the Plan. The
Committee or persons designated by it will cause such records to
be kept as may be necessary for the administration of the Plan.
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<PAGE> 5
6. MISCELLANEOUS PROVISIONS
------------------------
(a) RIGHTS NOT ASSIGNABLE. The right to receive any payment
under the Plan may not be transferred, assigned, pledged or otherwise
alienated.
(b) AMENDMENT, ETC. The Committee, with the concurrence of the Board,
may at any time amend or terminate the Plan or waive any provision of
the Plan, PROVIDED that no amendment, termination or waiver will
impair the rights of an Independent Trustee to receive upon Retirement
the payments which would have been made to that Independent Trustee
had there been no such amendment, termination or waiver (based upon
that Independent Trustee's Years of Service to the date of such
amendment, termination or waiver) or the rights of a former
Independent Trustee or Retired Trustee to receive any benefit due
under the Plan, without the consent of such present or former
Independent Trustee or Retired Trustee, as the case may be. A present
or former Independent Trustee or Retired Trustee may elect to waive
receipt of his benefit by so advising the Committee.
Notwithstanding any provision of this Plan to the contrary,
however, in the event of the sale of all or substantially all of the
assets of the Fund, the liquidation or dissolution of the Fund, or any
merger or other similar reorganization of the Fund that the Fund does
not survive:
(i) if although the Fund does not survive there is a surviving
entity, all rights and benefits (including without limitation
those of Retired Trustees) under the Plan shall cease upon
consummation of such transaction, unless, and only to the extent
that, the board of trustees (or other similar governing body) of
the surviving entity agrees to assume the Plan and/or to provide
any such rights or benefits; and
(ii) if there is no surviving entity, the Board shall have the right
to take specific action to terminate the Plan and/or to cause any
or all rights and benefits (including without limitation those
of Retired Trustees) under the Plan to cease as of the date of
such event but, in the absence of any such specific action, the
lump sum Actuarial Equivalent present value of the Accrued
Benefit of each present or former Independent Trustee or Retired
Trustee (or beneficiary thereof) who on the date of liquidation
is receiving or entitled to receive a benefit under the Plan or
would be entitled to receive a benefit under the Plan based on
his actual or deemed termination of service as of the date of
such liquidation shall be paid to such person.
(c) NO RIGHT TO RE-ELECTION. Nothing in the Plan will create any
obligation on the part of the Board to nominate any Independent
Trustee for re-election.
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<PAGE> 6
(d) VACANCIES. Although the Board will retain the right to increase or
decrease its size, it shall be the general policy of the Board to
replace each person who ceases to serve as an Independent Trustee by
selecting a new Independent Trustee from candidates duly proposed.
(e) CONSULTING. Each Retired Trustee may render such services for the
Fund, for such compensation, as may be agreed upon from time to time
by such Trustee and the Board of the Fund.
(f) CONSTRUCTION. Whenever any masculine terminology is used in this
Plan, it shall be taken to include the feminine, unless the context
otherwise indicates. The titles and headings included herein are for
convenience only and shall not be construed as in any way affecting or
modifying the text of this Plan, which text shall control. This Plan
shall be construed and regulated in accordance with the laws of The
Commonwealth of Massachusetts, except to the extent such state law is
preempted by federal law.
(g) EFFECTIVE DATE. This Plan will become effective on January 1, 1991
(the "Effective Date").
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<PAGE> 1
[LETTERHEAD]
EXHIBIT NO. 10
March 29, 1995
Massachusetts Investors Growth Stock Fund
500 Boylston Street
Boston, MA 02116
Re: POST-EFFECTIVE AMENDMENT NO. 59 TO REGISTRATION STATEMENT ON FORM
N-1A (FILE NO. 2-14677) (THE "REGISTRATION STATEMENT")
------------------------------------------------------
Gentlemen:
I am Senior Counsel of Massachusetts Financial Services Company, which
serves as investment adviser to Massachusetts Investors Growth Stock Fund (the
"Fund") and the Assistant Secretary Pro Tempore of the Fund. I am admitted to
practice law in The Commonwealth of Massachusetts. The Fund was created under
a written Declaration of Trust dated March 4, 1985, and executed and delivered
in Boston, Massachusetts, as amended and restated January 18, 1995 (the
"Declaration of Trust"). The beneficial interest thereunder is represented by
transferable shares without par value. The Trustees have the powers set forth
in the Declaration of Trust, subject to the terms, provisions and conditions
therein provided.
I am of the opinion that the legal requirements have been complied with
in the creation of the Fund, and that said Declaration of Trust is legal and
valid.
Under Article III, Section 3.4 and Article VI, Section 6.4 of the
Declaration of Trust, the Trustees are empowered, in their discretion, from
time to time to issue shares of the Fund for such amount and type of
consideration, at such time or times and on such terms as the Trustees may deem
best. Under Article VI, Section 6.1, it is provided that the number of Shares
of Beneficial Interest (without par value) ("Shares") authorized to be issued
under the Declaration of Trust is unlimited.
By vote adopted on March 4, 1985, the Trustees of the Fund determined
to sell to the public the authorized but unissued shares of beneficial interest
of the Fund for cash at a price which will net the Fund (before taxes) not less
than the net asset value thereof, as defined in the Fund's By-Laws, determined
next after the sale is made or at some later time after such sale.
<PAGE> 2
Massachusetts Investors Growth Stock Fund
March 29, 1995
Page Two
The Fund is about to register under the Securities Act of 1933, as
amended, 5,529,450 shares of beneficial interest by Post-Effective Amendment
No. 59 to the Fund's Registration Statement. W. Thomas London, Treasurer of
the Fund, has certified that the Fund received cash consideration for the
issuance of each of the Shares of the Fund sold during the Fund's fiscal year
ended November 30, 1994, including the 11,473,893 Shares which were sold in
reliance upon Rule 24f-2 of the General Rules and Regulations under the
Investment Company Act of 1940, as amended, at a price which netted the Fund
(before taxes) not less than the net asset value per share, as defined in the
Fund's Declaration of Trust, determined next after the sale was made.
I am of the opinion that all necessary Fund action precedent to the
issue of the Shares of the Fund, comprising the shares covered by
Post-Effective Amendment No. 59 to the Registration Statement has been duly
taken, and that all such shares may legally and validly be issued for cash, and
when sold will be fully paid and nonassessable by the Fund upon receipt by the
Fund or its agent of consideration thereof in accordance with the terms
described in the Registration Statement, subject to compliance with the
Securities Act of 1933, the Investment Company Act of 1940 and applicable state
laws regulating the sale of securities.
I consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to Post-Effective Amendment No. 59 to the Registration
Statement.
Very truly yours,
JAMES F. DESMARAIS
James F. DesMarais
Assistant Secretary Pro Tempore
JFD/bjn
<PAGE> 1
EXHIBIT NO. 11
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in this Post-Effective
Amendment No. 59 to Registration Statement No. 2-14677 of Massachusetts
Investors Growth Stock Fund of our report dated January 3, 1995, appearing in
the annual report to shareholders for the year ended November 30, 1994, of
Massachusetts Investors Growth Stock Fund, and to the references to us under
the headings "Condensed Financial Information" in the Prospectus and
"Independent Accountants and Financial Statements" in the Statement of
Additional Information, which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Boston, Massachusetts
March 27, 1995
<PAGE> 1
EXHIBIT NO. 15(a)
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
AMENDED AND RESTATED DISTRIBUTION PLAN
--------------------------------------
AMENDED AND RESTATED DISTRIBUTION PLAN with respect to the shares of beneficial
interest to be designated "CLASS A " of the MASSACHUSETTS INVESTORS GROWTH
STOCK FUND (the "Fund"), a business trust organized and existing under
the laws of The Commonwealth of Massachusetts, dated the 19th day of December,
1990, amended and restated the 1st day of August, 1993 and amended this 21st
day of December, 1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company and is registered under the Investment Company Act of 1940 (the "Act");
and
WHEREAS, a plan of distribution pursuant to Rule 12b-1 of the Act was
previously adopted and approved by the Trustees of the Fund, including the
Qualifying Trustees (as defined below), and by the shareholders of the Fund;
and
WHEREAS, the Fund intends to continue to distribute the Shares of Beneficial
Interest (without par value) of the Fund designated Class A Shares (the
"Shares") in part in accordance with Rule 12b-1 under the Act ("Rule
12b-1"), and desires to adopt this amended and restated Distribution Plan (the
"Plan") as a plan of distribution pursuant to such Rule; and
WHEREAS, the Fund has entered into a distribution agreement (the "Distribution
Agreement") in a form approved by the Board of Trustees of the Trust (the
"Board of Trustees") in the manner specified in Rule 12b-1, with MFS Fund
Distributors, Inc., a Delaware corporation, as distributor (the "Distributor"),
whereby the Distributor provides facilities and personnel and renders services
to the Fund in connection with the offering and distribution of the Shares; and
WHEREAS, the Fund recognizes and agrees that the Distributor will enter into
agreements ("Dealer Agreements") with various securities dealers and other
financial intermediaries ("Dealers") pursuant to which the Dealers will act as
dealers of the Shares in connection with the offering of Shares; and
WHEREAS, the Distribution Agreement provides that a sales charge may be paid by
investors who purchase Shares and that the Distributor and Dealers will receive
such sales charge as partial compensation for their services in connection with
sale of Shares; and
WHEREAS, the Board of Trustees, in considering whether the Fund should adopt
and implement this Plan, has evaluated such information as it deemed necessary
to an informed determination as to whether this Plan should be adopted and
implemented and has considered such pertinent factors as it deemed necessary to
form the basis for a decision to use assets of the Fund for such purposes, and
has determined that there is a reasonable likelihood that the adoption and
implementation of this Plan will benefit the Fund and its Class A shareholders;
NOW, THEREFORE, the Board of Trustees hereby adopts this Plan for the Fund as a
plan of distribution relating to the Shares in accordance with Rule 12b-1
under the Act, on the following terms and conditions:
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<PAGE> 2
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares to prospective shareholders. Among other things, the
Distributor shall be responsible for all expenses of printing (excluding
typesetting) and distributing prospectuses to prospective shareholders and
providing such other related services as are reasonably necessary in connection
therewith.
2. The Distributor shall bear all distribution-related expenses to
the extent specified in the Distribution Agreement in providing the services
described in Section 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. As partial consideration for the services performed and expenses
incurred in the performance of its obligations under the Distribution
Agreement, the Fund shall pay the Distributor a distribution fee periodically
at a rate of 0.10% per annum of the average daily net assets of the Fund
attributable to the Shares. Such payments shall commence following shareholder
approval of the plan but only upon notification by the Distributor to the Fund
of the commencement of the Plan (the "Commencement Date").
4. As partial consideration for the personal services and/or account
maintenance services performed by each Dealer in the performance of its
obligations under its Dealer Agreement, the Fund shall on or after the
Commencement Date pay each Dealer a service fee periodically at a rate not to
exceed 0.25% per annum of the portion of the average daily net assets of the
Fund that is represented by Shares that are owned by investors for whom such
Dealer is the holder or dealer of record. The Distributor may from time to
time reduce the amount of the service fee paid to a Dealer for Shares sold
prior to certain date.
5. In addition to fees payable pursuant to Sections 3 and 4 hereof,
the expenses permitted to be paid by the Fund pursuant to this Plan on or after
the Commencement Date shall include other distribution related expenses. These
other distribution related expenses may include, but are not limited to, a
dealer commission and a payment to wholesalers employed by the Distributor on
net asset value purchases at or above a certain dollar level.
The aggregate amount of fees and expenses paid pursuant to Sections 3
and 4 hereof and this Section 5 shall not exceed 0.35% per annum of the average
daily net assets of the Fund attributable to the Shares. No fees shall be paid
pursuant to Section 4 hereof or this Section 5 to any insurance company which
has entered into an agreement with the Fund and the Distributor that permits
such insurance company to purchase Shares from the Fund at their net asset
value in connection with annuity agreements issued in connection with the
insurance company's separate accounts. That portion of the Fund's average
daily net assets on which fees payable under Section 4 hereof and this Section
5 are calculated may be subject to certain minimum amount requirements as may
be determined, and additional or different dealer or wholesaler qualification
standards that may be established, from time to time by the Distributor. The
Distributor shall be entitled to be paid any fees payable under Section 4
hereof or this Section 5 with respect to accounts for which no Dealer of record
exists or qualification standards have not been met as partial consideration
for personal services and/or account maintenance services provided by the
Distributor to the Shares. The fees and expenses payable pursuant to Section 4
and this Section 5 may from time to time be paid by the Fund to the Distributor
and the Distributor will then pay these expenses on behalf of the Fund.
6. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the
responsibility for and control of the conduct of the affairs of the Fund.
-2-
<PAGE> 3
7. This Plan shall become effective upon (a) approval by a vote of at
least a "majority of outstanding voting securities" of the Shares, and (b)
approval by a vote of the Board of Trustees and vote of a majority of the
Trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any of the
agreements related to the Plan (the "Qualified Trustees"), such votes to be
cast in person at a meeting called for the purpose of voting on this Plan.
8. This Plan shall continue in effect indefinitely; PROVIDED,
HOWEVER, that such continuance is subject to annual approval by a vote of the
Board of Trustees and a majority of the Qualified Trustees, such votes to be
cast in person at a meeting called for the purpose of voting on continuance of
this Plan. If such annual approval is not obtained, this Plan shall expire 12
months after the effective date of the last approval.
9. This Plan may be amended at any time by the Board of Trustees;
provided that (a) any amendment to increase materially the amount to be spent
for the services described herein shall be effective only upon approval by a
vote of a "majority of the outstanding voting securities" of the Shares and (b)
any material amendment of this Plan shall be effective only upon approval by a
vote of the Board of Trustees and a majority of the Qualified Trustees, such
votes to be cast in person at a meeting called for the purpose of voting on
such amendment. This Plan may be terminated at any time by vote of a majority
of the Qualified Trustees or by a vote of a "majority of the outstanding voting
securities" of the Shares.
10. The Distributor shall provide the Board of Trustees, and the Board
of Trustees shall review, at least quarterly, a written report of the amounts
expended under the Plan and the purposes for which such expenditures were made.
11. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Fund.
12. For the purposes of this Plan, the terms "interested person" and
"majority of the outstanding voting securities" are used as defined in the Act.
In addition, for purposes of determining the fees payable to Dealers and
wholesalers, the value of the Share's net assets shall be computed in the
manner specified in the Fund's then current prospectus for computation of the
net asset value of the Shares.
13. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in Section 10 hereof (collectively
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such Record shall be kept in an easily
accessible place for the first two years of said record keeping.
14. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the Act.
15. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
-3-
<PAGE> 1
EXHIBIT NO. 15(b)
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to
be designated "CLASS B " of MASSACHUSETTS INVESTORS GROWTH STOCK (the
"Fund"), a Massachusetts business trust, dated September 1, 1993 and amended
this 21st day of December, 1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"); and
WHEREAS, the Fund intends to distribute the shares of beneficial
interest (without par value) of the Fund designated Class B Shares (the
"Shares") in accordance with Rule 12b-1 under the 1940 Act ("Rule 12b-1"), and
desires to adopt this Distribution Plan (the "Plan") as a plan of distribution
pursuant to such Rule; and
WHEREAS, the Fund desires for MFS Fund Distributors, Inc., a Delaware
corporation ("MFD"), to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Fund has entered into a distribution agreement (the
"Distribution Agreement") (in a form approved by the Board of Trustees of the
Fund in a manner specified in such Rule 12b-1) with the Distributor, whereby
the Distributor will provide facilities and personnel and render services to
the Fund in connection with the offering and distribution of the Shares (the
"Distribution Agreement"); and
WHEREAS, the Fund recognizes and agrees that (a) the Distributor may
retain the services of firms or individuals to act as dealers (the "Dealers")
of the Shares in connection with the offering of Shares, and (b) the
Distributor may make payments for such services to the Dealers out of the fee
paid to the Distributor hereunder, any deferred sales charges imposed by the
Distributor in connection with the repurchase of Shares, its profits or any
other source available to it; and
WHEREAS, the Fund recognizes and agrees that the Distributor may impose
certain deferred sales charges in connection with the repurchase of Shares by
the Fund, and the Distributor may retain (or receive from the Fund, as the case
may be) all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Fund, in considering whether the
Fund should adopt and implement this Plan, has evaluated such information as it
deemed necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for such
purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Fund and its Class B
shareholders;
NOW, THEREFORE, the Board of Trustees of the Fund hereby adopts this
Plan for the Fund as a plan for distribution relating to the Shares in
accordance with Rule 12b-1, on the following terms and conditions:
-1-
<PAGE> 2
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares. Among other things, the Distributor shall be responsible for
commissions payable to Dealers, all expenses of printing (excluding
typesetting) and distributing prospectuses to prospective shareholders and
providing such other related services as are reasonably necessary in connection
therewith.
2. The Distributor shall bear all distribution-related expenses to
the extent specified in the Distribution Agreement in providing the services
described in paragraph 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. It is understood that the Distributor may impose certain deferred
sales charges in connection with the repurchase of Shares by the Fund and the
Distributor may retain (or receive from the Fund, as the case may be) all such
deferred sales charges. As additional consideration for all services performed
and expenses incurred in the performance of its obligations under the
Distribution Agreement, the Fund shall pay the Distributor a distribution fee
periodically at a rate of 0.75% per annum of the Fund's average daily net
assets attributable to the Shares.
4. As partial consideration for the personal services and/or account
maintenance services performed by each Dealer in the performance of its
obligations under its dealer agreement with the Distributor, the Fund shall pay
each Dealer a service fee periodically at a rate not to exceed 0.25% per annum
of the portion of the average daily net assets of the Fund that is represented
by Shares that are owned by investors for whom such Dealer is the holder or
dealer of record. That portion of the Fund's average daily net assets on which
the fees payable under this paragraph 4 hereof are calculated may be subject to
certain minimum amount requirements as may be determined, and additional or
different dealer qualification standards that may be established from time to
time, by the Distributor. The Distributor shall be entitled to be paid any
fees payable under this paragraph 4 hereof with respect to Shares for which no
Dealer of record exists or qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
provided by the Distributor to the Shares. The service fee payable pursuant to
this paragraph 4 may from time to time be paid by the Fund to the Distributor
and the Distributor will then pay these fees on behalf of the Fund.
5. The Fund understands that agreements between the Distributor and
the Dealers may provide for payment of commissions to Dealers in connection
with the sales of Shares and may provide for a portion (which may be all or
substantially all) of the fees payable by the Fund to the Distributor under the
Distribution Agreement to be paid by the Distributor to the Dealers in
consideration of the Dealer's services as a dealer of the Shares. Except as
described in paragraph 4, nothing in this Plan shall be construed as requiring
the Fund to make any payment to any Dealer or to have any obligations to any
Dealer in connection with services as a dealer of the Shares. The Distributor
shall agree and undertake that any agreement entered into between the
Distributor and any Dealer shall provide that, except as provided in paragraph
4, such Dealer shall look solely to the Distributor for compensation for its
services thereunder and that in no event shall such Dealer seek any payment
from the Fund.
6. The Fund shall pay all fees and expenses of any independent
auditor, legal counsel, investment adviser, administrator, transfer agent,
custodian, shareholder servicing agent, registrar or dividend disbursing agent
of the Fund; expenses of distributing and redeeming Shares and servicing
shareholder accounts; expenses of preparing, printing and mailing prospectuses,
shareholder reports, notices, proxy statements and reports to governmental
officers and commissions and to shareholders of the Fund, except that the
Distributor shall be responsible for the distribution-related expenses as
provided in paragraphs 1 and 2 hereof.
-2-
<PAGE> 3
7. Nothing herein contained shall be deemed to require the Trust to
take any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the
responsibility for and control of the conduct of the affairs of the Fund.
8. This Plan shall become effective upon (a) approval by a vote of at
least a "majority of the outstanding voting securities" of the Shares, and (b)
approval by a vote of the Board of Trustees and a vote of a majority of the
Trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "Qualified Trustees"), such votes to be cast in person
at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect indefinitely; provided that
such continuance is "specifically approved at least annually" by a vote of both
a majority of the Trustees of the Fund and a majority of the Qualified
Trustees. If such annual approval is not obtained, this Plan shall expire 12
months after the effective date of the last approval.
10. This Plan may be amended at any time by the Board of Trustees;
provided that this Plan may not be amended to increase materially the amount of
permitted expenses hereunder without the approval of holders of a "majority of
the outstanding voting securities" of the Shares and may not be materially
amended in any case without a vote of a majority of both the Trustees and the
Qualified Trustees. This Plan may be terminated at any time by a vote of a
majority of the Qualified Trustees or by a vote of the holders of a "majority
of the outstanding voting securities" of the Shares.
11. The Fund and the Distributor shall provide the Board of Trustees,
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts expended under this Plan and the purposes for which such
expenditures were made.
12. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Trust.
13. For the purposes of this Plan, the terms "interested persons",
"majority of the outstanding voting securities" and "specifically approved at
least annually" are used as defined in the Act. In addition, for purposes of
determining the fees payable to the Distributor hereunder, the value of the
Fund's net assets shall be computed in the manner specified in the Fund's
then-current prospectus and statement of additional information for computation
of the net asset value of the Shares of the Fund.
14. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 11 hereof
(collectively, the "Records") for a period of six years from the end of the
fiscal year in which such Record was made and each such record shall be kept in
an easily accessible place for the first two years of said record-keeping.
15. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
-3-
<PAGE> 1
EXHIBIT NO. 16
TOTAL RATE OF RETURN CALCULATION
--------------------------------
FORMULA
-------
P(1 + T)n = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MASSACHUSETTS INVESTORS GROWTH STOCK FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> MFS MASSACHUSETTS INVESTORS GROWTH STOCK FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 778,959,814
<INVESTMENTS-AT-VALUE> 993,562,290
<RECEIVABLES> 9,938,017
<ASSETS-OTHER> 14,958
<OTHER-ITEMS-ASSETS> 377,927
<TOTAL-ASSETS> 1,003,893,192
<PAYABLE-FOR-SECURITIES> 15,876,292
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,300,887
<TOTAL-LIABILITIES> 17,177,179
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 671,268,899
<SHARES-COMMON-STOCK> 93,272,283
<SHARES-COMMON-PRIOR> 87,306,636
<ACCUMULATED-NII-CURRENT> (50,843)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 100,892,641
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 214,605,316
<NET-ASSETS> 986,716,013
<DIVIDEND-INCOME> 4,358,864
<INTEREST-INCOME> 2,516,072
<OTHER-INCOME> 0
<EXPENSES-NET> 7,599,877
<NET-INVESTMENT-INCOME> (724,941)
<REALIZED-GAINS-CURRENT> 101,534,996
<APPREC-INCREASE-CURRENT> (153,476,898)
<NET-CHANGE-FROM-OPS> (52,666,843)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (173,544,772)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,138,166
<NUMBER-OF-SHARES-REDEEMED> (15,368,839)
<SHARES-REINVESTED> 12,196,320
<NET-CHANGE-IN-ASSETS> (147,543,605)
<ACCUMULATED-NII-PRIOR> 4,517,967
<ACCUMULATED-GAINS-PRIOR> 171,598,657
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,277,285
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,642,126
<AVERAGE-NET-ASSETS> 1,023,720,418
<PER-SHARE-NAV-BEGIN> 12.97
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> (0.49)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.99)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.48
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MASSACHUSETTS INVESTORS GROWTH FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> MFS MASSACHUSETTS INVESTORS GROWTH STOCK FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 778,959,814
<INVESTMENTS-AT-VALUE> 993,562,290
<RECEIVABLES> 9,938,017
<ASSETS-OTHER> 14,958
<OTHER-ITEMS-ASSETS> 377,927
<TOTAL-ASSETS> 1,003,893,192
<PAYABLE-FOR-SECURITIES> 15,876,292
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,300,887
<TOTAL-LIABILITIES> 17,177,179
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 671,268,899
<SHARES-COMMON-STOCK> 899,356
<SHARES-COMMON-PRIOR> 138,556
<ACCUMULATED-NII-CURRENT> (50,843)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 100,892,641
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 214,605,316
<NET-ASSETS> 986,716,013
<DIVIDEND-INCOME> 4,358,864
<INTEREST-INCOME> 2,516,072
<OTHER-INCOME> 0
<EXPENSES-NET> 7,599,877
<NET-INVESTMENT-INCOME> (724,941)
<REALIZED-GAINS-CURRENT> 101,534,996
<APPREC-INCREASE-CURRENT> (153,476,898)
<NET-CHANGE-FROM-OPS> (52,666,843)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (311,145)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,335,727
<NUMBER-OF-SHARES-REDEEMED> (1,604,821)
<SHARES-REINVESTED> 29,894
<NET-CHANGE-IN-ASSETS> (147,543,605)
<ACCUMULATED-NII-PRIOR> 4,517,967
<ACCUMULATED-GAINS-PRIOR> 171,598,657
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,277,285
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,642,126
<AVERAGE-NET-ASSETS> 1,023,720,418
<PER-SHARE-NAV-BEGIN> 12.93
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> (0.05)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.99)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.35
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
