<PAGE> 1
As filed with the Securities and Exchange Commission on March 29, 1996
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. 61
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 22
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, MA 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)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on [date] 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 with respect to its fiscal
year ended November 30, 1995 on January 29, 1996.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Title of securities Number of shares Proposed maximum Proposed maximum Amount of
being registered being registered offering price per share aggregate offering registration fee
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Shares of Beneficial
Interest (without 7,193,359 $11.10 $290,000 $100
par value)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 20,366,682 shares were redeemed during the fiscal year ended
November 30, 1995. 13,199,449 shares were used for reductions pursuant to
paragraph (c) of Rule 24f-2 during the current fiscal year. 7,167,233 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 $11.10 per share on March 15, 1996 is the price used as the basis for
calculating the registration fee. While no fee is required for the 7,167,233
shares, the Registrant has elected to register, for $100, an additional $290,000
of shares (26,126 shares at $11.10 per share).
- --------------------------------------------------------------------------------
<PAGE> 2
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
-----------------------------------------
CROSS REFERENCE SHEET
---------------------
<TABLE>
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <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) Front Cover Page; The Fund; *
Investment Objective and
Policies; Investment Techniques
(b) Investment Objective and *
Policies; Investment Techniques
(c) Investment Objective and *
Policies; Additional Risk Factors
5 (a) The Fund; Management of the *
Fund - Investment Adviser
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <C> <C>
(b) Front Cover Page; Management *
of the Fund - Investment
Adviser; Back Cover Page
(c) Management of the Fund - *
Investment Adviser
(d) * *
(e) Management of the Fund - *
Shareholder Servicing Agent;
Back Cover Page
(f) Information Concerning the Fund - *
Expenses; Condensed Financial
Information; Expense Summary
(g) Additional Risk Factors - Portfolio *
Trading
5A (a) ** **
(b) ** **
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
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <C> <C>
(g) Information Concerning Shares *
of the Fund - Tax Status;
Information Concerning Shares
of the Fund - Distributions
(h) * *
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;
Shareholder Services;
Information Concerning Shares
of the Fund - Exchanges
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases; Shareholder Services
(e) Information Concerning Shares *
of the Fund - Distribution Plans;
Expense Summary
(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; Shareholder
Services
(b) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <C> <C>
(c) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases
(d) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases
9 * *
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 The Fund Definitions
13 (a), (b), (c) * Investment Objective,
Policies and Restrictions;
Investment Techniques;
Investment Restrictions
(d) * *
14 (a), (b) * Management of the Fund-
Trustees and Officer
(c) * *
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
Expenses
(c) * *
(d) * Management of the Fund-
Investment Adviser
(e) * Portfolio Transactions and
Brokerage Commissions
(f) Information Concerning Distribution Plans
Shares of the
Fund - Distribution
Plans
(g) * *
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <C> <C>
(h) * Management of the Fund-
Custodian; Independent
Auditors and Financial
Statements; Back Cover Page
(i) * Management of the Fund-
Shareholder Servicing
Agent
17 (a), (b), (c), * Portfolio Transactions and
(d), (e) Brokerage Commissions
18 (a) Information Concerning Description of Shares
Shares of the Fund- Voting Rights and
Description of Shares, Liabilities
Voting Rights and
Liabilities
(b) * *
19 (a) Information Concerning Shareholder Services
Shares of the Fund -
Purchases; Shareholder
Services
(b) Information Concerning Management of the
Shares of the Fund - Distributor; Determination
Net Asset Value; of Net Asset Value and
Information Concerning Performance - Net Asset
Shares of the Value
Fund - Purchases
(c) * *
20 * Tax Status
21 (a) * Management of the Fund -
Distributor; Distribution
Plans
(b) * Management of the Fund -
Distributor; Distribution
Plans
(c) * *
22 (a) * *
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<S> <C> <C>
(b) * Determination of Net Asset
Value and Performance
23 * Independent Auditors
and Financial Statements
<FN>
- -----------------------
* Not Applicable
** Contained in Annual Report
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
MASSACHUSETTS INVESTORS PROSPECTUS
GROWTH STOCK FUND April 1, 1996
(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................................................... 5
5. Investment Techniques............................................................... 5
6. Additional Risk Factors............................................................. 9
7. Management of the Fund.............................................................. 10
8. Information Concerning Shares of the Fund........................................... 12
Purchases........................................................................ 12
Exchanges........................................................................ 15
Redemptions and Repurchases...................................................... 16
Distribution Plans............................................................... 18
Distributions.................................................................... 19
Tax Status....................................................................... 20
Net Asset Value.................................................................. 20
Description of Shares, Voting Rights and Liabilities............................. 20
Performance Information.......................................................... 21
9. Shareholder Services................................................................ 21
Appendix A.......................................................................... A-1
</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 "Information Concerning Shares
of the Fund -- 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.
INVESTMENT PRODUCTS ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY,
AND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY FINANCIAL
INSTITUTION. SHARES OF MUTUAL FUNDS ARE SUBJECT TO INVESTMENT RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED, AND WILL FLUCTUATE IN VALUE. YOU
MAY RECEIVE MORE OR LESS THAN YOU PAID WHEN YOU REDEEM YOUR SHARES.
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 ("SAI"), dated April 1, 1996, as amended or supplemented from time
to time, 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 SAI. A copy of the SAI 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> 10
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):
Management Fees............................................. 0.31% 0.31%
Rule 12b-1 Fees............................................. 0.19%2 1.00%3
Other Expenses4............................................. 0.23% 0.32%
---- ----
Total Operating Expenses.................................... 0.73% 1.63%
</TABLE>
- ---------------
1 Purchases of $1 million or more are not subject to an initial sales charge;
however, a contingent deferred sales charge (a "CDSC") of 1% will be imposed
on such purchases in the event of certain redemption transactions within 12
months following such purchases (see "Information Concerning Shares of the
Fund -- Purchases" below).
2 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 "Information Concerning
Shares of the Fund -- Distribution Plans" below). Assets attributable to Class
A shares sold prior to March 1, 1991 are subject to a service fee of 0.15% per
annum. Payment of the 0.10% per annum Class A distribution fee will commence
on such date as the Trustees of the Trust may determine. Distribution expenses
paid under this plan, together with the initial sales charge, may cause
long-term shareholders to pay more than the maximum sales charge that would
have been permissible if imposed entirely as an initial sales charge.
3 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 "Information Concerning
Shares of the Fund -- Distribution Plans" below). Distribution expenses paid
under this plan, together with any CDSC payable upon redemption of Class B
shares, may cause long-term shareholders to pay more than the maximum sales
charge that would have been permissible if imposed entirely as an initial
sales charge.
4 The Fund has an expense offset arrangement which reduces the Fund's custodian
fee based upon the amount of cash maintained by the Fund with its custodian
and dividend disbursing agent, and may enter into other such arrangements and
directed brokerage arrangements (which would also have the effect of reducing
the Fund's expenses). Any such fee reductions are not reflected under "Other
Expenses."
2
<PAGE> 11
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 $ 57 $ 17
3 years............................................. 79 81 51
5 years............................................. 96 109 89
10 Years............................................. 143 169(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.
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. The
Adviser is responsible for the management of the Fund's assets and the officers
of the Fund are responsible for its operations. The Adviser manages the
portfolio from day to day in accordance with the Fund's investment objective.
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> 12
3. CONDENSED FINANCIAL INFORMATION
The following information has been audited for at least the latest five fiscal
years of the Fund and 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 SAI in reliance upon the report of the Fund's
independent auditors given upon their authority, as experts in accounting and
auditing. The Fund's current independent auditors are Deloitte & Touche LLP.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------------
CLASS A
---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period..... $ 10.48 $ 12.97 $ 12.15 $ 10.87 $ 8.48 $ 10.70
--------- --------- --------- --------- --------- ----------
Income from investment operations# --
Net investment income (loss)............. $ (0.01) $ (0.01) $ (0.01) $ (0.03) $ 0.01 $ 0.05
Net realized and unrealized gain (loss)
on investments......................... 3.12 (0.49) 1.55 2.07 2.93 (1.02)
--------- --------- --------- --------- --------- ----------
Total from investment operations....... $ 3.11 $ (0.50) $ 1.54 $ 2.04 $ 2.94 $ (0.97)
--------- --------- --------- --------- --------- ----------
Less distributions declared to
shareholders --
From net investment income............... $ -- $ -- $ -- $ -- $ (0.03) $ (0.05)
From net realized gain on investments.... (1.08) (1.99) (0.72) (0.76) (0.52) (1.20)
--------- --------- --------- --------- --------- ----------
Total distributions declared to
shareholders......................... $ (1.08) $ (1.99) $ (0.72) $ (0.76) $ (0.55) $ (1.25)
--------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- ----------
Net asset value -- end of period........... $ 12.51 $ 10.48 $ 12.97 $ 12.15 $ 10.87 $ 8.48
======== ======== ======== ======== ======== =========
Total return++............................. 32.91% (5.00)% 13.43% 19.35% 36.56% (10.27)%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATASEC.:
Expenses##............................... 0.73% 0.72% 0.71% 0.67% 0.63% 0.53%
Net investment income (loss)............. (0.08)% (0.06)% (0.19)% (0.24)% 0.14% 0.55%
PORTFOLIO TURNOVER......................... 46% 56% 52% 16% 39% 44%
NET ASSETS AT END OF PERIOD (000,000
OMITTED)................................. $ 1,180 $ 977 $ 1,132 $ 1,070 $ 950 $ 749
</TABLE>
- ---------------
<TABLE>
<S> <C>
# Per share data for the periods subsequent to November 30, 1992 is based on average shares outstanding.
## For the year ended November 30, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends
prior to March 1, 1991). If the charge had been included, the results would have been lower.
sec. 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 ratios would have been:
Net investment loss.................... $ (0.02) $ (0.03) $ (0.02) -- -- --
RATIOS (TO AVERAGE NET ASSETS):
Expenses##........................... 0.83% 0.82% 0.74% -- -- --
Net investment loss.................. (0.18)% (0.16)% (0.21)% -- -- --
</TABLE>
4
<PAGE> 13
FINANCIAL HIGHLIGHTS-- CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------------------------
CLASS A CLASS B
--------------------------------------------- ---------------------------------
1989 1988 1987 1986 1995 1994 1993*
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of
period.............................. $ 8.39 $ 9.05 $ 9.69 $ 10.68 $ 10.35 $ 12.93 $ 12.91
--------- --------- --------- --------- --------- --------- ---------
Income from investment operations# --
Net investment income (loss)........ $ 0.09 $ 0.12 $ 0.18 $ 0.20 $ (0.11) $ (0.09) $ (0.01)
Net realized and unrealized gain
(loss) on investments............. 3.14 0.64 (0.68) 1.99 3.10 (0.50) 0.03
--------- --------- --------- --------- --------- --------- ---------
Total from investment
operations...................... $ 3.23 $ 0.76 $ (0.50) $ 2.19 $ 2.99 $ (0.59) $ 0.02
--------- --------- --------- --------- --------- --------- ---------
Less distributions declared to
shareholders --
From net investment income.......... $ (0.08) $ (0.15) $ (0.14) $ (0.20) $ -- $ -- $ --
From net realized gain on
investments....................... (0.84) (1.27) -- (2.98) (1.08) (1.99) --
--------- --------- --------- --------- --------- --------- ---------
Total distributions declared to
shareholders.................... $ (0.92) $ (1.42) $ (0.14) $ (3.18) $ (1.08) $ (1.99) $ --
Net asset value -- end of period...... $ 10.70 $ 8.39 $ 9.05 $ 9.69 $ 12.26 $ 10.35 $ 12.93
======== ======== ======== ======== ======== ======== ========
Total return++........................ 42.14% 8.21% (5.57)% 20.30% 32.09% (5.82)% 0.70%+
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses##.......................... 0.54% 0.58% 0.50% 0.50% 1.63% 1.60% 1.49%+
Net investment income (loss)........ 0.91% 1.27% 1.60% 1.62% (0.98)% (0.87)% (0.99)%+
PORTFOLIO TURNOVER.................... 32% 75% 66% 77% 46% 56% 52%
NET ASSETS AT END OF PERIOD (000,000
OMITTED)............................ $ 907 $ 735 $ 774 $ 899 $ 14 $ 9 $ 2
</TABLE>
- ---------------
<TABLE>
<C> <S>
* For the period from the commencement of offering of Class B shares, September 7, 1993 to November 30, 1993.
+ Annualized.
# Per share data for the periods subsequent to November 30, 1992 is based on average shares outstanding.
## For the year ended November 30, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends
prior to March 1, 1991). If the charge had been included, the results would have been lower.
</TABLE>
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-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.
5. INVESTMENT TECHNIQUES
Consistent with the Fund's investment objective and policies, the Fund may
engage in the following investment techniques, many of which are described more
fully in the SAI. See "Investment Objective, Policies and Restrictions"' in the
SAI.
5
<PAGE> 14
FOREIGN SECURITIES: The Fund may invest up to 50% (and generally expects to
invest between 0% and 30%) of its total assets in foreign securities (not
including American Depositary Receipts ("ADRs")). 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.
EMERGING MARKET SECURITIES: Consistent with the Fund's objective and policies,
the Fund may invest in securities of issuers whose principal activities are
located in emerging market countries. Emerging market countries include any
country determined by the Adviser to have an emerging market economy, taking
into account a number of factors, including whether the country has a low- to
middle-income economy according to the International Bank for Reconstruction and
Development, the country's foreign currency debt rating, its political and
economic stability and the development of its financial and capital markets. The
Adviser determines whether an issuer's principal activities are located in an
emerging market country by considering such factors as its country of
organization, the principal trading market for its securities and the source of
its revenues and assets. The issuer's principal activities generally are deemed
to be located in a particular country if: (a) the security is issued or
guaranteed by the government of that country or any of its agencies, authorities
or instrumentalities; (b) the issuer is organized under the laws of, and
maintains a principal office in, that country; (c) the issuer has its principal
securities trading market in that country; (d) the issuer derives 50% or more of
its total revenues from goods sold or services performed in that country; or (e)
the issuer has 50% or more of its assets in that country.
AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in ADRs, which are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. Because ADRs trade on United States securities
exchanges, the Adviser does not treat them as foreign securities. However, they
are subject to many of the risks of foreign securities, such as changes in
exchange rates and more limited information about foreign issuers.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order
to earn 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 SAI, the Fund has adopted certain procedures intended to
minimize 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, U.S. Government Securities or an irrevocable letter of
credit 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 or a letter of credit).
"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
6
<PAGE> 15
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.
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 liquid and thus not subject to the Fund's limitations on investing
not more than 15% of its net assets in illiquid investments. 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 decreasing the level of liquidity 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.
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 SAI. The trading of yield curve options is subject to all the risks
associated with trading other types of options, as discussed below under
"Additional Risk Factors" and in the SAI. 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
7
<PAGE> 16
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 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.
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
8
<PAGE> 17
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 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.
6. ADDITIONAL RISK FACTORS
The following discussion of additional risk factors supplements the risk factors
described above. Additional information concerning risk factors can be found
under the caption "Investment Objective, Policies and Restrictions" in the SAI.
FUTURES CONTRACTS, OPTIONS, OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS, AND
OPTIONS ON FOREIGN CURRENCIES: 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 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.
EMERGING MARKET SECURITIES: 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. 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, decrease
in the level of liquidity in the Fund's portfolio, 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, and in such
markets the Fund bears the risk that the securities will not be delivered and
that the Fund's payments will not be returned. Securities prices in emerging
markets can be significantly more volatile than in the more developed nations of
the world, reflecting the greater uncertainties of investing in less established
markets and economics. In particular, countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions of repatriation
of
9
<PAGE> 18
assets, and may have less protection of property rights than more developed
countries. The economics of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the expenses of the Fund.
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 the 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 SAI.
------------------------
The policies described above are not fundamental except for the one policy
specifically noted as fundamental, and may be changed without shareholder
approval. The SAI 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 SAI may be changed
without shareholder approval unless indicated otherwise.
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.
7. 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, and Christian Felipe, a Senior Vice President of the
Adviser, have been the Fund's portfolio managers since July of 1993 and May of
1995, respectively. Mr. Bennett has been employed as a portfolio manager by the
Adviser since 1969. Mr. Felipe has been employed as a portfolio manager by the
Adviser since 1986. 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
10
<PAGE> 19
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, 1995, MFS
received management fees under the Advisory Agreement of $3,339,532, 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 various 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 $43.9 billion
on behalf of over 1.9 million investor accounts as of February 29, 1996. MFS is
a 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.
MFS has established a strategic alliance with Foreign & Colonial Management Ltd.
("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the world's
oldest financial services institutions, the London-based Foreign & Colonial
Investment Trust PLC, which pioneered the idea of investment management in 1868,
and HYPO-BANK (Bayerische Hypothekenund Weschsel-Bank AG), the oldest publicly
listed bank in Germany, founded in 1835. As part of this alliance, the portfolio
managers and investment analysts of MFS and Foreign & Colonial will share their
views on a variety of investment related issues, such as the economy, securities
markets, portfolio securities and their issuers, investment recommendations,
strategies and techniques, risk analysis, trading strategies and other portfolio
management matters. MFS will have access to the extensive international equity
investment expertise of Foreign & Colonial, and Foreign & Colonial will have
access to the extensive U.S. equity investment expertise of MFS. One or more MFS
investment analysts are expected to work for an extended period with Foreign &
Colonial's portfolio managers and investment analysts at their offices in
London. In return, one or more Foreign & Colonial employees are expected to work
in a similar manner at MFS' Boston offices.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS or clients of
Foreign & Colonial. Some simultaneous transactions are inevitable when several
clients receive investment advice from MFS and Foreign & Colonial, particularly
when the same security is suitable for more than one client. While in some cases
this arrangement could have a detrimental effect on the price or availability of
the security as far as the Fund is concerned, in other cases, however, it may
produce increased investment opportunities for 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.
11
<PAGE> 20
8. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased at the public offering price through any
dealer and other financial institutions ("dealers") having a selling agreement
with MFD. Dealers may also charge their customers fees relating to investment in
the Fund.
The Fund offers two classes of shares (Class A and Class B shares) which bear
sales charges and distribution fees in different forms and amounts, as described
below:
CLASS A SHARES: Class A shares are generally offered at net asset value plus an
initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.
PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at net
asset value plus an initial sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE* AS PERCENTAGE
OF: DEALER ALLOWANCE
----------------------------- AS A PERCENTAGE
OFFERING NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED 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 will apply to such purchases, as discussed below.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 5% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain other MFS Funds owned or
being purchased, the existence of an agreement to purchase additional shares
during a 13-month period (or 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 Purchase privileges by which the sales
charge may be reduced is set forth in the SAI.
PURCHASES SUBJECT TO A CDSC (but not subject to an initial sales charge). In the
following two circumstances, Class A shares are also offered at net asset value
without an initial sales charge but subject to a CDSC, equal to 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested dividend and
capital gain distributions) or the total cost of such shares, in the event of a
share redemption within 12 months following the purchase:
(i) on investments of $1 million or more in Class A shares; and
(ii) on investments in Class A shares by certain retirement plans subject to the
Employee Retirement Income Security Act of 1974, as amended, if the
sponsoring organization demonstrates 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.
12
<PAGE> 21
In the case of such purchases, MFS will pay commissions to dealers on new
investments in Class A shares made through such dealers as follows:
<TABLE>
<CAPTION>
COMMISSION PAID
BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT
- ----------------- --------------------------------
<C> <S>
1.00% On the first $2,000,000, plus
0.80 Over $2,000,000 to $3,000,000, plus
0.50 Over $3,000,000 to $50,000,000, plus
0.25 Over $50,000,000
</TABLE>
For purposes of determining the level of commissions to be paid to dealers with
respect to a shareholder's new investment in Class A shares made on or after
April 1, 1996, purchases for each shareholder account (and certain other
accounts for which the shareholder is a record or beneficial holder) will be
aggregated over a 12-month period (commencing from the date of the first such
purchase).
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" for
further discussion of the CDSC.
WAIVERS OF INITIAL SALES CHARGE AND CDSC. In certain circumstances, the initial
sales charge imposed upon purchases of Class A shares and the CDSC imposed upon
redemptions of Class A shares is waived. These circumstances are described in
Appendix A to this Prospectus.
CLASS B SHARES: Class B shares are offered at net asset value without an initial
sales charge but subject to a CDSC upon redemption as follows:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
---------------------------------------------------- ---------------
<S> <C>
First............................................... 4%
Second.............................................. 4%
Third............................................... 3%
Fourth.............................................. 3%
Fifth............................................... 2%
Sixth............................................... 1%
Seventh and following............................... 0%
</TABLE>
The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividends or capital gain distributions.
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 payable under the Fund's Class B Distribution Plan (see
"Distribution Plans" below) at a rate equal to 0.25% of the purchase price of
such shares. Therefore, the total amount paid to a dealer upon the sale of Class
B shares is 4% of the purchase price of the shares (commission rate of 3.75%
plus a service fee equal to 0.25% of the purchase price).
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" for
further discussion of the CDSC.
WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon redemption of
Class B shares is waived. These circumstances are described in Appendix A to
this Prospectus.
CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain outstanding
for approximately eight years will convert to Class A shares of the same Fund.
Shares purchased through the reinvestment of distributions paid in respect of
Class B shares will be treated as Class B shares for purposes of the payment of
the distribution and service fees under the Distribution Plan applicable to
Class B shares. See "Distribution Plans" below. However, for purposes of
conversion to Class A shares, all shares in a shareholder's account that were
purchased through the reinvestment of dividends and distributions paid in
respect of Class B shares (and which have not converted to Class A shares as
provided in the following sentence) will be held in a separate sub-
13
<PAGE> 22
account. Each time any Class B shares in the shareholder's account (other than
those in the sub-account) convert to Class A shares, a portion of the Class B
shares then in the sub-account will also convert to Class A shares. The portion
will be determined by the ratio that the shareholder's Class B shares not
acquired through reinvestment of dividends and distributions that are converting
to Class A shares bear to the shareholder's total Class B shares not acquired
through reinvestment. The conversion of Class B shares to Class A shares is
subject to the continuing availability of a ruling from the Internal Revenue
Service or an opinion of counsel that such conversion will not constitute a
taxable event for federal tax purposes. There can be no assurance that such
ruling or opinion will be available, and the conversion of Class B shares to
Class A shares will not occur if such ruling or opinion is not available. In
such event, Class B shares would continue to be subject to higher expenses than
Class A shares for an indefinite period.
GENERAL: The following information applies to purchases of all classes of the
Fund's shares.
MINIMUM INVESTMENT. 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 for sale at any time.
RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. 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 shares 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.
DEALER CONCESSIONS. Dealers may receive different compensation with respect to
sales of Class A and Class B shares. In addition, from time to time, MFD may pay
dealers 100% of the applicable sales charge on sales of Class A shares of
certain specified MFS Funds sold by such dealer during a specified sales period.
In addition, MFD or its affiliates may, from time to time, pay dealers an
additional commission equal to 0.50% of the net asset value of all of the Class
B shares of certain specified MFS Funds sold by such dealer during a specified
sales period. In addition, from time to time, MFD, at its expense, may provide
additional commissions, compensation or promotional incentives ("concessions")
to dealers which sell shares of the Fund. 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 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. From time to time, MFD may make expense
reimbursements for special training of a dealer's registered representatives in
group meetings or to help pay the
14
<PAGE> 23
expenses of sales contests. Other concessions may be offered to the extent not
prohibited by state laws or any self-regulatory agency, such as the NASD.
SPECIAL INVESTMENT PROGRAMS. 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.
RETIREMENT PLAN ACCOUNTS. Following the termination of any agreement between a
plan sponsor and the Shareholder Servicing Agent or its affiliates with respect
to the MFS FUNDamental 401(k) Plan or another similar recordkeeping system made
available by the Shareholder Servicing Agent, the Shareholder Servicing Agent
for each Fund in which the Plan invests shall combine all plan participant
accounts into a single omnibus or pooled account.
RESTRICTIONS ON ACTIVITIES OF NATIONAL BANKS. 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. 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 in
respect of shareholders who invested in the Fund through a national bank. 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.
------------------------
A shareholder whose shares are held in the name of, or controlled by, a dealer
might not receive many of the privileges and services from the Fund (such as
Right of Accumulation, Letter of Intent and certain recordkeeping services) that
the Fund ordinarily provides.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of the same class of any of the
other MFS Funds at net asset value (if available for sale).
EXCHANGES AMONG MFS FUNDS (EXCLUDING EXCHANGES FROM MFS MONEY MARKET FUNDS): No
initial sales charges or CDSC will be imposed in connection with an exchange
from shares of an MFS Fund to shares of any other MFS Fund, except with respect
to exchanges from an MFS money market fund to another MFS Fund which is not an
MFS money market fund (discussed below). With respect to an exchange involving
shares subject to a CDSC, the CDSC will be unaffected by the exchange and the
holding period for purposes of calculating the CDSC will carry over to the
acquired shares.
EXCHANGES FROM AN MFS MONEY MARKET FUND: Special rules apply with respect to the
imposition of an initial sales charge or a CDSC for exchanges from an MFS money
market fund to another MFS Fund which is not an MFS money market fund. These
rules are described under the caption "Exchanges" in the Prospectuses of those
MFS money market funds.
EXCHANGES INVOLVING THE MFS FIXED FUND: Class A shares of any MFS Fund held by
certain qualified retirement plans may be exchanged for units of participation
of the MFS Fixed Fund (a bank collective investment fund) (the "Units"), and
Units may be exchanged for Class A shares of any MFS Fund. With respect to
exchanges between Class A shares subject to a CDSC and Units, the CDSC will
carry over to the acquired shares or Units and will be deducted from the
redemption proceeds when such shares or Units are subsequently redeemed,
assuming the CDSC is then payable (the period during which the Class A shares
and the Units were held will be aggregated for purposes of calculating the
applicable CDSC). In the event that a shareholder initially purchases Units and
then exchanges into Class A shares subject to an initial sales charge of an MFS
Fund, the initial sales charge shall be due upon such exchange, but will not be
imposed with respect to any subsequent exchanges between such Class A shares and
15
<PAGE> 24
Units with respect to shares on which the initial sales charge has already been
paid. In the event that a shareholder initially purchases Units and then
exchanges into Class A shares subject to a CDSC of an MFS Fund, the CDSC period
will commence upon such exchange, and the applicability of the CDSC with respect
to subsequent exchanges shall be governed by the rules set forth above in this
paragraph.
GENERAL: A shareholder should read the prospectus of the other MFS Fund and
consider the differences in objectives, policies and restrictions before making
any exchange. 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 (generally, 4:00 p.m., Eastern time), the exchange will occur on that
day if all the requirements set forth above have been complied with at that time
and subject to the Fund's right to reject purchase orders. 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 dealers or the Shareholder Servicing Agent.
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 -- General -- Right to Reject Purchase Orders/Market
Timing."
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the value of his account on any
date on which the Fund is open for business by redeeming shares at their net
asset value (a redemption) or by selling such shares to the Fund through a
dealer (a repurchase). Certain redemptions and repurchases are, however, subject
to a CDSC. See "Contingent Deferred Sales Charge" below. Because the net asset
value of shares of the account fluctuates, redemptions or repurchases, which are
taxable transactions, are likely to result in gains or losses to the
shareholder. When a shareholder withdraws an amount from his account, the
shareholder is deemed to have tendered for redemption a sufficient number of
full and fractional shares in his account to cover the amount withdrawn. The
proceeds of a redemption or repurchase will normally be available within seven
days, except 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.
REDEMPTION BY MAIL: Each shareholder may redeem all or any portion of the shares
in his account by mailing or delivering to the Shareholder Servicing Agent (see
back cover for address) a stock power with a written request for redemption or a
letter of 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"
will 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
16
<PAGE> 25
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" below.
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 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 and the amount of any income tax
required to be withheld, are mailed by check to the designated account, without
charge, if the redemption proceeds do not exceed $1,000, and are wired in
federal funds to the designated account if the redemption proceeds exceed
$1,000. 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 may
be liable for any losses resulting from unauthorized telephone transactions if
it does not follow reasonable procedures designated 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.
REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares through
his 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, REDUCED BY
THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO
BE WITHHELD.
CONTINGENT DEFERRED SALES CHARGE: Investments in Class A or Class B shares
("Direct Purchases") will be subject to a CDSC for a period of 12 months (in the
case of purchases of $1 million or more of Class A shares or purchases by
certain retirement plans 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 of shares 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 or purchases by certain
retirement plans 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 a
particular class, (i) any Free Amount is not subject to the CDSC and (ii) the
amount of redemption equal to the then-current value of Reinvested Shares is not
subject to the CDSC, but (iii) any amount of 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 as described in Appendix A hereto.
GENERAL: The following information applies to redemptions and repurchases of all
classes of the Fund's shares.
17
<PAGE> 26
SIGNATURE GUARANTEE. In order to protect shareholders 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.
REINSTATEMENT PRIVILEGE. Shareholders of the Fund who have redeemed their shares
have a one-time right to reinvest the redemption proceeds in the same class of
shares of any of the MFS Funds (if shares of such Fund are available for sale)
at net asset value (with a credit for any CDSC paid) within 90 days of the
redemption pursuant to the Reinstatement Privilege. If the shares credited for
any CDSC paid are then redeemed within six years of the initial purchase in the
case of Class B shares or within 12 months of the initial purchase for certain
Class A share purchases, a CDSC will be imposed upon redemption. Such purchases
under the Reinstatement Privilege are subject to all limitations in the SAI
regarding this privilege.
IN-KIND DISTRIBUTIONS. Subject to compliance with applicable regulations, the
Fund has reserved the right to pay the redemption or repurchase price of shares
of the Fund, either totally or partially, by a distribution in-kind of
securities (instead of cash) from the Fund's portfolio. The securities
distributed in such a distribution would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in-kind, the shareholder could incur
brokerage or transaction charges when converting the securities to cash.
INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. 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 if at any time the total investment in such
account drops below $500 because of redemptions, except in the case of accounts
being established for monthly automatic investments and certain payroll savings
programs, Automatic Exchange Plan accounts and tax-deferred retirement plans,
for which there is a lower minimum investment requirement. See
"Purchases -- General -- Minimum Investment." 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.
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
"Distribution Plans"), after having concluded that there is a reasonable
likelihood that the Distribution Plans would benefit the Fund and its
shareholders.
FEATURES COMMON TO EACH DISTRIBUTION PLAN: The Distribution Plans have certain
common features, as described below.
SERVICE FEES. Each Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A or Class B
shares, as appropriate) (the "Designated Class") annually in order that MFD may
pay expenses on behalf of the Fund relating to the servicing of shares of the
Designated Class. The service fee is used by MFD to compensate dealers which
enter into a sales agreement with MFD in consideration for all personal services
and/or account maintenance services rendered by the dealer with respect to
shares of the Designated Class owned by investors for whom such dealer is the
dealer or holder of record. MFD may from time to time reduce the amount of the
service fees paid for shares sold prior to a certain date. Service fees may be
reduced for a 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 each 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 to shareholder accounts.
DISTRIBUTION FEES. Each Distribution Plan provides that the Fund may pay MFD a
distribution fee based on the average daily net assets attributable to the
Designated Class as partial consideration for distribution services performed
and expenses incurred in the performance of MFD's obligations under its
distribution agreement with the Fund. See "Management of the Fund --
18
<PAGE> 27
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plans, as does the use
by MFD of such distribution fees. Such amounts and uses are described below in
the discussion of the separate Distribution Plans. While the amount of
compensation received by MFD in the form of distribution fees during any year
may be more or less than the expense incurred by MFD under its distribution
agreement with the Fund, the Fund is not liable to MFD for any losses MFD may
incur in performing services under its distribution agreement with the Fund.
OTHER COMMON FEATURES. Fees payable under each Distribution Plan are charged to,
and therefore reduce, income allocated to shares of the Designated Class. The
Distribution Plans have substantially identical provisions with respect to their
operating policies and their initial approval, renewal, amendment and
termination.
FEATURES UNIQUE TO EACH DISTRIBUTION PLAN: The Distribution Plans have certain
features that are unique to each class of shares, as described below.
CLASS A DISTRIBUTION PLAN. Class A shares are generally offered pursuant to an
initial sales charge, a substantial portion of which is paid to or retained by
the dealer making the sale (the remainder of which is paid to MFD). See
"Purchases -- Class A Shares" above. In addition to the initial sales charge,
the dealer also generally receives the ongoing 0.25% per annum service fee, as
discussed above.
The distribution fee paid to MFD under the Class A Distribution Plan is equal,
on an annual basis, to 0.10% of the Fund's average daily net assets attributable
to Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commission to dealers with respect to purchases
of $1 million or more of Class A shares which are sold at net asset value but
which are subject to a 1% CDSC for one year after purchase). See
"Purchases -- Class A Shares" above. In addition, to the extent that the
aggregate service and distribution fees paid under the Class A Distribution Plan
do 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 such
distribution-related expenses or other distribution-related expenses.
CLASS B DISTRIBUTION PLAN. Class B shares are offered at net asset value without
an initial sales charge but subject to a CDSC. See "Purchases -- Class B Shares"
above. MFD will advance to dealers the first year service fee described above 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. Dealers will become eligible to
receive the ongoing 0.25% per annum service fee with respect to such shares
commencing in the thirteenth month following purchase.
Under the Class B Distribution Plan, the Fund pays MFD a distribution fee equal,
on an annual basis, to 0.75% of the Fund's average daily net assets attributable
to Class B shares. As noted above, this distribution fee may be used by MFD to
cover its distribution-related expenses under its distribution agreement with
the Fund (including the 3.75% commission it pays to dealers upon purchase of
Class B shares, as described under "Purchases -- Class B Shares" above).
CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES. The Fund's Class A and Class B
distribution and service fees for its current fiscal year are 0.19% and 1.00%
per annum, respectively. Payment of the 0.10% per annum Class A distribution fee
will commence on such date as the Trustees may determine. Assets attributable to
Class A shares sold prior to March 1, 1991 are subject to a service fee of 0.15%
per annum.
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
19
<PAGE> 28
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 Internal Revenue Code of 1986, as amended (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. Shortly after the end of each calendar year, each shareholder will
be sent a statement setting forth the federal income tax status of all dividends
and distributions for that 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.
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 treaty.
The Fund is also required in certain circumstances to apply backup withholding
at a rate of 31% on taxable dividends and redemption proceeds paid to any
shareholder (including a shareholder who is neither a citizen nor a resident of
the U.S.) who does not furnish to the Fund certain information and
certifications or who is otherwise subject to backup withholding. However,
backup withholding will not be applied to payments that have been subject to 30%
withholding. 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 SAI. The net asset value per share of each class of shares is
effective for orders received by the dealer prior to its calculation and
received by MFD prior to the close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has two classes of shares, entitled Class A and Class B Shares of
Beneficial Interest (without par value). 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
20
<PAGE> 29
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 SAI).
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 SAI. For further information
about the Fund's performance for the fiscal year ended November 30, 1995, 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.
9. 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> 30
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 SAI) 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 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.
22
<PAGE> 31
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 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 SAI 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 SAI, dated April 1, 1996, 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.
23
<PAGE> 32
APPENDIX A
WAIVERS OF SALES CHARGES
This Appendix sets forth the various circumstances in which all applicable sales
charges are waived (Section I), the initial sales charge and the contingent
deferred sales charge ("CDSC") for Class A shares are waived (Section II), and
the CDSC for Class B shares is waived (Section III).
I. WAIVERS OF ALL APPLICABLE SALES CHARGES
In the following circumstances, the initial sales charge imposed on purchases of
Class A shares and the CDSC imposed on certain redemptions of Class A shares and
on redemptions of Class B shares, as applicable, are waived:
1. DIVIDEND REINVESTMENT
- Shares acquired through dividend or capital gain reinvestment; and
- Shares acquired by automatic reinvestment of distributions of dividends
and capital gains of any fund in the MFS Family of Funds ("MFS Funds")
pursuant to the Distribution Investment Program.
2. CERTAIN ACQUISITIONS/LIQUIDATIONS
- Shares acquired on account of the acquisition or liquidation of assets of
other investment companies or personal holding companies.
3. AFFILIATES OF AN MFS FUND/CERTAIN DEALERS. SHARES ACQUIRED BY:
- Officers, eligible directors, employees (including retired employees) and
agents of Massachusetts Financial Services Company ("MFS"), Sun Life
Assurance Company of Canada ("Sun Life") or any of their subsidiary
companies;
- Trustees and retired trustees of any investment company for which MFS
Fund Distributors, Inc. ("MFD") serves as distributor;
- Employees, directors, partners, officers and trustees of any sub-adviser
to any MFS Fund;
- Employees or registered representatives of dealers and other financial
institutions ("dealers") which have a sales agreement with MFD;
- Certain family members of any such individual and their spouses
identified above and certain trusts, pension, profit-sharing or other
retirement plans for the sole benefit of such persons, provided the
shares are not resold except to the Fund which issued the shares; and
- Institutional Clients of MFS or MFS Asset Management, Inc. ("AMI").
4. INVOLUNTARY REDEMPTIONS (CDSC WAIVER ONLY)
- Shares redeemed at an MFS Fund's direction due to the small size of a
shareholder's account. See "Redemptions and Repurchases -- General --
Involuntary Redemptions/Small Accounts" in the Prospectus.
A-1
<PAGE> 33
5. RETIREMENT PLANS (CDSC WAIVER ONLY). Shares redeemed on account of
distributions made under the following circumstances:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS")
- Death or disability of the IRA Owner.
SECTION 401(A) PLANS ("401(A) PLANS") AND SECTION 403(B) EMPLOYER SPONSORED
PLANS ("ESP PLANS")
- Death, disability or retirement of 401(a) or ESP Plan participant;
- Loan from 401(a) or ESP Plan (repayment of loans, however, will
constitute new sales for purposes of assessing sales charges);
- Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time);
- Termination of employment of 401(a) or ESP Plan participant (excluding,
however, a partial or other termination of the Plan);
- Tax-free return of excess 401(a) or ESP Plan contributions;
- To the extent that redemption proceeds are used to pay expenses (or
certain participant expenses) of the 401(a) or ESP Plan (e.g.,
participant account fees), provided that the Plan sponsor subscribes to
the MFS FUNDamental 401(k) Plan or another similar recordkeeping system
made available by MFS Service Center, Inc. (the "Shareholder Servicing
Agent"); and
- Distributions from a 401(a) or ESP Plan that has invested its assets in
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 401(a) or ESP Plan
first invests its assets in one or more of the MFS Funds. The sales
charges will be waived in the case of a redemption of all of the 401(a)
or ESP Plan's shares in all MFS Funds (i.e., all the assets of the 401(a)
or ESP Plan invested in the MFS Funds are withdrawn), unless immediately
prior to the redemption, the aggregate amount invested by the 401(a) or
ESP Plan in shares of the MFS Funds (excluding the reinvestment of
distributions) during the prior four years equals 50% or more of the
total value of the 401(a) or ESP Plan's assets in the MFS Funds, in which
case the sales charges will not be waived.
SECTION 403(B) SALARY REDUCTION ONLY PLANS ("SRO PLANS")
- Death or disability of SRO Plan participant.
6. CERTAIN TRANSFERS OF REGISTRATION (CDSC WAIVER ONLY). Shares transferred:
- To an IRA rollover account where any sales charges with respect to the
shares being reregistered would have been waived had they been redeemed;
and
- From a single account maintained for a 401(a) Plan to multiple accounts
maintained by the Shareholder Servicing Agent on behalf of individual
participants of such Plan, provided that the Plan sponsor subscribes to
the MFS FUNDamental 401(k) Plan or another similar recordkeeping system
made available by the Shareholder Servicing Agent.
A-2
<PAGE> 34
II. WAIVERS OF CLASS A SALES CHARGES
In addition to the waivers set forth in Section I above, in the following
circumstances the initial sales charge imposed on purchases of Class A shares
and the CDSC imposed on certain redemptions of Class A shares are waived:
1. INVESTMENT OF REDEMPTION PROCEEDS FROM UNAFFILIATED MUTUAL FUNDS
- Shares acquired through the investment of redemption proceeds from
another open-end management investment company not distributed or managed
by MFD or its affiliates if: (i) the investment is made through a dealer
and appropriate documentation is submitted to MFD; (ii) the redeemed
shares were subject to an initial sales charge or deferred sales charge
(whether or not actually imposed); (iii) the redemption occurred no more
than 90 days prior to the purchase of Class A shares; and (iv) the MFS
Fund, MFD or its affiliates have not agreed with such company or its
affiliates, formally or informally, to waive sales charges on Class A
shares or provide any other incentive with respect to such redemption and
sale.
2. WRAP ACCOUNT INVESTMENTS
- Shares acquired by investments through certain dealers which have entered
into an agreement with MFD which includes a requirement that such shares
be sold for the sole benefit of clients participating in a "wrap" account
or a similar program under which such clients pay a fee to such dealer.
3. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS
- Shares acquired by insurance company separate accounts.
4. RETIREMENT PLANS
ADMINISTRATIVE SERVICES ARRANGEMENTS
- Shares acquired by retirement plans whose third party administrators or
dealers have entered into an administrative services agreement with MFD
or one of its affiliates to perform certain administrative services,
subject to certain operational and minimum size requirements specified
from time to time by MFD or one or more of its affiliates.
REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS
- Shares acquired through the automatic reinvestment in Class A shares of
Class A or Class B distributions which constitute required withdrawals
from qualified retirement plans.
SHARES REDEEMED ON ACCOUNT OF DISTRIBUTIONS MADE UNDER THE FOLLOWING
CIRCUMSTANCES:
IRAS
- Distributions made on or after the IRA owner has attained the age of
59 1/2 years old; and
- Tax-free returns of excess IRA contributions.
401(A) PLANS
- Distributions made on or after the 401(a) Plan participant has attained
the age of 59 1/2 years old; and
- Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a 401(a) Plan.
ESP PLANS AND SRO PLANS
- Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59 1/2 years old.
A-3
<PAGE> 35
III. WAIVERS OF CLASS B SALES CHARGES
In addition to the waivers set forth in Section I above, in the following
circumstances the CDSC imposed on redemptions of Class B shares is waived:
1. SYSTEMATIC WITHDRAWAL PLAN
- Systematic Withdrawal Plan redemptions with respect to up to 10% per year
of the account value at the time of establishment.
2. DEATH OF OWNER
- Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a living
trust for the benefit of the deceased individual.
3. DISABILITY OF OWNER
- Shares redeemed on account of the disability of the account owner if
shares are held either solely or jointly in the disabled individual's
name or in a living trust for the benefit of the disabled individual (in
which case a disability certification form is required to be submitted to
the Shareholder Servicing Agent).
4. RETIREMENT PLANS. Shares redeemed on account of distributions made under
the following circumstances:
IRAS, 401(A) PLANS, ESP PLANS AND SRO PLANS
- Distributions made on or after the IRA owner or the 401(a), ESP or SRO
Plan participant, as applicable, has attained the age of 70 1/2 years
old, but only with respect to the minimum distribution under applicable
Internal Revenue Code ("Code") rules.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS ("SAR-SEP PLANS")
- Distributions made on or after the SAR-SEP Plan participant has attained
the age of 70 1/2 years old, but only with respect to the minimum
distribution under applicable Code rules; and
- Death or disability of a SAR-SEP Plan participant.
A-4
<PAGE> 36
[LOGO] MFS (R)
THE FIRST NAME IN MUTUAL FUNDS
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000 MASSACHUSETTS INVESTORS
GROWTH STOCK FUND
Distributors, Inc.
MFS Fund Distributors, Inc. PROSPECTUS
500 Boylston Street April 1, 1996
Boston, MA 02116
(617) 954-5000
Custodian and Divdend Disbursing Agent
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02116
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 Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
[LOGO] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
MASSACHUSETTS INVESTORS
GROWTH STOCK FUND
500 Boylston Street
Boston, MA 02116
MIG-1 4/95 137.5M 13/213
<PAGE> 37
LOGO
MASSACHUSETTS INVESTORS STATEMENT OF
GROWTH STOCK FUND ADDITIONAL INFORMATION
(A member of the MFS Family of Funds(R)) April 1, 1996
- ------------------------------------------------------------------------------
<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.............................................................................. 11
Officers.............................................................................. 11
Investment Adviser.................................................................... 12
Custodian............................................................................. 13
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 Auditors and Financial Statements......................................... 23
Appendix A............................................................................ A-1
</TABLE>
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information (the "SAI"), as amended or supplemented
from time to time, sets forth information which may be of interest to investors
but which is not necessarily included in the Fund's Prospectus, dated April 1,
1996. 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> 38
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 of the
Fund, dated April 1, 1996,
as amended or supplemented
from time to time.
</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 SAI 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 investment policies of the Fund are described in the
Prospectus. In addition, certain of the Fund's investment policies are described
in greater detail below.
FOREIGN SECURITIES: The Fund may invest up to 50% (and generally expects to
invest between 0% 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. Under the terms of most sponsored
arrangements, depositories agree to distribute notices of shareholder meetings
and voting instructions, and to provide shareholder communications and other
information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under no
obligation to distribute shareholder communications received from the issuer of
the deposited securities or to pass through voting rights to ADR holders in
respect of the deposited securities. 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 at a standard rate due to the Fund together with the
repurchase
2
<PAGE> 39
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, U.S. Government securities or an irrevocable letter of
credit 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 cash collateral or a fee. 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, 1995.
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
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<PAGE> 40
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
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<PAGE> 41
conversion or exchange of other securities in its portfolio. 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
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<PAGE> 42
Futures Contract is a bilateral agreement providing for the purchase and sale of
a specified type and amount of a financial 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
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<PAGE> 43
writing of put Options on Futures Contracts (a) through sales of the underlying
Futures Contract, (b) through segregation of 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
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<PAGE> 44
Contracts or options based upon a narrower index of securities, such as those of
a particular industry group, may present greater risk than options or Futures
Contracts based on a broad market index, because a narrower index is more
susceptible to rapid and extreme fluctuations as a result of changes in the
value of a small number of securities. The trading of Options on Futures
Contracts also entails the risk that changes in the value of the underlying
Futures Contracts will not be fully reflected in the value of the option.
Further, with respect to options on securities, options on stock indices and
Options on Futures Contracts, the Fund is subject to the risk of market
movements between the time that the option is exercised and the time of
performance thereunder. In writing a covered call option on a security, index or
Futures Contract, the Fund also incurs the risk that changes in the value of the
instruments used to cover the position will not correlate closely with changes
in the value of the option or underlying index or instrument.
The Fund will invest in a hedging instrument only if, in the judgment of its
Adviser, there would be expected to be a sufficient degree of correlation
between movements in the value of the instrument and movements in the value of
the relevant portion of the Fund's portfolio for such hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.
It should also be noted that the Fund may purchase and sell options, 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 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
8
<PAGE> 45
writer of an Option on a Futures Contract is subject to the risks of commodity
futures trading, including the requirement of initial and variation margin
payments, as well as the additional risk that movements in the price of the
option may not correlate with movements in the price of the underlying index or
Futures Contract.
ADDITIONAL RISKS OF TRANSACTIONS NOT CONDUCTED ON EXCHANGES -- Transactions in
Forward Contracts are subject to all of the correlation, liquidity and other
risks outlined above. In addition, 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 leveraging effect of such Futures
Contract is minimized.
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 SAI, means the lesser of (i) more than 50% of the
outstanding shares of the Fund (or a class, as applicable) or (ii) 67% or more
of 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;
(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;
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<PAGE> 46
(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. The Fund also may not invest more
than 5% of the value of the Fund's net assets, valued at the lower of cost or
market, in warrants. Included within such amount, but not to exceed 2% of the
value of the Fund's net assets, may be warrants which are not listed on the New
York or American Stock Exchange. Warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.
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,
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<PAGE> 47
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
RICHARD B. BAILEY*
Private investor; Massachusetts Financial Services Company, former Chairman
(prior to September 30, 1991); Cambridge Bancorp, Director; Cambridge Trust
Company, Director
PETER G. HARWOOD
Private Investor
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 (prior to December 1991); The Neiman Marcus Group,
Inc., Vice Chairman and Chief Financial Officer (prior 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 (prior to November 1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge, Massachusetts
CHARLES W. SCHMIDT
Private investor; OHM Corporation, Director; The Boston Company, Director;
Boston Safe Deposit and Trust Company, Director; Mohawk Paper 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 (prior to September 1992)
Address: Weston, Massachusetts
DAVID B. STONE
North American Management Corp. (investment adviser), Chairman and Director;
Eastern Enterprises, Director
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
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 and Mr. Bailey (who
currently receive a fee of $3,250 per year plus $130 per committee meeting and
$165 for attendance at each meeting, plus certain out-of-pocket expenses, as
incurred) and has adopted a retirement plan for non-interested Trustees and Mr.
Bailey. Under this plan, a Trustee will retire upon reaching age 73 and if the
Trustee has completed at least five years of service, he would be entitled to
annual payments during his lifetime of up to 50% of such Trustee's average
annual compensation (based on the three years prior to his retirement) depending
on his length of service. A Trustee may also retire prior to age 73 and receive
reduced payments if he has completed at least five years of service. Under the
plan, a Trustee (or his beneficiaries) will also receive benefits for a period
of time in the event the Trustee is disabled or dies. These benefits will also
be based on the Trustee's average annual compensation and length of service.
There is no retirement plan provided by the Fund for Messrs. Brodkin, Scott and
Shames. 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 the Trustees and benefits accrued, and estimated benefits
payable, under the retirement plan. As of February 29, 1996, all Trustees and
officers as a group owned less than 1% of the outstanding shares of the Fund.
As of February 29, 1996, Mike Lawless, TTEE, Kerlan-Jobe Orthopedic Clinic, 301
John Street, 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
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<PAGE> 48
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.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a 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 $3,339,532,
$3,277,285 and $3,338,147 for the fiscal years ended November 30, 1995, 1994 and
1993, 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, 1995, 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, 1995, 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, 1996, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's 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.
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<PAGE> 49
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 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 calculated as a percentage of the average
daily net assets of each class of shares at an effective annual rate of up to
0.15% and up to 0.22% attributable to Class A and Class B shares, respectively.
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 SAI).
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, 1995, MFD received sales
charges of $36,131 and dealers received sales charges of $225,697 (as their
concession on gross sales charges of $261,828) for selling Class A shares of
Fund; the Fund received $22,438,010 representing the aggregate net asset value
of such shares. During the Fund's fiscal year ended November 30, 1994, MFD
received sales charges of $57,130
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<PAGE> 50
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, 1995, the CDSC imposed upon
redemption of Class B shares was $19,739. 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, 1996 and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.
5. PORTFOLIO TRANSACTIONS AND
BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by 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. Securities may be bought or sold
from time to time through such broker-dealers on behalf of the Fund. The
Trustees of the Fund (together with the Trustees of the other MFS Funds) have
directed the Adviser to allocate a total of $23,100 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).
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<PAGE> 51
The Adviser's investment management personnel attempt to evaluate the quality of
Research provided by brokers. Results of this effort are sometimes used by the
Adviser as a consideration in the selection of brokers to execute portfolio
transactions. However, the Adviser is unable to quantify the amount of
commissions set forth below which were paid as a result of such Research because
a substantial number of transactions were effected through brokers which provide
Research but which were selected principally because of their execution
capabilities.
The management fee 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, 1995, the Fund paid total brokerage
commissions of $1,180,285 on total transactions (other than short-term
obligations and U.S. Government Securities). 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.
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 by the Adviser 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.
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If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released by
the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in the
premises.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity discounts
on the purchase of Class A shares when his new investment, together with the
current offering price value of all holdings of all classes of shares of that
shareholder in the MFS Funds or MFS Fixed 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 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 $5,000 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
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 pro-
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<PAGE> 53
vided 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 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
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<PAGE> 54
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 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 ordinary income and any distributions from
net short-term capital gains, whether paid 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 gain distributions) is normally eligible for the dividends-received
deduction for corporations if the recipient otherwise qualifies for that
deduction with respect to its holding of Fund shares. 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 net long-term capital gains over net short-term capital losses), whether paid
in cash or reinvested in additional shares, are taxable to the Fund's
shareholders as long-term capital gains for federal income tax purposes
regardless of how long they have owned shares in the Fund. Fund dividends
declared in October, November or December, payable to shareholders of record in
such month,
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<PAGE> 55
and paid the following January, will be taxable to shareholders as if received
on December 31 of the year in which they are declared. The Fund will notify
shareholders regarding the federal tax status of its distributions shortly after
the end of each calendar year.
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 the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as a 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) without
payment of an additional sales charge of Class A shares of the Fund or of
another MFS Fund (or any other shares of an MFS Fund generally sold subject to a
sales charge).
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. The
Fund's investment in 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.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes; 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
at a rate of 31% on taxable dividends and redemption proceeds paid to any
shareholder (including a Non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. 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
19
<PAGE> 56
trading on the Exchange by deducting the amount of the liabilities attributable
to the class from the value of the assets attributable to the class and dividing
the difference by the number of shares of the class outstanding. 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 Class B
shares) 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, 1995 was 25.26%, 17.08% and 13.23%,
respectively. 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, 1995 was 32.91%, 18.48%
and 13.90%, respectively. The Fund's average annual total rate of return for
Class B shares, reflecting the CDSC, for the one-year period ended November 30,
1995 and for the period September 7, 1993 to November 30, 1995 was 28.09% and
9.22%, 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, 1995 and for the period September 7, 1993 to November 30, 1995 was 32.09%
and 10.36%, 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, 1986 through December 31, 1995. 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>
1986 $ 7,986 $ 2,481 $ 134 $10,601
1987 7,233 3,705 283 11,221
1988 6,717 4,559 405 11,681
1989 8,011 7,223 620 15,854
1990 7,148 7,321 634 15,103
1991 9,890 11,545 875 22,310
1992 9,906 12,964 877 23,747
1993 9,644 16,684 854 27,182
1994 8,079 16,559 715 25,353
1995 8,993 21,431 2,114 32,538
</TABLE>
EXPLANATORY NOTES: The results in the table assume that the initial investment
on January 1, 1986 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.,
20
<PAGE> 57
CDA Wiesenberger, Shearson Lehman and Salomon Bros. Indices, Ibbotson, Business
Week, Lowry Associates, Media General, Investment Company Data, The New York
Times, Your Money, Strangers Investment Advisor, Financial Planning on Wall
Street, Standard and Poor's, Individual Investor, The 100 Best Mutual Funds You
Can Buy, by Gordon K. Williamson, Consumer Price Index, and Sanford C. Bernstein
& Co. Fund performance may also be compared to the performance of other mutual
funds tracked by financial or business publications or periodicals.
From time to time, the Fund may discuss or quote its current portfolio manager
as well as other investment personnel, including such persons' views on: the
economy; securities markets; portfolio securities and their issuers; investment
philosophies, strategies, techniques and criteria used in the selection of
securities to be purchased or sold for the Fund; the Fund's portfolio holdings;
the investment research and analysis process; the formulation and evaluation of
investment recommendations; and the assessment and evaluation of credit,
interest rate, market and economic risks.
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 open-end
mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make
full public disclosure of its operations in shareholder reports.
-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to register
under the Securities Act of 1933. ("Truth in Securities Act" or "Full
Disclosure Act")
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional
shares or cash.
-- 1976 -- MFS(R) Municipal Bond Fund is among the first municipal bond funds
established.
-- 1979 -- Spectrum becomes the first combination fixed/variable annuity with
no initial sales charge.
-- 1981 -- MFS(R) World Governments Fund is established as America's first
globally diversified fixed-income mutual fund.
-- 1984 -- MFS(R) Municipal High Income Fund is the first open-end mutual
fund to seek high tax-free income from lower-rated municipal securities.
-- 1986 -- MFS(R) Managed Sectors Fund becomes the first mutual fund to
target and shift investments among industry sectors for shareholders.
-- 1986 -- MFS(R) Municipal Income Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.
-- 1987 -- MFS(R) Multimarket Income Trust is the first closed-end,
multimarket high income fund listed on the New York Stock Exchange.
-- 1989 -- MFS(R) Regatta becomes America's first non-qualified
market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS(R) World Total Return Fund is the first global balanced fund.
-- 1993 -- MFS(R) 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
21
<PAGE> 58
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 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
The Trustees have adopted separate Distribution Plans for Class A and Class B
shares (the "Distribution Plans") 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 each Distribution Plan would benefit the Fund and the
respective class of shareholders. The Distribution Plans are designed to promote
sales, thereby increasing the net assets of the Fund. Such an increase may
reduce the Fund's expense ratio to the extent that the Fund's fixed costs are
spread over a larger net asset base. Also, an increase in net assets may lessen
the adverse effect 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 Distribution Plans are described in the Prospectus under the caption
"Distribution Plans," which is incorporated herein by reference. The following
information supplements this Prospectus discussion.
SERVICE FEES: With respect to the Class A Distribution Plan, no service fees
will be paid: (i) to any 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); or
(ii) to any insurance company which has entered into an agreement with the Fund
and MFD that permits such insurance company to purchase Class A 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.
With respect to the Class B Distribution Plan, except in the case of the first
year service fee, no service fees 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 by MFD from time to time. Dealers may from time to time be required
to meet certain other criteria in order to receive service fees.
MFD or its affiliates shall be entitled to receive any service fee payable under
any 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.
DISTRIBUTION FEES: The purpose of distribution payments to MFD under the
Distribution Plans 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
22
<PAGE> 59
related expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel, office expense and
equipment.
DISTRIBUTION AND SERVICE FEES PAID DURING THE FUND'S LAST FISCAL YEAR: During
the fiscal year ended November 30, 1995, the Fund paid the following
Distribution Plan expenses:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF AMOUNT OF
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEES PAID FEES RETAINED FEES RECEIVED
DISTRIBUTION PLANS BY FUND BY MFD BY DEALERS
<S> <C> <C> <C>
Class A Distribution Plan $1,958,504 $597,172 $1,361,332
Class B Distribution Plan $ 122,954 $ 93,244 $ 29,710
</TABLE>
GENERAL: Each of the Distribution Plans will remain in effect until August 1,
1996, and will continue in effect thereafter only if such continuance is
specifically approved at least annually by vote of both the Trustees and a
majority of the Trustees who are not "interested persons" or financially
interested parties of such Plan ("Distribution Plan Qualified Trustees"). Each
of the Distribution Plans also requires that the Fund and MFD each shall provide
the Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under such Plan. Each of
the Distribution Plans may be terminated at any time by vote of a majority of
the Distribution Plan Qualified Trustees or by vote of the holders of a majority
of the respective class of the Fund's shares (as defined in "Investment
Restrictions"). All agreements relating to any of the Distribution Plans entered
into between the Fund or MFD and other organizations must be approved by the
Board of Trustees, including a majority of the Distribution Plan Qualified
Trustees. Agreements under any of the Distribution Plans 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 Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the respective
class of the Fund's shares. None of the Distribution Plans may be amended to
increase materially the amount of permitted distribution expenses without the
approval of a majority of the respective class of the Fund's shares (as defined
in "Investment Restrictions") or may be materially amended in any case without a
vote of the Trustees and a majority of the Distribution Plan Qualified Trustees.
The selection and nomination of Distribution Plan Qualified Trustees shall be
committed to the discretion of the non-interested Trustees then in office. No
Trustee who is not an "interested person" has any financial interest in any of
the Distribution Plans or in any related agreement.
11. INDEPENDENT AUDITORS AND
FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's independent auditors, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the SEC.
The Portfolio of Investments at November 30, 1995, the Statement of Assets and
Liabilities at November 30, 1995, the Statement of Operations for the year ended
November 30, 1995, the Statement of Changes in Net Assets for each of the years
in the two year period ended November 30, 1995, 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 auditors, as experts in accounting and
auditing. A copy of the Annual Report accompanies this SAI.
23
<PAGE> 60
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.................................... $5,047 $1,074 8 $ 263,815
A. Keith Brodkin..................................... 0 0 N/A 0
Peter G. Harwood..................................... 5,646 546 5 111,366
J. Atwood Ives....................................... 5,246 1,037 17 101,356
Lawrence T. Perera................................... 5,410 2,864 26 102,546
William Poorvu....................................... 5,646 2,848 25 111,366
Charles W. Schmidt................................... 5,546 2,702 20 105,411
Arnold D. Scott...................................... 0 0 N/A 0
Jeffrey L. Shames.................................... 0 0 N/A 0
Elaine R. Smith...................................... 5,546 1,045 27 105,411
David B. Stone....................................... 5,876 2,485 14 115,521
</TABLE>
- ---------------
(1) For fiscal year ended November 30, 1995.
(2) Based on normal retirement age of 73.
(3) For calendar year 1995. All Trustees receiving compensation served as
Trustees of 23 funds within the MFS fund complex (having aggregate net
assets at December 31, 1995, of approximately $17.6 billion) except Mr.
Bailey, who served as Trustee of 73 funds within the MFS fund complex
(having aggregate net assets at December 31, 1995, of approximately $31.7
billion).
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(4)
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE -------------------------------------
TRUSTEE 10 OR
FEES 3 5 7 MORE
- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C>
$4,542 $681 $1,136 $1,590 $2,271
4,927 739 1,232 1,724 2,463
5,311 797 1,328 1,859 2,655
5,695 854 1,424 1,993 2,848
6,079 912 1,520 2,128 3,040
6,464 970 1,616 2,262 3,232
</TABLE>
- ---------------
(4) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
A-1
<PAGE> 61
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 AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
MASSACHUSETTS
INVESTORS GROWTH
STOCK FUND
500 BOYLSTON STREET
BOSTON, MA 02116
LOGO MIG-13 4/95 500 13/213
<PAGE> 62
<PAGE>
{LOGO: M F S ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS] YEAR ENDED
NOVEMBER 30, 1995
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
Front cover
A photo of computer keyboard.
<PAGE>
<TABLE>
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
<S> <C>
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President State Street Bank and Trust Company
Richard B. Bailey* - Private Investor; AUDITORS
Former Chairman and Director (until 1991), Deloitte & Touche LLP
Massachusetts Financial Services Company; INVESTOR INFORMATION
Director, Cambridge Bancorp; Director, For MFS stock and bond market outlooks,
Cambridge Trust Company call toll free: 1-800-637-4458 anytime from
Peter G. Harwood - Private Investor a touch-tone telephone.
J. Atwood Ives - Chairman and Chief Executive For information on MFS mutual funds,
Officer, Eastern Enterprises call your financial adviser or, for an
Lawrence T. Perera - Partner, information kit, call toll free:
Hemenway & Barnes 1-800-637-2929 any business day from
William J. Poorvu - Adjunct Professor, 9 a.m. to 5 p.m. Eastern time (or leave
Harvard University Graduate School of a message anytime).
Business Administration INVESTOR SERVICE
Charles W. Schmidt - Private Investor MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive Vice P.O. Box 2281
President, Director and Secretary, Boston, MA 02107-9906
Massachusetts Financial Services Company For general information, call toll free:
Jeffrey L. Shames* - President and Director, 1-800-225-2606 any business day from
Massachusetts Financial Services Company 8 a.m. to 8 p.m. Eastern time.
Elaine R. Smith - Independent Consultant For service to speech- or hearing-impaired,
David B. Stone - Chairman, North American call toll free: 1-800-637-6576 any business
Management Corp. (investment adviser) day from 9 a.m. to 5 p.m. Eastern time.
INVESTMENT ADVISER (To use this service, your phone must be
Massachusetts Financial Services Company equipped with a Telecommunications Device for
500 Boylston Street the Deaf.)
Boston, MA 02116-3741 For share prices, account balances and
DISTRIBUTOR exchanges, call toll free: 1-800-MFS-TALK
MFS Fund Distributors, Inc. (1-800-637-8255) anytime from a touch-tone
500 Boylston Street telephone.
Boston, MA 02116-3741
PORTFOLIO MANAGERS
George F. Bennett, Jr.*
Christian Felipe* ----------------------------------------------------
TREASURER TOP-RATED SERVICE
W. Thomas London* DALBAR For the second year in a
ASSISTANT TREASURER row, MFS earned a
James O. Yost* MFS #1 MFS #1 ranking in
SECRETARY DALBAR, Inc.'s
Stephen E. Cavan* DALBAR Broker/Dealer Survey,
ASSISTANT SECRETARY Main Office Operations
James R. Bordewick, Jr.* Service Quality category. The firm achieved a 3.49
overall score - on a scale of 1 to 4 - in the 1995
survey. A total of 71 firms responded, offering input
on the quality of service they receive from 36 mutual
fund companies nationwide. The survey contained
questions about service quality in 17 categories,
including "knowledge of phone service contacts,"
"accuracy of transaction processing," and "overall
ease of doing business with the firm."
*Affiliated with the Investment Adviser ----------------------------------------------------
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
A moderate-growth economy, the apparent demise of high inflation, and declining
interest rates have driven the stock market up to record levels. For the year
ended November 30, 1995, Class A shares of the Fund achieved a total return of
+32.91% and Class B shares +32.09%. These returns include the reinvestment
of distributions but exclude the effects of any sales charges. While these
returns lagged the +36.93% return of the Standard & Poor's 500 Composite Index
(the S&P 500), a popular, unmanaged index of common stock performance, they were
slightly ahead of the Lipper Growth Fund category, which had an average return
of +31.42%. A discussion of the factors which contributed to the Fund's
results may be found in the Portfolio Performance and Strategy section of this
letter.
Economic Outlook
Moderate, but sustainable, growth has been the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy growing
at an annual rate of 4.2% in the third quarter, this surprisingly strong growth
was mainly driven by a pickup in consumer spending and an increase in business
and government outlays. Although impressive, this growth rate is not expected to
continue in coming months. Recent retail sales have been disappointing, in part
because of rising levels of consumer debt. An extended period of lower mortgage
rates seems to have relieved much of the pent-up demand for housing. Growth is
not expected to get much help from the manufacturing sector, either, as order
flows from manufacturers have moderated. Export activity, meanwhile, is also
expected to remain modest as continued weakness abroad has limited demand for
many U.S. goods. However, the Federal Reserve Board's consistent and, so far,
successful efforts to fight inflation seem to be giving consumers and businesses
enough longer term confidence to help maintain modest growth in real (adjusted
for inflation) gross domestic product into 1996.
Stock Market
After some volatility late in the third quarter, the stock market continued to
strengthen. Although many companies reported solid third-quarter results, there
was some weakness in the earnings of retail, financial services and even some
technology companies. However, a slowdown in earnings may be a positive
development if it is an indication that the economy is not overheating and that
inflation is under control. While we see a deceleration of corporate earnings as
the inevitable consequence of traditional business cycles, we remain encouraged
by the high absolute level of profitability among U.S. companies. Also, many
companies' increasing emphasis on cost containment and growing use of technology
have helped keep them highly competitive and reasonably profitable. Looking
ahead, we believe that a stabilizing interest rate environment, coupled with
reasonable earnings reports, could justify current market valuations.
Portfolio Performance and Strategy
After first-half returns that lagged those of the large-capitalization stocks
found in the S&P 500 and the Lipper Growth Fund category, the Fund enjoyed a
strong second-half recovery, relative to the indices, and increased in value by
over 20%. Investments in the cellular telephone and retail industries held back
performance. Cellular telephone stocks were impacted by concerns about future
competition and a recent slowdown in the very high growth rate of new
subscribers. Their weighting in the Fund has been reduced substantially
throughout the year. The retail industry, despite disappointing overall sales,
showed outstanding performance in certain segments where positions were
initiated or increased. Companies such as PetSmart, the dominant specialty store
in pet food and supplies, and Micro Warehouse, a catalog retailer of computer
software and hardware, were strong contributors to the Fund's performance.
On the positive side, the technology and telecommunications sectors were the
driving force in performance. Both sectors have been overweighted throughout the
year and the outlook for the rest of the decade continues to be positive. With
strong cash flows, and the need to be more competitive and productive, industry
is shifting its capital spending budget away from bricks and mortar and toward
technology. Companies such as LSI Logic and Intel in semiconductors, Cisco
Systems and Bay Networks in networking, and Oracle and Microsoft in software are
positions which we believe will benefit from this long-term trend.
While growth stocks as a group have lagged the stock market as a whole, we
believe that the weakening economy could eventually result in the relative
earnings of growth stocks becoming more attractive and that positive relative
price performance could follow.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ George F. Bennett, Jr.
/s/ A. Keith Brodkin /s/ Christian Felipe
George F. Bennett, Jr.
A. Keith Brodkin Christian Felipe
Chairman and President Portfolio Managers
December 13, 1995
PORTFOLIO MANAGER PROFILES
George Bennett began his career at MFS in 1969 as an industry specialist and was
promoted to Assistant Vice President - Investments in 1973, Vice President -
Investments in 1979, and Senior Vice President in 1986. He became Portfolio
Manager of Massachusetts Investors Growth Stock Fund in 1993.
On May 1, 1995, Christian Felipe joined George Bennett as a Portfolio Manager of
the Fund. Christian joined the MFS investment staff in 1986 as an industry
specialist. A graduate of the University of California, Los Angeles and the
Wharton School of Finance and Commerce of the University of Pennsylvania, he was
promoted to Assistant Vice President - Investments in 1988 and Vice President -
Investments in 1989.
OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital and future income
rather than current income.
The Fund's investment policy is to keep assets invested, except for working cash
balances, in the common stocks, or securities convertible into common stocks, of
companies believed by the investment adviser to possess better- than-average
prospects for long-term growth. Emphasis is placed on the selection of
progressive, well-managed companies.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
The Fund has designated $106,740,705 as a long-term capital gain distribution
for tax purposes. This distribution was made to shareholders of record as of
December 28, 1995, payable December 29, 1995.
PERFORMANCE
The information below and on the following page illustrates the historical
performance of Massachusetts Investors Growth Stock Fund Class A shares in
comparison to various market indicators. Fund results in the graph reflect the
deduction of the 5.75% maximum sales charge; benchmark comparisons are unmanaged
and do not reflect any fees or expenses. You cannot invest in an index. All
results reflect the reinvestment of all dividends and capital gains.
Please note that effective September 7, 1993, Class B shares were offered.
Information on Class B share performance appears on the next page.
In the table on the next page, we have included the average annual total returns
of all growth funds (including the Fund) tracked by Lipper Analytical Services,
Inc. (an independent firm which rates mutual fund performance) for the
applicable time periods. Because these returns do not reflect any applicable
sales charges, we have also included the Fund's results at net asset value (no
sales charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The investment return and principal value of an investment in a mutual
fund will vary with changes in market conditions, and shares, when redeemed, may
be worth more or less than their original cost. All Class A results reflect the
applicable expense subsidy which is explained in the Notes to Financial
Statements. Had the subsidy not been in effect, the results would have been less
favorable.
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-Year Period Ended November 30, 1995)
Line graph representing the growth of a $10,000 investment for the five-year
period ended November 30, 1995. The graph is scaled from $5,000 to $30,000 in
$5,000 segments. The years are marked in 12-month segments from 1990 to 1995.
There are three lines drawn to scale. One is a solid line representing
Massachusetts Investors Growth Stock Fund (Class A), a second line of short
dashes represents the S&P 500, a third line of medium-short dashes represents
the Consumer Price Index.
Massachusetts Investors Growth Stock Fund (Class A) $21,998
S&P 500 $21,700
Consumer Price Index $11,480
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-Year Period Ended November 30, 1995)
Line graph representing the growth of a $10,000 investment for the ten-year
period ended November 30, 1995. The graph is scaled from $0 to $50,000 in
$10,000 segments. The years are marked in 12-month segments from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing MFS Value
Fund (Class A), a second line of short dashes represents the S&P 500, a third
line of medium-short dashes represents the Consumer Price Index.
Massachusetts Investors Growth Stock Fund (Class A) $34,647
S&P 500 $41,096
Consumer Price Index $14,089
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Massachusetts Investors Growth Stock
Fund (Class A) including 5.75%
sales charge +25.26% +10.52% +17.08% +13.23%
- ------------------------------------------------------------------------------
Massachusetts Investors Growth Stock
Fund (Class A) at net asset value +32.91% +12.72% +18.48% +13.90%
- ------------------------------------------------------------------------------
Massachusetts Investors Growth Stock
Fund (Class B) with CDSC<F1> +28.09% -- -- + 9.22%<F2>
- ------------------------------------------------------------------------------
Massachusetts Investors Growth Stock
Fund (Class B) without CDSC +32.09% -- -- +10.36%<F2>
- ------------------------------------------------------------------------------
Average growth fund +31.42% +12.80% +16.61% +13.17%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite
Index +36.93% +15.05% +16.76% +15.18%
- ------------------------------------------------------------------------------
Consumer Price Index<F3> + 2.61% + 2.65% + 2.80% + 3.49%
- ------------------------------------------------------------------------------
<F1> These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
<F2> For the period from the commencement of offering of Class B shares,
September 7, 1993 to November 30, 1995.
<F3> The Consumer Price Index is a popular measure of change in prices.
<PAGE>
PORTFOLIO OF INVESTMENTS - November 30, 1995
Common Stocks - 90.7%
- -------------------------------------------------------------------------------
Issuer Shares Value
- -------------------------------------------------------------------------------
Airlines - 0.4%
Southwest Airlines Co. 200,000 $ 5,000,000
- -------------------------------------------------------------------------------
Apparel and Textiles - 0.8%
Nike, Inc., "B" 160,000 $ 9,280,000
- -------------------------------------------------------------------------------
Banks and Credit Companies - 0.3%
First Interstate Bancorp 25,000 $ 3,350,000
- -------------------------------------------------------------------------------
Business Machines - 2.4%
Motorola, Inc. 325,000 $ 19,906,250
Sun Microsystems, Inc.* 100,000 8,412,500
--------------
$ 28,318,750
- -------------------------------------------------------------------------------
Business Services - 6.8%
Alco Standard Corp. 260,000 $ 11,310,000
CUC International, Inc.* 1,462,500 55,575,000
Ceridian Corp.* 160,000 6,720,000
Computer Sciences Corp.* 72,200 5,252,550
DST Systems, Inc.* 45,600 1,316,700
Danka Business Systems, ADR 35,000 1,190,000
--------------
$ 81,364,250
- -------------------------------------------------------------------------------
Cellular Telephones - 3.1%
AirTouch Communications, Inc.* 425,000 $ 12,378,125
Cellular Communications of Puerto Rico* 213,832 5,720,006
Telephone & Data Systems, Inc. 500,000 19,062,500
--------------
$ 37,160,631
- -------------------------------------------------------------------------------
Computer Software - Personal Computers - 6.8%
Electronic Arts, Inc.* 500,000 $ 17,062,500
First Data Corp. 119,295 8,469,945
Microsoft Corp.* 645,000 56,195,625
--------------
$ 81,728,070
- -------------------------------------------------------------------------------
Computer Software - Systems - 12.4%
Adobe Systems, Inc. 210,000 $ 14,201,250
Compaq Computer Corp.* 108,300 5,360,850
Computer Associates International, Inc. 300,000 19,650,000
Compuware Corp.* 445,900 9,140,950
General Motors Corp., "E" 125,000 6,312,500
Informix Corp.* 637,900 17,661,856
Oracle Systems Corp.* 1,025,000 46,509,375
Sybase, Inc.* 533,200 18,728,650
System Software Associates, Inc. 293,900 10,580,400
--------------
$ 148,145,831
- -------------------------------------------------------------------------------
Consumer Goods and Services - 1.6%
Duracell International, Inc. 40,000 $ 2,120,000
Estee Lauder Cos., "A"* 9,700 352,838
Service Corp. International 88,500 3,595,313
Tyco International Ltd. 398,600 12,506,075
--------------
$ 18,574,226
- -------------------------------------------------------------------------------
Electronics - 7.3%
Intel Corp. 630,900 $ 38,406,038
LSI Logic Corp.* 895,700 37,507,438
Maxim Integrated Products, Inc.* 50,000 3,750,000
Tower Semiconductor Ltd.* 125,000 3,109,375
VLSI Technology, Inc.* 200,000 4,250,000
--------------
$ 87,022,851
- -------------------------------------------------------------------------------
Entertainment - 5.1%
Capital Cities/ABC, Inc. 85,000 $ 10,508,125
Comcast Corp., Special, "A" 400,000 7,900,000
Harrah's Entertainment, Inc.* 1,130,800 28,128,650
Infinity Broadcasting Corp., "A"* 200,000 6,400,000
Mirage Resorts, Inc.* 225,000 7,621,875
--------------
$ 60,558,650
- -------------------------------------------------------------------------------
Financial Institutions - 3.7%
Advanta Corp., "B" 100,000 $ 3,875,000
Donaldson Lufkin & Jenrette, Inc.* 17,300 575,225
Federal Home Loan Mortgage Corp. 100,000 7,700,000
Franklin Resources, Inc. 255,000 13,483,125
MBNA Corp. 450,000 18,168,750
--------------
$ 43,802,100
- -------------------------------------------------------------------------------
Insurance - 0.9%
General Re Corp. 75,000 $ 11,221,875
- -------------------------------------------------------------------------------
Medical and Health Products - 2.2%
Alza Corp.* 500,000 $ 11,500,000
Johnson & Johnson 100,000 8,662,500
Schering Plough Corp. 100,000 5,737,500
U.S. Healthcare, Inc. 20,000 910,000
--------------
$ 26,810,000
- -------------------------------------------------------------------------------
Medical and Health Technology and Services - 6.6%
Cardinal Health, Inc. 200,000 $ 10,800,000
Health Management Assoc., Inc.* 225,000 5,962,500
Manor Care, Inc. 75,000 2,446,875
Pacificare Health Systems, Inc., "B"* 195,000 16,916,250
United Healthcare Corp. 675,000 42,440,625
--------------
$ 78,566,250
- -------------------------------------------------------------------------------
Metals and Minerals - 0.5%
Nucor Corp. 130,000 $ 6,483,750
- -------------------------------------------------------------------------------
Pollution Control - 1.0%
WMX Technologies, Inc. 400,000 $ 11,800,000
- -------------------------------------------------------------------------------
Restaurants and Lodging - 2.1%
Brinker International, Inc.* 667,500 $ 10,262,812
Promus Hotel Corp.* 690,900 15,286,162
--------------
$ 25,548,974
- -------------------------------------------------------------------------------
Stores - 11.6%
AutoZone, Inc.* 489,600 $ 14,259,600
Bed Bath & Beyond, Inc.* 410,000 13,478,750
Circuit City Stores, Inc. 300,000 8,700,000
Gymboree Corp.* 192,400 4,545,450
Home Depot, Inc. 582,800 25,861,750
Micro Warehouse, Inc.* 464,500 21,831,500
Office Depot, Inc.* 1,011,250 24,775,625
Officemax, Inc.* 175,000 3,981,250
PetSmart, Inc.* 656,180 21,161,805
--------------
$ 138,595,730
- -------------------------------------------------------------------------------
Telecommunications - 9.1%
Bay Networks, Inc.* 349,297 $ 15,718,388
Cabletron Systems, Inc.* 505,300 41,939,900
Cisco Systems, Inc.* 310,000 26,078,750
Glenayre Technologies, Inc.* 81,400 4,660,150
Novell, Inc.* 200,000 3,375,000
Paging Network, Inc.* 575,000 12,793,750
Rogers Cantel Mobile Co., "B"* 50,000 1,125,000
Tellabs, Inc.* 30,000 1,177,500
U.S. Robotics Corp.* 17,100 1,881,000
--------------
$ 108,749,438
- -------------------------------------------------------------------------------
Utilities - Telephone - 2.1%
Frontier Corp. 215,600 $ 5,578,650
MCI Communications Corp. 733,500 19,621,125
--------------
$ 25,199,775
- -------------------------------------------------------------------------------
Foreign Stocks - 3.9%
Canada - 0.8%
Rogers Communications, Inc., "B"
(Telecommunications) 929,500 $ 9,745,702
- -------------------------------------------------------------------------------
Germany - 0.2%
Adidas AG* (Shoes - Leather) 38,600 $ 2,057,421
- -------------------------------------------------------------------------------
Singapore - 0.1%
Singapore Press Holdings (Publishing
- Newspaper) 100,000 $ 1,581,560
- -------------------------------------------------------------------------------
Sweden - 2.8%
Astra AB, Free, "B" (Pharmaceuticals) 900,000 $ 33,090,254
- -------------------------------------------------------------------------------
Total Foreign Stocks $ 46,474,937
- -------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $724,301,709) $1,083,756,088
- -------------------------------------------------------------------------------
Convertible Preferred Stock - 1.0%
- -------------------------------------------------------------------------------
Cellular Telephones - 1.0%
Cellular Communications (Identified Cost,
$5,703,270) 244,130 $ 11,687,724
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - continued
Short-Term Obligations - 7.7%
- -------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------
Federal Farm Credit, due 12/08/95 $ 7,050 $ 7,042,186
Federal Home Loan Bank, due 12/06/95 11,800 11,790,691
Federal Home Loan Bank, due 12/12/95 11,510 11,490,059
Federal Home Loan Mortgage Corp.,
due 12/13/95 9,000 8,983,020
Federal Home Loan Mortgage Corp.,
due 12/19/95 7,010 6,990,092
Federal National Mortgage Assn.,
due 12/04/95 13,540 13,533,625
Federal National Mortgage Assn.,
due 12/07/95 8,640 8,631,835
General Electric Co., due 12/01/95 9,150 9,150,000
General Electric Co., due 12/21/95 3,290 3,279,490
Raytheon Co., due 12/11/95 5,055 5,046,968
Transamerica Co., due 12/05/95 6,000 5,996,187
- -------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized
Cost and Value $ 91,934,153
- -------------------------------------------------------------------------------
Total Investments (Identified Cost,
$821,939,132) $1,187,377,965
Other Assets, Less Liabilities - 0.6% 7,442,197
===============================================================================
Net Assets - 100.0% $1,194,820,162
- -------------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
November 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $821,939,132) $1,187,377,965
Cash 242
Receivable for investments sold 18,899,317
Receivable for Fund shares sold 170,616
Dividends receivable 169,833
Other assets 13,503
--------------
Total assets $1,206,631,476
--------------
Liabilities:
Payable for investments purchased $ 10,513,372
Payable for Fund shares reacquired 697,240
Payable to affiliates -
Management fee 9,830
Shareholder servicing agent fee 4,228
Distribution fee 335,809
Accrued expenses and other liabilities 250,835
--------------
Total liabilities $ 11,811,314
--------------
Net assets $1,194,820,162
==============
Net assets consist of:
Paid-in capital $ 676,454,387
Unrealized appreciation on investments 365,438,833
Accumulated undistributed net realized gain on
investments and foreign currency transactions 152,988,797
Accumulated net investment loss (61,855)
--------------
Total $1,194,820,162
==============
Shares of beneficial interest outstanding 95,530,878
==============
Class A shares:
Net asset value and redemption price per share
(net assets of $1,180,344,126 / 94,350,267 shares of
beneficial interest outstanding) $12.51
======
Offering price per share (100/94.25) $13.27
======
Class B shares:
Net asset value and offering price per share
(net assets of $14,476,036 / 1,180,611 shares of
beneficial interest outstanding) $12.26
======
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, 1995
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 3,404,333
Interest 3,199,285
------------
Total investment income $ 6,603,618
------------
Expenses -
Management fee $ 3,339,532
Trustees' compensation 59,944
Shareholder servicing agent fee (Class A) 1,401,735
Shareholder servicing agent fee (Class B) 27,050
Distribution and service fee (Class A) 3,015,974
Distribution and service fee (Class B) 122,954
Custodian fee 421,149
Postage 102,538
Printing 83,468
Legal fees 49,278
Auditing fees 39,250
Miscellaneous 287,043
------------
Total expenses $ 8,949,915
Reduction of expenses by distributor (1,057,470)
Fees paid indirectly (302,673)
------------
Net expenses $ 7,589,772
------------
Net investment loss $ (986,154)
============
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $155,042,765
Foreign currency transactions 2,083
------------
Net realized gain on investments and foreign currency
transactions $155,044,848
------------
Change in unrealized appreciation (depreciation) -
Investments $150,836,357
Translation of assets and liabilities in foreign currencies (2,840)
------------
Net unrealized gain on investments $150,833,517
------------
Net realized and unrealized gain on investments and
foreign currency $305,878,365
------------
Increase in net assets from operations $304,892,211
============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended November 30, 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (986,154) $ (724,941)
Net realized gain on investments and foreign
currency transactions 155,044,848 101,534,996
Net unrealized gain (loss) on investments and
foreign currency 150,833,517 (153,476,898)
-------------- --------------
Increase (decrease) in net assets from operations $ 304,892,211 $ (52,666,843)
-------------- --------------
Distributions declared to shareholders -
From net realized gain on investments and foreign
currency transactions (Class A) $ (100,591,643) $ (173,544,772)
From net realized gain on investments and foreign
currency transactions (Class B) (1,381,907) (311,145)
-------------- --------------
Total distributions declared to shareholders $ (101,973,550) $ (173,855,917)
-------------- --------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 141,763,381 $ 123,072,342
Net asset value of shares issued to shareholders in
reinvestment of distributions 81,493,960 138,766,670
Cost of shares reacquired (218,071,853) (182,859,857)
-------------- --------------
Increase in net assets from Fund share
transactions $ 5,185,488 $ 78,979,155
-------------- --------------
Total increase (decrease) in net assets $ 208,104,149 $ (147,543,605)
Net assets:
At beginning of period 986,716,013 1,134,259,618
-------------- --------------
At end of period (including accumulated net
investment loss of $61,855 and $50,843,
respectively) $1,194,820,162 $ 986,716,013
============== ==============
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Year Ended November 30, 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------
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 $10.48 $12.97 $12.15 $10.87 $ 8.48 $10.70
------ ------ ------ ------ ------ ------
Income from investment operations<F1>-
Net investment income (loss) $(0.01) $(0.01) $(0.01) $(0.03) $ 0.01 $ 0.05
Net realized and unrealized
gain (loss) on investments 3.12 (0.49) 1.55 2.07 2.93 (1.02)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 3.11 $ (0.50) $ 1.54 $ 2.04 $ 2.94 $(0.97)
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $ -- $ -- $ -- $ -- $(0.03) $(0.05)
From net realized gain on
investments (1.08) (1.99) (0.72) (0.76) (0.52) (1.20)
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(1.08) $(1.99) $(0.72) $(0.76) $(0.55) $(1.25)
------ ------ ------ ------ ------ ------
Net asset value - end of period $12.51 $10.48 $12.97 $12.15 $10.87 $ 8.48
====== ====== ====== ====== ====== ======
Total return<F3> 32.91% (5.00)% 13.43% 19.35% 36.56% (10.27)%
Ratios (to average net assets)
/Supplemental data<F4>:
Expenses<F2> 0.73% 0.72% 0.71% 0.67% 0.63% 0.53%
Net investment income (loss) (0.08)% (0.06)% (0.19)% (0.24)% 0.14% 0.55%
Portfolio turnover 46% 56% 52% 16% 39% 44%
Net assets at end of period
(000,000 omitted) $1,180 $ 977 $1,132 $1,070 $ 950 $ 749
<FN>
<F1> Per share data for the periods subsequent to November 30, 1992 is based on
average shares outstanding.
<F2> For the year ended November 30, 1995, the Fund's expenses are calculated
without reduction for fees paid indirectly.
<F3> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the charge had
been included, the results would have been lower.
<F4> 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 ratios would have been:
Net investment loss $(0.02) $(0.03) $(0.02) -- -- --
Ratios (to average net assets):
Expenses<F2> 0.83% 0.82% 0.74% -- -- --
Net investment loss (0.18)% (0.16)% (0.21)% -- -- --
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended November 30, 1989 1988 1987 1986 1995 1994 1993<F1>
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 8.39 $ 9.05 $ 9.69 $10.68 $10.35 $12.93 $12.91
------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F3> -
Net investment income
(loss) $ 0.09 $ 0.12 $ 0.18 $ 0.20 $(0.11) $(0.09) $(0.01)
Net realized and
unrealized gain (loss)
on investments 3.14 0.64 (0.68) 1.99 3.10 (0.50) 0.03
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 3.23 $ 0.76 $(0.50) $ 2.19 $ 2.99 $(0.59) $ 0.02
------ ------ ------ ------ ------ ------ ------
Less distributions
declared to shareholders -
From net investment
income $(0.08) $(0.15) $(0.14) $(0.20) $ -- $ -- $ --
From net realized gain
on investments (0.84) (1.27) -- (2.98) (1.08) (1.99) --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.92) $(1.42) $(0.14) $(3.18) $(1.08) $(1.99) $ --
------ ------ ------ ------ ------ ------ ------
Net asset value - end
of period $10.70 $ 8.39 $ 9.05 $ 9.69 $12.26 $10.35 $12.93
====== ====== ====== ====== ====== ====== ======
Total return<F5> 42.14% 8.21% (5.57)% 20.30% 32.09% (5.82)% 0.70%<F1>)
Ratios (to average net assets)/Supplemental data:
Expenses<F4> 0.54% 0.58% 0.50% 0.50% 1.63% 1.60% 1.49%<F1>
Net investment
income (loss) 0.91% 1.27% 1.60% 1.62% (0.98)% (0.87)% (0.99)%<F1>
Portfolio turnover 32% 75% 66% 77% 46% 56% 52%
Net assets at end of period
(000,000 omitted) $ 907 $ 735 $ 774 $ 899 $ 14 $ 9 $ 2
<FN>
<F1> For the period from the commencement of offering of Class B shares,
September 7, 1993 to November 30, 1993.
<F2> Annualized.
<F3> #Per share data for the periods subsequent to November 30, 1992 is based on
average shares outstanding.
<F4> For the year ended November 30, 1995, the Fund's expenses are calculated
without reduction for fees paid indirectly.
<F5> Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to March 1, 1991). If the charge had
been included, the results would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
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. Forward contracts are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as maturity, and other market data, without
exclusive reliance upon exchange or over-the-counter prices. Short-term
obligations, which mature in 60 days or less, are valued at amortized cost,
which approximates market value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency
and translated into U.S. dollars at the closing daily exchange rate.
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.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Dividend income is recorded on the ex-dividend date for
dividends received in cash. Dividend payments received in additional
securities are recorded on the ex-dividend date in an amount equal to the
value of the security on such date.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its 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 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, 1995, $975,142 was
reclassified from accumulated undistributed net investment loss to accumulated
net realized gain on investments due to differences between book and tax
accounting for net investment losses 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. 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.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate
of 0.31% of average daily net assets.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Fund has an
unfunded defined benefit plan for all of its independent Trustees and Mr.
Bailey. Included in Trustees' compensation is a net periodic pension expense
of $15,984 for the year ended November 30, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$36,131 as its portion of the sales charge on sales of Class A shares of the
Fund.
The Trustees have adopted separate distribution plans for Class A and Class B
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets
attributable to Class A shares, commissions to dealers and payments to MFD
wholesalers for sales at or above a certain dollar level, and other such
distribution-related expenses that are approved by the Fund. MFD is currently
waiving the 0.10% distribution fee for an indefinite period. Fees incurred
under the distribution plan during the year ended November 30, 1995 were 0.19%
of average daily net assets attributable to Class A shares on an annualized
basis.
The Class B distribution plan provides that the Fund will pay MFD a
distribution fee, equal to 0.75% per annum, and a service fee of up to 0.25%
per annum, of the Fund's average daily net assets attributable to Class B
shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B shares.
The service fee is intended to be additional consideration for services
rendered by the dealer with respect to Class B shares. MFD retains the service
fee for accounts not attributable to a securities dealer, which amounted to
$1,029 for Class B shares for the year ended November 30, 1995. Fees incurred
under the distribution plan during the year ended November 30, 1995 were 1.00%
of average daily net assets attributable to Class B shares on an annualized
basis.
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
shareholder redemption within 12 months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended November 30, 1995 were $0
and $19,739 for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15% and up to 0.22% attributable to Class A
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
$467,608,545 and $621,710,700, 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 $822,212,290
============
Gross unrealized appreciation $387,584,231
Gross unrealized depreciation (22,418,556)
------------
Net unrealized appreciation $365,165,675
============
(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
1995 1994
Year Ended -------------------------- ---------------------------
November 30, Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 12,002,572 $ 129,204,725 9,138,166 $ 98,219,747
Shares issued
to shareholders
in reinvestment
of distributions 8,387,440 80,184,283 12,196,320 138,428,629
Shares reacquired (19,312,028) (207,377,260) (15,368,839) (165,721,705)
----------- ------------- ----------- -------------
Net increase 1,077,984 $ 2,011,748 5,965,647 $ 70,926,671
=========== ============= =========== =============
Class B Shares
1995 1994
Year Ended -------------------------- ---------------------------
November 30, Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold 1,196,877 $12,558,656 2,335,727 $24,852,595
Shares issued
to shareholders
in reinvestment
of distributions 139,032 1,309,677 29,894 338,041
Shares reacquired (1,054,654) (10,694,593) (1,604,821) (17,138,152)
---------- ----------- ---------- -----------
Net increase 281,255 $ 3,173,740 760,800 $ 8,052,484
========== =========== ======= ===========
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 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, 1995 was $14,255.
<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, 1995, the related statement of operations for
the year then ended, the statement of changes in net assets for the years
ended November 30, 1995 and 1994, and the financial highlights for each of the
years in the ten-year period ended November 30, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at November 30, 1995 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, 1995, 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 5, 1996
---------------------------------------------
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>
MASSACHUSETTS
INVESTORS GROWTH MFS #1 MFS -----------------
STOCK FUND
BULK RATE
500 Boylston Street U.S. POSTAGE
Boston, MA 02116 PAID
PERMIT #55638
BOSTON, MA
-----------------
[MFS Logo]
THE FIRST NAME IN MUTUAL FUNDS
MIG-2 1/96 47M 13/213
<PAGE> 63
PART C
------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) FINANCIAL STATEMENTS INCLUDED IN PARTS A AND B:
INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
For the ten years ended November 30, 1995:
Financial Highlights
INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
At November 30, 1995:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the two years ended November 30, 1995:
Statement of Changes in Net Assets*
For the year ended November 30, 1995:
Statement of Operations*
- --------------------------------------
* Incorporated herein by reference to the Fund's Annual Report to Shareholders
dated November 30, 1995, filed with the SEC via EDGAR on February 5, 1996.
(b) EXHIBITS
1 Amended & Restated Declaration of Trust, dated January 19,
1995. (1)
2 Amended & Restated By-Laws, dated December 21, 1994. (1)
3 Not Applicable.
4 Form of Share Certificate for Class A and Class B Shares.
(3)
5 Investment Advisory Agreement, dated July 19,1985. (6)
6 (a) Distribution Agreement, dated January 1, 1995. (1)
(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. (2)
7 Retirement Plan for Non-Interested Person Trustees, dated
January 1, 1991. (1)
8 (a) Custodian Agreement between the Trust and State Street Bank
and Trust Company, dated May 24, 1988. (6)
<PAGE> 64
(b) Amendment No. 1 to Custodian Agreement, dated May 24,
1988. (6)
(c) Amendment No. 2 to Custodian Agreement, dated September 20,
1989. (6)
(d) Amendment No. 3 to Custodian Agreement, dated October 1,
1989. (6)
(e) Amendment No. 4 to Custodian Agreement, dated December 28,
1990. (6)
(f) Amendment No. 5 to Custodian Agreement, dated September 17,
1991. (6)
9 (a) Shareholder Servicing Agent Agreement, dated August 1,
1985. (6)
(b) Amendment to Shareholder Servicing Agent Agreement, dated
September 7, 1993. (6)
(c) Form of Amendment to Shareholder Servicing Agent Agreement
FOR Class C shares (not yet offered). (6)
(d) Exchange Privilege Agreement, dated September 1, 1995. (7)
(e) Loan Agreement by and among the Banks named therein, the
MFS Funds named therein, and The First National Bank of
Boston, dated as of February 21, 1995. (4)
(f) Dividend Disbursing Agency Agreement, dated February 1,
1986. (3)
10 24e-2 Consent and Opinion of Counsel; filed herewith.
11 Consent of Deloitte & Touche LLP; filed herewith.
12 Not Applicable.
13 Not Applicable.
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. (1)
(b) Amended & Restated Distribution Plan for Class B Shares,
dated December 21, 1994. (1)
(c) Form of Distribution Plan for Class C Shares (not yet
offered), dated December 28, 1993. (6)
<PAGE> 65
16 Schedule of Computation for Performance Quotations -
Average Annual Total Return. (1)
27 Financial Data Schedules for each class; filed herewith.
18 Not Applicable.
Power of Attorney, dated September 21, 1994. (1)
- ---------------------------
(1) Incorporated by reference to the Registrant's Post-Effective Amendment
No. 59 filed with the SEC via EDGAR on March 30, 1995.
(2) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the SEC
via EDGAR on February 22, 1995.
(3) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 28 filed with the SEC
via EDGAR on July 28, 1995.
(4) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS Municipal
Income Trust (File No. 811-4841) filed with the SEC via EDGAR on February
28, 1995.
(5) Incorporated by reference to MFS Series Trust IX (File Nos. 2-50409 and
811-2464) Post-Effective Amendment No. 32 filed with the SEC via EDGAR on
August 28, 1995.
(6) Incorporated by reference to the Registrant's Post-Effective Amendment
No. 60 filed with the SEC via EDGAR on October 26, 1995.
(7) Incorporated by reference to MFS Series Trust X (File Nos. 33-1657 and
811-4492) Post-Effective Amendment No. 13 filed with the SEC on November
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 36,176
(without par value) (as of February 29, 1996)
Class B Shares of Beneficial Interest 2,185
(without par value) (as of February 29, 1996)
</TABLE>
ITEM 27. INDEMNIFICATION
---------------
Reference is hereby made to (a) Article V of Registrant's Declaration of
Trust, incorporated by reference to Post-Effective Amendment No. 59, filed with
the SEC on March 30, 1995 and (b) Section 9 of the Shareholder Servicing Agent
Agreement, incorporated by reference to Post-Effective Amendment No. 60, filed
with the SEC on October 26, 1995.
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 17g-1 under the
Investment Company Act of 1940, as amended.
<PAGE> 66
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
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 Limited Maturity Fund, MFS Series Trust I (which
has eight series: MFS Managed Sectors Fund, MFS Cash Reserve Fund, MFS World
Asset Allocation Fund, MFS Aggressive Growth Fund, MFS Research Growth and
Income Fund, MFS Core Growth Fund, MFS Equity Income Fund and MFS Special
Opportunities 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 Series Trust IX (which has
three series: MFS Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited
Maturity Fund), MFS Series Trust X (which has four series: MFS Government
Mortgage Fund, MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign
& Colonial International Growth Fund and MFS/Foreign & Colonial International
Growth and Income Fund), and 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) (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 seven 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 Funds, 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.
<PAGE> 67
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 Fund
(which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International Funds-Global
Governments Fund and MFS International Funds-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 Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund, MFS Meridian U.S. Equity Fund and MFS Meridian Research 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 International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.
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, MFSIT, MVI and UST.
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, Bruce C. Avery, William S. Harris, William W. Scott, Jr., and
Patricia A. Zlotin are Executive Vice Presidents, Stephen E. Cavan is a Senior
Vice President, General Counsel and an Assistant Secretary, Joseph W. Dello
Russo is a Senior Vice President, Chief Financial Officer and Treasurer, Robert
T. Burns is a Vice President, Associate General Counsel and an Assistant
Secretary of MFS, and Thomas B. Hastings is a Vice President and Assistant
Treasurer.
<PAGE> 68
MASSACHUSETTS INVESTORS TRUST
-----------------------------
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
-----------------------------------------
MFS GROWTH OPPORTUNITIES FUND
-----------------------------
MFS GOVERNMENT SECURITIES FUND
------------------------------
MFS SERIES TRUST I
------------------
MFS SERIES TRUST V
------------------
MFS SERIES TRUST VI
-------------------
MFS SERIES TRUST X
------------------
MFS GOVERNMENT LIMITED MATURITY FUND
------------------------------------
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 the Assistant Treasurer, James R. Bordewick, Jr., Vice President and
Associate General Counsel of MFS, is the 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 the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
-----------------------------------
MFS INTERMEDIATE INCOME TRUST
-----------------------------
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice President of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is the 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 the Assistant Treasurer, and James R.
Bordewick, Jr., is the 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 the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
<PAGE> 69
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
the Assistant Treasurer and James R. Bordewick, Jr., is the 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 the Assistant
Treasurer and James R. Bordewick, Jr., is the 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, Daniel E. McManus,
Assistant Vice President of MFS, is an Assistant Vice President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
----------------------------
MFS UNION STANDARD TRUST
------------------------
MFS INSTITUTIONAL TRUST
-----------------------
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS 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 the Assistant Treasurer and
James R. Bordewick, Jr., is the 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 the Assistant Treasurer and James R. Bordewick, Jr., is the
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
<PAGE> 70
Treasurer, and James O. Yost, is the Assistant Treasurer and James R.
Bordewick, Jr., is the Assistant Secretary.
SGVAF
-----
W. Thomas London is the Treasurer.
MIL
---
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott and
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is
the President, Thomas J. Cashman, Jr., a Senior Vice President of MFS, is a
Senior Vice President, Stephen E. Cavan is a Director, Senior Vice President
and the Clerk, James R. Bordewick, Jr. is a Director, Vice President and an
Assistant Clerk, Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo
is the Treasurer and Thomas B. Hastings is the Assistant Treasurer.
MIL-UK
------
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E. Cavan
is a Director and the Secretary, Ziad Malek is the President, James E. Russell
is the Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL FUNDS
---------
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle and Richard W. S. Baker 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, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker, 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, James O.
Yost is the Assistant Treasurer, and Ziad Malek is a Senior Vice President.
MFD
---
A. Keith Brodkin is the Chairman and a Director, 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, Joseph W. Dello Russo is the Treasurer,
and Thomas B. Hastings is the Assistant Treasurer.
CIAI
----
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery is
the Vice President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings
is the Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T.
Burns is the Assistant Secretary.
<PAGE> 71
MFSC
----
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Joseph A. Recomendes, a Senior Vice President
of MFS, is Vice Chairman and a Director, Janet A. Clifford is the Executive
Vice President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is
the Assistant 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, and
Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President and a
Director, Leslie J. Nanberg is a Senior Vice President, a Managing Director and
a Director, George F. Bennett, Carol A. Corley, John A. Gee, Brianne Grady and
Kevin R. Parke are Senior Vice Presidents and Managing Directors, Joseph W.
Dello Russo is the Treasurer, Thomas B. Hastings is the Assistant 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 and a Director, Douglas C. Grip, a
Senior Vice President of MFS, is the President, Joseph W. Dello Russo is the
Treasurer, Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is
the Secretary, Robert T. Burns is the Assistant Secretary and Sharon A.
Brovelli is a Senior Vice President.
<TABLE>
In addition, the following persons, Directors or officers of MFS, have
the affiliations indicated:
<S> <C>
A. Keith Brodkin Director, Sun Life Assurance Company
of Canada (U.S.), One Sun Life
Executive Park, Wellesley Hills,
Massachusetts
Director, Sun Life Insurance and
Annuity Company of New York, 67 Broad
Street, New York, New York
John R. Gardner President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West,
Toronto, Ontario, Canada (Mr. Gardner
is also an officer and/or Director of
various subsidiaries and affiliates
of Sun Life)
John D. McNeil Chairman, Sun Life Assurance Company
of Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada
(Mr. McNeil is also an officer and/or
Director of various subsidiaries and
affiliates of Sun Life)
Joseph W. Dello Russo Director of Mutual Fund Operations,
The Boston Company, Exchange Place,
Boston, Massachusetts (until August,
1994)
</TABLE>
<PAGE> 72
ITEM 29. DISTRIBUTORS
------------
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal
business address of each of these persons is 500 Boylston Street, Boston,
Massachusetts 02116.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
<TABLE>
The accounts and records of the Registrant are located, in whole or
in part, at the office of the Registrant and the following locations:
<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.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being Registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE> 73
<TABLE>
INDEX TO EXHIBITS
-----------------
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
10 24e-2 Consent and Opinion of Counsel.
11 Consent of Deloitte & Touche LLP.
27 Financial Data Schedules for each class.
</TABLE>
<PAGE> 74
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 25th day of March, 1996.
MASSACHUSETTS INVESTORS
GROWTH STOCK FUND
By: JAMES R. BORDEWICK, JR.
-------------------------------
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
<TABLE>
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 25, 1996.
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ A. KEITH BRODKIN* Chairman, President (Principal
- ------------------------ Executive Officer) and Trustee
A. Keith Brodkin
/s/ W. THOMAS LONDON* Treasurer (Principal Financial
- ------------------------ Officer and Principal
W. Thomas London Accounting Officer)
/s/ RICHARD B. BAILEY* Trustee
- ------------------------
Richard B. Bailey
/s/ PETER G. HARWOOD* Trustee
- ------------------------
Peter G. Harwood
/s/ J. ATWOOD IVES* Trustee
- ------------------------
J. Atwood Ives
</TABLE>
<PAGE> 1
EXHIBIT NO. 99.10
March 29, 1996
Massachusetts Investors Growth Stock Fund
500 Boylston Street
Boston, MA 02116
Re: Post-Effective Amendment No. 61 to Registration Statement on Form
N-1A (File No. 2-14677) (the "Registration Statement")
Gentlemen:
I am Vice President and Associate General Counsel of Massachusetts
Financial Services Company, which serves as investment adviser to Massachusetts
Investors Growth Stock Fund (the "Fund") and the Assistant Secretary of the
Fund. I am admitted to practice law in The Commonwealth of Massachusetts. The
Fund was created under a written Declaration of Trust dated March 4, 1985, and
executed and delivered in Boston, Massachusetts, as amended and restated
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 January 18, 1995, the Trustees of the Fund determined
to sell to the public the authorized but unissued shares of beneficial interest
of the Fund for cash at a price which will net the Fund (before taxes) not less
than the net asset value thereof, as defined in the Fund's By-Laws, determined
next after the sale is made or at some later time after such sale.
<PAGE> 2
The Fund is about to register under the Securities Act of 1933, as
amended, 7,193,359 shares of beneficial interest by Post-Effective Amendment
No. 61 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, 1995, including the 21,285,762 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. 61 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. 61 to the Registration
Statement.
Very truly yours,
JAMES R. BORDEWICK, JR.
---------------------------
James R. Bordewick, Jr.
JRB/bjn
<PAGE> 1
EXHIBIT NO. 99.11
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in this Post-Effective
Amendment No. 61 to Registration Statement No.2-14677 of Massachusetts Investors
Growth Stock Fund of our report dated January 5, 1996, appearing in the annual
report to shareholders for the year ended November 30, 1995, of Massachusetts
Investors Growth Stock Fund, and to the references to us under the headings
"Condensed Financial Information" in the Prospectus and "Independent Auditors
and Financial Statements" in the Statement of Additional Information, which are
part of such Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 27, 1996
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
CLASS A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000063090
<NAME> MASSACHUSETTS INVESTORS GROWTH STOCK FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 821,939,132
<INVESTMENTS-AT-VALUE> 1,187,377,965
<RECEIVABLES> 19,239,766
<ASSETS-OTHER> 13,503
<OTHER-ITEMS-ASSETS> 242
<TOTAL-ASSETS> 1,206,631,476
<PAYABLE-FOR-SECURITIES> 10,513,372
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,297,942
<TOTAL-LIABILITIES> 11,811,314
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 676,454,387
<SHARES-COMMON-STOCK> 94,350,267
<SHARES-COMMON-PRIOR> 93,272,283
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 61,855
<ACCUMULATED-NET-GAINS> 152,988,797
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 365,438,833
<NET-ASSETS> 1,194,820,162
<DIVIDEND-INCOME> 3,404,333
<INTEREST-INCOME> 3,199,285
<OTHER-INCOME> 0
<EXPENSES-NET> 7,589,772
<NET-INVESTMENT-INCOME> (986,154)
<REALIZED-GAINS-CURRENT> 155,044,848
<APPREC-INCREASE-CURRENT> 150,833,517
<NET-CHANGE-FROM-OPS> 304,892,211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 100,591,643
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,002,572
<NUMBER-OF-SHARES-REDEEMED> 19,312,028
<SHARES-REINVESTED> 8,387,440
<NET-CHANGE-IN-ASSETS> 208,104,149
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 100,892,641
<OVERDISTRIB-NII-PRIOR> 50,843
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,339,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,949,915
<AVERAGE-NET-ASSETS> 1,069,765,873
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 3.12
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.08
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.51
<EXPENSE-RATIO> 0.73
<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 STOCK FUND
CLASS B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000063090
<NAME> MASSACHUSETTS INVESTORS GROWTH STOCK FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 821,939,132
<INVESTMENTS-AT-VALUE> 1,187,377,965
<RECEIVABLES> 19,239,766
<ASSETS-OTHER> 13,503
<OTHER-ITEMS-ASSETS> 242
<TOTAL-ASSETS> 1,206,631,476
<PAYABLE-FOR-SECURITIES> 10,513,372
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,297,942
<TOTAL-LIABILITIES> 11,811,314
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 676,454,387
<SHARES-COMMON-STOCK> 1,180,611
<SHARES-COMMON-PRIOR> 899,356
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 61,855
<ACCUMULATED-NET-GAINS> 152,988,797
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 365,438,833
<NET-ASSETS> 1,194,820,162
<DIVIDEND-INCOME> 3,404,333
<INTEREST-INCOME> 3,199,285
<OTHER-INCOME> 0
<EXPENSES-NET> 7,589,772
<NET-INVESTMENT-INCOME> (986,154)
<REALIZED-GAINS-CURRENT> 155,044,848
<APPREC-INCREASE-CURRENT> 150,833,517
<NET-CHANGE-FROM-OPS> 304,892,211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,381,907
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,196,877
<NUMBER-OF-SHARES-REDEEMED> 1,054,654
<SHARES-REINVESTED> 139,032
<NET-CHANGE-IN-ASSETS> 208,104,149
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 100,892,641
<OVERDISTRIB-NII-PRIOR> 50,843
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,339,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,949,915
<AVERAGE-NET-ASSETS> 1,069,765,873
<PER-SHARE-NAV-BEGIN> 10.35
<PER-SHARE-NII> (0.11)
<PER-SHARE-GAIN-APPREC> 3.10
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.08
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.26
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
