MASSACHUSETTS INVESTORS TRUST
<TABLE>
Front Cover: A 6-1/4" by 8-1/4" photo of cars.
<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
Peter G. Harwood - Former Financial Vice For MFS stock and bond market outlooks,
President, Treasurer and Director (until 1988), call toll-free: 1-800-637-4458 anytime from
Loomis, Sayles & Co., Inc. a touch-tone telephone.
J. Atwood Ives - Chairman and Chief Executive For information on MFS mutual funds
Officer, Eastern Enterprises call your financial adviser or, for an
information kit, call toll-free:
Lawrence T. Perera - Partner, Hemenway & Barnes 1-800-637-2929 any business day from
9 a.m. to 5 p.m. Eastern time (or, leave
William J. Poorvu - Adjunct Professor, Harvard a message anytime).
University Graduate School of Business
Administration INVESTOR SERVICE
MFS Service Center, Inc.
Charles W. Schmidt - Private Investor; P.O. Box 2281
Former Senior Vice President and Group Executive Boston, MA 02107-9906
(until 1990), Raytheon Company
For current account service, call toll free:
Arnold D. Scott* - Senior Executive Vice President, 1-800-225-2606 any business day from
Massachusetts Financial Services Company 8 a.m. to 8 p.m. Eastern time.
Jeffrey L. Shames* - President and Chief Equity For service to speech- or hearing-impaired,
Officer, Massachusetts Financial Services Company call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
Elaine R. Smith - Independent Consultant
For share prices, account balances and
David B. Stone - Chairman, North American exchanges, call toll free: 1-800-MFS-TALK
Management Corp. (Investment Advisers) (1-800-637-8255) anytime from a touch-tone
telephone.
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116-3741
PORTFOLIO MANAGERS
Amy W. de Rham*
John D. Laupheimer, Jr.*
Kevin R. Parke*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
-------------------------
TOP-RATED SERVICE
MFS was rated first when
securities firms evaluated the
quality of service they receive
from 40 mutual fund compa-
nies. MFS got high marks for
answering calls quickly, processing trans-
actions accurately and sending statements
out on time.
(Source: 1994 DALBAR Survey)
-------------------------
Cover photo: Through their wide range of investments, MFS mutual funds help you
share in America's growth.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
The past year was a difficult one for the stock market with many stocks
performing significantly worse than the market averages. A major change in
investment focus occurred during the year when it became clear that the Federal
Reserve Board intended to slow the economy by raising short-term interest rates.
At that time, stocks of companies whose earnings are particularly sensitive to
the business cycle began to significantly underperform the Standard & Poor's 500
Composite Index (S&P 500), a popular, unmanaged index of common stock
performance, while stocks whose earnings tend to be less cyclical (such as
medical and consumer non-durable issues) began to outperform the market
averages.
For the 12 months ended December 31, 1994, the stock market, as measured by
the S&P 500, had a return of +1.31%. During that same period, Class A shares of
the Trust provided a total return of -1.02%, while Class B shares had a total
return of -1.88%. Both of these returns include the reinvestment of
distributions but exclude the effects of any sales charges. A discussion of the
factors which contributed to the Trust's modest underperformance relative to the
S&P 500 may be found in the Portfolio Performance and Strategy section of this
letter. Complete performance data may be found on pages three and four of this
report.
Economic Environment
The economic expansion, about to enter its fifth year, has gained firmer
underpinnings as employers have been stepping up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4% real (adjusted for inflation) gross domestic product
growth in 1994. Interest rates rose significantly in 1994, which should help
restrain, but not curtail, the economic expansion. Based on improving economic
fundamentals both here and abroad, we expect the business expansion to continue
well into 1995.
Stock Market
The stock market proved volatile in 1994, influenced by both a strengthening
economy and uncertainty over interest rates. Although the stronger economy has
been beneficial to corporate earnings, higher interest rates have negatively
impacted price-to-earnings multiples (or stock valuations). Given our
expectation of further upward pressure on short-term interest rates as the
Federal Reserve continues to lean against the current economic expansion, we
believe the stock market will have difficulty sustaining any significant
improvement. When interest rates finally stabilize, however, we expect the stock
market to benefit given our continuing outlook for improved corporate earnings.
Portfolio Performance and Strategy
The Trust follows a conservative growth investment policy. We attempt to
structure the portfolio with stocks we believe possess modestly above-average
earnings growth prospects relative to the S&P 500. While doing this, we attempt
to maintain an overall conservative investment posture by focusing on companies
with moderately below-average price-to-earnings ratios relative to the S&P 500.
In addition, we concentrate on large-capitalization, well-established and
recognized corporations. This is a long-term investment strategy unaffected by
our short-term market outlook.
Given our outlook for continued cyclical economic expansion, the Trust began
1994 with a substantial overweighting in consumer durable stocks, such as those
of automotive companies and industrial companies like John Deere. We also
overweighted banks and financial services companies, believing these stocks were
undervalued relative to their earnings. At the same time, the portfolio was
substantially underweighted in consumer non-durable companies and medical
issues, and modestly underweighted in technology issues. This strategy proved
the correct strategy for the first half of the year and the Trust's performance
at the end of June was ahead of the market averages. At mid-year, we began to
move the Trust away from cyclicals and to consumer non-durables, which has
proved to be the correct direction. However, we did not complete the transition
quickly enough and were hurt by declines in stocks such as John Deere and CSX.
These stocks underperformed the market despite having very strong earnings. We
were also negatively impacted by our modest overweighting in the retail sector,
which struggled with an unusually weak sales environment despite a strong
economy. Finally, financial services stocks underperformed in 1994 as they
approached historically low relative valuations.
For 1995, the Trust is structured for slowing economic growth. We have
significantly reduced cyclical exposure and increased consumer non-durable and
medical positions which we believe could show more consistent earnings growth.
We remain overweighted in financial service stocks based on our view that these
stocks are modestly priced relative to our expectations of strong earnings
growth. The market as a whole is unlikely to show significant improvement until
it becomes clear that the economy has slowed and interest rates have stabilized.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
Amy W. de Rham
A. Keith Brodkin John D. Laupheimer, Jr.
Chairman and President Kevin R. Parke
January 20, 1995 Portfolio Managers
The Trustees of the Massachusetts Investors Trust (the "Trust") circulated
a proxy statement and form of ballot, dated August 4, 1994 to shareholders of
the Trust. The results of the ballot are as follows:
ITEM 1: The election of Arnold D. Scott and Jeffrey L. Shames as Trustees of the
Trust.
Number of Shares
----------------
Nominee For Against
------- --- -------
Arnold D. Scott 90,711,601.161 1,756,159.036
Jeffrey L. Shames 90,682,051.606 1,785,708.591
Trustees continuing in office who were not subject to re-election at this
time are A. Keith Brodkin, Richard B. Bailey, Peter G. Harwood, J. Atwood Ives,
Lawrence T. Perera, William J. Poorvu, Charles W. Schmidt, Elaine R. Smith and
David B. Stone.
ITEM 2: The approval of the amendment to the Trust's Declaration of Trust.
Number of Shares
----------------
For 77,832,959.727
Against 7,624,980.746
Abstain 2,531,825.724
No vote 4,477,994.000
ITEM 3: The ratification of the selection of Deloitte & Touche as the
independent public accountants to be employed by the Trust for the fiscal year
ending December 31, 1995.
Number of Shares
----------------
For 89,975,488.936
Against 912,920.263
Abstain 1,579,350.998
PORTFOLIO MANAGERS PROFILES
Amy de Rham has been a member of the MFS investment staff for eight years. A
graduate of Princeton University and the Amos Tuck School of Business
Administration of Dartmouth College, she began her career at MFS in the Research
Department and was named Assistant Vice President - Investments in 1988. In
1989, she was named Vice President - Investments and in 1993 became Portfolio
Manager of Massachusetts Investors Trust.
John Laupheimer has been a member of the MFS investment staff for 13 years. A
graduate of Boston University and the Sloan School of Management of
Massachusetts Institute of Technology, he began his career at MFS as an Industry
Specialist. He was named Assistant Vice President - Investments in 1984. In
1986, he was named Vice President - Investments and in 1993 he was named
Portfolio Manager of Massachusetts Investors Trust. In 1995 he became Senior
Vice President. John is a Chartered Financial Analyst (C.F.A.).
Kevin Parke has been a member of the MFS investment staff for nine years. A
graduate of Lehigh University and the Harvard University Graduate School of
Business Administration, he began his career at MFS as an Industry Specialist.
He was named Assistant Vice President - Investments in 1987. In 1988, he was
named Vice President - Investments. In 1992, he was named Portfolio Manager of
Massachusetts Investors Trust and in 1993 he became Senior Vice President.
PERFORMANCE
The following information illustrates the historical performance of
Massachusetts Investors Trust Class A shares in comparison to various market
indicators. Results reflect the deduction of the 5.75% maximum sales charge.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. You
cannot invest in an index. All results reflect the reinvestment of all dividends
and capital gains.
Please note that effective September 7, 1993, Class B shares were offered.
Information on Class B share performance appears on the next page.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(Over the 5-Year Period Ended December 31, 1994)
Page 3
Line graph representing the growth of a $10,000 investment for the 5-year period
ended December 31, 1994. The graph is scaled from $8,000 to $18,000 in $2,000
segments. The years are marked from 1990 to 1994. There are three lines drawn to
scale. One is a solid line representing Massachusetts Investors Trust Class A, a
second line of short dashes represents the S&P 500, and a third line of long
dashes represents the Consumer Price Index.
Massachusetts Investors Trust
Class A $14,054
S&P 500 $15,160
Consumer Price Index $11,872
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(Over the 10-Year Period Ended December 31, 1994)
Page 4
Line graph representing the growth of a $10,000 investment for the 10-year
period ended December 31, 1994. The graph is scaled from $0 to $50,000 in
$10,000 segments. The years are marked from 1985 to 1994. There are three lines
drawn to scale. One is a solid line representing Massachusetts Investors Trust
Class A, a second line of short dashes represents the S&P 500, and a third line
of long dashes represents the Consumer Price Index.
Massachusetts Investors Trust
Class A $33,146
S&P 500 $38,268
Consumer Price Index $14,214
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class A)
including 5.75% sales charge -6.70% +3.30% +7.05% +12.73%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class A)
at net asset value -1.02% +5.36% +8.33% +13.40%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class B)
with CDSC<F2> -5.37% -- -- - 1.82%<F1>
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class B)
without CDSC -1.88% -- -- + 0.53%<F1>
- ------------------------------------------------------------------------------------------------------------------------------
Average growth and income fund -0.94% +6.33% +8.29% +12.38%
- ------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index +1.31% +6.26% +8.68% +14.36%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Price Index<F3> +2.67% +2.78% +3.49% + 3.58%
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to December 31, 1994.
<F2>These returns reflect the current maximum Class B CDSC of 4%.
<F3>The Consumer Price Index is a popular measure of change in prices.
</TABLE>
In the above table, we have included the average annual total returns of all
growth and income funds (including the Trust) tracked by Lipper Analytical
Services, Inc. (an independent firm which reports mutual fund performance) for
the applicable time periods (348, 225, 182 and 109 funds for the 1-, 3-, 5- and
10-year periods ended December 31, 1994, respectively). Because these returns do
not reflect any applicable sales charge, we have also included the Trust's
results at net asset value (no sales charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The principal value and income return of an investment in a mutual fund
will vary with changes in market conditions, and shares, when redeemed, may be
worth more or less than their original cost. All Class A share results reflect
the applicable expense subsidy which is explained in the Notes to Financial
Statements. Had the subsidy not been in effect, the results would have been less
favorable. The subsidy may be rescinded at any time.
TAX FORM SUMMARY
In January 1995, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1994.
For the year ended December 31, 1994, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to 100%.
OBJECTIVES AND POLICIES
The Trust's investment objectives are to provide reasonable current income and
long-term growth of capital and income. Any investment involves risk and there
can be no assurance that the Trust will achieve its investment objectives.
The Trust is believed to constitute a conservative medium for that portion of an
investor's capital which he wishes to have invested in securities considered to
be of high or improving investment quality. The term "conservative medium"
indicates that the Trust attempts to exercise prudence, discretion and
intelligence in the selection of investments with due regard for both probable
income and probable safety of capital. The words "high investment quality"
reflect the intention of the Trust to avoid the acquisition of speculative
securities or those of doubtful character even if immediate prospects are
tempting.
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1994
Common Stocks - 92.6%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Common Stocks - 85.0%
Aerospace - 3.7%
Allied-Signal, Inc. 630,000 $ 21,420,000
Lockheed Corp. 100,000 7,262,500
Martin-Marietta Corp. 300,000 13,312,500
McDonnell Douglas Corp. 127,000 18,034,000
--------------
$ 60,029,000
- -----------------------------------------------------------------------------
Apparel and Textiles - 2.8%
Nike, Inc., "B" 295,000 $ 22,014,375
Reebok International Ltd. 120,000 4,740,000
VF Corp. 375,100 18,239,237
--------------
$ 44,993,612
- -----------------------------------------------------------------------------
Automotive - 0.6%
Eaton Corp. 180,000 $ 8,910,000
- -----------------------------------------------------------------------------
Banks and Credit Companies - 8.2%
Bankers Trust New York Corp. 160,000 $ 8,860,000
Barnett Banks, Inc. 230,000 8,826,250
First Bank System, Inc. 780,000 25,935,000
First Security Corp. 50,000 1,137,500
Firstar Corp. 290,000 7,793,750
NBD Bancorp, Inc. 530,000 14,508,750
National City Corp. 280,000 7,245,000
Norwest Corp. 1,560,000 36,465,000
SunTrust Banks, Inc. 250,000 11,937,500
U.S. Bancorp 375,000 8,484,375
--------------
$ 131,193,125
- -----------------------------------------------------------------------------
Broadcasting - 0.1%
LIN Television Corp.* 50,000 $ 1,137,500
- -----------------------------------------------------------------------------
Business Machines - 1.7%
Hewlett-Packard Co. 125,000 $ 12,484,375
Xerox Corp. 150,000 14,850,000
--------------
$ 27,334,375
- -----------------------------------------------------------------------------
Cellular Telephones - 0.8%
LIN Broadcasting Corp.* 100,000 $ 13,350,000
- -----------------------------------------------------------------------------
Chemicals - 1.5%
Air Products & Chemicals, Inc. 50,000 $ 2,231,250
du Pont (E.I.) de Nemours & Co. 315,000 17,718,750
Grace (W.R.) & Co. 125,000 4,828,125
--------------
$ 24,778,125
- -----------------------------------------------------------------------------
Computer Software - Systems - 3.4%
Compaq Computer Corp.* 100,000 $ 3,950,000
Honeywell, Inc. 350,000 11,025,000
Microsoft Corp.* 550,000 33,618,750
Oracle Systems Corp.* 125,000 5,515,625
--------------
$ 54,109,375
- -----------------------------------------------------------------------------
Conglomerates - 0.9%
ITT Corp. 160,000 $ 14,180,000
- -----------------------------------------------------------------------------
Consumer Goods and Services - 8.0%
Colgate-Palmolive Co. 535,000 $ 33,905,625
Duracell International, Inc. 75,000 3,253,125
Gillette Co. 400,000 29,900,000
Philip Morris Cos., Inc. 510,000 29,325,000
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Common Stocks - continued
Consumer Goods and Services - continued
Procter & Gamble Co. 405,000 $ 25,110,000
RJR Nabisco Holdings Corp., Inc.* 1,250,000 6,875,000
--------------
$ 128,368,750
- -----------------------------------------------------------------------------
Containers - 1.2%
Corning, Inc. 625,000 $ 18,671,875
- -----------------------------------------------------------------------------
Defense Electronics - 1.0%
Loral Corp. 440,000 $ 16,665,000
- -----------------------------------------------------------------------------
Electrical Equipment - 1.9%
General Electric Co. 610,000 $ 31,110,000
- -----------------------------------------------------------------------------
Electronics - 2.5%
E-Systems, Inc. 260,000 $ 10,822,500
Intel Corp. 285,000 18,204,375
Motorola, Inc. 185,000 10,706,875
--------------
$ 39,733,750
- -----------------------------------------------------------------------------
Entertainment - 0.2%
Disney (Walt) Co. 82,000 $ 3,782,250
- -----------------------------------------------------------------------------
Financial Institutions - 2.2%
Beneficial Corp. 454,000 $ 17,706,000
Federal National Mortgage Assn. 100,000 7,287,500
State Street Boston Corp. 370,000 10,591,250
--------------
$ 35,584,750
- -----------------------------------------------------------------------------
Food and Beverage Products - 6.6%
Archer-Daniels-Midland Co. 975,000 $ 20,109,375
CPC International, Inc. 475,000 25,293,750
Conagra, Inc. 685,000 21,406,250
Hershey Foods Corp. 160,000 7,740,000
PepsiCo, Inc. 235,000 8,518,750
Sara Lee Corp. 870,000 21,967,500
--------------
$ 105,035,625
- -----------------------------------------------------------------------------
Forest and Paper Products - 1.3%
Kimberly-Clark Corp. 233,000 $ 11,766,500
Scott Paper Co. 80,000 5,530,000
Weyerhaeuser Co. 75,000 2,812,500
--------------
$ 20,109,000
- -----------------------------------------------------------------------------
Insurance - 5.0%
American General Corp. 135,000 $ 3,813,750
General Re Corp. 125,000 15,468,750
Marsh & McLennan Cos., Inc. 55,200 4,374,600
Progressive Corp. Ohio 300,000 10,500,000
Providian Corp. 129,000 3,982,875
Torchmark Corp. 410,000 14,298,750
Transamerica Corp. 324,600 16,148,850
UNUM Corp. 290,000 10,947,500
--------------
$ 79,535,075
- -----------------------------------------------------------------------------
Machinery - 1.8%
Caterpillar, Inc. 75,000 $ 4,134,375
Deere & Co., Inc. 375,000 24,843,750
--------------
$ 28,978,125
- -----------------------------------------------------------------------------
Medical and Health Products - 5.3%
Abbott Laboratories 150,000 $ 4,893,750
Bausch & Lomb, Inc. 100,000 3,387,500
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Common Stocks - continued
Medical and Health Products - continued
Johnson & Johnson 370,000 $ 20,257,500
Lilly (Eli) & Co. 250,000 16,406,250
Pfizer, Inc. 175,000 13,518,750
Warner-Lambert Co. 345,000 26,565,000
--------------
$ 85,028,750
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 1.1%
Columbia HCA Healthcare Corp. 295,000 $ 10,767,500
Manor Care, Inc. 250,000 6,843,750
--------------
$ 17,611,250
- -----------------------------------------------------------------------------
Oils - 5.8%
Amoco Corp. 235,000 $ 13,894,375
Atlantic Richfield Co. 100,000 10,175,000
Chevron Corp. 680,000 30,345,000
Exxon Corp. 345,000 20,958,750
Mobil Corp. 210,000 17,692,500
--------------
$ 93,065,625
- -----------------------------------------------------------------------------
Photographic Products - 1.0%
Eastman Kodak Co. 340,000 $ 16,235,000
- -----------------------------------------------------------------------------
Pollution Control - 0.8%
WMX Technologies, Inc. 500,000 $ 13,125,000
- -----------------------------------------------------------------------------
Printing and Publishing - 1.2%
Times Mirror Co., "A" 220,000 $ 6,902,500
Tribune Co., Inc. 220,000 12,045,000
--------------
$ 18,947,500
- -----------------------------------------------------------------------------
Railroads - 3.5%
CSX Corp. 430,000 $ 29,938,750
Illinois Central Corp. 580,000 17,835,000
Norfolk Southern Corp. 130,000 7,881,250
--------------
$ 55,655,000
- -----------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Brinker International, Inc.* 100,000 $ 1,812,500
- -----------------------------------------------------------------------------
Retail - 4.2%
Dayton-Hudson Corp. 165,000 $ 11,673,750
Federated Department Stores* 620,000 11,935,000
May Department Stores Co. 470,000 15,862,500
Penney (J.C.) & Co., Inc. 495,000 22,089,375
Tandy Corp. 100,000 5,012,500
--------------
$ 66,573,125
- -----------------------------------------------------------------------------
Special Products and Services - 0.5%
Stanley Works 225,000 $ 8,043,750
- -----------------------------------------------------------------------------
Utilities - Electric - 1.6%
Cinergy Corp. 204,600 $ 4,782,525
DPL, Inc. 395,700 8,111,850
Peco Energy Co. 350,000 8,575,000
Texas Utilities Co. 150,000 4,800,000
--------------
$ 26,269,375
- -----------------------------------------------------------------------------
Utilities - Gas - 0.5%
Pacific Enterprises 400,000 $ 8,500,000
- -----------------------------------------------------------------------------
Utilities - Telephone - 4.0%
American Telephone & Telegraph Co. 350,000 $ 17,587,500
BellSouth Corp. 100,000 5,412,500
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Common Stocks - continued
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Common Stocks - continued
Utilities - Telephone - continued
GTE Corp. 350,000 $ 10,631,250
MCI Communications Corp. 435,000 7,993,125
Pacific Telesis Group 325,000 9,262,500
Southwestern Bell Corp. 160,000 6,460,000
US West, Inc. 190,000 6,768,750
--------------
$ 64,115,625
- -----------------------------------------------------------------------------
Total U.S. Common Stocks (Identified Cost, $1,182,748,217) $1,362,571,812
- -----------------------------------------------------------------------------
Foreign Stocks - 7.6%
Argentina - 0.5%
YPF S.A., ADR (Oils) 362,500 $ 7,748,437
- -----------------------------------------------------------------------------
Australia - 0.2%
Australia & New Zealand Bank Group Ltd.
(Finance) 1,000,000 $ 3,293,808
- -----------------------------------------------------------------------------
Denmark - 0.4%
Tele Danmark, ADR (Utilities - Telephone)*+ 280,000 $ 7,140,000
- -----------------------------------------------------------------------------
Finland - 0.5%
Nokia Corp., ADR (Electronics)* 115,000 $ 8,625,000
- -----------------------------------------------------------------------------
France - 0.6%
LVMH Moet-Hennessy (Food and Beverage
Products) 40,000 $ 6,319,340
Pinault-Printemps (Retail) 21,000 3,730,885
--------------
$ 10,050,225
- -----------------------------------------------------------------------------
Japan - 0.3%
Canon, Inc. (Office Equipment) 250,000 $ 4,236,014
- -----------------------------------------------------------------------------
Netherlands - 1.0%
IHC Caland (Transportation) 45,900 $ 1,161,858
Royal Dutch Petroleum Co. (Oils) 132,000 14,190,000
--------------
$ 15,351,858
- -----------------------------------------------------------------------------
New Zealand - 0.2%
Lion Nathan Ltd. (Food and Beverage Products) 2,000,000 $ 3,814,888
- -----------------------------------------------------------------------------
South Korea - 0.3%
Korea Electric Power Corp., ADR
(Utilities - Electric) 250,000 $ 5,343,750
- -----------------------------------------------------------------------------
Sweden - 1.5%
Astra AB, "B" (Medical and Health Products) 464,300 $ 11,848,535
Hennes & Mauritz AB, "B" (Retail) 144,000 7,388,295
Svenska Handelsbank S.A., "A" (Banks
and Credit Companies) 300,000 3,959,169
--------------
$ 23,195,999
- -----------------------------------------------------------------------------
Switzerland - 0.6%
Nestle A.G. (Food and Beverage Products) 10,000 $ 9,531,453
- -----------------------------------------------------------------------------
United Kingdom - 1.5%
British Steel (Steel) 3,550,000 $ 8,563,596
PowerGen PLC (Utilities - Electric) 1,000,000 8,395,990
Southern Electric PLC (Utilities - Electric) 500,000 6,310,699
--------------
$ 23,270,285
- -----------------------------------------------------------------------------
Total Foreign Stocks (Identified Cost,
$101,806,463) $ 121,601,717
- -----------------------------------------------------------------------------
Total Common Stocks (Identified Cost,
$1,284,554,680) $1,484,173,529
- -----------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - continued
Convertible Preferred Stocks - 2.1%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Atlantic Richfield Co., 9.01s (Oils) 120,000 $ 3,135,000
Bowater, Inc., 7s, "B" (Forest and
Paper Products) 150,000 3,693,750
Ford Motor Co., $4.20, "A" (Automotive) 60,000 5,520,000
Occidental Petroleum Corp., $3.875
(Oils)+ 200,000 9,700,000
RJR Nabisco Holdings, $0.6012 (Consumer
Goods and Services) 1,850,000 11,100,000
- -----------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Identified Cost, $32,519,249) $ 33,148,750
- -----------------------------------------------------------------------------
Convertible Bonds - 0.9%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Costco Wholesaler Corp., 5.75s, 2002 (Retail) $ 2,500 $ 2,037,500
Equitable Cos., Inc., 6.125s, 2024
(Insurance) 6,250 5,625,000
Motorola, Inc., 0s, 1998 (Electronics) 8,230 5,843,300
Rogers Communications, Inc., 2s, 2005
(Telecommunications) 3,000 1,582,500
- -----------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost,
$16,131,307) $ 15,088,300
- -----------------------------------------------------------------------------
Short-Term Obligations - 4.1%
- -----------------------------------------------------------------------------
Federal Farm Credit Bank, due 1/11/95 $ 9,000 $ 8,986,300
Federal Farm Credit Bank, due 1/13/95 80 79,853
Federal Home Loan Bank, due 1/03/95 9,700 9,696,998
Federal Home Loan Bank, due 1/04/95 9,000 8,995,665
Federal Home Loan Bank, due 1/06/95 8,800 8,792,850
Federal National Mortgage Assn., due 2/01/95 8,200 8,158,269
Pfizer, Inc., due 1/11/95 10,600 10,582,481
Student Loan Marketing Assn., due 1/03/95 10,350 10,346,694
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 65,639,110
- -----------------------------------------------------------------------------
Total Investments (Identified Cost,
$1,398,844,346) $1,598,049,689
Other Assets, Less Liabilities - 0.3% 5,507,087
- -----------------------------------------------------------------------------
Net Assets - 100.0% $1,603,556,776
- -----------------------------------------------------------------------------
*Non-income producing security.
+Restricted security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
December 31, 1994
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,398,844,346) $1,598,049,689
Cash 800,061
Foreign currency, at value (identified cost, $133,607) 135,398
Receivable for investments sold 847,896
Receivable for Trust shares sold 4,256,104
Dividends and interest receivable 4,265,780
Other assets 22,322
--------------
Total assets $1,608,377,250
--------------
Liabilities:
Distributions payable $ 1,640
Payable for investments purchased 2,011,504
Payable for Trust shares reacquired 1,458,376
Payable to affiliates -
Management fee 18,281
Shareholder servicing agent fee 10,886
Distribution fee 2,810
Accrued expenses and other liabilities 1,316,977
--------------
Total liabilities $ 4,820,474
--------------
Net assets $1,603,556,776
==============
Net assets consist of:
Paid-in capital $1,407,190,670
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 199,211,202
Accumulated distributions in excess of net realized gain on
investments and foreign currency transactions (2,785,811)
Accumulated distributions in excess of net investment
income (59,285)
--------------
Total $1,603,556,776
==============
Shares of beneficial interest outstanding 159,244,562
==============
Class A shares:
Net asset value and redemption price per share
(net assets of $1,535,051,748 / 152,412,907 shares of
beneficial interest outstanding) $10.07
======
Offering price per share (100/94.25) $10.68
======
Class B shares:
Net asset value, offering price and redemption price
per share
(net assets of $68,505,028 / 6,831,655 shares of
beneficial interest outstanding) $10.03
======
On sales of $50,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended December 31, 1994
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 43,624,688
Interest 4,762,379
-------------
Total investment income $ 48,387,067
-------------
Expenses -
Management fee $ 4,385,702
Trustees' compensation 74,270
Shareholder servicing agent fee (Class A) 1,914,686
Shareholder servicing agent fee (Class B) 93,704
Distribution and service fee (Class A) 5,330,343
Distribution and service fee (Class B) 425,930
Custodian fee 459,465
Postage 263,932
Printing 113,319
Auditing fees 40,732
Registration fees 25,205
Legal fees 12,011
Miscellaneous 710,265
-------------
Total expenses $ 13,849,564
Reduction of expenses by distributor (1,615,767)
-------------
Net expenses $ 12,233,797
-------------
Net investment income $ 36,153,270
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 160,167,831
Foreign currency transactions (7,080,871)
-------------
Net realized gain on investments $ 153,086,960
-------------
Change in unrealized appreciation (depreciation) -
Investments $(207,043,744)
Translation of assets and liabilities in foreign
currencies 37,149
-------------
Net unrealized loss on investments $(207,006,595)
-------------
Net realized and unrealized loss on investments and
foreign currency transactions $ (53,919,635)
-------------
Decrease in net assets from operations $ (17,766,365)
=============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended December 31, 1994 1993
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 36,153,270 $ 49,481,094
Net realized gain on investments and
foreign currency transactions 153,086,960 212,619,860
Net unrealized loss on investments and
foreign currency transactions (207,006,595) (105,788,415)
-------------- --------------
Decrease in net assets from operations $ (17,766,365) $ 156,312,539
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (34,653,221) $ (49,084,360)
From net investment income (Class B) (721,674) (180,367)
In excess of net investment income
(Class A) (58,099) --
In excess of net investment income
(Class B) (1,186) --
From net realized gain on investments
and foreign currency transactions (154,197,201) (213,230,913)
In excess of net realized gain on
investments and foreign currency
transactions (2,785,811) --
-------------- --------------
Total distributions declared to
shareholders $ (192,417,192) $ (262,495,640)
-------------- --------------
Trust share (principal) transactions -
Net proceeds from sale of shares $ 193,471,112 $ 159,150,400
Net asset value of shares issued to
shareholders in reinvestment
of distributions 136,047,466 175,259,430
Cost of shares reacquired (156,603,306) (135,096,331)
-------------- --------------
Increase in net assets from Trust
share transactions $ 172,915,272 $ 199,313,499
-------------- --------------
Total increase (decrease) in net
assets $ (37,268,285) $ 93,130,398
Net assets:
At beginning of period 1,640,825,061 1,547,694,663
-------------- --------------
At end of period (including
distributions in excess of net
investment income of $59,285 and $0,
respectively) $1,603,556,776 $1,640,825,061
============== ==============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $11.50 $12.31 $13.87 $12.28 $13.55 $11.22 $11.26
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F5> -
Net investment income<F6> $ 0.25 $ 0.39 $ 0.32 $ 0.38 $ 0.43 $ 0.45 $ 0.40
Net realized and unrealized gain (loss)
on investments (0.36) 0.86 0.69 2.95 (0.45) 3.56 0.76
------ ------ ------ ------ ------ ------ ------
Total from investment operations $(0.11) $ 1.25 $ 1.01 $ 3.33 $(0.02) $ 4.01 $ 1.16
------ ------ ------ ------- ------ ------ ------
Less distributions declared to
shareholders -
From net investment income<F3> $(0.25) $(0.39) $(0.33) $(0.39) $(0.43) $(0.45) $(0.39)
From net realized gain on
investments<F2> (1.05) (1.67) (2.22) (1.32) (0.82) (1.22) (0 81)
In excess of net realized gain on
investments (0.02) -- -- -- -- -- --
From paid-in capital<F1> -- -- (0.02) (0.03) -- (0.01) --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.32) $(2.06) $(2.57) $(1.74) $(1.25) $(1.68) $(1.20)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $10.07 $11.50 $12.31 $13.87 $12.28 $13.55 $11.22
====== ====== ====== ====== ====== ====== ======
Total return<F4> (1.02)% 10.03% 7.68% 27.41% (0.33)% 35.80% 10.12%
Ratios (to average net assets)/
Supplemental data:<F6>
Expenses 0.71% 0.68% 0.62% 0.62% 0.47% 0.50% 0.55%
Net investment income 2.20% 3.04% 2.30% 2.73% 3.28% 3.40% 3.39%
Portfolio turnover 87% 41% 46% 44% 26% 20% 19%
Net assets at end of period
(000,000 omitted) $1,535 $1,626 $1,548 $1,530 $1,265 $1,382 $1,139
<F1>For the year ended December 31, 1988, the per share distribution from paid-in capital was $0.001.
<F2>For the year ended December 31, 1991, the per share distribution in excess of net realized gain on investments was $0.0041.
<F3>For the year ended December 31, 1994, the per share distribution in excess of net investment income was $0.0004 for Class A
shares.
<F4>Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to January
2, 1991.) If the charge had been included, the results would have been lower.
<F5>For the periods subsequent to December 31, 1992, the per share data is based on average shares outstanding for both Class A
and Class B shares.
<F6>The distributor did not impose a portion of its distribution fee, attributable to Class A shares, for the periods indicated.
Furthermore, for the year ended December 31, 1993, net investment income for Class A shareholders includes $0.12 per share
applicable to nonrecurring dividend income. Had such dividend not been included and the management fee related to such income
and a portion of the distribution fee related to Class A shareholders not been waived, the net investment income per share and
the ratios would have been:
Net investment income $ 0.24 $ 0.27 -- -- -- -- --
Ratios (to average net assets):
Expenses 0.81% 0.74% -- -- -- -- --
Net investment income 2.10% 2.05% -- -- -- -- --
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1987 1986 1985 1994 1993<F4>
- ------------------------------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value- beginning of period $12.09 $12.12 $11.02 $11.48 $13.02
------ ------ ------ ------ ------
Income from investment operations<F5> -
Net investment income<F6> $ 0.38 $ 0.40 $ 0.46 $ 0.15 $ 0.04
Net realized and unrealized gain (loss)
on investments 0.57 1.72 2.18 (0.36) 0.32
------ ------ ------ ------ ------
Total from investment operations $ 0.95 $ 2.12 $ 2.64 $(0.21) $ 0.36
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income<F2> $(0.39) $(0.40) $(0.46) $(0.17) $(0.23)
From net realized gain on investments (1.39) (1.73) (1.06) (1.05) (1.67)
In excess of net realized gain on investments -- -- -- (0.02) --
From paid-in capital -- (0.02) (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.78) $(2.15) $(1.54) $(1.24) $(1.90)
------ ------ ------ ------ ------
Net asset value - end of period $11.26 $12.09 $12.12 $10.03 $11.48
====== ====== ====== ====== ======
Total return<F3> 7.25% 16.97% 24.21% (1.88)% 2.62%
Ratios (to average net assets)/Supplemental data:<F6>
Expenses 0.45% 0.49% 0.55% 1.61% 1.56%<F1>
Net investment income 2.63% 2.99% 3.91% 1.37% 1.05%<F1>
Portfolio turnover 23% 26% 33% 87% 41%
Net assets at end of period
(000,000 omitted) $1,177 $1,186 $1,155 $69 $15
<F1>Annualized.
<F2>For the year ended December 31,1994, the per share distribution in excess of net investment income was $0.0003
for Class B shares.
<F3>Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends
prior to January 2, 1991.) If the charge had been included, the results would have been lower.
<F4>For the period from the commencement of offering Class B shares, September 7, 1993 to December 31, 1993.
<F5>For the periods subsequent to December 31, 1992, the per share data is based on average shares outstanding for
both Class A and Class B shares.
<F6>For the year ended December 31, 1993, net investment income for Class B shareholders includes $0.007 per share
applicable to nonrecurring dividend income. Had such dividend not been included and the manage- ment fee
related to such income not been waived, the net investment income per share and the ratios would have been:
Net investment income -- -- -- -- $ 0.03
Ratios (to average net assets):
Expenses -- -- -- -- 1.66%<F1>
Net investment income -- -- -- -- 0.29%<F1>
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
Massachusetts Investors Trust (the Trust) was organized as a common law trust
under the laws of the Commonwealth of Massachusetts in 1924 and is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company.
(2) Significant Accounting Policies
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed issues
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. Futures
contracts, options and options on futures contracts listed on commodities
exchanges are valued at closing settlement prices. Over-the-counter options are
valued by brokers through the use of a pricing model which takes into account
closing bond valuations, implied volatility and short-term repurchase rates.
Securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Trustees.
Repurchase Agreements - The Trust may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Trust requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Trust to obtain those securities
in the event of a default under the repurchase agreement. The Trust monitors, on
a daily basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Trust under each such repurchase agreement.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Trust may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Trust. The Trust, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income-producing strategy reflecting the view of
the Trust's management on the direction of interest rates.
Futures Contracts - The Trust may enter into stock index and foreign currency
futures contracts for the delayed delivery of securities, or contracts based on
financial indices at a fixed price on a future date. In entering such contracts,
the Trust is required to deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Subsequent payments are made or
received by the Trust each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Trust. The Trust's investment in futures
contracts is designed to hedge against anticipated future changes in interest
rates or securities prices. The Trust may also invest in futures contracts for
non-hedging purposes. For example, interest rate futures may be used in
modifying the duration of the portfolio without incurring the additional
transaction costs involved in buying and selling the underlying securities.
Should interest rates or securities prices move unexpectedly, the Trust may not
achieve the anticipated benefits of the futures contracts and may realize a
loss.
Forward Foreign Currency Exchange Contracts - The Trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Trust will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Trust may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Trust may enter into
contracts with the intent of changing the relative exposure of the Trust's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Tax Matters and Distributions - The Trust'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 income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided.
The Trust 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 Trust'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 Trust distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended December 31, 1994, $778,375 and $325,211 were
reclassified from accumulated undistributed net investment income and paid in
capital, respectively, to accumulated net realized gain on investments, due to
differences between book and tax accounting for currency transactions. This
change had no effect on the net assets or net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Trust offers Class A and
Class B shares. Class B shares were first offered to the public on September 7,
1993. The two classes of shares differ in their shareholder servicing agent,
distribution and service fees. Shareholders of each class also bear certain
expenses that pertain only to that particular class. All shareholders bear the
common expenses of the Trust pro rata, based on the average daily net assets of
each class, without distinction between share classes. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses, including distribution and shareholder servicing fees.
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee, computed daily and paid monthly at an effective annual rate of
0.16% of average daily net assets and 3.46% of investment income, amounted to
$4,385,702. The Trust pays no compensation directly to its Trustees who are
officers of the investment adviser, or to officers of the Trust, all of whom
receive remuneration for their services to the Trust from MFS. Certain of the
officers and Trustees of the Trust are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has an
unfunded defined benefit plan for all of its independent Trustees. Included in
Trustees' compensation is a net periodic pension expense of $23,930 for the year
ended December 31, 1994.
Distributor - FSI, a wholly owned subsidiary of MFS, as distributor, received
$257,995 as its portion of the sales charge on sales of Class A shares of the
Trust. Effective January 1, 1995, MFS Financial Services, Inc. (FSI) became MFS
Fund Distributors (MFD). The Trustees have adopted separate distribution plans
for Class A and Class B shares pursuant to Rule 12b-1 of the Investment Company
Act of 1940 as follows:
The Class A Distribution Plan provides that the Trust will pay MFD up to 0.35%
of its average daily net assets attributable to Class A shares annually in order
that MFD may pay expenses on behalf of the Trust 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 Trust'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 Trust'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 Trust. MFD is not imposing the 0.10% distribution fee for an
indefinite period. Fees incurred under the distribution plan, net of waiver,
during the year ended December 31, 1994 were 0.23% of average daily net assets
attributable to Class A shares on an annualized basis and amounted to $3,714,576
(of which MFD retained $1,080,283).
The Class B Distribution Plan provides that the Trust will pay MFD a monthly
distribution fee, equal to 0.75% per annum, and a quarterly service fee of up to
0.25% per annum, of the Trust's average daily net assets attributable to Class B
shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD, all or a portion of the service fee attributable to Class B shares.
The service fee is intended to be additional consideration for services rendered
by the dealer with respect to Class B shares. Fees incurred under the
distribution plan for the year ended December 31, 1994 were 1.00% of average
daily net assets attributable to Class B shares on an annualized basis and
amounted to $425,930 (of which MFD retained $2,779).
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a share
redemption within twelve months following the share purchase. A contingent
deferred sales charge is imposed on shareholder redemptions of Class B shares in
the event of a shareholder redemption within six years of purchase. MFD receives
all contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended December 31, 1994 were $2,552 and $59,341 for Class A and
Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$1,914,686 and $93,704 for Class A and Class B shares, respectively, for its
services as shareholder servicing agent. The fee is calculated as a percentage
of the average daily net assets of each class of shares at an effective annual
rate of up to 0.15% and up to 0.22% attributable to Class A 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
$1,381,483,004 and $1,406,355,898, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Trust, as computed on a federal income tax basis, are as follows:
Aggregate cost $1,401,630,157
==============
Gross unrealized appreciation $ 226,793,100
Gross unrealized depreciation (30,373,568)
--------------
Net unrealized appreciation $ 196,419,532
==============
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue 180,000,000 full and
fractional shares of beneficial interest (par value $0.33 1/3). Transactions in
Trust shares were as follows:
Class A Shares
<TABLE>
<CAPTION>
1994 1993
------------------------- -------------------------
Year Ended December 31, Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 11,401,171 $ 129,970,532 11,370,013 $ 144,127,688
Shares issued to shareholders in
reinvestment of distributions 12,678,046 129,231,432 14,857,094 173,569,724
Shares reacquired (13,044,429) (148,666,502) (10,548,472) (134,654,616)
----------- ------------- ----------- -------------
Net increase 11,034,788 $ 110,535,462 15,678,635 $ 183,042,796
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
1994 1993*
------------------------- -------------------------
Year Ended December 31, Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,590,985 $ 63,500,580 1,158,058 $15,022,712
Shares issued to shareholders in
reinvestment of distributions 674,366 6,816,034 145,785 1,689,706
Shares reacquired (703,746) (7,936,804) (33,793) (441,715)
--------- ------------ --------- ------------
Net increase 5,561,605 $ 62,379,810 1,270,050 $16,270,703
--------- ------------ --------- ------------
*For the period from the commencement of offering of Class B shares, September
7, 1993 to December 31, 1993.
</TABLE>
(6) Line of Credit
The Trust entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $300 million, collectively.
Borrowings may be made to temporarily finance the repurchase of Trust 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 Trust for the
year ended December 31, 1994 was $25,428.
(7) Restricted Securities
The Trust may invest not more than 15% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At December 31,
1994, the Trust owned the following restricted securities (constituting 1.05% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers.
<TABLE>
<CAPTION>
Date of
Description Acquisition Shares Cost Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Occidental Petroleum Corp., $3.875 3/24/93 150,000 $ 8,156,250 $ 7,275,000
Occidental Petroleum Corp., $3.875 7/19/94 50,000 2,537,500 2,425,000
Tele Danmark, ADR 4/28/94 280,000 6,587,280 7,140,000
----------- -----------
$17,281,030 $16,840,000
=========== ===========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of Massachusetts Investors Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Massachusetts Investors Trust as of December
31, 1994, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended December 31, 1994 and
1993, and the financial highlights for each of the years in the ten-year period
ended December 31, 1994. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 1994 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Massachusetts
Investors Trust at December 31, 1994, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 1, 1995
----------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
