[Q] [M] [I] [S] Annual Report of
Year Ended
THE FIRST NAME IN MUTUAL FUNDS December 31, 1995
MASSACHUSETTS INVESTORS TRUST
[GRAPHIC PHOTO OF A KEYBOARD]
<PAGE>
MASSACHUSETTS INVESTORS TRUST
Trustees
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Peter G. Harwood - Private Investor
J. Atwood Ives - Chairman and Chief Executive Officer, Eastern Enterprises
Lawrence T. Perera - Partner, Hemenway & Barnes
William J. Poorvu - Adjunct Professor, Harvard University Graduate School of
Business Administration
Charles W. Schmidt - Private Investor
Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company
Elaine R. Smith - Independent Consultant
David B. Stone - Chairman, North American Management Corp. (investment adviser)
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street Boston, MA
02116-3741 Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Managers
Mitchell D. Dynan*
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
Custodian
State Street Bank and Trust Company
Auditors
Deloitte & Touche llp
Investor Information
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m. to
5 p.m. Eastern time (or leave a message anytime). Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576 any
business day from 9 a.m. to 5 p.m. Eastern time. (To use this service, your
phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
[GRAPHIC]
Top-Rated Service
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s Broker/
Dealer Survey, Main Office Operations 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."
<PAGE>
Letter to Shareholders
Dear Shareholders:
The past year was an extraordinarily good one for the stock market. The
market's performance was fueled by two main factors. First, the market
anticipated the slowdown in economic activity in 1995. This drove long-term
interest rates close to their lows of 1993, and stocks of financial services
and growth companies responded strongly. Second, corporate earnings were very
strong despite the weaker economy. This, combined with higher valuations
resulting from lower interest rates, helped drive up stock prices and
contributed to the Trust's good performance for the year.
For the 12 months ended December 31, 1995, the stock market, as measured
by the Standard & Poor's 500 Composite Index (the S&P 500), a popular,
unmanaged index of common stock performance, had a total return of +37.53%.
During that same period, Class A shares of the Trust had a total return of
+39.34%, while Class B shares had a total return of +38.05%. 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
outperformance may be found in the Portfolio Performance and Strategy section
of this letter.
Economic Environment
Moderate but sustainable growth has been the hallmark of the economic
expansion's fifth year, although the economy did show signs of sluggishness
late in the year. For example, retail sales have been disappointing, in part
because of rising levels of consumer debt, while 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
limits 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 inflation is under control. While we see a deceleration of
corporate earnings as the inevitable consequence of traditional business
cycles, we
1
<PAGE>
Letter to Shareholders -- continued
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
The Trust follows a conservative growth investment strategy. 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.
We entered the year overweighted in financial services and consumer growth
stocks. We felt that these areas represented stocks with attractive relative
earnings strength. Late last year we raised our technology weightings to a
near-market weighting, which is unusual for our conservative methodology.
Another area of overweighting was industrial goods and services, where we were
concentrated in machinery and in aerospace and defense companies. We also
entered the year effectively fully invested, consistent with our strategy of
not timing the market. We found this strategy to be appropriate for most of the
year, and our only major change in portfolio strategy was to reduce our
technology weighting in mid-summer. While this proved somewhat premature, it
turned out to be the right decision.
Looking ahead to 1996, we continue to feel that relative earnings strength
will be the key to superior performance. We have maintained our overweighting
in financial services but have moved away from banks and toward insurance
companies. We are also overweighted in consumer non- durables and in industrial
companies. One area where we retain an overweighting but have not been rewarded
is retail, an area that has underperformed the S&P 500 for several years. We
feel fine companies with solid long-term prospects in this sector can be bought
at modest valuations.
A key to 1996 performance will be judging the effectiveness of the Federal
Reserve's monetary easing. So far, the market has benefited from the overall
reduction in interest rates but, specifically, economically sensitive stocks
have lagged. We feel one of the major challenges of the Trust will be to
measure when and how significantly these stocks will respond. As of this
writing, we have not made significant moves in this direction.
2
<PAGE>
Letter to Shareholders -- continued
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ Mitchell D. Dynan
/s/ John D. Laupheimer, Jr.
/s/ Kevin R. Parke
/s/ A. Keith Brodkin /s/ Portfolio Managers
A. Keith Brodkin Mitchell D. Dynan
Chairman and President John D. Laupheimer, Jr.
Kevin R. Parke
Portfolio Managers
January 12, 1996
Portfolio Managers Profiles
Mitch Dynan joined the MFS Research Department in 1986. A graduate of Tufts
University, he was named Assistant Vice President - Investments in 1987 and
Vice President - Investments in 1988. Mr. Dynan became a Portfolio Manager of
Massachusetts Investors Trust in 1995.
John Laupheimer joined the MFS Research Department in 1981 as an industry
specialist. A graduate of Boston University and the Sloan School of
Management of Massachusetts Institute of Technology, he was named Investment
Officer in 1983, Assistant Vice President - Investments in 1984, Vice
President - Investments in 1986 and Senior Vice President in January 1995.
Mr. Laupheimer became a Portfolio Manager of Massachusetts Investors Trust in
1993.
Kevin Parke joined the MFS Research Department in 1985 as an industry
specialist. A graduate of Lehigh University and the Harvard University
Graduate School of Business Administration, he was named Assistant Vice
President - Investments in 1987, Vice President - Investments in 1988, Senior
Vice President - Investments in 1993 and Director of Research in 1995. Mr.
Parke became a Portfolio Manager of Massachusetts Investors Trust in 1992.
3
<PAGE>
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 Trust has designated $135,643,154 as a long-term capital gain
distribution for tax purposes. This distribution was made to shareholders of
record as of December 27, 1995, payable January 2, 1996.
For the year ended December 31, 1995, the amount of distributions from income
eligible for the 70% dividends-received deduction for corporations came to
59.09%.
Performance
The information below and on the following page illustrates the historical
performance of Massachusetts Investors Trust Class A shares in comparison to
various market indicators. Trust results in the graphs 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.
See Appendix page for performance chart descriptions
Growth of a Hypothetical $10,000 Investment
(For the 5-Year Period Ended December 31, 1995)
Growth of a Hypothetical $10,000 Investment
(For the 10-Year Period Ended December 31, 1995)
The performance of other classes will be greater than or less than the line
shown, based on the differences in loads and fees paid by shareholders
investing in the different classes.
Average Annual Total Returns
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
==================================================================================================
Massachusetts Investors Trust (Class A) including
5.75% sales charge +31.38% +12.67% +14.42% +14.00%
- --------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class A) at net
asset value +39.34% +14.92% +15.78% +14.68%
- --------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class B) with CDSC+ +34.05% -- -- +14.24%*
- --------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class B) without
CDSC +38.05% -- -- +15.29%*
- --------------------------------------------------------------------------------------------------
Average growth and income fund** +30.82% +13.21% +15.31% +12.64%
- --------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index** +37.53% +15.32% +16.56% +14.86%
- --------------------------------------------------------------------------------------------------
Consumer Price IndexS.** +2.54% +2.65% +2.79% +3.46%
- --------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
* For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1995.
** Source: Lipper Analytical Services, Inc.
SS The Consumer Price Index is a popular measure of change in prices.
5
<PAGE>
Average Annual Total Returns - continued
In the table on the preceding page, 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 rates mutual fund
performance) for the applicable time periods. Because these returns do not
reflect any applicable sales charges, 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 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
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.
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.
6
<PAGE>
Portfolio of Investments - December 31, 1995
<TABLE>
<CAPTION>
Common Stocks - 96.3%
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 91.8%
Aerospace - 6.0%
AlliedSignal, Inc. 480,000 $ 22,800,000
Boeing Co. 50,000 3,918,750
General Dynamics Corp. 104,000 6,149,000
Lockheed Martin Corp. 380,000 30,020,000
McDonnell-Douglas Co. 409,000 37,628,000
Raytheon Co. 740,000 34,965,000
------------
$135,480,750
- --------------------------------------------------------------------------------
Apparel and Textiles - 2.1%
Intimate Brands, Inc., "A"* 104,300 $ 1,564,500
Nike, Inc., "B" 462,000 32,166,750
VF Corp. 240,000 12,660,000
------------
$ 46,391,250
- --------------------------------------------------------------------------------
Automotive - 0.5%
Eaton Corp. 120,000 $ 6,435,000
General Motors Corp. 100,000 5,287,500
------------
$ 11,722,500
- --------------------------------------------------------------------------------
Banks and Credit Companies - 9.0%
Chase Manhattan Corp. 75,000 $ 4,546,875
Comerica, Inc. 38,500 1,544,813
First Bank System, Inc. 910,000 45,158,750
First Chicago NBD Corp. 610,000 24,095,000
Firstar Corp. 310,000 12,283,750
Integra Financial Corp. 302,500 19,057,500
Meridian Bancorp, Inc. 30,000 1,395,000
National City Corp. 180,000 5,962,500
Northern Trust Corp. 300,000 16,800,000
Norwest Corp. 1,293,000 42,669,000
Suntrust Banks, Inc. 250,000 17,125,000
U.S. Bancorp 320,000 10,760,000
------------
$201,398,188
- --------------------------------------------------------------------------------
Business Machines - 1.2%
Compaq Computer Corp.* 150,000 $ 7,200,000
Hewlett-Packard Co. 100,000 8,375,000
International Business Machines Corp. 106,600 9,780,550
Xerox Corp. 10,000 1,370,000
------------
$ 26,725,550
- --------------------------------------------------------------------------------
Business Services - 0.2%
ALCO Standard Corp. 46,000 $ 2,098,750
DST Systems, Inc.* 38,300 1,091,550
First Data Corp. 20,500 1,370,938
------------
$ 4,561,238
- --------------------------------------------------------------------------------
Cellular Telephones - 0.1%
AirTouch Communications, Inc.* $
60,000 1,695,000
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Portfolio of Investments - continued
<TABLE>
<CAPTION>
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Chemicals - 1.3%
du Pont (E. I.) de Nemours & Co. 179,000 $ 12,507,625
Grace (W.R.) & Co. 125,000 7,390,625
Monsanto Co. 75,000 9,187,500
------------
$ 29,085,750
- --------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.5%
Microsoft Corp.* 149,000 $ 13,074,750
Computer Software - Systems - 2.5%
Computer Association International, Inc. 483,000 $ 27,470,625
General Motors Corp., "E" 393,100 20,441,200
Oracle Systems Corp.* 176,000 7,458,000
------------
$ 55,369,825
- --------------------------------------------------------------------------------
Consumer Goods and Services - 8.1%
American Standard Cos., Inc.* 150,000 $ 4,200,000
Colgate-Palmolive Co. 309,500 21,742,375
Gillette Co. 867,000 45,192,375
Philip Morris Cos., Inc. 649,100 58,743,550
Procter & Gamble Co. 374,000 31,042,000
Seagram Ltd. 87,200 3,019,300
Service Corp. International 155,700 6,850,800
Tyco International Ltd. 264,000 9,405,000
------------
$180,195,400
- --------------------------------------------------------------------------------
Containers - 0.3%
Corning, Inc. 200,000 $ 6,400,000
- --------------------------------------------------------------------------------
Defense Electronics - 1.7%
Loral Corp. 1,076,400 $ 38,077,650
- --------------------------------------------------------------------------------
Electrical Equipment - 3.5%
General Electric Co. 660,000 $ 47,520,000
Honeywell, Inc. 610,000 29,661,250
------------
$ 77,181,250
- --------------------------------------------------------------------------------
Electronics - 1.1%
Intel Corp. 370,000 $ 20,997,500
LSI Logic Corp.* 38,000 1,244,500
National Semiconductor Corp.* 100,000 2,225,000
------------
$ 24,467,000
- --------------------------------------------------------------------------------
Entertainment - 0.8%
Comcast Corp., Special, "A" 60,000 $ 1,091,250
Disney (Walt) Co. 265,000 15,635,000
Harrah's Entertainment, Inc.* 36,000 873,000
------------
$ 17,599,250
- --------------------------------------------------------------------------------
Financial Institutions - 2.5%
Beneficial Corp. 561,000 $ 26,156,625
Federal Home Loan Mortgage Corp. 147,000 12,274,500
</TABLE>
8
<PAGE>
Portfolio of Investments - continued
<TABLE>
<CAPTION>
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Financial Institutions - continued
MBNA Corp. 46,700 $ 1,722,063
State Street Boston Corp. 370,000 16,650,000
------------
$ 56,803,188
- --------------------------------------------------------------------------------
Food and Beverage Products - 8.3%
Anheuser-Busch Cos., Inc. 160,000 $ 10,700,000
CPC International, Inc. 380,000 26,077,500
Campbell Soup Co. 471,600 28,296,000
General Mills, Inc. 273,500 15,794,625
Hershey Foods Corp. 86,000 5,590,000
Kellogg Co. 150,000 11,587,500
Nabisco Holdings Corp., "A" 808,000 26,361,000
PepsiCo, Inc. 576,000 32,184,000
Ralston Purina Co. 472,500 29,472,188
------------
$186,062,813
- --------------------------------------------------------------------------------
Forest and Paper Products - 2.0%
Kimberly Clark Corp. 552,860 $ 45,749,160
- --------------------------------------------------------------------------------
Insurance - 7.3%
AFLAC, Inc. 308,000 $ 13,359,500
American Re Corp. 257,000 10,504,875
CIGNA Corp. 213,500 22,043,875
MBIA, Inc. 353,000 26,475,000
Progressive Corp. - Ohio 391,200 19,119,900
Prudential Reinsurance Holdings, Inc.* 59,400 1,388,475
St. Paul Cos., Inc. 413,000 22,973,125
Torchmark, Inc. 530,000 23,982,500
Transamerica Corp. 324,600 23,655,225
------------
$163,502,475
- --------------------------------------------------------------------------------
Machinery - 2.9%
AGCO Corp. 100,000 $ 5,100,000
Case Corp. 150,000 6,862,500
Deere & Co., Inc. 484,000 17,061,000
Ingersoll Rand Co. 440,000 15,455,000
York International Corp. 420,000 19,740,000
------------
$ 64,218,500
- --------------------------------------------------------------------------------
Medical and Health Products - 4.9%
American Home Products Corp. 118,700 $ 11,513,900
Baxter International, Inc. 250,000 10,468,750
Johnson & Johnson 380,000 32,537,500
Lilly (Eli) & Co. 132,766 7,468,088
Pfizer, Inc. 340,000 21,420,000
Warner-Lambert Co. 280,000 27,195,000
------------
$110,603,238
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Portfolio of Investments - continued
<TABLE>
<CAPTION>
Common Stocks - continued
================================================================================
Issuer Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Medical and Health Technology and Services - 2.2%
Guidant Corp.* 167,323 $ 7,069,397
Manor Care, Inc. 40,000 1,400,000
Medtronic, Inc. 150,000 8,381,250
Pacificare Health Systems, Inc., "B"* 231,000 20,097,000
United Healthcare Corp. 187,000 12,248,500
------------
$ 49,196,147
- --------------------------------------------------------------------------------
Metals and Minerals - 0.7%
Phelps Dodge Corp. 240,000 $ 14,940,000
- --------------------------------------------------------------------------------
Oil Services - 0.3%
Schlumberger Ltd. 94,000 $ 6,509,500
- --------------------------------------------------------------------------------
Oils - 5.7%
Amoco Corp. 430,000 $ 30,906,250
Chevron Corp. 120,000 6,300,000
Exxon Corp. 328,000 26,281,000
Mobil Corp. 445,000 49,840,000
USX-Marathon Group 600,000 11,700,000
Union Pacific Resource Group, Inc.* 93,300 2,367,488
------------
$127,394,738
- --------------------------------------------------------------------------------
Photographic Products - 0.8%
Eastman Kodak Co. 270,000 $ 18,090,000
- --------------------------------------------------------------------------------
Pollution Control - 0.1%
WMX Technologies, Inc. 46,500 $ 1,389,188
- --------------------------------------------------------------------------------
Printing and Publishing - 0.6%
Tribune Co., Inc. 220,000 $ 13,447,500
- --------------------------------------------------------------------------------
Railroads - 4.4%
CSX Corp. 832,000 $ 37,960,000
Conrail, Inc. 380,000 26,600,000
Illinois Central Corp. 580,000 22,257,500
Norfolk Southern Corp. 150,000 11,906,250
------------
$ 98,723,750
- --------------------------------------------------------------------------------
Restaurants and Lodging
Promus Hotel Corp.* 18,000 $ 400,500
- --------------------------------------------------------------------------------
Special Products and Services - 0.3%
Stanley Works 150,000 $ 7,725,000
- --------------------------------------------------------------------------------
Stores - 4.1%
Circuit City Stores, Inc. 520,000 $ 14,365,000
Dayton-Hudson Corp. 190,000 14,250,000
Federated Department Stores, Inc.* 48,000 1,320,000
Home Depot, Inc. 120,000 5,745,000
Lowe's Cos., Inc. 150,000 5,025,000
May Department Stores Co. 495,000 20,913,750
Penney (J.C.), Inc. 320,000 15,240,000
Sears, Roebuck & Co. 150,000 5,850,000
</TABLE>
10
<PAGE>
Portfolio of Investments - continued
<TABLE>
<CAPTION>
Common Stocks - continued
=================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Stores - continued
Wal-Mart Stores, Inc. 450,000 $ 10,068,750
--------------
$ 92,777,500
- ---------------------------------------------------------------------------------
Utilities - Electric - 1.4%
CMS Energy Corp. 42,000 $ 1,254,750
Cinergy Corp. 204,600 6,265,875
DPL, Inc. 395,700 9,793,575
Illinova Corp. 46,000 1,380,000
Peco Energy Co. 300,000 9,037,500
Pinnacle West Capital Corp. 50,000 1,437,500
Portland General Corp. 50,000 1,456,250
--------------
$ 30,625,450
- ---------------------------------------------------------------------------------
Utilities - Gas - 0.6%
Pacific Enterprises 480,000 $ 13,560,000
- ---------------------------------------------------------------------------------
Utilities - Telephone - 3.8%
AT&T Corp. 270,000 $ 17,482,500
Ameritech Corp. 204,000 12,036,000
BellSouth Corp. 240,000 10,440,000
GTE Corp. 497,000 21,868,000
Pacific Telesis Group 200,000 6,725,000
SBC Communications, Inc. 275,000 15,812,500
--------------
$ 84,364,000
- ---------------------------------------------------------------------------------
Total U.S. Stocks $2,055,507,998
- ---------------------------------------------------------------------------------
Foreign Stocks - 4.5%
Denmark - 0.4%
Tele Danmark, ADR, "B" (Utilities - Telephone) 320,000 $ 8,840,000
- ---------------------------------------------------------------------------------
Italy - 0.1%
Telecom Italia (Telecommunications) 1,250,000 $ 2,201,481
- ---------------------------------------------------------------------------------
Japan - 0.7%
Bank of Tokyo (Finance) 401,000 $ 7,017,403
Takeda Chemical Industries (Chemicals) 503,000 8,267,427
---------
$ 15,284,830
- ---------------------------------------------------------------------------------
Netherlands - 1.0%
IHC Caland, NV (Transportation) 143,100 $ 4,808,587
Royal Dutch Petroleum Co. (Oils) 132,000 18,628,500
--------------
$ 23,437,087
- ---------------------------------------------------------------------------------
New Zealand - 0.2%
Lion Nathan Ltd. (Food and Beverage Products) 2,000,000 $ 4,765,439
- ---------------------------------------------------------------------------------
Singapore - 0.1%
Mandarin Oriental International Ltd.
(Restaurants and Lodging) 112,900 $ 136,609
Singapore Press Holdings Ltd. (Publishing) 150,000 2,652,426
--------------
$ 2,789,035
- ---------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Portfolio of Investments - continued
<TABLE>
<CAPTION>
Common Stocks - continued
=================================================================================
Issuer Shares Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - continued
Sweden - 1.3%
Astra AB, "B" (Pharmaceuticals) 593,600 $ 23,495,997
Hennes & Mauritz, "B" (Retail) 82,050 4,569,036
--------------
$ 28,065,033
- ---------------------------------------------------------------------------------
United Kingdom - 0.7%
British Petroleum PLC, ADR (Oils) 15,500 $ 1,582,938
PowerGen PLC, ADR (Utilities - Electric) 1,312,400 4,502,880
PowerGen PLC (Utilities - Electric) 1,005,800 8,307,209
SmithKline Beecham PLC, ADR (Medical and Health
Products) 25,000 1,387,500
--------------
$ 15,780,527
- ---------------------------------------------------------------------------------
Total Foreign Stocks $ 101,163,430
- ---------------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $1,538,328,977) $2,156,671,435
- ---------------------------------------------------------------------------------
Convertible Preferred Stock - 0.1%
=================================================================================
Atlantic Richfield Co. (Oils) (Identified Cost,
$2,970,000) 120,000 $ 2,820,000
- ---------------------------------------------------------------------------------
Convertible Bonds - 1.0%
=================================================================================
Principal Amount
(000 Omitted)
- ---------------------------------------------------------------------------------
Costco Wholesale Corp., 5.75s, 2002 (Stores) $ 2,500 $ 2,375,000
Equitable (Cos.), Inc., 6.125s, 2024 (Insurance) 6,250 7,132,813
Roche Holdings, Inc., 0s, 2010
(Medical and Health Technology and Services)## 20,512 9,025,280
Sandoz, 2s, 2002 (Chemicals) ## 4,750 4,488,750
- ---------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost,
$20,077,891) $ 23,021,843
- ---------------------------------------------------------------------------------
Short-Term Obligations - 4.3%
=================================================================================
Abbott Labs, due 1/10/96 $ 12,780 $ 12,762,108
Federal Home Loan Bank, due 1/22/96 12,780 12,739,296
Federal Home Loan Mortgage Corp., due 1/22/96 7,035 7,012,635
Federal National Mortgage Assn., due 1/04/96 -
1/17/96 24,260 24,223,401
Ford Motor Credit Corp., due 1/02/96 - 1/05/96 31,905 31,890,482
Raytheon Co., due 1/08/96 2,650 2,646,960
Transamerica Co., due 1/02/96 10 9,998
Weyerhaeuser Co., due 1/09/96 4,560 4,554,123
- ---------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost and Value $ 95,839,003
- ---------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,657,215,871) $2,278,352,276
Other Assets, Less Liabilities - (1.7)% (38,968,459)
=================================================================================
Net Assets - 100.0% $2,239,383,817
- ---------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
12
<PAGE>
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
================================================================================================
December 31, 1995
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $1,657,215,871) $2,278,352,276
Cash 6,080
Receivable for investments sold 176,240
Receivable for Trust shares sold 5,763,435
Interest and dividends receivable 4,948,282
Other assets 22,128
--------------
Total assets $2,289,268,441
--------------
Liabilities:
Distributions payable $ 43,321,632
Payable for investments purchased 2,530,553
Payable for Trust shares reacquired 2,189,167
Net payable for forward foreign currency exchange contracts sold 176,905
Payable to affiliates -
Management fee 37,565
Shareholder servicing agent fee 21,888
Distribution fee 1,141,685
Accrued expenses and other liabilities 465,229
--------------
Total liabilities $ 49,884,624
--------------
Net assets $2,239,383,817
==============
Net assets consist of:
Paid-in capital $1,619,728,971
Unrealized appreciation on investments and translation of assets and
liabilities
in foreign currencies 620,961,085
Accumulated distributions in excess of net realized gain on investments
and foreign currency transactions (1,230,776)
Accumulated undistributed net investment income (75,463)
--------------
Total $2,239,383,817
==============
Shares of beneficial interest outstanding 176,322,348
==============
Class A shares:
Net asset value and redemption price per share
(net assets of $2,074,498,655 / 163,272,441 shares of beneficial interest
outstanding) $12.71
======
Offering price per share (100/94.25) $13.49
======
Class B shares:
Net asset value and offering price per share
(net assets of $164,885,162 / 13,049,907 shares of beneficial interest
outstanding) $12.63
======
</TABLE>
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
13
<PAGE>
Financial Statements -- continued
<TABLE>
<CAPTION>
Statement of Operations
=====================================================================================
Year Ended December 31, 1995
- -------------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 48,726,746
Interest 5,996,829
Foreign taxes withheld (356,689)
------------
Total investment income $ 54,366,886
------------
Expenses -
Management fee $ 4,973,977
Trustees' compensation 79,395
Shareholder servicing agent fee (Class A) 2,086,710
Shareholder servicing agent fee (Class B) 243,026
Distribution and service fee (Class A) 6,246,877
Distribution and service fee (Class B) 1,104,662
Custodian fee 605,693
Postage 292,600
Printing 135,466
Auditing fees 41,175
Legal fees 15,025
Miscellaneous 632,502
------------
Total expenses $ 16,457,107
Fees paid indirectly (242,362)
Reduction of expenses by distributor (1,812,629)
------------
Net expenses $ 14,402,116
------------
Net investment income $ 39,964,770
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $172,145,965
Foreign currency transactions (54,138)
------------
Net realized gain on investments and foreign currency
transactions $172,091,827
------------
Change in unrealized appreciation (depreciation) -
Investments $421,925,203
Translation of assets and liabilities in foreign currencies (175,320)
------------
Net unrealized gain on investments $421,749,883
------------
Net realized and unrealized gain on investments and foreign
currency $593,841,710
------------
Increase in net assets from operations $633,806,480
============
</TABLE>
See notes to financial statements
14
<PAGE>
Financial Statements -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
==================================================================================
Year Ended December 31, 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 39,964,770 $ 36,153,270
Net realized gain on investments and foreign
currency transactions 172,091,827 153,086,960
Net unrealized gain (loss) on investments and
foreign currency translation 421,749,883 (207,006,595)
-------------- --------------
Increase (decrease) in net assets from
operations $ 633,806,480 $ (17,766,365)
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (38,309,881) $ (34,653,221)
From net investment income (Class B) (1,554,192) (721,674)
From net realized gain on investments and
foreign currency transactions (Class A) (158,264,565) (154,197,201)
From net realized gain on investments and
foreign currency transactions (Class B) (12,389,102) --
In excess of net investment income (Class A) -- (58,099)
In excess of net investment income (Class B) -- (1,186)
In excess of net realized gain on investments
and foreign currency transactions (Class A) -- (2,785,811)
-------------- --------------
Total distributions declared to shareholders $ (210,517,740) $ (192,417,192)
-------------- --------------
Trust share (principal) transactions -
Net proceeds from sale of shares $ $
286,048,738 193,471,112
Net asset value of shares issued to shareholders
in reinvestment of distributions 154,187,632 136,047,466
Cost of shares reacquired (227,698,069) (156,603,306)
-------------- --------------
Increase in net assets from Trust share
transactions $ 212,538,301 $ 172,915,272
-------------- --------------
Total increase (decrease) in net assets $ 635,827,041 $ (37,268,285)
Net assets:
At beginning of period 1,603,556,776 1,640,825,061
-------------- --------------
At end of period (including accumulated
undistributed net investment income and
accumulated distributions in excess of net
investment income of $(75,463) and $59,285,
respectively) $2,239,383,817 $1,603,556,776
============== ==============
</TABLE>
See notes to financial statements
15
<PAGE>
Financial Statements-- continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------
Class
A
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.07 $11.50 $12.31 $13.87 $12.28 $13.55 $11.22
------ ------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment incomeSS $ 0.25 $ 0.25 $ 0.39 $ 0.32 $ 0.38 $ 0.43 $ 0.45
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 3.67 (0.36) 0.86 0.69 2.95 (0.45) 3.56
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 3.92 $(0.11) $ 1.25 $ 1.01 $ 3.33 $(0.02) $ 4.01
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income+++ $(0.46) $(0.25) $(0.39) $(0.33) $(0.39) $(0.43) $(0.45)
From net realized gain on investments
and foreign currency transactions (0.82) (1.05) (1.67) (2.22) (1.32) (0.82) (1.22)
In excess of net realized gain on
investments and foreign currency
transactions++ -- (0.02) -- -- -- -- --
From paid-in capital -- -- -- (0.02) (0.03) -- (0.01)
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(1.28) $(1.32) $(2.06) $(2.57) $(1.74) $(1.25) $(1.68)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $12.71 $10.07 $11.50 $12.31 $13.87 $12.28 $13.55
====== ====== ====== ====== ====== ====== ======
Total return= 39.34% (1.02)% 10.03% 7.68% 27.41% (0.33)% 35.80%
Ratios (to average net assets)/Supplemental dataSS.:
Expenses## 0.70% 0.71% 0.68% 0.62% 0.62% 0.47% 0.50%
Net investment income 2.13% 2.20% 3.04% 2.30% 2.73% 3.28% 3.40%
Portfolio turnover 54% 87% 41% 46% 44% 26% 20%
Net assets at end of period (000,000
omitted) $2,074 $1,535 $1,626 $1,548 $1,530 $1,265 $1,382
++ For the year ended December 31, 1991, the per share distribution in excess of net realized gain on investments
was $0.0041.
+++ For the year ended December 31, 1994, the per share distribution in excess of net investment income was
$0.0004 for Class A shares.
# Per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust'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 January 2, 1991). If the charge had been included, the results would have been lower.
SS The distributor did not impose a portion of its distribution fee for the periods indicated. For the year ended
December 31, 1993, net investment income for Class A shares includes $0.012 per share applicable to
nonrecurring dividend income. Had the dividend for the period not been included and the management fee related
to such income not been waived, and the distribution fee not been waived, the net investment income per share
and the ratios would have been:
Net investment income $0.24 $0.24 $0.27 -- -- -- --
Ratios (to average net assets):
Expenses## 0.81% 0.81% 0.74% -- -- -- --
Net investment income 2.02% 2.10% 2.05% -- -- -- --
</TABLE>
See notes to financial statements
16
<PAGE>
Financial Statements -- continued
Financial Highlights -- continued
<TABLE>
<CAPTION>
=========================================================================================================
Year Ended December 31, 1988 1987 1986 1995 1994 1993*
- ---------------------------------------------------------------------------------------------------------
Class A Class B
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.26 $12.09 $12.12 $10.03 $11.48 $13.02
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment incomeSS $ 0.40 $ 0.38 $ 0.40 $ 0.15 $ 0.15 $ 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.76 0.57 1.72 3.64 (0.36) 0.32
------ ------ ------ ------ ------ ------
Total from investment operations $ 1.16 $ 0.95 $ 2.12 $ 3.79 $(0.21) $ 0.36
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income++++ $(0.39) $(0.39) $(0.40) $(0.37) $(0.17) $(0.23)
From net realized gain on investments
and foreign currency transactions (0.81) (1.39) (1.73) (0.82) (1.05) (1.67)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.02) --
From paid-in capital // -- -- (0.02) -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.20) $(1.78) $(2.15) $(1.19) $(1.24) $(1.90)
------ ------ ------ ------ ------ ------
Net asset value - end of period $11.22 $11.26 $12.09 $12.63 $10.03 $11.48
====== ====== ====== ====== ====== ======
Total return= 10.12% 7.25% 16.97% 38.05% (1.88)% 2.62%
Ratios (to average net assets)/Supplemental dataSS:
Expenses## 0.55% 0.45% 0.49% 1.56% 1.61% 1.56%+
Net investment income 3.39% 2.63% 2.99% 1.25% 1.37% 1.05%+
Portfolio turnover 19% 23% 26% 54% 87% 41%
Net assets at end of period (000,000
omitted) $1,139 $1,177 $1,186 $165 $69 $15
</TABLE>
* For the period from the commencement of offering of Class B shares,
September 7, 1993, to December 31, 1993.
// For the year ended December 31, 1988, the per share distribution from
paid-in capital was $0.001.
++++ For the year ended December 31, 1994, the per share distribution in
excess of net investment income was $0.0003 for Class B shares.
+ Annualized.
# Per share data for the periods subsequent to December 31, 1992 is based
on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust'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 January 2, 1991). If
the charge had been included, the results would have been lower.
SS The distributor did not impose a portion of its distribution fee for the
periods indicated. For the year ended December 31, 1993, net investment
income for Class B shares includes $0.007 per share applicable to
nonrecurring dividend income. Had the dividend for the period not been
included and the management fee related to such income not been waived,
and the distribution fee not been waived, the net investment income per
share and the ratios would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income -- -- -- $0.15 -- $0.03
Ratios (to average net assets):
Expenses## -- -- -- 1.58% -- 1.66%+
Net investment income -- -- -- 1.23% -- 0.29%+
</TABLE>
See notes to financial statements
17
<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 market value.
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.
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 into 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
18
<PAGE>
Notes to Financial Statements - continued
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 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.
Fees Paid Indirectly - The Trust's custodian bank calculates its fee based on
the Trust'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
Trust. This amount is shown as a reduction of expenses on the Statement of
Operations.
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 taxable
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, 1995, $116,875 was
reclassified from accumulated undistributed net investment income 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.
19
<PAGE>
Notes to Financial Statements - continued
At December 31, 1995, accumulated realized gain on investments and foreign
currency transactions under book accounting was different from tax accounting
due to temporary differences in accounting for foreign currency.
Multiple Classes of Shares of Beneficial Interest - The Trust offers both
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 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.
(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 is computed daily and paid monthly at an effective annual rate
of 0.16% of average daily net assets and 3.55% of investment income.
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 and Mr.
Bailey. Included in Trustees' compensation is a net periodic pension expense
of $21,835 for the year ended December 31, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$388,820 for the year ended December 31, 1995, as its portion of the sales
charge on sales of Class A shares of the Trust.
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% per annum of its average daily net assets attributable to Class A
shares 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 retains the service fee for accounts not attributable to a
securities dealer, which amounted to $1,145,755 for Class A shares for the
year ended December 31, 1995. MFD is waiving the 0.10% distribution fee for
an indefinite period. Fees incurred under the distribution plan
20
<PAGE>
Notes to Financial Statements - continued
during the year ended December 31, 1995 were 0.24% of average daily net
assets attributable to Class A shares on an annualized basis.
The Class B distribution plan provides that the Trust will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Trust's average daily net assets attributable to Class B
shares. The service fee is currently suspended on Class B shares held over
one year. 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 $12,142 for Class B shares for the year ended December 31, 1995.
Fees incurred under the distribution plan during the year ended December 31,
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 December 31, 1995 were
$18,908 and $157,607 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 and
short- term obligations, aggregated $1,051,337,424 and $995,290,305,
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:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $1,657,215,871
==============
Gross unrealized appreciation $ 628,630,475
Gross unrealized depreciation (7,494,070)
--------------
Net unrealized appreciation $ 621,136,405
==============
</TABLE>
21
<PAGE>
Notes to Financial Statements - continued
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Class A Shares
Year Ended December 31, Shares Amount Shares Amount
==========================================================================================
<S> <C> <C> <C> <C>
Shares sold 17,087,194 $204,278,899 11,401,171 $129,970,532
Shares issued to
shareholders in
reinvestment of
distributions 11,238,706 141,190,710 12,678,046 129,231,432
Shares reacquired (17,466,366) (207,986,831) (13,044,429) (148,666,502)
----------- ------------ ----------- ------------
Net increase 10,859,534 $137,482,778 11,034,788 $110,535,462
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Class B Shares
Year Ended December 31, Shares Amount Shares Amount
==========================================================================================
<S> <C> <C> <C> <C>
Shares sold $ 6,848,511 81,769,839 5,590,985 $ 63,500,580
Shares issued to
shareholders in
reinvestment of
distributions 1,037,328 12,996,922 674,366 6,816,034
Shares reacquired (1,667,587) (19,711,238) (703,746) (7,936,804)
----------- ------------ ----------- ------------
Net increase 6,218,252 $75,055,523 5,561,605 $62,379,810
=========== ============ =========== ============
</TABLE>
(6) Line of Credit
The Trust 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 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, 1995 was $25,635.
22
<PAGE>
Notes to Financial Statements - continued
(7) Financial Instruments
The Trust trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates.
These financial instruments include forward foreign currency exchange
contracts. The notional or contractual amounts of these instruments represent
the investment the Trust has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Contracts
Settlement to In Exchange Contracts Net Unrealized
Date Deliver for at Value Depreciation
===================================================================================
<S> <C> <C> <C> <C> <C>
Sales 3/15/96 88,704,000 $13,100,576 $13,277,481 $(176,905)
=========
</TABLE>
SEK = Swedish Kronor
At December 31, 1995, the Trust had sufficient cash and/or securities to
cover any commitments under these contracts.
(8) Restricted Securities
The Trust may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At December 31,
1995, the Trust owned the following restricted securities (constituting 0.60%
of net assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). 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. Certain of
these securities may be offered and sold to "qualified institutional buyers"
under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Date of Principal
Description Acquisition Amount Cost Value
===========================================================================================
<S> <C> <C> <C> <C>
Roche Holdings, Inc., 0s, 2010 4/12/95 $20,512,000 $7,308,015 $ 9,025,280
Sandoz, 2s, 2002 9/28/95 4,750,000 3,923,495 4,488,750
-----------
$13,514,030
===========
</TABLE>
23
<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, 1995, the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended December
31, 1995 and 1994, and the financial highlights for each of the years in the
ten-year period ended December 31, 1995. 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, 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 Trust at December 31, 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
February 1, 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.
24
<PAGE>
It's Easy to Contact Us
[Phone Graphic] MFS Automated Information
Account Information:
Call 1-800-MFS-TALK (1-800-637-8255) anytime.
Market Outlook:
Call 1-800-637-4458 anytime for the MFS outlook on the bond and stock
markets.
[Graphic Question Mark] MFS Personal Service
Account Service:
Call 1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time.
Product Information:
Call 1-800-637-2929 any business day from 9 a.m. to 5 p.m. Eastern time.
IRA Service:
Call 1-800-637-1255 any business day from 8 a.m. to 6 p.m. Eastern time.
Service for the Hearing-Impaired:
Call 1-800-637-6576 any business day from 9 a.m. to 5 p.m. Eastern time (TDD
required).
[Graphic Envelope] MFS Mailing Addresses
For Personal Accounts:
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For IRA Accounts:
MFS Service Center, Inc.
J.W. McCormack Station
P.O. Box 4501
Boston, MA 02101-9817
25
<PAGE>
A Word About MFS Products and Services
Making Additional Investments at Your Convenience
There are several easy ways to make additional single investments of at least
$50:
(bullet) send a check with the lower portion of your account statement
(bullet) contact your financial adviser to purchase shares on your behalf
(bullet) wire additional investments through your bank; call us first for
instructions
Making Additional Investments Automatically
By investing a set amount at regular intervals, over time you will buy more
shares when prices are low, and fewer shares when prices are high. Because
dollar cost averaging involves periodic purchases regardless of fluctuating
share prices, you should consider your financial ability to continue
investing in periods of low prices. MFS offers two dollar-cost-averaging
programs. See the prospectus for further details. Dollar cost averaging does
not assure a profit or avoid a loss.
The Automatic Investment Plan offers a simple way to make regular investments
of at least $50 through automatic withdrawals from your checking account.
The Automatic Exchange Plan automatically exchanges shares from any MFS fund
with $5,000 or more into the same class of shares in up to four other MFS
funds. You choose the amounts of the exchanges (as little as $50) and their
frequency.
A Hypothetical Example of Automatic Monthly Investing Compounding at 8% a Year
<TABLE>
<CAPTION>
5
Amount Years 10 15 20 25
- ------- ------ ----- ----- ------ -------
<S> <C> <C> <C> <C> <C>
$50 3,671 9,064 16,989 28,633 45,742
$75 5,506 13,596 25,483 42,950 68,613
$100 7,341 18,128 33,978 57,266 91,484
$200 14,683 36,257 67,956 114,532 182,968
</TABLE>
For illustration only. Not indicative of future performance of any MFS fund.
For applications or further information call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
If you are a participant in a retirement plan, check with your plan sponsor
regarding the availability of these options.
26
<PAGE>
A Financial Adviser Can Help You Be a Better Investor
Financial advisers can be valuable resources for their clients, providing
ongoing education and guidance about investments, as well as a wide range of
services. Here are just some of the ways your financial adviser may be able
to help you be a better investor:
[checkmark] Day-to-day monitoring of your portfolio
[checkmark] Tax recordkeeping
[checkmark] In-depth information on fund managers, their track records and
their tenure
[checkmark] Risk/reward analyses of current or potential holdings
[checkmark] Asset allocation advice
[checkmark] Construction of a detailed personal financial profile
[checkmark] Order and confirmation processing
[checkmark] Information on a fund group's range of shareholder services
[checkmark] Portfolio adjustments based on lifestyle changes
[checkmark] Assistance with business retirement planning
[checkmark] Evaluation of lump-sum distribution options
[checkmark] Recommendations on a selection of fund groups
[checkmark] Specialized research and investment information not readily
available to individuals
[checkmark] In-depth knowledge of markets and products, kept current by
ongoing tracking
[checkmark] Estate, tax, insurance, and business planning
[checkmark] Help with possible savings on sales charges through breakpoints,
rights of accumulation, and letters of intent
27
<PAGE>
MFS Investment Opportunities
Mutual Funds
The MFS Family of Funds(R), shown on the facing page, falls into the eight
general categories below. All offer full-time professional management, a
diversified portfolio, and a wide array of shareholder services.
Stock funds seek growth of capital rather than income through investments in
stocks.
Stock and bond funds seek current income and growth of capital through
investments in both stocks and bonds.
Bond funds seek current income through investments in debt securities.
World funds seek stock, balanced, and bond fund objectives through
investments in U.S. and foreign stocks and bonds.
Limited-maturity bond funds seek current income and preservation of capital
through investments in debt securities with remaining maturities of five
years or less.
National tax-free bond funds seek current income exempt from federal income
tax through investments in debt securities issued by states and
municipalities.(1)
State tax-free bond funds seek current income exempt from federal and state
income taxes through investments in debt securities issued by a single state
and its municipalities.(1)
Money market funds seek preservation of capital and current income through
investments in short-term debt securities.(2)
To determine which MFS fund may be appropriate for you, please contact your
financial adviser, who can help you relate these investment opportunities to
your financial goals. If you prefer, you may call MFS Investor Information
for literature(3) on MFS products and services: 1-800-637-2929, from 9 a.m.
to 5 p.m. Eastern time any business day (leave a message anytime).
(1) A small portion of the income may be subject to federal, state and/or
alternative minimum tax.
(2) Investments in money market funds are not issued or guaranteed by the
U.S. government and there is no assurance that the fund will be able to
maintain a stable net asset value.
(3) Including a prospectus containing more complete information including
charges and expenses. Read the prospectus carefully before investing.
28
<PAGE>
The MFS Family of Funds(R)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the
types of securities in their portfolios. For free prospectuses containing
more complete information, including the exchange privilege and all charges
and expenses, please contact your financial adviser or call MFS at
1-800-637-2929 any business day from 9 a.m. to 5 p.m. Eastern time (or, leave
a message anytime). This material should be read carefully before investing
or sending money.
Stock
- -------------------------------------------------------------
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Value Fund
Stock and Bond
- -------------------------------------------------------------
MFS(R) Total Return Fund
MFS(R) Utilities Fund
Bond
- -------------------------------------------------------------
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
Limited Maturity Bond
- -------------------------------------------------------------
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
- -------------------------------------------------------------
World
- ----------------------------------------------------------------
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
MFS(R)/Foreign & Colonial International Growth Fund
MFS(R)/Foreign & Colonial International Growth and Income Fund
MFS(R) World Asset Allocation Fund(SM)
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
National Tax-Free Bond
- ----------------------------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund (closed to new investors)
MFS(R) Municipal Income Fund
State Tax-Free Bond
- ----------------------------------------------------------------
Alabama, Arkansas, California, Florida, Georgia, Louisiana,
Maryland, Massachusetts, Mississippi, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia,
Washington, West Virginia
Money Market
- ----------------------------------------------------------------
MFS(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
- ----------------------------------------------------------------
<PAGE>
APPENDIX
Massachusetts Investors Trust
Front cover
A photo of a keyboard.
Page 4
Line graph representing the growth of a $10,000 investment for the 5-year
period ended December 31, 1995. The graph is scaled from $5,000 to $30,000 in
$5,000 segments. The years are marked from 1991 to 1995. 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.
Mass. Investors Trust (Class A) $19,607
S&P 500 $21,519
Consumer Price Index $11,472
Page 5
Line graph representing the growth of a $10,000 investment for the 10-year
period ended December 31, 1995. The graph is scaled from $10,000 to $50,000 in
$10,000 segments. The years are marked from 1986 to 1995. 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.
Mass. Investors Trust (Class A) $37,071
S&P 500 $39,955
Consumer Price Index $14,045
