<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1997
1933 Act File No. 2-11401
1940 Act File No. 811-203
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 74
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 25
MASSACHUSETTS INVESTORS TRUST
(Exact Name of Registrant as Specified in Charter)
500 Boylston, Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 617-954-5000
Stephen E. Cavan, Massachusetts Financial Services Co.,
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b)
|X| on April 30, 1997 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant filed a declaration under Rule 24f-2on March 4, 1997. Pursuant
to Rule 24f-2, the Registrant hasregistered an indefinite number of its
Shares of Beneficial Interest ($0.33 1/3 par value), under the Securities Act
of 1933 with respect to its fiscal year ended December 31, 1997.
===============================================================================
<PAGE>
MASSACHUSETTS INVESTORS TRUST
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<C> <S> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Condensed Financial Information *
(b) * *
(c) Information Concerning Shares *
of the Fund - Performance
Information
(d) Condensed Financial Information *
4 (a) Front Cover Page; The Fund; *
Investment Objectives and
Policies
(b) Investment Objectives and Policies; *
Investment Techniques and Risk
Factors
(c) Investment Objective and Policies; *
Investment Techniques and Risk
Factors; Additional Risk Factors
5 (a) The Fund; Management of the *
Fund - Investment Adviser
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<C> <S> <C>
(b) Front Cover Page; Management *
of the Fund - Investment
Adviser; Back Cover Page
(c) Management of the Fund - *
Investment Adviser
(d) Management of the Fund - Management of the Fund
Administrator Administrator
(e) Management of the Fund - *
Shareholder Servicing Agent;
Back Cover Page
(f) Information Concerning the *
Fund - Expenses; Condensed
Financial Information;
Expense Summary
(g) Additional Risk Factors - *
Portfolio Trading
(h) * *
5A (a), (b), (c) ** **
6 (a) Information Concerning Shares *
of the Fund - Description of
Shares, Voting Rights and
Liabilities; Information
Concerning Shares of the Fund -
Redemptions and Repurchases;
Information Concerning Shares
of the Fund - Purchases; Exchanges
(b), (c), (d) * *
(e) Shareholder Services *
(f) Information Concerning Shares *
of the Fund - Distributions;
Shareholder Services -
Distribution Options
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<C> <S> <C>
(g) Information Concerning Shares *
of the Fund - Tax Status;
Information Concerning Shares
of the Fund - Distributions
(h) * *
7 (a) Front Cover Page; Management *
of the Fund - Distributor; Back
Cover Page
(b) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Net Asset Value
(c) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Exchanges;
Information Concerning Shares
of the Fund - Shareholder Services
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases; Shareholder Services
(e) Information Concerning Shares *
of the Fund - Distribution Plans;
Purchases; Expense Summary
(f) Information Concerning Shares *
of the Fund - Distribution Plans
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<C> <S> <C>
(g) Expense Summary; Information *
Concerning shares of the Fund -
Purchases; Information
Concerning Shares of the Fund -
Exchanges; Information Concerning
Shares of the Fund; Redemptions
and Repurchases; Information
Concerning Shares of the Fund -
Distribution Plan; Information
Concerning Shares of the Fund -
Distributions; Information
Concerning Shares of the Fund -
Performance Information; Shareholder
Services
8 (a) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases; Information Concerning
Shares of the Fund - Purchases;
Shareholder Services
(b), (c), (d) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases
9 * *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<C> <S> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * Definitions
13 (a), (b), (c) * Investment Objectives, Policies
and Restrictions; Investment
Techniques; Investment
Restrictions
(d) * *
14 (a), (b) * Management of the Fund -
Trustees and Officers
(c) * Management of the Fund -
Trustees and Officers; Trustee
Compensation Table
15 (a) * *
(b), (c) * Management of the Fund -
Trustees; Management of the
Fund - Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser;
Management of the Fund -
Trustees; Management of the
Fund - Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
(c) * *
(d) * Management of the Fund-
Investment Adviser -
Administrator
(e) * Portfolio Transactions and
Brokerage Commissions
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -------------------
<C> <S> <C>
(f) Information Concerning Shares Distribution Plans
of The Fund - Distribution
Plans
(g) * *
(h) * Management of the Fund-
Custodian; Independent
Auditors and Financial
Statements; Back Cover Page
(i) * Management of the Fund -
Shareholder Servicing Agent
17 (a), (b), * Portfolio Transactions and
(c), (d), (e) Brokerage Commissions
18 (a) Information Concerning Shares Description of Shares, Voting
of the Fund - Description of Rights and Liabilities
Shares, Voting Rights and
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Services
of the Fund - Purchases;
Shareholder Services
(b) Information Concerning Shares Management of the Fund -
of the Fund - Net Asset Value; Distributor; Determination of
Information Concerning Shares Net Asset Value and
of the Fund - Purchases Performance - Net Asset Value
(c) * *
20 * Tax Status
21 (a), (b) * Management of the Fund -
Distributor; Distribution Plans
(c) * *
22 (a) * *
(b) * Determination of Net Asset
Value and Performance;
Appendix A
23 * Independent Auditors and
Financial Statements
- --------------------------
* Not Applicable
** Contained in Annual Report
</TABLE>
<PAGE>
MASSACHUSETTS INVESTORS TRUST
SUPPLEMENT TO THE MAY 1, 1997 PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUND'S
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION ("SAI"), DATED MAY 1, 1997,
AND CONTAINS A DESCRIPTION OF CLASS I SHARES.
CLASS I SHARES ARE AVAILABLE FOR PURCHASE ONLY BY CERTAIN INVESTORS AS
DESCRIBED UNDER THE CAPTION "ELIGIBLE PURCHASERS" BELOW.
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES: CLASS I
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price)..................... None
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds,
as applicable)................................................. None
ANNUAL OPERATING EXPENSES OF THE FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees.................................................. 0.23%
Rule 12b-1 Fees.................................................. None
Other Expenses(1)(2)............................................. 0.23%
-----
Total Operating Expenses......................................... 0.46%
.........
(1) "Other Expenses" is based on Class A expenses incurred during the fiscal
year ended December 31, 1996.
(2) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in Class I shares of the Fund, assuming (a) a 5% annual return and
(b) redemption at the end of each of the time periods indicated:
PERIOD CLASS I
1 year........................................ $ 5
3 years....................................... 15
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. A more complete description of the Fund's
management fee is set forth under the caption "Management of the Fund" in the
Prospectus.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
ELIGIBLE PURCHASERS
Class I shares are available for purchase only by the following purchasers
("Eligible Purchasers"):
(i) certain retirement plans established for the benefit of employees of
Massachusetts Financial Services Company ("MFS"), the Fund's investment
adviser, and employees of MFS' affiliates;
(ii) any fund distributed by MFS Fund Distributors, Inc. ("MFD"), the Fund's
distributor, if the fund seeks to achieve its investment objective by
investing primarily in shares of the Fund and other funds distributed by
MFD;
(iii)any retirement plan, endowment or foundation which (a) purchases shares
directly through MFD (rather than through a third party broker or dealer or
other financial intermediary); (b) has, at the time of purchase of Class I
shares, aggregate assets of at least $100 million; and (c) invests at least
$10 million in Class I shares of the Fund either alone or in combination
with investments in Class I shares of other MFS funds distributed by MFD
(additional investments may be made in any amount); provided that MFD may
accept purchases from smaller plans ,endowments or foundations or in
smaller amounts if it believes, in its sole discretion, that such entity's
aggregate assets will equal or exceed $100 million, or that such entity
will make additional investments which will cause its total investment to
equal or exceed $10 million, within a reasonable period of time; and
(iv) bank trust departments which initially invest, on behalf of their trust
clients, at least $100,000 in Class I shares of the Fund (additional
investments may be made in any amount); provided that MFD may accept
smaller initial purchases if it believes, in its sole discretion, that the
bank trust department will make additional investments, on behalf of its
trust clients, which will cause its total investment to equal or exceed
$100,000 within a reasonable period of time.
In no event will the Fund, MFS, MFD or any of their affiliates pay any sales
commissions or compensation to any third party in connection with the sale of
Class I shares; the payment of any such sales commission or compensation would,
under the Fund's policies, disqualify the purchaser as an eligible investor of
Class I shares.
SHARE CLASSES OFFERED BY THE FUND
Four classes of shares of the Fund currently are offered for sale, Class A
shares, Class B shares, Class C shares and Class I shares. Class I shares are
available for purchase only by Eligible Purchasers, as defined above, and are
described in this Supplement. Class A shares, Class B shares and Class C shares
are described in the Fund's Prospectus and are available for purchase by the
general public.
Class A shares are offered at net asset value plus an initial sales charge
up to a maximum of 5.75% of the offering price (or a contingent deferred sales
charge (a "CDSC") upon redemption of 1.00% during the first year in the case of
purchases of $1 million or more and certain purchases by retirement plans), and
are subject to an annual distribution fee and service fee up to a maximum of
0.35% per annum. Class B shares are offered at net asset value without an
initial sales charge but are subject to a CDSC upon redemption (declining from
4.00% during the first year to 0% after six years) and an annual distribution
fee and service fee up to a maximum of 1.00% per annum; Class B shares convert
to Class A shares approximately eight years after purchase. Class C shares are
offered at net asset value without an initial sales charge but are subject to a
CDSC upon redemption of 1.00% during the first year and an annual distribution
fee and service fee up to a maximum of 1.00% per annum. Class I shares are
offered at net asset value without an initial sales charge or CDSC and are not
subject to a distribution or service fee. Class C and Class I shares do not
convert to any other class of shares of the Fund.
OTHER INFORMATION
Eligible Purchasers may purchase Class I shares only directly through MFD.
Eligible Purchasers may exchange Class I shares of the Fund for Class I shares
of any other MFS Fund available for purchase by such Eligible Purchasers at
their net asset value (if available for sale), and may exchange Class I shares
of the Fund for shares of the MFS Money Market Fund (if available for sale), and
may redeem Class I shares of the Fund at net asset value. Distributions paid by
the Fund with respect to Class I shares generally will be greater than those
paid with respect to Class A shares, Class B shares and Class C shares because
expenses attributable to Class A shares, Class B shares and Class C shares
generally will be higher.
THE DATE OF THIS SUPPLEMENT IS MAY 1, 1997
<PAGE>
PROSPECTUS
May 1, 1997
MASSACHUSETTS Class A Shares of Beneficial Interest
INVESTORS TRUST Class B Shares of Beneficial Interest
(A member of the MFS Family of Fund(R)) Class C Shares of Beneficial Interest
- ------------------------------------------------------------------------------
Page
1. Expense Summary ............................................... 2
2. The Fund ...................................................... 3
3. Condensed Financial Information ............................... 4
4. Investment Objectives and Policies ............................ 6
5. Management of the Fund ........................................ 12
6. Information Concerning Shares of the Fund ..................... 13
Purchases ................................................. 13
Exchanges ................................................. 18
Redemptions and Repurchases ............................... 19
Distribution Plan ......................................... 21
Distributions ............................................. 23
Tax Status ................................................ 23
Net Asset Value ........................................... 24
Description of Shares, Voting Rights and Liabilities ...... 24
Performance Information ................................... 24
7. Shareholder Services .......................................... 25
Appendix A .................................................... A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MASSACHUSETTS INVESTORS TRUST
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
America's First Open-End Investment Company, Organized March 21, 1924 as a
Common Law Trust under the Laws of The Commonwealth of Massachusetts.
Massachusetts Investors Trust (the "Fund") is an open-end diversified investment
company. The Fund's investment objectives are to provide reasonable current
income and long-term growth of capital and income. See "Investment Objectives
and Policies." The minimum initial investment is generally $1,000 per account
(see "Information Concerning Shares of the Fund -- Purchases").
The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.
INVESTMENT PRODUCTS ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY,
AND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY FINANCIAL
INSTITUTION. SHARES OF MUTUAL FUNDS ARE SUBJECT TO INVESTMENT RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED, AND WILL FLUCTUATE IN VALUE. YOU
MAY RECEIVE MORE OR LESS THAN YOU PAID WHEN YOU REDEEM YOUR SHARES.
This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information, dated May 1, 1997, as amended or supplemented from time to time
(the "SAI"), which contains more detailed information about the Fund and is
incorporated into this Prospectus by reference. See page 27 for a further
description of the information set forth in the SAI. A copy of the SAI may be
obtained without charge by contacting the Shareholder Servicing Agent (see back
cover for address and phone number). The SEC maintains an Internet World Wide
Web site that contains the SAI, materials that are incorporated by reference
into this Prospectus and the SAI, and other informtion regarding the Fund. This
Prospectus is available on the Adviser's Internet World Wide Web Site at
http:/www.mfs.com.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares (as a
percentage of offering price) ............................................ 5.75 % 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) .................... See Below((1)) 4.00% 1.00%
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ............................................................ 0.23 % 0.23% 0.23%
Rule 12b-1 Fees ............................................................ 0.325%((2)) 1.00%((3)) 1.00%((3))
Other Expenses((4)) ........................................................ 0.23 % 0.23% 0.23%((5))
----- ---- ----
Total Operating Expenses ................................................... 0.785% 1.46% 1.46%
- ----------
(1) Purchases of $1 million or more and certain purchases by retirement plans are not subject to an initial sales charge;
however, a contingent deferred sales charge (a "CDSC") of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases (see "Purchases" below).
(2) The Fund has adopted a distribution plan for its shares in accordance with Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act") (the "Distribution Plan"), which provides that it will pay distribution/service
fees aggregating up to (but not necessarily all of) 0.35% per annum of the average daily net assets attributable to the
Class A shares. The Fund is currently paying distribution fees in the amount of 0.075%. Payment of the remaining portion
of the 0.10% per annum distribution fee equal to 0.025% per annum will commence on such date as the Trustees of the
Trust may determine. The 0.25% per annum service fee is reduced to 0.15% per annum for shares purchased prior to January
2, 1991. Distribution expenses paid under this Plan, together with the initial sales charge, may cause long-term
shareholders to pay more than the maximum sales charge that would have been permissible if imposed entirely as an
initial sales charge. (See "Information Concerning Shares of the Fund -- Distribution Plan" below).
(3) The Fund's Distribution Plan provides that it will pay distribution/ service fees aggregating up to 1.00% per annum of
the average daily net assets attributable to Class B and Class C shares, respectively. Distribution expenses paid under
the Distribution Plan, with respect to Class B or Class C shares, together with any CDSC, may cause long-term
shareholders to pay more than the maximum sales charge that would have been permissible if imposed entirely as an
initial sales charge. (See "Information Concerning Shares of the Fund -- Distribution Plan" below).
(4) The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent, and may enter into other such arrangements and
directed brokerage arrangements (which would also have the effect of reducing the Fund's expenses). Any such fee
reductions are not reflected under "Other Expenses."
(5) "Other Expenses" is based on Class A expenses incurred during the fiscal year ended December 31, 1996.
</TABLE>
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) a 5% annual return and (b) redemption at
the end of each of the time periods indicated (unless otherwise noted):
<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B CLASS C
- ------ ------- -------------------- -------------------
(1) (1)
<S> <C> <C> <C> <C> <C>
1 year ........................................... $ 65 $ 55 $ 15 $ 25 $ 15
3 years .......................................... 81 76 46 46 46
5 years .......................................... 99 100 80
10 years .......................................... 149 156(2) 156(2)
- ------------
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after purchase; therefore, years nine and ten reflect
Class A expenses.
</TABLE>
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. More complete descriptions of the following expenses are set
forth in the following sections of the Prospectus: (i) varying sales charges on
share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii)
management fees -- "Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution
plan) fees -- "Distribution Plan."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
<PAGE>
2. THE FUND
The Fund is an open-end, diversified management investment company which was
organized as a common law trust under the laws of The Commonwealth of
Massachusetts in 1924. Shares of the Fund are continuously sold to the public,
and the Fund uses the proceeds to buy securities (common stocks and other
instruments) for its portfolio. Three classes of shares of the Fund currently
are offered for sale to the general public. Class A shares are offered at net
asset value plus an initial sales charge up to a maximum of 5.75% of the
offering price (or a CDSC of 1.00% upon redemption during the first year in the
case of purchases of $1 million or more and certain purchases by retirement
plans) and subject to an annual distribution fee and service fee up to a maximum
of 0.35% per annum. Class B shares are offered at net asset value without an
initial sales charge but are subject to a CDSC upon redemption (declining from
4.00% during the first year to 0% after six years) and an annual distribution
fee and service fee up to a maximum of 1.00% per annum; Class B shares will
convert to Class A shares approximately eight years after purchase. Class C
shares are offered at net asset value without an initial sales charge but are
subject to a CDSC of 1.00% upon redemption during the first year and an annual
distribution fee and service fee up to a maximum of 1.00% per annum. Class C
shares do not convert to any other class of shares of the Fund. In addition, the
Fund offers an additional class of shares, Class I shares, exclusively to
certain institutional investors. Class I shares are made available by means of a
separate Prospectus Supplement provided to institutional investors eligible to
purchase Class I shares and are offered at net asset value without an initial
sales charge or CDSC upon redemption and without an annual distribution and
service fee.
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. A majority of the Trustees are not affiliated with the Adviser. The
Adviser is responsible for the management of the Fund's assets and the officers
of the Fund are responsible for its operations. The Adviser manages the
portfolio from day to day in accordance with the Fund's investment objectives
and policies. The selection of investments and the way they are managed depend
on the conditions and trends in the economy and the financial marketplaces. The
Fund also offers to buy back (redeem) its shares from its shareholders at any
time at net asset value less any applicable CDSC.
<PAGE>
3. CONDENSED FINANCIAL INFORMATION
The following information has been audited for at least the latest five years
and should be read in conjunction with the financial statements included in the
Fund's Annual Report to shareholders which are incorporated by reference into
the SAI in reliance upon the report of the Fund's independent auditors, given
upon their authority as experts in accounting and auditing. The Fund's auditors
are Deloitte & Touche LLP.
FINANCIAL HIGHLIGHTS -- CLASS A, CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- ----
CLASS A
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ..... $12.71 $10.07 $11.50 $12.31 $13.87
------ ------ ------ ------ ------
Income from investment operations --
Net investment income# .................... $ 0.21 $ 0.25 $ 0.25 $ 0.39 $ 0.32
Net realized and unrealized gain (loss) on
investments and
foreign currency transactions ............ 3.07 3.67 (0.36) 0.86 0.69
------ ------ ------ ------ ------
Total from investment operations ........ $ 3.28 $ 3.92 $(0.11) $ 1.25 $ 1.01
------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income++ .............. $(0.21) $(0.46) $(0.25) $(0.39) $(0.33)
From net realized gain on investments and
foreign
currency transactions .................... (1.32) (0.82) (1.05) (1.67) (2.22)
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 ............................... $(1.53) $(1.28) $(1.32) $(2.06) $(2.57)
------ ------ ------ ------ ------
Net asset value -- end of period............ $14.46 $12.71 $10.07 $11.50 $12.31
====== ====== ====== ====== ======
Total return(+) ............................ 25.90% 39.34% (1.02)% 10.03% 7.68%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ................................ 0.74% 0.70% 0.71% 0.68% 0.62%
Net investment income ..................... 1.51% 2.13% 2.20% 3.04% 2.30%
PORTFOLIO TURNOVER ......................... 47% 54% 87% 41% 46%
AVERAGE COMMISSION RATE### ................. $0.0520 -- -- -- --
NET ASSETS AT END OF PERIOD (000,000
OMITTED) ................................... $ 2,678 $2,074 $1,535 $1,626 $1,548
- ------------
++ 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 fee
paid indirectly.
### Average commission rate is calculated for the Trust for fiscal years beginning on or after September 1, 1995.
(+) 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.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS -- (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1991 1990 1989 1988 1987
---- ---- ---- ---- ----
CLASS A
--------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of period ...... $12.28 $13.55 $11.22 $11.26 $12.09
------ ------ ------ ------ ------
Income from investment operations --
Net investment income ...................... $ 0.38 $ 0.43 $ 0.45 $ 0.40 $ 0.38
Net realized and unrealized gain (loss) on
investments and
foreign currency transactions ............. 2.95 (0.45) 3.56 0.76 0.57
------ ------ ------ ------ ------
Total from investment operations ......... $ 3.33 $(0.02) $ 4.01 $ 1.16 $ 0.95
------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ................. $(0.39) $(0.43) $(0.45) $(0.39) $(0.39)
From net realized gain on investments and
foreign
currency transactions ..................... (1.32) (0.82) (1.22) (0.81) (1.39)
In excess of net realized gain on
investments and foreign
currency transactions++ ................... 0.00 -- -- -- --
From paid-in capital+ ...................... (0.03) -- (0.01) 0.00 --
------ ------ ------ ------ ------
Total distributions declared to
shareholders ........................... $(1.74) $(1.25) $(1.68) $(1.20) $(1.78)
------ ------ ------ ------ ------
Net asset value -- end of period............. $13.87 $12.28 $13.55 $11.22 $11.26
====== ====== ====== ====== ======
Total return(+) ............................. 27.41% (0.33)% 35.80% 10.12% 7.25%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ................................... 0.62% 0.47% 0.50% 0.55% 0.45%
Net investment income ...................... 2.73% 3.28% 3.40% 3.39% 2.63%
PORTFOLIO TURNOVER .......................... 44% 26% 20% 19% 23%
NET ASSETS AT END OF PERIOD (000,000 OMITTED)
............................................. $1,530 $1,265 $1,382 $1,139 $1,177
- ------------
+ For the year ended December 31, 1988, the per share distribution from paid-in capital was $0.001.
++ For the year ended December 31, 1991, the per share distribution in excess of net realized gain on investments was $0.0041.
(+) 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.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS -- (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993* 1996**
---- ---- ---- ---- ----
CLASS B CLASS C
-------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period . $12.63 $10.03 $11.48 $13.02 $13.93
------ ------ ------ ------ ------
Income from investment operations --
Net investment income# ................ $ 0.10 $ 0.15 $ 0.15 $ 0.04 $ 0.05
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ......................... 3.06 3.64 (0.36) 0.32 1.76
------ ------ ------ ------ ------
Total from investment operations .... $ 3.16 $ 3.79 $(0.21) $ 0.36 $ 1.81
------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income+++ ......... $(0.11) $(0.37) $(0.17) $(0.23) $(0.09)
From net realized gain on investments
and foreign
currency transactions ................ (1.32) (0.82) (1.05) (1.67) (1.32)
In excess of net realized gain on
investments and
foreign currency transactions ........ -- -- (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders ...................... $(1.43) $(1.19) $(1.24) $(1.90) $(1.41)
------ ------ ------ ------ ------
Net asset value -- end of period........ $14.36 $12.63 $10.03 $11.48 $14.33
====== ====== ====== ====== ======
Total return ........................... 25.05% 38.05% (1.88)% 2.62% 12.74%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses##............................. 1.54% 1.56% 1.61% 1.56%+ 1.49%+
Net investment income ................. 0.72% 1.25% 1.37% 1.05%+ 0.77%+
PORTFOLIO TURNOVER ..................... 47% 54% 87% 41% 47%
AVERAGE COMMISSION RATE### ............. $0.0520 -- -- -- $0.0520
NET ASSETS AT END OF PERIOD (000,000
OMITTED) ............................... $ 437 $ 165 $ 69 $ 15 $ 12
- ------------
* For the period from the commencement of offering of Class B shares, September 7, 1993 to December 31, 1993.
** For the period from the commencement of offering of Class C shares, July 2, 1996, to December 31, 1996.
+ Annualized.
++ Not annualized.
+++ For the year ended December 31, 1994, the per share distribution in excess of net investment income was $0.0003 for
Class B shares.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for fee paid
indirectly.
### Average commission rate is calculated for the Trust for fiscal years beginning on or after September 1, 1995.
</TABLE>
<PAGE>
4. INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES -- The Fund'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 Fund will
achieve its investment objectives.
INVESTMENT POLICIES -- The Fund 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 Fund 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 Fund to avoid the acquisition of
speculative securities or those of doubtful character even if immediate
prospects are tempting.
The assets of the Fund are normally invested in equity securities. The Fund may
invest in all types of equity securities, including the following: common
stocks, preferred stocks and preference stocks; securities such as bonds,
warrants or rights that are convertible into stocks; and depository receipts for
those securities. These securities may be listed on securities exchanges, traded
in various over-the-counter markets or have no organized markets. However, the
Fund may hold its assets in cash or invest in commercial paper, repurchase
agreements or other forms of debt securities either to provide reserves for
future purchases of securities or as a temporary defensive measure in certain
economic environments. Since shares of the Fund represent an investment in
securities with fluctuating market prices, shareholders should understand that
the value of shares of the Fund will vary as the aggregate value of the Fund's
portfolio securities increases or decreases. Moreover, the amount of dividends
the Fund pays to its shareholders will vary in relation to the amount of
dividends and interest the Fund receives from its portfolio securities.
FOREIGN SECURITIES: The Fund may invest up to 35% (and expects generally to
invest between 0% and 15%) of its total assets in foreign securities which are
not traded on a U.S. exchange (not including American Depositary Receipts
("ADRs"). Investing in securities of foreign issuers generally involves risks
not ordinarily associated with investing in securities of domestic issuers.
These include changes in currency rates, exchange control regulations,
governmental administration or economic or monetary policy (in the United States
or abroad) or circumstances in dealings between nations. Costs may be incurred
in connection with conversions between various currencies. Special
considerations may also include more limited information about foreign issuers,
higher brokerage costs, different accounting standards and thinner trading
markets. Foreign securities markets may also be less liquid, more volatile and
less subject to government supervision than in the United States. Investments in
foreign countries could be affected by other factors including expropriation,
confiscatory taxation and potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods. The Fund may
hold foreign currency received in connection with investments in foreign
securities when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. dollars at a later date, based on anticipated
changes in the relevant exchange rate. The Fund may also hold foreign currency
in anticipation of purchasing foreign securities.
AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in ADRs, which are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. Because ADRs trade on U.S. securities exchanges,
the Adviser does not treat them as foreign securities. However, they are subject
to many of the risks of foreign securities such as changes in exchange rates and
more limited information about foreign issuers. See the SAI for further
discussion of foreign securities and the holding of foreign currency, as well as
the associated risks.
EMERGING MARKET SECURITIES: Consistent with the Fund's objectives and policies,
the Fund may invest in securities of issuers whose principal activities are
located in emerging market countries. Emerging market countries include any
country determined by the Adviser to have an emerging market economy, taking
into account a number of factors, including whether the country has a low- to
middle-income economy according to the International Bank for Reconstruction and
Development, the country's foreign currency debt rating, its political and
economic stability and the development of its financial and capital markets. The
Adviser determines whether an issuer's principal activities are located in an
emerging market country by considering such factors as its country of
organization, the principal trading market for its securities and the source of
its revenues and assets. The issuer's principal activities generally are deemed
to be located in a particular country if: (a) the security is issued or
guaranteed by the government of that country or any of its agencies, authorities
or instrumentalities; (b) the issuer is organized under the laws of, and
maintains a principal office in, that country; (c) the issuer has its principal
securities trading market in that country; (d) the issuer derives 50% or more of
its total revenues from goods sold or services performed in that country; or (e)
the issuer has 50% or more of its assets in that country.
The risks of investing in foreign securities may be intensified in the case of
investments in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Fund is uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security, a decrease in the level of
liquidity in the Fund's portfolio, or, if the Fund has entered into a contract
to sell the security, in possible liability to the purchaser. Certain markets
may require payment for securities before delivery and in such markets the Fund
bears the risk that the securities will not be delivered and that the Fund's
payments will not be returned. Securities prices in emerging markets can be
significantly more volatile than in the more developed nations of the world,
reflecting the greater uncertainties of investing in less established markets
and economies. In particular, countries with emerging markets may have
relatively unstable governments, presenting the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions on repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the expenses of the Fund.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn income on available cash or as a temporary defensive measure. Under a
repurchase agreement, the Fund acquires securities subject to the seller's
agreement to repurchase at a specified time and price. If the seller becomes
subject to a proceeding under the bankruptcy laws or its assets are otherwise
subject to a stay order, the Fund's right to liquidate the securities may be
restricted (during which time the value of the securities could decline). As
discussed in the SAI, the Fund has adopted certain procedures intended to
minimize risk.
RESTRICTED SECURITIES: The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933, as amended (the
"1933 Act"), but can be offered and sold to "qualified institutional buyers"
under Rule 144A under the 1933 Act ("Rule 144A"). A determination is made, based
upon a continuing review of the trading markets for the specific 144A security,
whether such security is liquid and thus not subject to the Fund's limitation on
investing not more than 15% of its net assets in illiquid investments. The Board
of Trustees has adopted guidelines and has delegated to the Adviser the daily
function of determining and monitoring liquidity of restricted securities
available pursuant to Rule 144A. The Board, however, retains oversight, focusing
on factors such as valuation, liquidity and availability of information.
Investing in Rule 144A Securities could have the effect of decreasing the level
of liquidity in the Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these 144A securities. Subject to
the Fund's 15% limitation on investments in illiquid investments, the Fund may
also invest in restricted securities that may not be sold under Rule 144A, which
presents certain risks. As a result, the Fund might not be able to sell these
securities when the Adviser wishes to do so, or might have to sell them at less
than fair value. In addition, market quotations are less readily available.
Therefore, the judgment of the Adviser may at times play a greater role in
valuing these securities than in the case of unrestricted securities.
"WHEN-ISSUED" SECURITIES: In order to help ensure the availability of suitable
securities for its portfolio, the Fund may purchase securities on a "when
issued" or on a "forward delivery" basis, which means that the securities will
be delivered to the Fund at a future date usually beyond customary settlement
time. In general, the Fund does not pay for such securities until received and
does not start earning interest or dividends on the securities until the
contractual settlement date. In order to invest its assets immediately, while
awaiting delivery of securities purchased on such bases, the Fund will normally
invest in cash, short-term money market instruments and high grade debt
securities. See the SAI for a further discussion of the nature of such
transactions and risks associated therewith.
ZERO COUPON BONDS: The Fund may also invest in securities which are convertible
into zero coupon bonds. Zero coupon bonds are debt obligations which are issued
or purchased at a significant discount from face value. The discount
approximates the total amount of interest the bonds will accrue and compound
over the period until maturity, at a rate of interest reflecting the market rate
of the security at the time of issuance. Zero coupon bonds do not require the
periodic payment of interest. Such investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of return
to attract investors who are willing to defer receipt of such cash. Such
investments may experience greater volatility in market value due to changes in
interest rates than debt obligations which make regular payments of interest.
The Fund will accrue income on such investments for tax and accounting purposes,
which is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
to satisfy the Fund's distribution obligations.
OPTIONS ON SECURITIES: The Fund may write (sell) covered put and call options on
securities and purchase put and call options on securities. The Fund will write
such options for the purpose of increasing its return and/or to protect the
value of its portfolio. In particular, where the Fund writes an option which
expires unexercised or is closed out by the Fund at a profit, it will retain the
premium paid for the option, which will increase its gross income and will
offset in part the reduced value of a portfolio security in connection with
which the option may have been written or the increased cost of portfolio
securities to be acquired. However, the writing of options constitutes only a
partial hedge, up to the amount of the premium, less any transaction costs. In
contrast, however, if the price of the security underlying the option moves
adversely to the Fund's position, the option may be exercised and the Fund will
be required to purchase or sell the security at a disadvantageous price,
resulting in losses which may only be partially offset by the amount of the
premium. The Fund may also write combinations of put and call options on the
same security, known as "straddles." Such transactions can generate additional
premium income but also present increased risk.
The Fund may purchase put or call options in anticipation of declines in the
value of portfolio securities or increases in the value of securities to be
acquired. In the event that such declines or increases occur, the Fund may be
able to offset the resulting adverse effect on its portfolio, in whole or in
part, through the options purchased. The risk assumed by the Fund in connection
with such transactions is limited to the amount of the premium and related
transaction costs associated with the option, although the Fund may be required
to forfeit such amounts in the event that the prices of securities underlying
the options do not move in the direction or to the extent anticipated.
OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put options
and purchase call and put options on stock indices. The Fund may write options
on stock indices for the purpose of increasing its gross income and to protect
its portfolio against declines in the value of securities it owns or increases
in the value of securities to be acquired. When the Fund writes an option on a
stock index, and the value of the index moves adversely to the holder's
position, the option will not be exercised, and the Fund will either close out
the option at a profit or allow it to expire unexercised. The Fund will thereby
retain the amount of the premium, which will increase its gross income and
offset part of the reduced value of portfolio securities or the increased cost
of securities to be acquired. Such transactions, however, will constitute only
partial hedges against adverse price fluctuations, since any such fluctuations
will be offset only to the extent of the premium received by the Fund for the
writing of the option. In addition, if the value of an underlying index moves
adversely to the Fund's option position, the option may be exercised, and the
Fund will experience a loss which may only be partially offset by the amount of
the premium received.
The Fund may also purchase put or call options on stock indices in order,
respectively, to hedge its investments against a decline in value or to attempt
to reduce the risk of missing a market or industry segment advance. The Fund's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.
OPTIONS ON FOREIGN CURRENCIES: The Fund may also purchase and write options on
foreign currencies ("Options on Foreign Currencies") for the purpose of
protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. As in the
case of other types of options, however, the writing of an Option on Foreign
Currency will constitute only a partial hedge, up to the amount of the premium
received, and the Fund may be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
Option on Foreign Currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, it may forfeit the entire amount of the premium paid for
the option plus related transaction costs. The Fund may also choose to, or be
required to, receive delivery of the foreign currencies underlying Options on
Foreign Currencies into which it has entered. Under certain circumstances, such
as where the Adviser believes that the applicable exchange rate is unfavorable
at the time the currencies are received or the Adviser anticipates, for any
other reason, that the exchange rate will improve, the Fund may hold such
currencies for an indefinite period of time. See "Investment Objectives and
Policies -- Foreign Securities" in the SAI for information on the risks
associated with holding foreign currency.
FUTURES CONTRACTS: The Fund may enter into stock index and foreign currency
futures contracts (collectively, "Futures Contracts"). Such transactions may be
entered into for hedging purposes, in order to protect the Fund's current or
intended investments from the effects of changes in exchange rates or declines
in the stock market, and for non-hedging purposes subject to applicable law. The
Fund will incur brokerage fees when it purchases and sells Futures Contracts,
and will be required to maintain margin deposits. In addition, Futures Contracts
entail risks. Although the Adviser believes that use of such contracts will
benefit the Fund, if its investment judgment about the general direction of
exchange rates or the stock market is incorrect, the Fund's overall performance
may be poorer than if it had not entered into any such contract and the Fund may
realize a loss. The Fund will not enter into any Futures Contract if immediately
thereafter the value of securities and other obligations underlying all such
Futures Contracts would exceed 50% of the value of its total assets.
OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and write options on Futures
Contracts ("Options on Futures Contracts") in order to protect against declines
in the values of portfolio securities or against increases in the cost of
securities to be acquired and for non-hedging purposes, subject to applicable
law, which involves greater risk and may result in losses which are not offset
by gains on other portfolio assets. Purchases of Options on Futures Contracts
may present less risk in hedging the Fund's portfolio than the purchase or sale
of the underlying Futures Contracts since the potential loss is limited to the
amount of the premium plus related transaction costs, although it may be
necessary to exercise the option to realize any profit, which results in the
establishment of a futures position. The writing of Options on Futures
Contracts, however, does not present less risk than the trading of Futures
Contracts and will constitute only a partial hedge, up to the amount of the
premium received. In addition, if an option is exercised, the Fund may suffer a
loss on the transaction.
In order to assure that the Fund will not be deemed to be a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission (the "CFTC") require that the Fund enter into transactions in
Futures Contracts and Options on Futures Contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions does not exceed 5% of the liquidation value of the Fund's
assets. In addition, the Fund must comply with the requirements of various state
securities laws in connection with such transactions.
FORWARD CONTRACTS ON FOREIGN CURRENCY: The Fund may enter into forward foreign
currency exchange contracts for the purchase or sale of a fixed quantity of a
foreign currency at a future date ("Forward Contracts"). The Fund may enter into
Forward Contracts for hedging purposes as well as for non-hedging purposes
(i.e., speculative purposes). By entering into transactions in Forward Contracts
for hedging purposes, the Fund may be required to forego the benefits of
advantageous changes in exchange rates and, in the case of Forward Contracts
entered into for non-hedging purposes, the Fund may sustain losses which will
reduce its gross income. Such transactions, therefore, could be considered
speculative. Forward Contracts are traded over-the-counter and not on organized
commodities or securities exchanges. As a result, Forward Contracts operate in a
manner distinct from exchange-traded instruments, and their use involves certain
risks beyond those associated with transactions in Futures Contracts or options
traded on exchanges. The Fund may choose to, or be required to, receive delivery
of the foreign currencies underlying Forward Contracts into which it has
entered. Under certain circumstances, such as where the Adviser believes that
the applicable exchange rate is unfavorable at the time the currencies are
received or the Adviser anticipates, for any other reason, that the exchange
rate will improve, the Fund may hold such currencies for an indefinite period of
time. The Fund may also enter into a Forward Contract on one currency to hedge
against risk of loss arising from fluctuations in the value of a second currency
(referred to as a "cross hedge") if, in the judgment of the Adviser, a
reasonable degree of correlation can be expected between movements in the values
of the two currencies. The Fund has established procedures consistent with
statements of the SEC and its staff regarding the use of Forward Contracts by
registered investment companies, which requires the use of segregated assets or
"cover" in connection with the purchase and sale of such contracts. See
"Investment Objective and Policies -- Foreign Securities" in the SAI for
information on the risks associated with holding foreign currency.
RISKS OF OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS: Although the Fund
will enter into certain transactions in options, Futures Contracts, Options on
Futures Contracts, Forward Contracts and Options on Foreign Currencies for
hedging purposes, such transactions nevertheless involve certain risks. For
example, a lack of correlation between the instrument underlying an option or
Futures Contract and the assets being hedged, or unexpected adverse price
movements, could render the Fund's hedging strategy unsuccessful and could
result in losses. The Fund also may enter into transactions in such instruments
for other than hedging purposes, subject to applicable law, which involves
greater risk. In particular, such transactions may result in losses for the Fund
which are not offset by gains on other portfolio positions, thereby reducing
gross income. In addition, foreign currency markets may be extremely volatile
from time to time. There also can be no assurance that a liquid secondary market
will exist for any contract purchased or sold, and the Fund may be required to
maintain a position until exercise or expiration, which could result in losses.
The SAI contains a description of the nature and trading mechanics of options,
Futures Contracts, Options on Futures Contracts, Forward Contracts and Options
on Foreign Currencies, and includes a discussion of the risks related to
transactions therein.
Transactions in Forward Contracts may be entered into only in the
over-the-counter market. Futures Contracts and Options on Futures Contracts may
be entered into on U.S. exchanges regulated by the CFTC and on foreign
exchanges. In addition, the securities underlying options, Futures Contracts and
Options on Futures Contracts traded by the Fund will include both domestic and
foreign securities.
PORTFOLIO TRADING: The primary consideration in placing portfolio security
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. Consistent with the foregoing primary
consideration, the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD") and such other policies as the Trustees may
determine, the Adviser may consider sales of shares of the Fund and of the
other investment company clients of MFD as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. From time to
time, the Adviser may direct certain portfolio transactions to broker-dealer
firms which, in turn, have agreed to pay a portion of the Fund's operating
expenses (e.g., fees charged by the custodian of the Fund's assets). For a
further discussion of portfolio trading, see "Portfolio Transactions and
Brokerage Commissions" in the SAI.
----------------
The investment objectives and policies described above are not fundamental and
may be changed without shareholder approval.
The SAI includes a discussion of other investment policies and a listing of
specific investment restrictions which govern the Fund's investment policies.
The specific investment restrictions listed in the SAI may be changed without
shareholder approval unless indicated otherwise (see "Investment Restrictions"
in the SAI). The Fund's investment limitations and policies are adhered to at
the time of purchase or utilization of assets; a subsequent change in
circumstances will not be considered to result in a violation of policy.
5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated May 20, 1982 (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. Kevin R. Parke, a Senior Vice President of the Adviser, and
John D. Laupheimer, Jr., a Senior Vice President of the Adviser, have been the
Fund's portfolio managers since 1992. Mitchell D. Dynan, a Vice President of the
Adviser, has also been a portfolio manager of the Fund since March, 1995.
Messrs. Parke, Dynan and Laupheimer have been employed as portfolio managers by
the Adviser since 1985, 1986 and 1981, respectively. Subject to such policies as
the Trustees may determine, the Adviser makes investment decisions for the Fund.
For these services and facilities, the Adviser receives a management fee,
computed and paid monthly on the basis of a formula based upon a percentage of
the Fund's average daily net assets plus a percentage of the Fund's gross income
(i.e., income other than gains from the sale of securities), in each case on an
annualized basis for the Fund's then-current fiscal year. The applicable
percentages are reduced as assets and income reach the following levels:
<TABLE>
<CAPTION>
ANNUAL RATE OF MANAGEMENT FEE ANNUAL RATE OF MANAGEMENT FEE
BASED ON AVERAGE DAILY NET ASSETS BASED ON GROSS INCOME
---------------------------------- -----------------------------
<S> <C>
0.30% of the first $200 million 6.67% of the first $6 million
0.24% of the next $300 million 5.33% of the next $9 million
0.12% of average daily net assets in excess of $500 million 2.67% of gross income in excess of $15 million
</TABLE>
For the Fund's fiscal year ended December 31, 1996, MFS received management fees
under the Advisory Agreement of $5,982,062, equivalent on an annualized basis to
0.23% of the Fund's average daily net assets (excluding the payment attributable
to certain property described below). Management fees received by MFS for the
Fund's fiscal year ended December 31, 1996 were comprised of $3,882,808 based on
average daily net asset and $2,099,254 based on gross investment income.
However, the Advisory Agreement provides that the compensation of the Adviser
will be reduced by an annual sum representing the Fund's share of the fair value
of the use of office furniture, furnishings and equipment purchased over the
years with funds furnished by the Fund and Massachusetts Investors Growth Stock
Fund as part of shared expenses. The total annual use value of this property for
the period ending December 31, 1996 has been determined pursuant to a formula
devised by an independent supplier to be $110,820 for the Fund, which amount was
transferred to the Fund by the Adviser.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS Union
Standard Trust, MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun
Life Series Trust, and seven variable accounts, each of which is a registered
investment company established by Sun Life Assurance Company of Canada (U.S.)
("Sun Life of Canada (U.S.)") in connection with the sale of various
fixed/variable annuity contracts. MFS and its wholly owned subsidiary, MFS
Institutional Advisors, Inc., provide investment advice to substantial private
clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924, and the
founding of the Fund as the first mutual fund in the United States. Net assets
under the management of the MFS organization were approximately $51.5 billion
on behalf of approximately 2.4 million investor accounts as of March 31, 1997.
MFS is a subsidiary of Sun Life of Canada (U.S.) which in turn is a subsidiary
of Sun Life Assurance Company of Canada ("Sun Life"). The Directors of MFS are
A. Keith Brodkin, Jeffrey L. Shames, Arnold D. Scott, Donald A. Stewart and
John D. McNeil. Mr. Brodkin is the Chairman, Mr. Shames is the President and
Mr. Scott is the Secretary and a Senior Executive Vice President of MFS.
Messrs. McNeil and Stewart are the Chairman and President, respectively, of
Sun Life. Sun Life, a mutual life insurance company, is one of the largest
international life insurance companies and has been operating in the United
States since 1895, establishing a headquarters office here in 1973. The
executive officers of MFS report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is also the Chairman,
President and a Trustee of the Fund. W. Thomas London, Stephen E. Cavan, James
O. Yost and James R. Bordewick, Jr., all of whom are officers of MFS, are
officers of the Fund.
MFS has established a strategic alliance with Foreign & Colonial Management Ltd.
("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the world's
oldest financial services institutions, the London-based Foreign & Colonial
Investment Trust PLC, which pioneered the idea of investment management in 1868,
and HYPO-BANK (Bayerische Hypotheken-und Wechsel-Bank AG), the oldest publicly
listed bank in Germany, founded in 1835. As part of this alliance, the portfolio
managers and investment analysts of MFS and Foreign & Colonial will share their
views on a variety of investment related issues, such as the economy, securities
markets, portfolio securities and their issuers, investment recommendations,
strategies and techniques, risk analysis, trading strategies and other portfolio
management matters. MFS has access to the extensive international equity
investment expertise of Foreign & Colonial, and Foreign & Colonial has access to
the extensive U.S. equity investment expertise of MFS. MFS and Foreign &
Colonial each have investment personnel working in each other's office in Boston
and London, respectively.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS or clients of
Foreign & Colonial. Some simultaneous transactions are inevitable when several
clients receive investment advice from MFS and Foreign & Colonial, particularly
when the same security is suitable for more than one client. While in some cases
this arrangement could have a detrimental effect on the price or availability of
the security as far as the Fund is concerned, in other cases, however, it may
produce increased investment opportunities for the Fund.
ADMINISTRATOR -- MFS provides the Fund with certain administrative services
pursuant to a Master Administrative Services Agreement dated March 1, 1997.
Under this Agreement, MFS provides the Fund with certain financial, legal,
compliance, shareholder communications and other administrative services. As a
partial reimbursement for the cost of providing these services, the Fund pays
MFS an adminstrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets that
exceed $3 billion.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. ("Shareholder Servicing
Agent"), a wholly owned subsidiary of MFS, performs transfer agency, certain
dividend disbursing agency and other services for the Fund.
6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Class A, Class B and Class C shares of the Fund may be purchased at the public
offering price through any securities dealer, certain banks and other financial
institutions ("dealers") having selling agreements with MFD. Dealers may also
charge their customers fees relating to an investment in the Fund.
This Prospectus offers to the general public Class A, Class B and Class C
shares, which bear sales charges and distribution fees in different forms and
amounts as described below:
CLASS A SHARES: Class A shares are generally offered at net asset value plus an
initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.
PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at
net asset value plus an initial sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE* AS
PERCENTAGE OF:
-------------------------------- DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
- ------------------ -------------- -------------- -----------------
<S> <C> <C> <C>
Less than $50,000 .......................................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000 ............................................. 4.75 4.99 4.00
$100,000 but less than $250,000 ............................................ 4.00 4.17 3.20
$250,000 but less than $500,000 ............................................ 2.95 3.04 2.25
$500,000 but less than $1,000,000 .......................................... 2.20 2.25 1.70
$1,000,000 or more ......................................................... None** None** See Below**
- ------------
*Because of rounding in the calculation of offering price, actual sales charges may be more or less than those calculated using
the percentages above.
**A CDSC will apply to such purchases, as discussed below.
</TABLE>
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 5% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain other MFS Funds owned or
being purchased, the existence of an agreement to purchase additional shares
during a 13-month period (or 36-month period for purchases of $1 million or
more) or other special purchase programs. A description of the Right of
Accumulation, Letter of Intent and Group Purchase privileges by which the sales
charge may be reduced is set forth in the SAI.
PURCHASES SUBJECT TO A CDSC (but not an initial sales charge) -- In the
following four circumstances, Class A shares are offered at net asset value
without an initial sales charge, but subject to a CDSC equal to 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested dividend and
capital gain distributions) or the total cost of such shares, in the event of a
share redemption within 12 months following the purchase:
(i) on investments of $1 million or more in Class A shares;
(ii) on investments in Class A shares by certain retirement plans subject
to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if, prior to July 1, 1996 (a) the plan had established an
account with the Shareholder Servicing Agent and (b) the sponsoring
organization had demonstrated to the satisfaction of MFD that either
(i) the employer had at least 25 employees or (ii) the aggregate
purchases by the retirement plan of Class A shares of Funds in the
MFS Funds would be in an aggregate amount of at least $250,000
within a reasonable period of time, as determined by MFD in its sole
discretion;
(iii) on investments in Class A shares by certain retirement plans subject
to ERISA, if: (a) the retirement plan and/or sponsoring organization
subscribes to the MFS FUNDamental 401(k) Program or any similar
recordkeeping system made available by the Shareholder Servicing Agent
(the "MFS Participant Recordkeeping System"); (b) the plan establishes
an account with the Shareholder Servicing Agent on or after July 1,
1996; and (c) the aggregate purchases by the retirement plan of Class
A shares of the MFS Funds will be in an aggregate amount of at least
$500,000 within a reasonable period of time, as determined by MFD in
its sole discretion; and
(iv) on investments in Class A shares by certain retirement plans subject to
ERISA, if: (a) the plan establishes an account with the Shareholder
Servicing Agent on or after July 1, 1996 and (b) the plan has, at the
time of purchase, a market value of $500,000 or more invested in shares
of any class or classes of the MFS Funds. THE RETIREMENT PLAN WILL
QUALIFY UNDER THIS CATEGORY ONLY IF THE PLAN OR ITS SPONSORING
ORGANIZATION INFORMS THE SHAREHOLDER SERVICING AGENT PRIOR TO THE
PURCHASE THAT THE PLAN HAS A MARKET VALUE OF $500,000 OR MORE INVESTED
IN SHARES OF ANY CLASS OR CLASSES OF THE MFS FUNDS. THE SHAREHOLDER
SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE WHETHER
SUCH A PLAN QUALIFIES UNDER THIS CATEGORY.
In the case of all such purchases, MFD will pay commissions to dealers on new
investments in Class A shares made through such dealers as follows:
COMMISSION PAID BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT
--------------------------------- --------------------------
1.00% On the first $2,000,000, plus
0.80% Over $2,000,000 to $3,000,000, plus
0.50% Over $3,000,000 to $50,000,000, plus
0.25% Over $50,000,000
For purposes of determining the level of commissions to be paid to dealers with
respect to a shareholder's new investment in Class A shares made on or after
April 1, 1996, purchases for each shareholder account (and certain other
accounts for which the shareholder is a record or beneficial holder) will be
aggregated over a 12-month period (commencing from the date of the first such
purchases).
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" in the
Prospectus for further discussion of the CDSC.
WAIVERS OF INITIAL SALES CHARGE AND CDSC. -- In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemption of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus. In addition to these circumstances,
the CDSC imposed upon the redemption of Class A shares is waived with respect to
shares held by certain retirement plans qualified under Section 401(a) or 403(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), and subject to
ERISA, where:
(i) the retirement plan and/or sponsoring organization does not subscribe to
the MFS Participant Recordkeeping System; and
(ii) the retirement plan and/or sponsoring organization demonstrates to the
satisfaction of, and certifies to, the Shareholder Servicing Agent that the
retirement plan has, at the time of certification or will have pursuant to
a purchase order placed with the certification, a market value of $500,000
or more invested in shares of any class or classes of the MFS Funds and
aggregate assets of at least $10 million;
provided, however, that the CDSC will not be waived (i.e., it will be imposed)
in the event that there is a change in law or regulations which results in a
material adverse change to the tax advantaged nature of the plan, or in the
event that the plan and/or sponsoring organization: (i) becomes insolvent or
bankrupt; (ii) is terminated or partially terminated under ERISA or is
liquidated or dissolved; or (iii) is acquired by, merged into, or consolidated
with, any other entity.
CLASS B SHARES: Class B shares are offered at net asset value without an initial
sales charge but subject to a CDSC upon redemption as follows:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
---------------- --------------
First ......................................... 4%
Second ........................................ 4%
Third ......................................... 3%
Fourth ........................................ 3%
Fifth ......................................... 2%
Sixth ......................................... 1%
Seventh and following ......................... 0%
The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividends or capital gain distributions.
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" for
further discussion of the CDSC.
Except as described below, MFD will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee payable under the Fund's
Distribution Plan (see "Distribution Plan" below) at a rate equal to 0.25% of
the purchase price of such shares. Therefore, the total amount paid to a dealer
upon the sale of Class B shares is 4% of the purchase price of the shares
(commission rate of 3.75% plus a service fee equal to 0.25% of the purchase
price).
Class B shares purchased by a retirement plan whose sponsoring organization
subscribes to the MFS Participant Recordkeeping System and which has established
its account with the Shareholder Servicing Agent on or after July 1, 1996, will
be subject to the CDSC described above, only under limited circumstances, as
explained below under "Waivers of CDSC." With respect to such purchases, MFD
pays an amount to dealers equal to 3.00% of the amount purchased through such
dealers (rather than the 4.00% payment described above), which is comprised of a
commission of 2.75% plus the advancement of the first year service fee equal to
0.25% of the purchase price payable under the Fund's Distribution Plan. As
discussed above, such retirement plans are eligible to purchase Class A shares
of the Fund at net asset value without an initial sales charge but subject to a
1% CDSC if the plan has, at the time of purchase, a market value of $500,000 or
more invested in shares of any class or classes of the MFS Funds. IN THIS EVENT,
THE PLAN OR ITS SPONSORING ORGANIZATION SHOULD INFORM THE SHAREHOLDER SERVICING
AGENT THAT THE PLAN IS ELIGIBLE TO PURCHASE CLASS A SHARES UNDER THIS CATEGORY;
THE SHAREHOLDER SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE
WHETHER SUCH A PLAN QUALIFIES UNDER THIS CATEGORY FOR THE PURCHASE OF CLASS A
SHARES.
WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon redemption
of Class B shares is waived. These circumstances are described in Appendix A to
this Prospectus. In addition to these circumstances, the CDSC imposed upon the
redemption of Class B shares is waived with respect to shares held by a
retirement plan whose sponsoring organization subscribes to the MFS Participant
Recordkeeping System and which has established an account with the Shareholder
Servicing Agent on or after July 1, 1996; provided, however, that the CDSC will
not be waived (i.e., it will be imposed) in the event that there is a change in
law or regulations which results in a material adverse change to the tax
advantaged nature of the plan, or in the event that the plan and/or sponsoring
organization: (i) becomes insolvent or bankrupt; (ii) is terminated or partially
terminated under ERISA or is liquidated or dissolved; or (iii) is acquired by,
merged into, or consolidated with, any other entity.
CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain
outstanding for approximately eight years will convert to Class A shares of the
Fund. Shares purchased through the reinvestment of distributions paid in respect
of Class B shares will be treated as Class B shares for purposes of the payment
of the distribution and service fees under the Fund's Distribution Plan. See
"Distribution Plan" below. However, for purposes of conversion to Class A
shares, all shares in a shareholder's account that were purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
(and which have not converted to Class A shares as provided in the following
sentence) will be held in a separate sub-account. Each time any Class B shares
in the shareholder's account (other than those in the sub-account) convert to
Class A shares, a portion of the Class B shares then in the sub-account will
also convert to Class A shares. The portion will be determined by the ratio that
the shareholder's Class B shares not acquired through reinvestment of dividends
and distributions that are converting to Class A shares bears to the
shareholder's total Class B shares not acquired through reinvestment. The
conversion of Class B shares to Class A shares is subject to the continuing
availability of a ruling from the Internal Revenue Service or an opinion of
counsel that such conversion will not constitute a taxable event for federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B shares to Class A shares will not occur
if such ruling or opinion is not available. In such event, Class B shares would
continue to be subject to higher expenses than Class A shares for an indefinite
period.
CLASS C SHARES: Class C shares are offered at net asset value without an initial
sales charge but are subject to a CDSC upon redemption of 1.00% during the first
year. Class C shares do not convert to any other class of the Fund. The maximum
investment in Class C shares that may be made is up to $1,000,000 per
transaction.
The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividend and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividend or capital gain distributions.
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" below
for further discussion of the CDSC.
MFD will pay dealers 1.00% of the purchase price of Class C shares purchased
through dealers and, as compensation therefor, MFD will retain the 1.00% per
annum distribution and service fee paid under the Fund's Distribution Plan to
MFD for the first year after purchase (see "Distribution Plan" below).
Class C shares are not currently available for purchase by any retirement plan
qualified under Sections 401(a) or 403(b) of the Code if the retirement plan
and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k) Plan
or another similar recordkeeping program made available by the Shareholder
Servicing Agent.
WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon
redemption of Class C shares is waived. These circumstances are described in
Appendix A to this Prospectus.
GENERAL: The following information applies to purchases of Class A, Class B
and Class C shares of the Fund.
MINIMUM INVESTMENT. Except as described below, the minimum initial
investment is $1,000 per account and the minimum additional investment is $50
per account. Accounts being established for monthly automatic investments and
under payroll savings programs and tax-deferred retirement programs (other than
IRAs) involving the submission of investments by means of group remittal
statements are subject to a $50 minimum on initial and additional investments
per account. The minimum initial investment for IRAs is $250 per account and the
minimum additional investment is $50 per account. Accounts being established for
participation in the Automatic Exchange Plan are subject to a $50 minimum on
initial and additional investments per account. There are also other limited
exceptions to these minimums for certain tax-deferred retirement programs. Any
minimums may be changed at any time at the discretion of MFD. The Fund reserves
the right to cease offering its shares at any time.
SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-free
at (800) 225-2606. The minimum purchase amount is $50 and the maximum purchase
amount is $100,000. Shareholders wishing to avail themselves of this telephone
purchase privilege must so elect on their Account Application and designate
thereon a bank and account number from which purchases will be made. If a
telephone purchase request is received by the Shareholder Servicing Agent on any
business day prior to the close of regular trading on the Exchange (generally,
4:00 p.m., Eastern time), the purchase will occur at the closing net asset value
of the shares purchased on that day. The Shareholder Servicing Agent may be
liable for any losses resulting from unauthorized telephone transactions if it
does not follow reasonable procedures designed to verify the identity of the
caller. The Shareholder Servicing Agent will request personal or other
information from the caller, and will normally also record calls. Shareholders
should verify the accuracy of confirmation statements immediately after their
receipt.
RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserves the
right to reject any specific purchase order or to restrict any specific purchase
or exchange request. In the event that the Fund or MFD rejects an exchange
request, neither the redemption nor the purchase side of the exchange will be
processed.
The Fund is not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Fund defines a "market
timer" as an individual, or organization acting on behalf of one or more
individuals, if (i) the individual or organization makes three or more exchange
requests out of the Fund per calendar year and (ii) any one of such exchange
requests represents shares equal in value to 1/2 or 1% or more of the Fund's net
assets at the time of the request. Accounts under common ownership or control,
including accounts administered by market timers, will be aggregated for
purposes of this definition.
As noted above, the Fund and MFD each reserves the right to reject or restrict
any specific purchase and exchange request, and, in addition, may impose
specific limitations with respect to market timers, including delaying for up to
seven days the purchase side of an exchange request by market timers or
specifically rejecting or otherwise restricting purchase and exchange requests
by markets timers. Other funds in the MFS Funds may have different and/or more
restrictive policies with respect to market timers than the Fund. These policies
are disclosed in the prospectuses of these other MFS Funds.
DEALER CONCESSIONS. Dealers may receive different compensation with respect
to sales of Class A, Class B and Class C shares. In addition, from time to time,
MFD may pay dealers 100% of the applicable sales charge on sales of Class A
shares of certain specified MFS Funds sold by such dealer during a specified
sales period. In addition, MFD or its affiliates may, from time to time, pay
dealers an additional commission equal to 0.50% of the net asset value of all of
the Class B and/or Class C shares of certain specified MFS Funds sold by such
dealer during a specified sales period. In addition, from time to time, MFD, at
its expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell shares of the Fund. Such
concessions provided by MFD may include financial assistance to dealers in
connection with preapproved conferences or seminars, sales or training programs
for invited registered representatives, payment for travel expenses, including
lodging, incurred by registered representatives for such seminars or training
programs, seminars for the public, advertising and sales campaigns regarding one
or more MFS Funds, and/or other dealer-sponsored events. From time to time, MFD
may make expense reimbursements for special training of a dealer's registered
representatives in group meetings or to help pay the expenses of sales contests.
Other concessions may be offered to the extent not prohibited by state laws or
any self-regulatory agency, such as the NASD.
SPECIAL INVESTMENT PROGRAMS. For shareholders who elect to participate in
certain investment programs (e.g., the Automatic Investment Plan) or other
shareholder services, MFD or its affiliates may either (i) give a gift of
nominal value, such as a hand-held calculator, or (ii) make a nominal charitable
contribution on their behalf.
RESTRICTIONS ON ACTIVITIES OF NATIONAL BANKS. The Glass-Steagall Act
prohibits national banks from engaging in the business of underwriting,
selling or distributing securities. Although the scope of the prohibition has
not been clearly defined, MFD believes that such Act should not preclude banks
from entering into agency agreements with MFD. If, however, a bank were
prohibited from so acting, the Trustees would consider what actions, if any,
would be necessary to continue to provide efficient and effective shareholder
services in respect of Shareholders who invested in the Fund through a
national bank. It is not expected that shareholders would suffer any adverse
financial consequence as a result of these occurrences. In addition, state
securities laws on this issue may differ from the interpretation of federal
law expressed herein and banks and financial institutions may be required to
register as broker-dealers pursuant to state law.
----------------
A shareholder whose shares are held in the name of, or controlled by, a dealer
might not receive many of the privileges and services from the Fund (such as
Right of Accumulation, Letter of Intent and certain recordkeeping services) that
the Fund ordinarily provides.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of the same class of any of the
other MFS Funds at net asset value (if available for sale). Shares of one class
may not be exchanged for shares of any other class.
EXCHANGES AMONG MFS FUNDS (EXCLUDING MFS MONEY MARKET FUNDS): No initial sales
charges or CDSC will be imposed in connection with an exchange from shares of an
MFS Fund to shares of any other MFS Fund, except with respect to exchanges from
an MFS money market fund to another MFS Fund which is not an MFS money market
fund (discussed below). With respect to an exchange involving shares subject to
a CDSC, the CDSC will be unaffected by the exchange and the holding period for
purposes of calculating the CDSC will carry over to the acquired shares.
EXCHANGES FROM AN MFS MONEY MARKET FUND: Special rules apply with respect to the
imposition of an initial sales charge or a CDSC for exchanges from an MFS money
market fund to another MFS Fund which is not an MFS money market fund. These
rules are described under the caption "Exchanges" in the Prospectuses of those
MFS money market funds.
EXCHANGES INVOLVING THE MFS FIXED FUND: Class A shares of any MFS Fund held by
certain qualified retirement plans may be exchanged for units of participation
of the MFS Fixed Fund (a bank collective investment fund) (the "Units"), and
Units may be exchanged for Class A shares of any MFS Fund. With respect to
exchanges between Class A shares subject to a CDSC and Units, the CDSC will
carry over to the acquired shares or Units and will be deducted from the
redemption proceeds when such shares or Units are subsequently redeemed,
assuming the CDSC is then payable (the period during which the Class A shares
and the Units were held will be aggregated for purposes of calculating the
applicable CDSC). In the event that a shareholder initially purchases Units and
then exchanges into Class A shares subject to an initial sales charge of an MFS
Fund, the initial sales charge shall be due upon such exchange, but will not be
imposed with respect to any subsequent exchanges between such Class A shares and
Units with respect to shares on which the initial sales charge has already been
paid. In the event that a shareholder initially purchases Units and then
exchanges into Class A shares subject to a CDSC of an MFS Fund, the CDSC period
will commence upon such exchange, and the applicability of the CDSC with respect
to subsequent exchanges shall be governed by the rules set forth above in this
paragraph.
GENERAL: A shareholder should read the prospectus of the other MFS Fund into
which an exchange is made and consider the differences in objectives, policies
and restrictions before making any exchange. Exchanges will be made only after
instructions in writing or by telephone (an "Exchange Request") are received for
an established account by the Shareholder Servicing Agent in proper form (i.e.,
if in writing -- signed by the record owner(s) exactly as the shares are
registered; if by telephone -- proper account identification is given by the
dealer or shareholder of record) and each exchange must involve either shares
having an aggregate value of at least $1,000 ($50 in the case of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by the
Shareholder Servicing Agent) or all the shares in the account. If an Exchange
Request is received by the Shareholder Servicing Agent on any business day prior
to the close of regular trading on the New York Stock Exchange (generally, 4:00
p.m., Eastern time) (the "Exchange"), the exchange will occur on that day if all
the requirements set forth above have been complied with at that time and
subject to the Fund's right to reject purchase orders. No more than five
exchanges may be made in any one Exchange Request by telephone. Additional
information concerning this exchange privilege and prospectuses for any of the
other MFS Funds may be obtained from dealers or the Shareholder Servicing Agent.
For federal and (generally) state income tax purposes, an exchange is treated as
a sale of the shares exchanged and, therefore, an exchange could result in a
gain or loss to the shareholder making the exchange. Exchanges by telephone are
automatically available to most non-retirement plan accounts and certain
retirement plan accounts. For further information regarding exchanges by
telephone, see "Redemptions by Telephone." The exchange privilege (or any aspect
of it) may be changed or discontinued and is subject to certain limitations,
including certain restrictions on purchases by market timers.
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the value of his account on any
date on which the Fund is open for business by redeeming shares at their net
asset value (a redemption) or by selling such shares to the Fund through a
dealer (a repurchase). Certain redemptions and repurchases are, however, subject
to a CDSC. See "Contingent Deferred Sales Charge" below. Because the net asset
value of shares of the account fluctuates, redemptions or repurchases, which are
taxable transactions, are likely to result in gains or losses to the
shareholder. When a shareholder withdraws an amount from his account, the
shareholder is deemed to have tendered for redemption a sufficient number of
full and fractional shares in his account to cover the amount withdrawn. The
proceeds of a redemption or repurchase will normally be available within seven
days, except for shares purchased or received in exchange for shares purchased
by check (including certified checks or cashier's checks). Payment of redemption
proceeds may be delayed for up to 15 days from the purchase date in an effort to
assure that such check has cleared. See "Tax Status" below.
REDEMPTION BY MAIL: Each shareholder may redeem all or any portion of the shares
in his account by mailing or delivering to the Shareholder Servicing Agent (see
back cover for address) a stock power with a written request for redemption or
letter of instruction, together with his share certificates (if any were
issued), all in "good order" for transfer. "Good order" generally means that the
stock power, written request for redemption, letter of instruction or
certificate must be endorsed by the record owner(s) exactly as the shares are
registered and the signature(s) must be guaranteed in the manner set forth below
under the caption "Signature Guarantee." In addition, in some cases "good order"
will require the furnishing of additional documents. The Shareholder Servicing
Agent may make certain de minimis exceptions to the above requirements for
redemption. Within seven days after receipt of a redemption request in "good
order" by the Shareholder Servicing Agent, the Fund will make payment in cash of
the net asset value of the shares next determined after such redemption request
was received, reduced by the amount of any applicable CDSC described above and
the amount of any income tax required to be withheld, except during any period
in which the right of redemption is suspended or date of payment is postponed
because the Exchange is closed or trading on such Exchange is restricted or to
the extent otherwise permitted by the 1940 Act if an emergency exists.
REDEMPTION BY TELEPHONE: Each shareholder may redeem an amount from his account
by telephoning the Shareholder Servicing Agent toll-free at (800) 225-2606.
Shareholders wishing to avail themselves of this telephone redemption privilege
must so elect on their Account Application, designate thereon a bank and account
number to receive the proceeds of such redemption, and sign the Account
Application Form with the signature(s) guaranteed in the manner set forth below
under the caption "Signature Guarantee." The proceeds of such a redemption,
reduced by the amount of any applicable CDSC and the amount of any income tax
required to be withheld, are mailed by check to the designated account, without
charge, if the redemption proceeds do not exceed $1,000, and are wired in
federal funds to the designated account if the redemption proceeds exceed
$1,000. If a telephone redemption request is received by the Shareholder
Servicing Agent by the close of regular trading on the Exchange on any business
day, shares will be redeemed at the closing net asset value of the Fund on that
day. Subject to the conditions described in this section, proceeds of a
redemption are normally mailed or wired on the next business day following the
date of receipt of the order for redemption. The Shareholder Servicing Agent
will not be responsible for any losses resulting from unauthorized telephone
transactions if it follows reasonable procedures designed to verify the identity
of the caller. The Shareholder Servicing Agent will request personal or other
information from the caller, and will normally also record calls. Shareholders
should verify the accuracy of confirmation statements immediately after their
receipt.
REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares through
his dealer (a repurchase), the shareholder can place a repurchase order with his
dealer, who may charge the shareholder a fee. IF THE DEALER RECEIVES THE
SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE EXCHANGE AND
COMMUNICATES IT TO MFD BEFORE THE CLOSE OF BUSINESS ON THE SAME DAY, THE
SHAREHOLDER WILL RECEIVE THE NET ASSET VALUE CALCULATED ON THAT DAY, REDUCED BY
THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO
BE WITHHELD.
CONTINGENT DEFERRED SALES CHARGE: Investments in Class A, Class B and Class C
shares ("Direct Purchases") will be subject to a CDSC for a period of: (i) with
respect to Class A and Class C shares, 12 months, (however, the CDSC on Class A
shares is only imposed with respect to purchases of $1 million or more of Class
A shares or purchases by certain retirement plans of Class A shares) or (ii)
with respect to Class B shares, six years. Purchases of Class A shares made
during a calendar month, regardless of when during the month the investment
occurred, will age one month on the last day of the month and each subsequent
month. Class B shares purchased on or after January 1, 1993 and Class C shares
will be aggregated on a calendar month basis -- all transactions made during a
calendar month, regardless of when during the month they have occurred, will age
one year at the close of business on the last day of such month in the following
calendar year and each subsequent year. For Class B shares of the Fund purchased
prior to January 1, 1993, transactions will be aggregated on a calendar year
basis -- all transactions made during a calendar year, regardless of when during
the year they have occurred, will age one year at the close of business on
December 31 of that year and each subsequent year.
At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class of shares represented by Direct Purchases exceeds
the sum of the six calendar year aggregations (12 months in the case of
purchases of Class C shares and of purchases of $1 million or more of Class A
shares or purchases by certain retirement plans of Class A shares) of Direct
Purchases may be redeemed without charge ("Free Amount"). Moreover, no CDSC is
ever assessed on additional shares acquired through the automatic reinvestment
of dividends or capital gain distributions ("Reinvested Shares"). Therefore, at
the time of redemption of a particular class, (i) any Free Amount is not subject
to the CDSC and (ii) the amount of the redemption equal to the then-current
value of Reinvested Shares is not subject to the CDSC, but (iii) any amount of
the redemption in excess of the aggregate of the then-current value of
Reinvested Shares and the Free Amount is subject to a CDSC. The CDSC will first
be applied against the amount of Direct Purchases which will result in any such
charge being imposed at the lowest possible rate. The CDSC to be imposed upon
redemptions of shares will be calculated as set forth in "Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except as described in Appendix A hereto.
GENERAL: The following information applies to redemptions and repurchases of
all classes of the Fund's shares.
SIGNATURE GUARANTEE. In order to protect shareholders against fraud, the
Fund requires, in certain instances as indicated above, that the shareholder's
signature be guaranteed. In these cases the shareholder's signature must be
guaranteed by an eligible bank, broker, dealer, credit union, national
securities exchange, registered securities association, clearing agency or
savings association. Signature guarantees shall be accepted in accordance with
policies established by the Shareholder Servicing Agent.
REINSTATEMENT PRIVILEGE. Shareholders of the Fund who have redeemed their
shares have a one-time right to reinvest the redemption proceeds in the same
class of shares of any of the MFS Funds (if shares of such Fund are available
for sale) at net asset value (with a credit for any CDSC paid) within 90 days of
the redemption pursuant to the Reinstatement Privilege. If the shares credited
for any CDSC paid are then redeemed within six years of the initial purchase in
the case of Class B shares or within 12 months of the initial purchase for Class
C and certain Class A share purchases, a CDSC will be imposed upon redemption.
Such purchases under the Reinstatement Privilege are subject to all limitations
in the SAI regarding this privilege.
IN-KIND DISTRIBUTIONS. The Trust agrees to redeem shares of the Fund solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund
during any 90-day period for any one shareholder. The Fund has reserved the
right to pay other redemptions, either totally or partially, by a distribution
in-kind of securities (instead of cash) from the Fund's portfolio. The
securities distributed in such a distribution would be valued at the same amount
as that assigned to them in calculating the net asset value for the shares being
sold. If a shareholder received a distribution in-kind, the shareholder could
incur brokerage or transaction charges when converting the securities to cash.
INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. Due to the relatively high cost of
maintaining small accounts, the Fund reserves the right to redeem shares in any
account for their then-current value if at any time the total investment in such
account drops below $500 because of redemptions or exchanges, except in the case
of accounts being established for monthly automatic investments and certain
payroll savings programs, Automatic Exchange Plan accounts and tax-deferred
retirement plans, for which there is a lower minimum investment requirement. See
"Purchases -- General -- Minimum Investment." Shareholders will be notified that
the value of their account is less than the minimum investment requirement and
allowed 60 days to make an additional investment before the redemption is
processed.
DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for Class A, Class B and Class C
shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Distribution Plan"), after having concluded that there is a reasonable
likelihood that the Distribution Plan would benefit the Fund and its
shareholders.
In certain circumstances, the fees described below may not be imposed or are
being waived. These circumstances, if any, are described below under the heading
"Current Level of Distribution and Service Fees."
FEATURES COMMON TO EACH CLASS OF SHARES: There are features of the Distribution
Plan that are common to each class of shares, as described below.
SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A or Class B
shares, as appropriate) (the "Designated Class") annually in order that MFD may
pay expenses on behalf of the Fund relating to the servicing of shares of the
Designated Class. The service fee is used by MFD to compensate dealers which
enter into a sales agreement with MFD in consideration for all personal services
and/or account maintenance services rendered by the dealer with respect to
shares of the Designated Class owned by investors for whom such dealer is the
dealer or holder of record. MFD may from time to time reduce the amount of the
service fees paid for shares sold prior to a certain date. Service fees may be
reduced for a dealer that is the holder or dealer of record for an investor who
owns shares of the Fund having an aggregate net asset value at or above a
certain dollar level. Dealers may from time to time be required to meet certain
criteria in order to receive service fees. MFD or its affiliates are entitled to
retain all service fees payable under the Distribution Plan for which there is
no dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by MFD or its affiliates to shareholder accounts.
DISTRIBUTION FEES. The Distribution Plan provides that the Fund may pay MFD
a distribution fee based on the average daily net assets attributable to the
Designated Class as partial consideration for distribution services performed
and expenses incurred in the performance of MFD's obligations under its
distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plan, as does the use
by MFD of such distribution fees. Such amounts and uses are described below in
the discussion of the provision of the Distribution Plan relating to each Class
of shares. While the amount of compensation received by MFD in the form of
distribution fees during any year may be more or less than the expense incurred
by MFD under its distribution agreement with the Fund, the Fund is not liable to
MFD for any losses MFD may incur performing services under its distribution
agreement with the Fund.
OTHER COMMON FEATURES. Fees payable under the Distribution Plan are charged
to, and therefore reduce, income allocated to shares of the Designated Class.
The provisions of the Distribution Plan relating to operating policies as well
as initial approval, renewal, amendment and termination are substantially
identical as they relate to each class of shares covered by the Distribution
Plan.
FEATURES UNIQUE TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are unique to each class of shares, as described below.
CLASS A SHARES. Class A shares are generally offered pursuant to an initial
sales charge, a substantial portion of which is paid to or retained by the
dealer making the sale (the remainder of which is paid to MFD). See "Purchases
- -- Class A Shares" above. In addition to the initial sales charge, the dealer
also generally receives the ongoing 0.25% per annum service fee, as discussed
above.
The distribution fee paid to MFD under the Distribution Plan is equal, on an
annual basis, to 0.10% of the Fund's average daily net assets attributable to
Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commission to dealers with respect to purchases
of $1 million or more and purchases by certain retirement plans of Class A
shares which are sold at net asset value but which are subject to a 1% CDSC for
one year after purchase). See "Purchases -- Class A Shares" above. In addition,
to the extent that the aggregate service and distribution fees paid under the
Distribution Plan do not exceed 0.35% per annum of the average daily net assets
of the Fund attributable to Class A shares, the Fund is permitted to pay such
distribution-related expenses or other distribution-related expenses.
CLASS B SHARES. Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class B Shares"
above. MFD will advance to dealers the first year service fee described above at
a rate equal to 0.25% of the purchase price of such shares and, as compensation
therefor, MFD may retain the service fee paid by the Fund with respect to such
shares for the first year after purchase. Dealers will become eligible to
receive the ongoing 0.25% per annum service fee with respect to such shares
commencing in the thirteenth month following purchase.
Under the Distribution Plan, the Fund pays MFD a distribution fee equal, on an
annual basis, to 0.75% of the Fund's average daily net assets attributable to
Class B shares. As noted above, this distribution fee may be used by MFD to
cover its distribution-related expenses under its distribution agreement with
the Fund (including the 3.75% commission it pays to dealers upon purchase of
Class B shares, as described under "Purchases -- Class B Shares" above).
CLASS C SHARES. Class C shares are offered at net asset value without an
inital sales charge but subject to a CDSC. See "Purchases -- Class C Shares"
above. MFD will pay a commission to dealers of 1.00% of the purchase price of
Class C shares purchased through dealers at the time of purchase. In
compensation for this 1.00% commission paid by MFD to dealers, MFD will retain
the 1.00% per annum Class C distribution and service fees paid by the Fund with
respect to such shares for the first year after purchase, and dealers will
become eligible to receive from MFD the ongoing 1.00% per annum distribution and
service fees paid by the Fund to MFD with respect to such shares commencing in
the thirteenth month following purchase.
This ongoing 1.00% fee is comprised of the 0.25% per annum service fee paid to
MFD under the Distribution Plan (which MFD in turn pays to dealers), as
discussed above, and a distribution fee paid to MFD (which MFD also in turn pays
to dealers) under the Distribution Plan equal, on an annual basis, to 0.75% of
the Fund's average daily net assets attributable to Class C shares.
CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class B and
Class C distribution and service fees for its current fiscal year are 0.325%,
1.00% and 1.00% per annum, respectively. Payment of a portion of the 0.10% per
annum Class A distribution fee equal to 0.025% per annum will commence on such
date as the Trustees of the Trust may determine. The 0.25% per annum Class A
service fee is reduced to 0.15% per annum for shares purchased prior to January
2, 1991.
DISTRIBUTIONS
The Fund intends to pay shareholders substantially all of its net investment
income as dividends on a quarterly basis. In determining the net investment
income available for distributions, the Fund may rely on projections of its
anticipated net investment income over a longer term, rather than its actual net
investment income for the period. In addition, the Fund may make one or more
distributions during the calendar year to its shareholders from any long-term
capital gains and may make one or more distributions during the calendar year to
its shareholders from short-term capital gains. Shareholders may elect to
receive dividends and capital gain distributions in either cash or additional
shares of the same class with respect to which a distribution is made. See "Tax
Status" and "Shareholder Services -- Distribution Options" below. Distributions
paid by the Fund with respect to Class A shares will generally be greater than
those paid with respect to Class B and Class C shares because expenses
attributable to Class B and Class C shares will generally be higher.
TAX STATUS
In order to minimize the taxes the Fund would otherwise be required to pay, the
Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Because the Fund intends to distribute all of its net investment income and net
realized capital gains to its shareholders in accordance with the timing
requirements imposed by the Code, it is not expected that the Fund will be
required to pay any federal income or excise taxes, although the Fund's
foreign-source income may be subject to foreign withholding taxes.
Shareholders of the Fund normally will have to pay federal income taxes, and any
state or local taxes, on the dividends and capital gain distributions they
receive from the Fund, whether the distribution is paid in cash or in additional
shares. A portion of the dividends received from the Fund (but none of the
Fund's capital gains distributions) may qualify for the dividends received
deduction for corporations.
Shortly after the end of each calendar year, each shareholder will be sent a
statement setting forth the federal income tax status of all dividends and
distributions for that year, including the portion taxable as ordinary income,
the portion taxable as long-term capital gain, the portion, if any, representing
a return of capital (which is free of current taxes but results in basis
reduction), and the amount, if any, of federal income tax withheld. Fund
distributions will reduce the Fund's net asset value per share. Shareholders who
buy shares shortly before the Fund makes a distribution may thus pay the full
price for the shares and then effectively receive a portion of the purchase
price back as a taxable distribution.
The Fund intends to withhold U.S. federal income tax at the rate of 30% on
dividends and other payments that are subject to such withholding and that are
made to persons who are neither citizens nor residents of the U.S., regardless
of whether a lower rate may be permitted under an applicable treaty. The Fund is
also required in certain circumstances to apply backup withholding at the rate
of 31% on taxable dividends and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. Backup withholding will not,
however, be applied to payments that have been subject to 30% withholding.
Prospective investors should read the Fund's Account Application for additional
information regarding backup withholding of federal income tax and should
consult their own tax advisers as to the tax consequences to them of an
investment in the Fund.
NET ASSET VALUE
The net asset value per share of each class of the Fund is determined each day
during which the Exchange is open for trading. This determination is made once
each day as of the close of regular trading on the Exchange by deducting the
amount of the liabilities attributable to the class from the value of the Fund's
assets attributable to the class and dividing the difference by the number of
shares of the class outstanding. Equity securities in the Fund's portfolio are
valued at their market value. For a discussion of the manner in which values of
these and other assets in the Fund's portfolio are determined, see the SAI. The
net asset value per share of each class of shares is effective for orders
received by the dealer prior to its calculation and received by MFD prior to the
close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has three classes of shares which it offers to the general public,
entitled Class A, Class B and Class C shares of Beneficial Interest. The
Trustees have fixed the par value at $0.33 1/3 per share. The Fund also has a
class of shares which if offers exclusively to certain institutional investors,
entitled Class I Shares. The Fund has reserved the right to create and issue
additional classes of shares, in which case each class of shares of the Fund
would participate equally in the earnings, dividends and assets attributable to
that class of shares of the Fund. Shareholders are entitled to one vote for each
share held and may vote in the election of Trustees and on other matters
submitted to meetings of shareholders. Additionally, each class of shares of the
Fund will vote separately on any material increase in the fees under the
Distribution Plan or on any other matter that solely affects that class of
shares, but will otherwise vote together with all other classes of shares of the
Fund on all other matters. The Fund does not intend to hold annual meetings. The
Fund's Declaration of Trust provides that a Trustee may be removed from office
in certain instances.
Each share of a class represents an equal proportionate interest in the Fund
with each other class share, subject to the liabilities of the particular class.
Shares have no pre-emptive or conversion rights (except as set forth in
"Purchases -- Conversion of Class B Shares"). Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
The Declaration of Trust has no provision for annual meetings. New Trustees are
appointed by the remaining Trustees (not the shareholders) subject to the
written assent of more than 50% of the shares voting on each appointment.
Shareholders therefore have limited non-cumulative voting rights and holders of
more than 50% of the shares voting may accept or reject each appointment while
holders of less than 50% are not able to reject any appointment. Amendments to
the Declaration of Trust require written consent of the holders of a majority of
the shares. The 1940 Act confers additional voting rights on the shareholders.
PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of shares and may also quote fund
rankings in the relevant fund category from various sources, such as the Lipper
Analytical Securities Corporation and Wiesenberger Investment Companies Service.
All performance quotations are based on historical performance and are not
intended to indicate future performance. Yield calculations are based on the
annualized net investment income per share allocated to each class of the Fund
over a 30-day period stated as a percent of the maximum public offering price of
that class on the last day of that period. Yield calculations for Class B and
Class C shares assume no CDSC is paid. The current distribution rate for each
class is generally based upon the total amount of dividends per share paid by
the Fund to shareholders of that class during the past twelve months and is
computed by dividing the amount of such dividends by the maximum public offering
price of that class at the end of such period. Current distribution rate
calculations for Class B and Class C shares assume no CDSC is paid. The current
distribution rate differs from the yield calculation because it may include
distributions to shareholders from sources other than dividends and interest,
such as premium income from option writing, short-term capital gains, and return
of invested capital, and is calculated over a different period of time. Total
rate of return quotations will reflect the average annual percentage change over
stated periods in the value of an investment in each class of shares of the Fund
made at the maximum public offering price of the shares of that class with all
distributions reinvested and which will give effect to the imposition of any
applicable CDSC assessed upon redemptions of the Fund's Class B and Class C
shares. Such total rate of return quotations may be accompanied by quotations
which do not reflect the reduction in value of the initial investment due to the
sales charge or the deduction of a CDSC, and which will thus be higher. Total
rate of return reflects all components of investment over a stated period of
time and current distribution rate reflects only the rate of distributions paid
by the Fund over a stated period of time.
The Fund offers multiple classes of shares which were initially offered for sale
to the public on different dates. The calculation of total rate of return for a
class of shares which initially was offered for sale to the public subsequent to
another class of shares of the Fund is based both on (i) the performance of the
Fund's newer class from the date it initially was offered for sale to the public
and (ii) the performance of the Fund's oldest class from the date it initially
was offered for sale to the public up to the date that the newer class initially
was offered for sale to the public. See the SAI for further information on the
calculation of total rate of return for share classes initially offered for sale
to the public on different dates.
All performance quotations may from time to time be used in advertisements,
shareholder reports or other communications to shareholders. For a discussion of
the manner in which the Fund will calculate its yield, current distribution rate
and total rate of return, see the SAI. For further information about the Fund's
performance for the fiscal year ended December 31, 1996, please read the Fund's
Annual Report. A copy of the Annual Report may be obtained without charge by
contacting the Shareholder Servicing Agent (see back cover for address and phone
number). In addition to information provided in shareholder reports, the Fund
may, in its discretion, from time to time, make a list of all or a portion of
holdings available to investors upon request.
7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund, should contact the Shareholder
Servicing Agent (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account. At the
end of each calendar year, each shareholder will receive income tax information
regarding reportable dividends and capital gain distributions for that year (see
"Tax Status").
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares;
this option will be assigned if no other option is specified;
-- Dividends in cash; capital gain distributions reinvested in additional
shares;
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gains
distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash) and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, or
the shareholder does not respond to mailings from the Shareholder Servicing
Agent with regard to uncashed distribution checks, such shareholder's
distribution option will automatically be converted to having all dividends and
other distributions reinvested in additional shares. Any request to change a
distribution option must be received by the Shareholder Servicing Agent by the
record date for a dividend or distribution in order to be effective for that
dividend or distribution. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the SAI) anticipates purchasing $50,000 or more of Class A shares
of the Fund alone or in combination with shares of any class of other MFS Funds
or MFS Fixed Fund (a bank collective investment fund) within a 13-month period
(or 36-month period for purchases of $1 million or more), the shareholder may
obtain such shares at the same reduced sales charge as though the total quantity
were invested in one lump sum, subject to escrow agreements and the appointment
of an attorney for redemptions from the escrow amount if the intended purchases
are not completed, by completing the Letter of Intent section of the Account
Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of Class A, Class B and Class C
shares of that shareholder in the MFS Funds or MFS Fixed Fund (a bank collective
investment fund) reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of any other MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic payments
based upon the value of his account. Each payment under a Systematic Withdrawal
Plan (a "SWP") must be at least $100, except in certain limited circumstances.
The aggregate withdrawals of Class B and Class C shares in any year pursuant to
a SWP will not be subject to a CDSC and are generally limited to 10% of the
value of the account at the time of the establishment of the SWP. The CDSC will
not be waived in the case of SWP redemptions of Class A shares which are subject
to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account on any day of the month. If the
shareholder does not specify a date, the investment will automatically occur on
the first business day of the month. Required forms are available from the
Shareholder Servicing Agent or investment dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds under the Automatic Exchange Plan. The Automatic Exchange
Plan provides for automatic monthly or quarterly exchanges of funds from the
shareholder's account in an MFS Fund for investment in the same class of shares
of other MFS Funds selected by the shareholder. Under the Automatic Exchange
Plan, exchanges of at least $50 each may be made to up to six different funds. A
shareholder should consider the objectives and policies of a fund and review its
prospectus before electing to exchange money into such fund through the
Automatic Exchange Plan. No transaction fee is imposed in connection with
transfer transactions under the Automatic Exchange Plan. However, exchanges of
shares of MFS Money Market Fund, MFS Government Money Market Fund or Class A
shares of MFS Cash Reserve Fund will be subject to any applicable sales charge.
For federal and (generally) state income tax purposes, an exchange is treated as
a sale of the shares exchanged and, therefore, could result in a capital gain or
loss to the shareholder making the exchange. See the SAI for further information
concerning the Automatic Exchange Plan. Investors should consult their tax
advisers for information regarding the potential capital gain and loss
consequences of transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of shares
regardless of fluctuating share offering prices, a shareholder should consider
his financial ability to continue his purchases through periods of low price
levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund may be purchased by all
types of tax-deferred retirement plans, including IRAs, SEP-IRA plans, 401(k)
plans, 403(b) plans and certain other qualified pension and profit-sharing
plans. Investors should consult with their tax advisers before establishing any
of the tax-deferred retirement plans described above.
----------------
The Fund's SAI dated May 1, 1997 contains more detailed information about the
Fund, including information related to: (i) investment policies and
restrictions; (ii) Trustees, officers and investment adviser; (iii) portfolio
transactions and brokerage commissions; (iv) the Distribution Plan; and (v)
various services and privileges provided by the Fund for the benefit of its
shareholders, including additional information with respect to the exchange
privilege.
<PAGE>
APPENDIX A
WAIVERS OF SALES CHARGES
This Appendix sets forth the various circumstances in which all applicable sales
charges are waived (Section I), the initial sales charge and the CDSC for Class
A shares is waived (Section II), and the CDSC for Class B and Class C shares is
waived (Section III).
I. WAIVERS OF ALL APPLICABLE SALES CHARGES
In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions of
Class A shares and on redemptions of Class B and Class C shares, as
applicable, is waived:
1. DIVIDEND REINVESTMENT
o Shares acquired through dividend or capital gain reinvestment; and
o Shares acquired by automatic reinvestment of distributions of
dividends and capital gains of any Fund in the MFS Family of Funds
("MFS Funds") pursuant to the Distribution Investment Program.
2. CERTAIN ACQUISITIONS/LIQUIDATIONS
o Shares acquired on account of the acquisition or liquidation of assets
of other investment companies or personal holding companies.
3. AFFILIATES OF AN MFS FUND/CERTAIN DEALERS. Shares acquired by:
o Officers, eligible directors, employees (including retired employees)
and agents of Massachusetts Financial Services Company ("MFS"), Sun
Life or any of their subsidiary companies;
o Trustees and retired trustees of any investment company for which MFS
Fund Distributors, Inc. ("MFD") serves as distributor;
o Employees, directors, partners, officers and trustees of any sub-
adviser to any MFS Fund;
o Employees or registered representatives of dealers and other
financial institution ("dealers") which have a sales agreement with
MFD;
o Certain family members of any such individual and their spouses
identified above and certain trusts, pension, profit-sharing or other
retirement plans for the sole benefit of such persons, provided the
shares are not resold except to the MFS Fund which issued the shares;
and
o Institutional Clients of MFS or MFS Institutional Advisors, Inc.
("MFSI")
4. INVOLUNTARY REDEMPTIONS (CDSC WAIVER ONLY)
o Shares redeemed at an MFS Fund's direction due to the small size of a
shareholder's account. See "Redemptions and Repurchases -- General --
Involuntary Redemptions/ Small Accounts" in the Prospectus.
5. RETIREMENT PLANS (CDSC WAIVER ONLY). Shares redeemed on account of
distributions made under the following circumstances:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRA'S")
o Death or disability of the IRA owner.
SECTION 401(A) PLANS ("401(A) PLANS") AND SECTION 403(B) EMPLOYER
SPONSORED PLANS ("ESP PLANS")
o Death, disability or retirement of 401 (a) or ESP Plan participant;
o Loan from 401(a) or ESP Plan (repayment of loans, however, will
constitute new sales for purposes of assessing sales charges);
o Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1 (d)(2), as amended from time to time);
o Termination of employment of 401(a) or ESP Plan participant
(excluding, however, a partial or other termination of the 401(a) or
ESP Plan);
o Tax-free return of excess 401(a) or ESP Plan contributions;
o To the extent that redemption proceeds are used to pay expenses (or
certain participant expenses) of the 401(a) or ESP Plan (e.g.,
participant account fees), provided that the Plan sponsor subscribes
to the MFS FUNDamental 401 (k) Plan or another similar recordkeeping
system made available by the Shareholder Servicing Agent; and
o Distributions from a 401(a) or ESP Plan that has invested its assets
in one or more of the MFS Funds for more than 10 years from the later
to occur of: (i) January 1, 1993 or (ii) the date such 401(a) or ESP
Plan first invests its assets in one or more of the MFS Funds. The
sales charges will be waived in the case of a redemption of all of
the 401(a) or ESP Plan's shares in all MFS Funds (i.e., all the
assets of the 401(a) or ESP Plan invested in the MFS Funds are
withdrawn), unless immediately prior to the redemption, the aggregate
amount invested by the 401(a) or ESP Plan in shares of the MFS Funds
(excluding the reinvestment of distributions) during the prior four
years equals 50% or more of the total value of the 401(a) or ESP
Plan's assets in the MFS Funds, in which case the sales charges will
not be waived.
SECTION 403(B) SALARY REDUCTION ONLY PLANS ("SRO PLANS")
o Death or disability of SRO Plan participant.
6. CERTAIN TRANSFERS OF REGISTRATION (CDSC WAIVER ONLY). Shares
transferred:
o To an IRA rollover account where any sales charges with respect to
the shares being reregistered would have been waived had they been
redeemed; and
o From a single account maintained for a 401(a) Plan to multiple
accounts maintained by the Shareholder Servicing Agent on behalf of
individual participants of such Plan, provided that the Plan sponsor
subscribes to the MFS FUNDamental 401(k) Plan or another similar
recordkeeping system made available by the Shareholder Servicing
Agent.
II. WAIVERS OF CLASS A SALES CHARGES
In addition to the waivers set forth in Section I above, in the following
circumstances the initial sales charge imposed on purchases of Class A
shares and the CDSC imposed on certain redemptions of Class A shares is
waived:
1. INVESTMENT OF REDEMPTION PROCEEDS FROM UNAFFILIATED MUTUAL FUNDS
o Shares acquired through the investment of redemption proceeds from
another open-end management investment company not distributed or
managed by MFD or its affiliates if: (i) the investment is made
through a dealer and appropriate documentation is submitted to MFD;
(ii) the redeemed shares were subject to an initial sales charge or
deferred sales charge (whether or not actually imposed); (iii) the
redemption occurred no more than 90 days prior to the purchase of
Class A shares; and (iv) the MFS Fund, MFD or its affiliates have not
agreed with such company or its affiliates, formally or informally,
to waive sales charges on Class A shares or provide any other
incentive with respect to such redemption and sale.
2. WRAP ACCOUNT INVESTMENTS
o Shares acquired by investments through certain dealers which have
entered into an agreement with MFD which includes a requirement that
such shares be sold for the sole benefit of clients participating in
a "wrap" account or a similar program under which such clients pay a
fee to such dealer.
3. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS
o Shares acquired by insurance company separate accounts.
4. RETIREMENT PLANS
ADMINISTRATIVE SERVICES ARRANGEMENTS
o Shares acquired by retirement plans whose third party administrators,
or dealers have entered into an administrative services agreement
with MFD or one of its affiliates to perform certain administrative
services, subject to certain operational and minimum size
requirements specified from time to time by MFD or one or more of its
affiliates.
REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS
o Shares acquired through the automatic reinvestment in Class A shares
of Class A or Class B distributions which constitute required
withdrawals from qualified retirement plans.
SHARES REDEEMED ON ACCOUNT OF DISTRIBUTIONS MADE UNDER THE FOLLOWING
CIRCUMSTANCES:
IRA'S
o Distributions made on or after the IRA owner has attained the age of
59 1/2 years old; and
o Tax-free returns of excess IRA contributions.
401(A) PLANS
o Distributions made on or after the 401 (a) Plan participant has
attained the age of 59 1/2 years old; and
o Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a 401(a) Plan.
ESP PLANS AND SRO PLANS
o Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59 1/2 years old.
III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES
In addition to the waivers set forth in Section I above, in the following
circumstances the CDSC imposed on redemptions of Class B shares is waived:
1. SYSTEMATIC WITHDRAWAL PLAN
o Systematic Withdrawal Plan redemptions with respect to up to 10% per
year of the account value at the time of establishment.
2. DEATH OF OWNER
o Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a
living trust for the benefit of the deceased individual.
3. DISABILITY OF OWNER
o Shares redeemed on account of the disability of the account owner if
shares are held either solely or jointly in the disabled individual's
name or in a living trust for the benefit of the disabled individual
(in which case a disability certification form is required to be
submitted to the Shareholder Servicing Agent.).
4. RETIREMENT PLANS. Shares redeemed on account of distributions made
under the following circumstances:
IRA'S, 401(A) PLANS, ESP PLANS AND SRO PLANS
o Distributions made on or after the IRA owner or the 401(a), ESP or
SRO Plan participant, as applicable, has attained the age of 70 1/2
years old, but only with respect to the minimum distribution under
applicable Internal Revenue Code ("Code") rules.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS ("SAR-SEP PLANS")
o Distributions made on or after the SAR-SEP Plan participant has
attained the age of 70 1/2 years old, but only with respect to the
minimum distribution under applicable Code rules;
o Death or disability of a SAR-SEP Plan participant.
<PAGE>
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Shareholder Servicing Agent
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll-free: (800) 225-2606
Mailing Address:
P.O. Box 2281
Boston, MA 02107-9906
Independent Auditors
Deloitte & Touche llp
125 Summer Street
Boston, MA 02110
[logo]
INVESTMENT MANAGEMENT
We inveted the mutual fund(TM)
MASSACHUSETTS
INVESTORS TRUST
500 Boylston Street
Boston, MA 02116
MIT-1-5/97/555M 12/212/312
[logo]
INVESTMENT MANAGEMENT
We invented the mutual fund(TM)
MASSACHUSETTS INVESTORS TRUST
Prospectus
May 1, 1997
[graphic omitted]
<PAGE>
[logo] MFS(SM)
INVESTMENT MANAGEMENT
MASSACHUSETTS STATEMENT OF
INVESTORS TRUST ADDITIONAL INFORMATION
(A member of the MFS Family of Funds(R)) May 1, 1997
- -------------------------------------------------------------------------------
Page
1. Definitions ............................................... 2
2. Investment Objectives, Policies and Restrictions .......... 2
3. Management of the Fund .................................... 9
Trustees ............................................... 9
Officers ............................................... 9
Trustees Compensation Table ............................ 10
Investment Adviser ..................................... 10
Administrator .......................................... 11
Custodian .............................................. 11
Shareholder Servicing Agent ............................ 11
Distributor ............................................ 11
4. Portfolio Transactions and Brokerage Commissions .......... 12
5. Shareholder Services ...................................... 13
Investment and Withdrawal Programs ..................... 13
Exchange Privilege ..................................... 15
Tax-Deferred Retirement Plans .......................... 16
6. Tax Status ................................................ 16
7. Determination of Net Asset Value and Performance .......... 17
8. Distribution Plan ......................................... 19
9. Independent Auditors and Financial Statements ............. 20
Appendix A ................................................ 21
MASSACHUSETTS INVESTORS TRUST
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information, as amended or supplemented from time
to time (the "SAI"), sets forth information which may be of interest to
investors but which is not necessarily included in the Prospectus, dated May
1, 1997. This SAI should be read in conjunction with the Prospectus, a copy of
which may be obtained without charge by contacting the Shareholder Servicing
Agent (see last page for address and phone number).
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
1. DEFINITIONS
"Fund" -- Massachusetts Investors Trust, a
common law trust organized under
the
laws of The Commonwealth of
Massachusetts.
"MFS" or the "Adviser" -- Massachusetts Financial Services
Company, a Delaware corporation.
"MFD" -- MFS Fund Distributors, Inc., a
Delaware corporation.
"Prospectus" -- The Prospectus of the Fund dated
May 1, 1997, as amended or
supplemented from time to time.
2. INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS
INVESTMENT OBJECTIVES. The Fund'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 Fund will
achieve its investment objectives.
INVESTMENT POLICIES. The Fund 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 Fund 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 Fund to avoid the acquisition
of speculative securities or those of doubtful character even if immediate
prospects are tempting.
The assets of the Fund are normally invested in common stocks or securities
convertible into common stocks. However, the Fund may hold its assets in cash
or invest in commercial paper, repurchase agreements or other forms of debt
securities either to provide reserves for future purchases of common stock or
as a defensive measure in certain economic environments. Since shares of the
Fund represent an investment in securities with fluctuating market prices,
shareholders should understand that the value of shares of the Fund will vary
as the aggregate value of the Fund's portfolio securities increases or
decreases. Moreover, the amount of dividends the Fund pays to its shareholders
will vary in relation to the amount of dividends and interest the Fund
receives from its portfolio securities.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements with
sellers who are member firms (or a subsidiary thereof) of the New York Stock
Exchange (the "Exchange") or members of the Federal Reserve System, recognized
primary U.S. Government securities dealers or institutions which the Adviser
has determined to be of comparable creditworthiness. The securities that the
Fund purchases and holds through its agent are U.S. Government securities, the
values of which are equal to or greater than the repurchase price agreed to be
paid by the seller. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a standard rate due to the Fund
together with the repurchase price on repurchase. In either case, the income
to the Fund is unrelated to the interest rate on the U.S. Government
securities.
The repurchase agreement provides that in the event the seller fails to pay
the price agreed upon on the agreed upon delivery date or upon demand, as the
case may be, the Fund will have the right to liquidate the securities. If at
the time the Fund is contractually entitled to exercise its right to liquidate
the securities, the seller is subject to a proceeding under the bankruptcy
laws or its assets are otherwise subject to a stay order, the Fund's exercise
of its right to liquidate the securities may be delayed and result in certain
losses and costs to the Fund. The Fund has adopted and follows procedures
which are intended to minimize the risks of repurchase agreements. For
example, the Fund only enters into repurchase agreements after the Adviser has
determined that the seller is creditworthy, and the Adviser monitors that
seller's creditworthiness on an ongoing basis. Moreover, under such
agreements, the value of the securities (which are marked to market every
business day) is required to be greater than the repurchase price, and the
Fund has the right to make margin calls at any time if the value of the
securities falls below the agreed upon margin.
FOREIGN SECURITIES: The Fund may invest up to 35% (and expects generally to
invest between 0% and 15%) of its total assets in foreign securities (not
including American Depositary Receipts) considered to be of high or improving
investment quality. As discussed in the Prospectus, investing in foreign
securities generally represents a greater degree of risk than investing in
domestic securities, due to possible exchange rate fluctuations, less publicly
available information, more volatile markets, less securities regulation, less
favorable tax provisions, war or expropriation. As a result of its investments
in foreign securities, the Fund may receive interest or dividend payments, or
the proceeds of the sale or redemption of such securities, in the foreign
currencies in which such securities are denominated. Under certain
circumstances, such as where the Adviser believes that the applicable exchange
rate is unfavorable at the time the currencies are received or the Adviser
anticipates, for any other reason, that the exchange rate will improve, the
Fund may hold such currencies for an indefinite period of time. While the
holding of currencies will permit the Fund to take advantage of favorable
movements in the applicable exchange rate, such strategy also exposes the Fund
to risk of loss if exchange rates move in a direction adverse to the Fund's
position. Such losses could reduce any profits or increase any losses
sustained by the Fund from the sale or redemption of securities and could
reduce the dollar value of interest or dividend payments received. The Fund
may also hold foreign currency in anticipation of purchasing foreign
securities.
AMERICAN DEPOSITARY RECEIPTS: American Depositary Receipts ("ADRs") are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. ADRs may be sponsored or unsponsored. A
sponsored ADR is issued by a depository which has an exclusive relationship
with the issuer of the underlying security. An unsponsored ADR may be issued
by any number of U.S. depositories. Under the terms of most sponsored
arrangements, depositories agree to distribute notices of shareholder meetings
and voting instructions, and to provide shareholder communications and other
information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under
no obligation to distribute shareholder communications received from the
issuer of the deposited securities or to pass through voting rights to ADR
holders in respect of the deposited securities. The Fund may invest in either
type of ADR. Although the U.S. investor holds a substitute receipt of
ownership rather than direct stock certificates, the use of the depositary
receipts in the United States can reduce costs and delays as well as potential
currency exchange and other difficulties. The Fund may purchase securities in
local markets and direct delivery of these ordinary shares to the local
depository of an ADR agent bank in the foreign country. Simultaneously, the
ADR agents create a certificate which settles at the Fund's custodian in five
days. The Fund may also execute trades on the U.S. markets using existing
ADRs. A foreign issuer of the security underlying an ADR is generally not
subject to the same reporting requirements in the United States as a domestic
issuer. Accordingly, the information available to a U.S. investor will be
limited to the information the foreign issuer is required to disclose in its
own country and the market value of an ADR may not reflect undisclosed
material information concerning the issuer of the underlying security. ADRs
may also be subject to exchange rate risks if the underlying foreign
securities are denominated in foreign currency.
"WHEN-ISSUED" SECURITIES: The Fund may purchase securities on a "when-issued"
or on a "forward delivery" basis. It is expected that, under normal
circumstances, the Fund will take delivery of such securities. When the Fund
commits to purchase a security on a "when-issued" or on a "forward delivery"
basis, it will set up procedures consistent with Securities and Exchange
Commission ("SEC") policies concerning such purchases. Since those policies
currently recommend that an amount of the Fund's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the commitment,
the Fund will always have liquid assets sufficient to cover any commitments or
to limit any potential risk. However, although the Fund does not intend to
make such purchases for speculative purposes and the Fund does intend to
adhere to the provisions of SEC policies, purchases of securities on such
basis may involve more risk than other types of purchases. For example, the
Fund may have to sell assets which have been set aside in order to meet
redemptions. Also, if the Fund determines it necessary to sell the "when-
issued" or "forward delivery" securities before delivery, the Fund may incur a
loss because of market fluctuations since the time the commitment to purchase
such securities was made.
It is not the Fund's policy to invest for the purpose of exercising control or
management or with a view to making short-term trading profits. This operating
policy is not fundamental and may be changed without shareholder approval.
OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options
on securities and purchase call and put options on securities. The Fund may
write options on securities for the purpose of increasing its return on such
securities and for hedging purposes.
A call option written by the Fund is covered if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire such
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion
or exchange of other securities held in its portfolio. A call option is also
covered if a Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in liquid assets in a segregated account with its custodian. A put
option written by the Fund is covered if the Fund maintains liquid assets with
a value equal to the exercise price in a segregated account with its
custodian, or else holds a put on the same security and in the same principal
amount as the put written where the exercise price of the put held (i) is
equal to or greater than the exercise price of the put written or (ii) is less
than the exercise price of the put written if the difference is maintained by
the Fund in liquid assets in a segregated account with its custodian. Put and
call options written by the Fund may also be covered in such other manner as
may be in accordance with the requirements of the exchange on which, or the
counterparty with which, the option is traded, and applicable laws and
regulations.
Effecting a closing transaction in the case of a written call option will
permit the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both, or in the case
of a written put option will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by liquid assets. Such
transactions permit the Fund to generate additional premium income, which will
partially offset declines in the value of portfolio securities or increases in
the cost of securities to be acquired. Also, effecting a closing transaction
will permit the proceeds from the concurrent sale of any securities subject to
the option to be used for other investments of the Fund, provided that another
option on such security is not written. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option,
it will effect a closing transaction in connection with the option prior to or
concurrent with the sale of the security.
The Fund will realize a profit from a closing transaction if the premium paid
in connection with the closing of an option written by the Fund is less than
the premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by the Fund is more than
the premium paid for the original purchase. Conversely, the Fund will suffer a
loss if the premium paid or received in connection with a closing transaction
is more or less, respectively, than the premium received or paid in
establishing the option position. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the closing out of a call option
previously written by the Fund is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Fund.
The Fund may write options in connection with buy-and-write transactions; that
is, the Fund may purchase a security and then write a call option against that
security. The exercise price of the call option the Fund determines to write
will depend upon the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"), equal to ("at-
the-money") or above ("out-of-the-money") the current value of the underlying
security at the time the option is written. If the call options are exercised
in such transactions, the Fund's maximum gain will be the premium received by
it for writing the option, adjusted upwards or downwards by the difference
between the Fund's purchase price of the security and the exercise price, less
related transaction costs. If the options are not exercised and the price of
the underlying security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options could be used by
the Fund in the same market environments that call options would be used in
equivalent buy-and-write transactions.
The Fund may write combinations of put and call options on the same security,
a practice known as a "straddle." By writing a straddle, the Fund undertakes a
simultaneous obligation to sell and purchase the same security in the event
that one of the options is exercised. If the price of the security
subsequently rises sufficiently above the exercise price to cover the amount
of the premium and transaction costs, the call will likely be exercised and
the Fund will be required to sell the underlying security at a below market
price. This loss may be offset, however, in whole or in part, by the premiums
received on the writing of the two options. Conversely, if the price of the
security declines by a sufficient amount, the put will likely be exercised.
The writing of straddles will likely be effective, therefore, only where the
price of a security remains stable and neither the call nor the put is
exercised. In an instance where one of the options is exercised, the loss on
the purchase or sale of the underlying security may exceed the amount of the
premiums received.
By writing a call option, the Fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, the Fund assumes the risk that
it may be required to purchase the underlying security for an exercise price
above its then current market value, resulting in a capital loss unless the
security subsequently appreciates in value. The writing of options on
securities will be undertaken by the Fund for purposes in addition to hedging,
and could involve certain risks which are not present in the case of hedging
transactions. Moreover, even where options are written for hedging purposes,
such transactions will constitute only a partial hedge against declines in the
value of portfolio securities or against increases in the value of securities
to be acquired, up to the amount of the premium.
The Fund also may purchase put and call options on securities. Put options
would be purchased to hedge against a decline in the value of securities held
in the Fund's portfolio. If such a decline occurs, the put options will permit
the Fund to sell the underlying securities at the exercise price, or to close
out the options at a profit. By using put options in this way, the Fund will
reduce any profit it might otherwise have realized in the underlying security
by the amount of the premium paid for the put option and related transaction
costs. The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund anticipates purchasing in the future. If
such an increase occurs, the call option will permit the Fund to purchase the
securities at the exercise price or to close out the option at a profit. The
premium paid for a call or put option plus any transaction costs will reduce
the benefit, if any, realized by the Fund upon exercise of the option, and,
unless the price of the underlying security rose or declined sufficiently, the
option may expire worthless to the Fund.
The staff of the SEC has taken the position that purchased over-the-counter
options and assets used to cover written over-the-counter options are illiquid
and, therefore, together with other illiquid securities, cannot exceed a
certain percentage of the Fund's assets (the "SEC illiquidity ceiling").
Although the Adviser disagrees with this position, the Adviser intends to
limit the Fund's writing of over-the-counter options in accordance with the
following procedure. Except as provided below, the Fund intends to write over-
the-counter options only with primary U.S. Government securities dealers
recognized by the Federal Reserve Bank of New York. Also, the contracts which
the Fund has in place with such primary dealers will provide that the Fund has
the absolute right to repurchase an option it writes at any time at a price
which represents the fair market value, as determined in good faith through
negotiation between the parties, but which in no event will exceed a price
determined pursuant to a formula in the contract. Although the specific
formula may vary between contracts with different primary dealers, the formula
will generally be based on a multiple of the premium received by the Fund for
writing the option, plus the amount, if any, of the option's intrinsic value
(i.e., the amount that the option is in-the-money). The formula may also
include a factor to account for the difference between the price of the
security and the strike price of the option if the option is written out-of-
money. The Fund will treat all or a part of the formula price as illiquid for
purposes of the SEC illiquidity ceiling. The Fund may also write over-the-
counter options with non-primary dealers, including foreign dealers, and will
treat the assets used to cover these options as illiquid for purposes of such
SEC illiquidity ceiling.
OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put
options on stock indices and purchase call and put options on stock indices
for the purpose of increasing its gross income and to protect its portfolio
against declines in the value of securities it owns or increases in the value
of securities to be acquired.
The Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of the Adviser, are expected to be similar to
those of the index, or by having an absolute and immediate right to acquire
such securities without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion
or exchange of other securities in its portfolio. Nevertheless, where the Fund
covers a call option on a stock index through ownership of securities, such
securities may not match the composition of the index and, in that event, the
Fund will not be fully covered and could be subject to risk of loss in the
event of adverse changes in the value of the index. A Fund may also cover call
options on stock indices by holding a call on the same index and in the same
principal amount as the call written where the exercise price of the call held
(a) is equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. The Fund may cover put options on stock indices by maintaining
liquid assets with a value equal to the exercise price in a segregated account
with its custodian, or else by holding a put on the same stock index and in
the same principal amount as the put written where the exercise price of the
put held (a) is equal to or greater than the exercise price of the put written
or (b) is less than the exercise price of the put written if the difference is
maintained by the Fund in liquid assets in a segregated account with its
custodian. Put and call options on stock indices written by the Fund may also
be covered in such other manner as may be in accordance with the rules of the
exchange on which, or the counterparty with which, the option is traded, and
applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised
or is closed out at a profit. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a
profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any decline in the value of the securities it owns.
If the value of the index rises, however, the Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in the Fund's stock investments. By writing a put option, the
Fund assumes the risk of a decline in the index. To the extent that the price
changes of securities owned by a Fund correlate with changes in the value of
the index, writing covered put options on indices will increase the Fund's
losses in the event of a market decline, although such losses will be offset
in part by the premium received for writing the option.
The purchase of call options on stock indices may be used by the Fund to
attempt to reduce the risk of missing a broad market advance, or an advance in
an industry or market segment, at a time when the Fund holds uninvested cash
or short-term debt securities awaiting investment. When purchasing call
options for this purpose, the Fund will also bear the risk of losing all or a
portion of the premium paid, and related transaction costs, if the value of
the index does not rise. The purchase of call options on stock indices when
the Fund is substantially fully invested is a form of leverage, up to the
amount of the premium and related transaction costs, and involves risks of
loss and of increased volatility similar to those involved in purchasing calls
on securities the Fund owns.
The Fund also may purchase put options on stock indices to hedge its
investments against a decline in value. By purchasing a put option on a stock
index, the Fund will seek to offset a decline in the value of securities it
owns through appreciation of the put option. If the value of the Fund's
investments does not decline as anticipated, or if the value of the option
does not increase, the Fund's loss will be limited to the premium paid for the
option, plus related transaction costs. The success of this strategy will
largely depend on the accuracy of the correlation between the changes in value
of the index and the changes in value of the Fund's security holdings.
OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write put and call
options on foreign currencies ("Options on Foreign Currencies") for the
purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. For example, a decline in the dollar value of a
foreign currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put Options on the Foreign
Currency. If the value of the currency did decline, the Fund would have the
right to sell such currency for a fixed amount in dollars and would thereby
offset, in whole or in part, the adverse effect on its portfolio which
otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of
such securities, the Fund may purchase call options thereon. The purchase of
such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of Options on Foreign
Currencies would be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in
the direction or to the extent anticipated, the Fund could sustain losses on
transactions in Options on Foreign Currencies which would require it to forego
a portion or all of the benefits of advantageous changes in such rates.
The Fund may write Options on Foreign Currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar
value of foreign-denominated securities due to adverse fluctuations in
exchange rates it may, instead of purchasing a put option, write a call option
on the relevant currency. If the expected decline occurred, the option would
most likely not be exercised, and the diminution in value of portfolio
securities would be offset by the amount of the premium received less related
transaction costs. As in the case of other types of options, therefore, the
writing of Options on Foreign Currencies will constitute only a partial hedge.
FUTURES CONTRACTS: The Fund may enter into stock index and foreign currency
futures contracts ("Futures Contracts"). A Futures Contract is a bilateral
agreement providing for the purchase and sale of a specified type and amount
of a financial instrument, or foreign currency, or for the making and
acceptance of a cash settlement, at a stated time in the future for a fixed
price. By its terms, a Futures Contract provides for a specified settlement
date on which, in the case of the majority of foreign currency futures
contracts, the currency or the contract are delivered by the seller and paid
for by the purchaser, or on which, in the case of stock index futures
contracts and certain foreign currency futures contracts, the difference
between the price at which the contract was entered into and the contract's
closing value is settled between the purchaser and seller in cash. Futures
contracts differ from options in that they are bilateral agreements, with both
the purchaser and the seller equally obligated to complete the transaction.
Futures Contracts call for settlement only on the expiration date and cannot
be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract differs from the purchase or sale
of a security or the purchase of an option in that no purchase price is paid
or received. Instead, an amount of cash or cash equivalents, which varies but
may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the
broker, referred to as "variation margin," are made on a daily basis as the
value of the index or instrument underlying the Futures Contract fluctuates,
making positions in the Futures Contract more or less valuable -- a process
known as "marking to the market".
Purchases or sales of stock index futures contracts may be used to attempt to
protect a Fund's current or intended stock investments from broad fluctuations
in stock prices. For example, a Fund may sell stock index futures contracts in
anticipation of or during a market decline to attempt to offset the decrease
in market value of the Fund's securities portfolio that might otherwise
result. If such decline occurs, the loss in value of portfolio securities may
be offset, in whole or part, by gains on the futures position. When a Fund is
not fully invested in the securities market and anticipates a significant
market advance, it may purchase stock index futures contracts in order to gain
rapid market exposure that may, in part or entirely, offset increases in the
cost of securities that the Fund intends to purchase. As such purchases are
made, the corresponding positions in stock index futures contracts will be
closed out. In a substantial majority of these transactions, the Fund will
purchase such securities upon termination of the futures position, but under
unusual market conditions, a long futures position may be terminated without a
related purchase of securities. Stock index futures may also be used for non-
hedging purposes, subject to applicable law.
As noted in the Prospectus, a Fund may purchase and sell foreign currency
futures contracts for hedging purposes, to attempt to protect its current or
intended investments from fluctuations in currency exchange rates, and for
non-hedging purposes, subject to applicable law. Such fluctuations could
reduce the dollar value of portfolio securities denominated in foreign
currencies, or increase the cost of foreign-denominated securities to be
acquired, even if the value of such securities in the currencies in which they
are denominated remains constant. A Fund may sell futures contracts on a
foreign currency, for example, where it holds securities denominated in such
currency and it anticipates a decline in the value of such currency relative
to the dollar. In the event such decline occurs, the resulting adverse effect
on the value of foreign-denominated securities may be offset, in whole or in
part, by gains on the futures contracts.
Conversely, a Fund could protect against a rise in the dollar cost of foreign-
denominated securities to be acquired by purchasing futures contracts on the
relevant currency, which could offset, in whole or in part, the increased cost
of such securities resulting from a rise in the dollar value of the underlying
currencies. Where a Fund purchases futures contracts under such circumstances,
however, and the prices of securities to be acquired instead decline, the Fund
will sustain losses on its futures position which could reduce or eliminate
the benefits of the reduced cost of portfolio securities to be acquired.
OPTIONS ON FUTURES CONTRACTS: The Fund may write or purchase options to buy or
sell Futures Contracts ("Options on Futures Contracts"). The writing of a call
Option on a Futures Contract constitutes a partial hedge against declining
prices of the securities or other instruments required to be delivered under
the terms of the Futures Contract. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the full amount of
the option premium, less related transaction costs, which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put Option on a Futures Contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures Contract. If the
futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium, less related
transaction costs, which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call
option the Fund has written is exercised, the Fund will incur a loss which
will be reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Fund's losses from
existing Options on Futures Contracts may to some extent be reduced or
increased by changes in the value of portfolio securities.
The Fund may cover the writing of call Options on Futures Contracts (a)
through purchases of the underlying Futures Contract, (b) through ownership of
the instrument, or instruments included in the index, underlying the Futures
Contract, or (c) through the holding of a call on the same Futures Contract
and in the same principal amount as the call written where the exercise price
of the call held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call written if the
difference is maintained by the Fund in liquid assets in a segregated account
with its custodian. The Fund may cover the writing of put Options on Futures
Contracts (a) through sales of the underlying Futures Contract, (b) through
segregation of liquid assets in an amount equal to the value of the security
or index underlying the Futures Contract, or (c) through the holding of a put
on the same Futures Contract and in the same principal amount as the put
written where the exercise price of the put held (i) is equal to or greater
than the exercise price of the put written or (ii) is less than the exercise
price of the put written if the difference is maintained by the Fund in liquid
assets in a segregated account with its custodian. Put and Call Options on
Futures Contracts written by the Fund may also be covered in such other manner
as may be in accordance with the rules of the exchange on which, or the
counterparty with which, the option is traded, and applicable laws and
regulations. Upon the exercise of a call Option on a Futures Contract written
by the Fund, the Fund will be required to sell the underlying Futures Contract
which, if the Fund has covered its obligation through the purchase of such
Contract, will serve to liquidate its futures position. Similarly, where a put
Option on a Futures Contract written by the Fund is exercised, the Fund will
be required to purchase the underlying Futures Contract which, if the Fund has
covered its obligation through the sale of such Contract, will close out its
futures position.
The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of a projected market-wide decline or changes in interest or
exchange rates, the Fund could, in lieu of selling Futures Contracts, purchase
put options thereon. In the event that such decrease occurs, it may be offset,
in whole or part, by a profit on the option. Conversely, where it is projected
that the value of securities to be acquired by the Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call Options on Futures Contracts, rather than
purchasing the underlying Futures Contracts. The Fund may also use Options on
Futures Contracts for non-hedging purposes subject to applicable law.
FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a specific currency at a future date at
a price set at the time of the contract (a "Forward Contract"). The Fund may
enter into Forward Contracts for hedging purposes as well as for non-hedging
purposes. The Fund may also enter into Forward Contracts for "cross-hedging"
as noted in the Prospectus. Transactions in Forward Contracts entered into for
hedging purposes will include forward purchases or sales of foreign currencies
for the purpose of protecting the dollar value of securities denominated in a
foreign currency or protecting the dollar equivalent of interest or dividends
to be paid on such securities. By entering into such transactions, however,
the Fund may be required to forego the benefits of advantageous changes in
exchange rates. The Fund may also enter into transactions in Forward Contracts
for other than hedging purposes which presents greater profit potential but
also involves increased risk. For example, if the Adviser believes that the
value of a particular foreign currency will increase or decrease relative to
the value of the U.S. dollar, the Fund may purchase or sell such currency,
respectively, through a Forward Contract. If the expected changes in the value
of the currency occur, the Fund will realize profits which will increase its
gross income. Where exchange rates do not move in the direction or to the
extent anticipated, however, the Fund may sustain losses which will reduce its
gross income. Such transactions, therefore, could be considered speculative.
The Fund has established procedures consistent with the statements by the SEC
and its Staff concerning the use of Forward Contracts by registered investment
companies. Since that policy currently recommends that an amount of the Fund's
assets equal to the amount of the commitment be held aside or segregated for
"cover" to be used to pay for the commitment, the Fund will always have liquid
assets available sufficient to cover any commitments under contracts to
purchase or sell foreign currencies or to limit any potential risk. The
segregated account will be marked to market on a daily basis. While these
contracts are not presently requlated by the Commodity Futures Trading
Commission (the "CFTC"), the CFTC may in the future assert authority to
regulate Forward Contracts. In such event, the Fund's ability to utilize
Forward Contracts in the manner set forth above may be restricted.
The Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such contracts. In those instances in which the
Fund satisfies this requirement through segregation of assets, it will
maintain, in a segregated account, liquid assets, which will be marked to
market on a daily basis, in an amount equal to the value of its commitments
under Forward Contracts entered into by the Fund. Alternatively, the Fund may
"cover" its obligations under such contracts through the ownership of the
amount of foreign currency required to be delivered under a Forward Contract,
in the case of a Forward Contract entered into by the Fund to sell such
currency, or through the purchase of a call option, or a call option on a
Futures Contract, on the underlying currency, provided that, if the strike
price of the option is greater than the price established under the Forward
Contract, the Fund will segregate cash, short-term money market instruments or
high grade debt securities with a value equal to the difference between the
strike price of the option and the price of the Forward Contract. The Fund may
cover its obligations under a Forward Contract to purchase a foreign currency
by purchasing a put option, or a put option on a Futures Contract, on the
underlying currency, provided that, if the strike price of the option is less
than the price established under the Forward Contract, the Fund will segregate
liquid assets with a value equal to the difference between the strike price of
the option and the price of the Forward Contract. The Fund may also cover
Forward Contracts in such other manner as may be in accordance with the
requirements of the counter party to the contract and applicable laws and
regulations.
RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts, and Forward
Contracts will depend on the degree to which price movements in the underlying
index or instrument correlate with price movements in the relevant portion of
the Fund's portfolio. Because the securities in the Fund's portfolio will most
likely not be the same as those securities underlying a stock index, the
correlation between movements in the portfolio and in the securities
underlying the index will not be perfect. The trading of Futures Contracts and
options entails the additional risk of imperfect correlation between movements
in the futures or option price and the price of the underlying index or
obligation. The anticipated spread between the prices may be distorted due to
the differences in the nature of the markets, such as differences in margin
requirements, the liquidity of such markets and the participation of
speculators in such markets. In this regard, trading by speculators in options
and Futures Contracts has in the past occasionally resulted in market
distortions, which may be difficult or impossible to predict, particularly
near the expiration of such contracts. It should be noted that Futures
Contracts or options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than options or
Futures Contracts based on a broad market index, because a narrower index is
more susceptible to rapid and extreme fluctuations as a result of changes in
the value of a small number of securities. The trading of Options on Futures
Contracts also entails the risk that changes in the value of the underlying
Futures Contracts will not be fully reflected in the value of the option.
Further, with respect to options on securities, options on stock indices and
Options on Futures Contracts, the Fund is subject to the risk of market
movements between the time that the option is exercised and the time of
performance thereunder. In writing a covered call option on a security, index
or Futures Contract, the Fund also incurs the risk that changes in the value
of the instruments used to cover the position will not correlate closely with
changes in the value of the option or underlying index or instrument.
The Fund will invest in a hedging instrument only if, in the judgment of its
Adviser, there would be expected to be a sufficient degree of correlation
between movements in the value of the instrument and movements in the value of
the relevant portion of the Fund's portfolio for such hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.
It should also be noted that the Fund may purchase and sell options, Futures
Contracts, Options on Future Contracts, Forward Contracts and Options on
Foreign Currencies not only for hedging purposes, but for the purpose of
increasing its return on portfolio securities subject to applicable law. As a
result, in the event of adverse market movements, the Fund might be subject to
losses, which would not be offset by increases in the value of portfolio
securities or declines in the cost of securities to be acquired. In addition,
the method of covering an option employed by the Fund may not fully protect it
against risk of loss and, in any event, the Fund could suffer losses on the
option position which might not be offset by corresponding portfolio gains.
With respect to the writing of straddles on securities, the Fund incurs the
risk that the price of the underlying security will not remain stable, that
one of the options written will be exercised and that the resulting loss will
not be offset by the amount of the premiums received.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET: Prior to exercise or expiration,
a futures or option position can only be terminated by entering into a closing
purchase or sale transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was entered into.
While the Fund will enter into options or futures positions only if there
appears to be a liquid secondary market therefor, there can be no assurance
that such a market will exist for any particular contracts at any specific
time. In that event, it may not be possible to close out a position held by
the Fund, and the Fund could be required to purchase or sell the instrument
underlying an option, make or receive a cash settlement or meet ongoing
variation margin requirements. Under such circumstances, if the Fund had
insufficient cash available to meet margin requirements, it might be necessary
to liquidate portfolio securities at a time when it would be disadvantageous
to do so. The inability to close out options and futures positions, therefore,
could have an adverse impact on the Fund's ability effectively to hedge its
portfolios, and could result in trading losses. The liquidity of a secondary
market in a Futures Contract or options thereon may also be adversely affected
by "daily price fluctuation limits," established by exchanges, which limit the
amount of fluctuation in the price of a contract during a single trading day.
The trading of Futures Contracts and options is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
MARGIN: Because of low initial margin deposits made upon the opening of a
futures position and the writing of an option, such transactions involve
substantial leverage. As a result, relatively small movements in the price of
the contract can result in substantial unrealized gains or losses. Where the
Fund engages in the purchase or sale of such instruments for hedging purposes,
any losses incurred in connection therewith should, if the hedging strategy is
successful, be offset, in whole or in part, by increases in the value of
securities held by the Fund or decreases in the prices of securities the Fund
intends to acquire. Where the Fund uses such instruments for other than
hedging purposes, the margin requirements associated with such transactions
could expose the Fund to greater risk.
TRADING AND POSITION LIMITS: The exchanges on which Futures Contracts and
options are traded may impose limitations governing the maximum number of
positions on the same side of the market and involving the same underlying
instrument which may be held by a single investor, whether acting alone or in
concert with others (regardless of whether such contracts are held on the same
or different exchanges or held or written in one or more accounts or through
one or more brokers). In addition, the CFTC and the various contract markets
have established limits referred to as "speculative position limits" on the
maximum net long or net short position which any person may hold or control in
a particular futures or option contract. An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions. The Adviser does not believe that these trading and
position limits will have any adverse impact on the strategies for hedging the
portfolio of the Fund.
RISK OF OPTIONS ON FUTURES CONTRACTS: The amount of risk the Fund assumes when
it purchases an Option on a Futures Contract is the premium paid for the
option, plus related transaction costs. In order to profit from an option
purchased, however, it may be necessary to exercise the option and to
liquidate the underlying Futures Contract, subject to the risks of the
availability of a liquid offset market described herein. The writer of an
Option on a Futures Contract is subject to the risks of commodity futures
trading, including the requirement of initial and variation margin payments,
as well as the additional risk that movements in the price of the option may
not correlate with movements in the price of the underlying index or Futures
Contract.
ADDITIONAL RISKS OF TRANSACTIONS NOT CONDUCTED ON EXCHANGES: Transactions in
Forward Contracts are subject to all of the correlation, liquidity and other
risks outlined above. In addition, however, such transactions are subject to
the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate
trading and could have a substantial adverse effect on the value of positions
held by the Fund. In addition, the value of such positions could be adversely
affected by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies. Further, unlike
trading in most other types of instruments, there is no systematic reporting
of last sale information with respect to the foreign currencies underlying
contracts thereon. As a result, the available information on which trading
systems will be based may not be as complete as the comparable data on which
the Fund makes investment and trading decisions in connection with other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur on that market which would not be
reflected in the forward markets until the following day, thereby preventing
the Fund from responding to such events in a timely manner. Settlements of
exercises of Forward Contracts generally must occur within the country issuing
the underlying currency, which in turn requires traders to accept or make
delivery of such currencies in conformity with any United States or foreign
restrictions and regulations regarding the maintenance of foreign banking
relationships, fees, taxes or other charges.
Forward Contracts, and over-the-counter options on securities, are not traded
on exchanges regulated by the CFTC or the SEC, but through financial
institutions acting as market-makers. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will
not be available. In addition, over-the-counter transactions can only be
entered into with a financial institution willing to take the opposite side,
as principal, of the Fund's position unless the institution acts as broker and
is able to find another counterparty willing to enter into the transaction
with the Fund. Where no such counterparty is available, it will not be
possible to enter into a desired transaction. There also may be no liquid
secondary market in the trading of over-the-counter contracts, and the Fund
could be required to retain options purchased or written, or Forward Contracts
entered into, until exercise, expiration or maturity. This in turn could limit
the Fund's ability to profit from open positions or to reduce losses
experienced, and could result in greater losses. Further, over-the-counter
transactions are not subject to the performance guarantee of an exchange
clearing house, and the Fund will therefore be subject to the risk of default
by, or the bankruptcy of, the financial institution serving as its
counterparty.
While Forward Contracts are not presently subject to regulation by the CFTC,
the CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, the Fund's ability to utilize Forward Contracts in
the manner set forth above could be restricted.
RESTRICTIONS ON THE USE OF OPTIONS AND FUTURES: In order to assure that the
Fund will not be deemed to be a "commodity pool" for purposes of the Commodity
Exchange Act, regulations of the CFTC require that the Fund enter into
transactions in Futures Contracts and Options on Futures Contracts only (i)
for bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums
on such non-hedging positions does not exceed 5% of the liquidation value of
the Fund's assets. In addition, the Fund must comply with the requirements of
various state securities laws in connection with such transactions.
The Fund has adopted the additional restriction that it will not enter into a
Futures Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Futures Contracts would exceed 50% of the
value of the Fund's total assets. Moreover, the Fund will not purchase put and
call options if, as a result, more than 5% of its total assets would be
invested in such options.
When the Fund purchases a Futures Contract, an amount of liquid assets will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated will at all times equal the value of the Futures Contract,
thereby ensuring that the leveraging effect of such Futures Contract is
minimized.
INVESTMENT RESTRICTIONS: The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of the
Fund's shares (which, as used in this SAI, means the lesser of (i) more than
50% of the outstanding shares of the Fund (or a class, as applicable) or (ii)
67% or more of the outstanding shares of the Fund (or a class, as applicable),
present at a meeting if holders of more than 50% of the outstanding shares of
the Fund (or a class, as applicable) are represented at such meeting in person
or by proxy):
The Fund may not, except temporarily in case of a merger, purchase securities
of any issuer if such purchase would cause more than 5% of its total assets
(taken at market value) to be invested in the securities of such issuer
(exclusive of U.S. or Canadian Government obligations), or if such purchase
would cause more than 10% of any class of securities of an issuer to be held
by the Fund. The Fund may not invest more than 5% of its assets in the
securities of an issuer which, including predecessors, has not been in
continuous operation for at least three years. The Fund may not purchase
securities issued by investment companies except in the open market or in
connection with a plan of consolidation or merger, nor may the Fund purchase
or retain securities of a company if one or more of its Trustees and officers
own 1/2 of 1% each and such persons collectively own more than 5% of that
company's securities. The Fund may borrow money up to 10% of its gross assets
(taken at cost) or its net assets (taken at market value), whichever is less,
but only temporarily for extraordinary or emergency purposes and subject to a
300% asset coverage requirement and may pledge up to 15% of its gross assets
(taken at cost) (for the purpose of this restriction collateral arrangements
with respect to Options on Securities, Stock Indexes and Foreign Currencies,
Future Contracts, Options on Future Contracts and Forward Contracts, and
payments of initial and variation margin in connection therewith are not
considered a pledge of assets). The Fund has reserved freedom of action to
underwrite securities in limited cases, but has not done so since 1940, and
the amount of any one underwriting commitment may not exceed 5% of its net
assets. It is not the Fund's policy to concentrate more than 25% of its assets
in any one industry or to purchase or sell real estate, commodities or
commodity contracts except for Options on Securities, Stock Indexes and
Foreign Currencies, Future Contracts, Options on Future Contracts and Forward
Contracts. The Fund may not make loans to other persons. For these purposes,
the purchase of short-term commercial paper, the purchase of a portion or all
of an issue of debt securities in accordance with the Fund's investment
objectives and policies, the lending of portfolio securities, or the
investment of the Fund's assets in repurchase agreements, shall not be
considered the making of a loan.
As a matter of non-fundamental policy, the Fund may not invest more than 5% of
the value of the Fund's net assets, valued at the lower of cost or market, in
warrants. Included in such amount, but not to exceed 2% of the Fund's net
assets, may be warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by the Fund in units or attached to securities may
be deemed to be without value. The Fund also may not purchase or sell
interests in oil, gas or mineral leases in the ordinary course of the business
of the Fund (the Fund reserves the freedom of action to hold and sell real
estate acquired as a result of the ownership of securities). The Fund also may
not sell any security which it does not own unless by virtue of its ownership
of other securities the Fund has at the time of sale a right to obtain
securities without payment of further consideration equivalent in kind and
amount to the securities sold and provided that if such right is conditional
the sale is made upon the same conditions.
These investment restrictions are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy.
3. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of
the Fund. The Adviser is responsible for the management of the Fund's assets
and the officers of the Fund are responsible for its operations. The Trustees
and officers are listed below, together with their principal occupations
during the past five years. (Their titles may have varied during that period.)
TRUSTEES
A. KEITH BRODKIN,* Chairman and President (born 8/4/35)
Massachusetts Financial Services Company, Chairman and Director
RICHARD B. BAILEY* (born 9/14/26)
Private investor; Massachusetts Financial Services Company
PETER G. HARWOOD (born 4/3/26)
Private Investor
Address: 211 Lindsay Pond Road, Concord, Massachusetts
J. ATWOOD IVES (born 5/1/36)
Eastern Enterprises (diversified services company), Chairman and Chief
Executive Officer
Address: 9 Riverside Road, Weston, Massachusetts
LAWRENCE T. PERERA (born 6/23/35)
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts
WILLIAM J. POORVU (born 4/10/35)
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (a real estate investment
trust), Director; The Baupost Fund (a registered investment company), Vice
Chairman (since November 1993), Chairman and Trustee (prior to November
1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge, Massa-
chusetts
CHARLES W. SCHMIDT (born 3/18/28)
Private investor; OHM Corporation, Director; The Boston Company, Director;
Boston Safe Deposit and Trust Company, Director; Mohawk Paper Company,
Director
Address: 30 Colpitts Road, Weston, Massachusetts
ARNOLD D. SCOTT* (born 12/16/42)
Massachusetts Financial Services Company, Senior Executive Vice President and
Secretary
JEFFREY L. SHAMES* (born 6/2/55)
Massachusetts Financial Services Company, President
ELAINE R. SMITH (born 4/25/46)
Independent Consultant; Brigham and Women's Hospital, Executive Vice President
and Chief Operating Officer (prior to September 1992)
Address: Weston, Massachusetts
DAVID B. STONE (born 9/2/27)
North American Management Corp. (investment adviser), Chairman; Eastern
Enterprises, Director
Address: 10 Post Office Square, Suite 300, Boston, Massachusetts
OFFICERS
W. THOMAS LONDON,* Treasurer (born 3/1/44)
Massachusetts Financial Services Company, Senior Vice President
STEPHEN E. CAVAN,* Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary
JAMES R. BORDEWICK, JR.,* Assistant Secretary (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and Associate
General Counsel
JAMES O. YOST,* Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Vice President
- ----------
*"Interested persons" (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Adviser, whose address is 500 Boylston
Street, Boston, Massachusetts 02116.
Each Trustee and officer hold comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor. Mr. Brodkin, the Chairman of MFD, Messrs.
Shames and Scott, Directors of MFD, and Mr. Cavan, the Secretary of MFD, hold
similar positions with certain other MFS affiliates. Mr. Bailey is a Director
of Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)"),
the corporate parent of MFS.
The Fund pays the compensation of non-interested Trustees and Mr. Bailey (who
currently receive a retainer of $5,500 per year, $225 per committee meeting
and $250 for attendance at each meeting plus certain out-of-pocket expenses,
as incurred) and has adopted a retirement plan for non-interested Trustees and
Mr. Bailey. Under this plan, a Trustee will retire upon reaching age 73 and if
the Trustee has completed at least 5 years of service, he would be entitled to
annual payments during his lifetime of up to 50% of such Trustee's average
annual compensation (based on the three years prior to his retirement)
depending on his length of service. A Trustee may also retire prior to age 73
and receive reduced payments if he has completed at least five years of
service. Under the plan, a Trustee (or his beneficiaries) will also receive
benefits for a period of time in the event the Trustee is disabled or dies.
These benefits will also be based on the Trustee's average annual compensation
and length of service. There is no retirement plan provided by the Fund for
Messrs. Brodkin, Scott and Shames. The Fund will accrue compensation expenses
each year to cover current year's service and amortize past service cost.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
RETIREMENT BENEFIT ESTIMATED TOTAL TRUSTEE FEES
TRUSTEE FEES ACCRUED AS PART OF CREDITED YEARS FROM FUND AND
TRUSTEE FROM FUND(1) FUND EXPENSE(1) OF SERVICE(2) FUND COMPLEX(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard B. Bailey $7,050 $1,521 8 $247,168
A. Keith Brodkin 0 0 N/A 0
Peter G. Harwood $7,750 $1,051 5 $105,995
J. Atwood Ives $7,225 $1,581 17 $ 98,750
Lawrence T. Perera $7,200 $3,142 26 $ 98,310
William J. Poorvu $7,500 $3,288 25 $102,840
Charles W. Schmidt $7,750 $3,132 20 $105,995
Arnold D. Scott 0 0 N/A 0
Jeffrey L. Shames 0 0 N/A 0
Elaine R. Smith $7,750 $1,566 27 $105,995
David B. Stone $7,925 $3,297 14 $108,710
</TABLE>
(1) For fiscal year ended December 31, 1996.
(2) Based on normal retirement age of 73.
(3) Information provided is for calendar year 1996. All Trustees receiving
compensation served as Trustees of 23 funds within the MFS fund complex
(having aggregate net assets at December 31, 1996, of approximately $21
billion) except Mr. Bailey, who served as Trustee of 81 funds within the
MFS fund complex (having aggregate net assets at December 31, 1996, of
approximately $38 billion).
ESTIMATED ANNUAL BENEFITS PAYABLE BY
FUND UPON RETIREMENT(4)
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$6,345 $ 952 $1,586 $2,221 $3,173
$6,820 $1,023 $1,705 $2,387 $3,410
$7,294 $1,094 $1,824 $2,553 $3,647
$7,769 $1,165 $1,942 $2,719 $3,884
$8,243 $1,236 $2,061 $2,885 $4,122
$8,718 $1,308 $2,179 $3,051 $4,359
</TABLE>
(4) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
As of April 1, 1997, all Trustees and officers as a group owned less than 1%
of the outstanding shares of the Fund, not including 998,328 shares (which
represent approximately 4.1% of the outstanding shares of the Fund) owned of
record by certain employee benefit plans of MFS of which Messrs. Brodkin,
Scott and Shames are Trustees.
As of March 31, 1997, MLPF&S, 4800 Deer Lake Drive, Jacksonville, Florida, for
the sole benefit of its customers, was the record owner of approximately
24.50% of the outstanding Class C shares of the Fund. As of March 31, 1997,
MFS Defined Contribution Plan, MFS 401(K) Plan and the MFS Pension Plan,
located at 500 Boylston Street, Boston, Massachusetts were the record owners
of approximately 69.40%, 18.88% and 11.71%, respectively of Class I shares of
the Fund.
The Declaration of Trust provides that the Fund will indemnify its officers
and Trustees against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Fund, unless, as to liability to the Fund or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
with respect to any matter, unless it is adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interest of the Fund. In the case of settlement, such indemnification will not
be provided unless it has been determined by a court or other body approving
the settlement or other disposition or by reasonable determination by
disinterested Trustees or in a written opinion of independent counsel based
upon a review of readily available facts, that such officers or Trustees have
not engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management
dating from 1924. MFS is a subsidiary of Sun Life of Canada (U.S.) which in
turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life").
The Adviser manages the Fund pursuant to an Investment Advisory Agreement,
dated May 20, 1982, as amended (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser provides the Fund with overall investment advisory
services. Subject to such policies as the Trustees may determine, the Adviser
makes investment decisions for the Fund. For these services and facilities,
the Adviser receives a management fee computed and paid monthly on the basis
of a formula based upon a percentage of the Fund's average daily net assets
plus a percentage of its gross income other than gains from the sale of
securities, in each case on an annualized basis for the Fund's then-current
fiscal year. The applicable percentages are reduced as assets and income reach
the following levels:
ANNUAL RATE OF MANAGEMENT FEE ANNUAL RATE OF MANAGEMENT FEE
BASED ON AVERAGE DAILY NET ASSETS BASED ON GROSS INCOME
- ------------------------------------ --------------------------------
0.30% of the first $200 million 6.67% of the first $6 million
0.24% of the next $300 million 5.33% of the next $9 million
0.12% of average daily net assets in 2.67% of gross income in excess
excess of $500 million of $15 million
Under the Advisory Agreement, MFS received management fees of $5,982,062,
$4,973,977 and $4,385,702 for fiscal years ended December 31, 1996, 1995 and
1994, respectively. In order to comply with the expense limitations of certain
state securities commissions the Adviser will reduce its management fee or
otherwise reimburse the Fund for any expenses, exclusive of interest, taxes
and brokerage commissions, incurred by the Fund in any fiscal year to the
extent such expenses exceed the most restrictive of such state expense
limitations. The Adviser will make appropriate adjustments to such
reimbursements in response to any amendment or rescission of the various state
requirements.
The Advisory Agreement provides that the compensation of the Adviser will be
reduced by an annual sum representing the Fund's share of the fair value of
the use of office furniture, furnishings and equipment purchased over the
years with funds furnished by the Fund and Massachusetts Investors Growth
Stock Fund as part of shared expenses. The total annual use value of this
property for the period ended December 31, 1996 has been determined pursuant
to a formula devised by an independent supplier to be $110,820, which amount
was transferred to the Fund by the Adviser. This determination has been
approved by the Trustees who are not affiliated with the Adviser. This amount
and amounts so determined and approved in subsequent years will be credited
24% to Massachusetts Investors Growth Stock Fund and 76% to the Fund, being
the average of their proportionate contributions to shared expenses over the
ten-year period ended December 31, 1968.
The Fund pays all of its expenses (other than those assumed by MFS or MFD),
including: Trustees fees discussed above; governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the
Fund; fees and expenses of independent auditors, of legal counsel, and of any
transfer agent, registrar or dividend disbursing agent of the Fund; expenses
of repurchasing and redeeming shares; expenses of preparing, printing and
mailing share certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of State Street Bank and
Trust Company, the Fund's custodian, for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Fund;
and expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses for such purposes are borne by the Fund
except that its Distribution Agreement with MFD requires MFD to pay for
prospectuses that are to be used for sales purposes. For a list of the Fund's
expenses, including the compensation paid to the Trustees who are not officers
of MFS, during the Fund's fiscal year ended December 31, 1996, see "Statement
of Operations" in the Fund's Annual Report to shareholders incorporated by
reference into this SAI. Payment by the Fund of brokerage commissions for
brokerage and research services of value to the Adviser in serving its clients
is discussed under the caption "Portfolio Transactions and Brokerage
Commissions."
MFS pays the compensation of the Fund's officers and of any Trustee who is an
officer of MFS. The Adviser also furnishes at its own expense all necessary
administrative services, including office space, equipment, clerical
personnel, investment advisory facilities, and all executive and supervisory
personnel necessary for managing the Fund's investments, effecting its
portfolio transactions, and, in general, administering its affairs.
The Advisory Agreement will remain in effect until August 1, 1997, and will
continue in effect thereafter only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority
of the Fund's shares (as defined in "Investment Restrictions") and, in either
case, by a majority of the Trustees who are not parties to the Advisory
Agreement or interested persons of any such party. The Advisory Agreement
terminates automatically if it is assigned and may be terminated without
penalty by vote of a majority of the Fund's shares (as defined in "Investment
Restrictions") or by either party on not more than 60 days' nor less than 30
days' written notice. The Advisory Agreement further provides that MFS may
render services to others and that neither the Adviser nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its or their duties or by reason of reckless
disregard of its or their obligations and duties under the Advisory Agreement.
ADMINISTRATOR
MFS provides the Fund with certain administrative services pursuant to a
Master Administrative Services Agreement dated March 1, 1997. Under this
Agreement, MFS provides the Fund with certain financial, legal, compliance,
shareholder communications and other administrative services. As a partial
reimbursement for the cost of providing these services, the Fund pays MFS an
administrative fee up to 0.015% per annum of the Fund's average daily net
assets, provided that the administrative fee is not assessed on Fund assets
that exceed $3 billion.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery
of securities, determining income and collecting interest and dividends on the
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily
net asset value of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities of the
Custodian and may deal with the Custodian as principal in securities
transactions. The Custodian has contracted with the Adviser for the Adviser to
perform certain accounting functions related to options transactions for which
the Adviser receives remuneration on a cost basis.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agent Agreement, dated August 1, 1985, as amended (the
"Agency Agreement"), with the Fund. The Shareholder Servicing Agent's
responsibilities under the Agency Agreement include administering and
performing transfer agent functions and keeping records in connection with the
issuance, transfer and redemption of each class of the shares of the Fund. For
these services, the Shareholder Servicing Agent will receive a fee calculated
as a percentage of the average daily net assets of the Fund at an effective
annual rate of 0.13%. State Street Bank and Trust Company, the dividend and
distribution disbursing agent of the Fund, has contracted with the Shareholder
Servicing Agent to administer and perform certain dividend and distribution
disbursing functions for the Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the
continuous offering of shares of the Fund pursuant to a Distribution
Agreement, dated January 1, 1995 (the "Distribution Agreement"), with the
Fund. Prior to January 1, 1995, MFS Financial Services, Inc. ("FSI"), another
wholly-owned subsidiary of MFS, was the Fund's distributor. Where this SAI
refers to MFD in relation to the receipt or payment of money with respect to a
period or periods prior to January 1, 1995, such reference shall be deemed to
include FSI, as the predecessor in interest to MFD.
CLASS A SHARES: MFD acts as agent in selling Class A shares of the Fund to
dealers. The public offering price of Class A shares of the Fund is their net
asset value next computed after the sale plus a sales charge which varies
based upon the quantity purchased. The public offering price of Class A shares
of the Fund is calculated by dividing the net asset value of a Class A share
by the difference (expressed as a decimal) between 100% and the sales charge
percentage of offering price applicable to the purchase (see "Purchases" in
the Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS
Funds") and other funds (as noted under Rights of Accumulation), by any
person, including members of a family unit (e.g., husband, wife and minor
children) and bona fide trustees, and also applies to purchases made under the
Right of Accumulation or a Letter of Intent (see "Investment and Withdrawal
Programs" in this SAI). A group might qualify to obtain quantity sales charge
discounts (see "Investment and Withdrawal Programs" in this SAI).
Class A shares of the Fund may be sold at their net asset value to certain
persons or in certain instances as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others
with whom MFS, MFD and/or the Fund have business relationships, and because
the sales effort, if any, involved in making such sales is negligible.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The commission
paid to the distributor is the difference between the total amount invested
and the sum of (a) the net proceeds to the Fund and (b) the dealer commission.
Because of rounding in the computation of offering price, the portion of the
sales charge paid to the distributor may vary and the total sales charge may
be more or less than the sales charge calculated using the sales charge
expressed as a percentage of offering price or as a percentage of the net
amount invested as listed in the Prospectus. In the case of the maximum sales
charge, the dealer retains 5% and MFD retains approximately 3/4 of 1% of the
public offering price. In addition, MFD, on behalf of the Fund, pays
commissions to dealers who initiate and are responsible for purchases of $1
million or more as described in the Prospectus.
CLASS B, CLASS C AND CLASS I SHARES: MFD acts as agent in selling Class B,
Class C and Class I shares of the Fund. The public offering price of Class B
shares is their net asset value next computed after the sale (see "Purchases"
in the Prospectus and the Prospectus Supplement pursuant to which Class I
shares are offered).
GENERAL: Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change. On occasion, MFD may obtain brokers
loans from various banks, including the custodian banks for the MFS Funds, to
facilitate the settlement of sales of shares of the Fund to dealers. MFD may
benefit from its temporary holding of funds paid to it by investment dealers
for the purchase of Fund shares.
During the Fund's fiscal year ended December 31, 1996, MFD received sales
charges of $852,527 and dealers received sales charges of $5,772,387 (as their
concession on gross sales charges of $6,624,914) for selling Class A shares of
the Fund; the Fund received $320,514,447, representing the aggregate net asset
value of such shares. During the Fund's fiscal year ended December 31, 1995,
MFD received sales charges of $388,820 and dealers received sales charges of
$2,937,684 (as their concession on gross sales charges of $3,326,504) for
selling Class A shares of the Fund; the Fund received $183,211,268
representing the aggregate net asset value of such shares. During the Fund's
fiscal year ended December 31, 1994, MFD received sales charges of $257,995
and dealers received sales charges of $2,389,049 (as their concession on gross
sales charges of $2,647,044) for selling Class A shares of the Fund; the Fund
received $125,304,888, representing the aggregate net asset value of such
shares.
During the Fund's fiscal years ended December 31, 1996, 1995 and 1994 the CDSC
imposed on the redemption of Class A shares was $39,432, $18,908 and $2,552,
respectively. During the Fund's fiscal years ended December 31, 1996, 1995 and
1994, the CDSC imposed on the redemption of Class B shares was $325,303,
$157,607 and $59,341, respectively. During the period from July 2, 1996 to
December 31, 1996, the CDSC imposed on the redemption of Class C shares was
$550.
The Distribution Agreement will remain in effect until August 1, 1997, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by the Board of Trustess or by vote of a majority
of the Fund's shares (as defined in "Investment Restrictions") and, in either
case, by a majority of the Trustees who are not parties to the Distribution
Agreement or interested persons of any such party. The Distribution Agreement
terminates automatically if it is assigned and may be terminated without
penalty by either party on not more than 60 days' nor less than 30 days'
notice.
4. PORTFOLIO TRANSACTIONS AND BROKERAGE
COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. The Fund's portfolio manager may serve
other clients of the Adviser and any subsidiary of the Adviser in a similar
capacity.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the
value and quality of their brokerage services, and the general level of their
brokerage commissions. In the case of securities traded in the over-the-
counter market (where no stated commissions are paid but the prices include a
dealer's markup or markdown), the Adviser normally seeks to deal directly with
the primary market makers, unless in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
Adviser on the tender of the Fund's portfolio securities in so-called tender
or exchange offers. Such soliciting dealer fees are in effect recaptured for
the Fund by the Adviser. At present no other recapture arrangements are in
effect.
Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. ("NASD") and such other
policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of the other investment company clients of MFD as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
Under the Advisory Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Adviser may cause the Fund to pay a
broker-dealer which provides brokerage and research services to the Adviser an
amount of commission for effecting a securities transaction for the Fund in
excess of the amount other broker-dealers would have charged for the
transaction if the Adviser determines in good faith that the greater
commission is reasonable in relation to the value of the brokerage and
research services provided by the executing broker-dealer viewed in terms of
either a particular transaction or the Adviser's overall responsibilities to
the Fund or to its other clients. Not all of such services are useful or of
value in advising the Fund.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; and effecting securities transactions and performing
functions incidental thereto, such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to
the availability of securities or of purchasers or sellers of securities and
services in effecting securities transactions and performing functions
incidental thereto, such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other
factual information or services ("Research") to the Adviser for no
consideration other than brokerage or underwriting commissions. Securities may
be bought or sold from time to time through such broker-dealers on behalf of
the Fund. The Trustees of the Fund (together with the Trustees of the other
MFS Funds) have directed the Adviser to allocate a total of $39,100 of
commission business from the MFS Funds to Pershing Division of Donaldson,
Luftkin & Jenrette as consideration for the annual renewal of certain
publications provided by Lipper Analytical Securities Corporation (which
provides information useful to the Trustees in reviewing the relationship
between the Fund and the Adviser).
The Adviser's investment management personnel attempt to evaluate the quality
of Research provided by brokers. The Adviser sometimes uses evaluations
resulting from this effort as a consideration in the selection of brokers to
execute portfolio transactions. However, the Adviser is unable to quantify the
amount of commissions set forth below which were paid as a result of such
Research because a substantial number of transactions were effected through
brokers which provide Research but which were selected principally because of
their execution capabilities.
The management fee that the Fund pays to the Adviser will not be reduced as a
consequence of the Adviser's receipt of brokerage and research services. To
the extent the Fund's portfolio transactions are used to obtain brokerage and
research services, the brokerage commissions paid by the Fund will exceed
those that might otherwise be paid for such portfolio transactions, or for
such portfolio transactions and research, by an amount which cannot be
presently determined. Such services would be useful and of value to the
Adviser in serving both the Fund and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients
would be useful to the Adviser in carrying out its obligations to the Fund.
While such services are not expected to reduce the expenses of the Adviser,
the Adviser would, through use of the services, avoid the additional expenses
which would be incurred if it should attempt to develop comparable information
through its own staff.
During the Fund's fiscal years ended December 31, 1996, 1995 and 1994, the
Fund paid total brokerage commissions of $2,905,736, $3,459,699 and
$4,542,396, respectively, on total transactions of $2,209,064,543,
$2,184,943,228 and $2,372,631,245, respectively.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for that of one or more of the other clients of the
Adviser or any subsidiary of the Adviser. Investment decisions for the Fund
and for such other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold
for, other clients. Likewise, a particular security may be bought for one or
more clients when one or more other clients are selling that same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed by the Adviser to be equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of
the security as far as the Fund is concerned. In other cases, however, the
Fund believes that its ability to participate in volume transactions will
produce better executions for the Fund.
5. SHAREHOLDER SERVICES
INVESTMENT AND WITHDRAWAL PROGRAMS -- The Fund makes available the following
programs designed to enable shareholders to add to their investment or
withdraw from it with a minimum of paper work. These are described below and,
in certain cases, in the Prospectus. The programs involve no extra charge to
shareholders (other than a sales charge in the case of certain Class A share
purchases) and may be changed or discontinued at any time by a shareholder or
the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $50,000 or more of Class A shares of the Fund
alone or in combination with shares of all classes of other MFS Funds or MFS
Fixed Fund (a bank collective investment fund) within a 13-month period (or
36-month period, in the case of purchases of $1 million or more), the
shareholder may obtain Class A shares of the Fund at the same reduced sales
charge as though the total quantity were invested in one lump sum by
completing the Letter of Intent section of the Fund's Account Application or
filing a separate Letter of Intent application (available from the Shareholder
Servicing Agent) within 90 days of the commencement of purchases. Subject to
acceptance by MFD and the conditions mentioned below, each purchase will be
made at a public offering price applicable to a single transaction of the
dollar amount specified in the Letter of Intent application. The shareholder
or his dealer must inform MFD that the Letter of Intent is in effect each time
shares are purchased. The shareholder makes no commitment to purchase
additional shares, but if his purchases within 13 months (or 36 months, in the
case of purchases of $1 million or more), plus the value of shares credited
toward completion of the Letter of Intent do not total the sum specified, he
will pay the increased amount of the sales charge as described below.
Instructions for issuance of shares in the name of a person other than the
person signing the Letter of Intent application must be accompanied by a
written statement from the dealer stating that the shares were paid for by the
person signing such Letter. Neither income dividends nor capital gain
distributions taken in additional shares will apply toward the completion of
the Letter of Intent. Dividends and distributions of other MFS Funds
automatically reinvested in shares of the Fund pursuant to the Distribution
Investment Program will also not apply toward completion of the Letter of
Intent.
Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder
or to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month period or 36-month period, as
applicable), the shareholder will be notified and the escrowed shares will be
released.
If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released
by the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in
the premises.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when his new investment, together
with the current offering price value of all holdings of Class A, Class B and
Class C shares of that shareholder in the MFS Funds or, MFS Fixed Fund (a bank
collective investment fund) reaches a discount level. See "Purchases" in the
Prospectus for the sales charges on quantity discounts. For example, if a
shareholder owns shares valued at $37,500 and purchases an additional $12,500
of Class A shares of the Fund, the sales charge for the $12,500 purchase would
be at the rate of 4.75% (the rate applicable to single transactions of
$50,000). A shareholder must provide the Shareholder Servicing Agent (or his
investment dealer must provide MFD) with information to verify that the
quantity sales charge discount is applicable at the time the investment is
made.
SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-
free at (800) 225-2606. The minimum purchase amount is $50 and the maximum
purchase amount is $100,000. Shareholders wishing to avail themselves of this
telephone purchase privilege must so elect on their Account Application and
designate thereon a bank and account number from which purchases will be made.
If a telephone purchase request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), the purchase will occur at the closing
net asset value of the shares purchased on that day. The Shareholder Servicing
Agent may be liable for any losses resulting from unauthorized telephone
transactions if it does not follow reasonable procedures designed to verify
the identity of the caller. The Shareholder Servicing Agent will request
personal or other information from the caller, and will normally also record
calls. Shareholders should verify the accuracy of confirmation statements
immediately after their receipt.
DISTRIBUTION INVESTMENT PROGRAM: Distributions of dividends and capital
gains made by the Fund with respect to a particular class of shares may be
automatically invested in shares of the same class of one of the other MFS
Funds, if shares of the fund are available for sale. Such investments will be
subject to additional purchase minimums. Distributions will be invested at net
asset value (exclusive of any sales charge) and not subject to any CDSC.
Distributions will be invested at the close of business on the payable date
for the distribution. A shareholder considering the Distribution Investment
Program should obtain and read the prospectus of the other fund and consider
the differences in objectives and policies before making any investment.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic
payments based upon the value of his account. Each payment under a Systematic
Withdrawal Plan (a "SWP") must be at least $100, except in certain limited
circumstances. The aggregate withdrawals of Class B and Class C shares in any
year pursuant to a SWP generally are limited to 10% of the value of the
account at the time of establishment of the SWP. SWP payments are drawn from
the proceeds of share redemptions (which would be a return of principal and,
if reflecting a gain, would be taxable). Redemptions of Class B and Class C
shares will be made in the following order: (i) any "Free Amount"; (ii) to the
extent necessary, any "Reinvested Shares"; and (iii) to the extent necessary,
the "Direct Purchase" subject to the lowest CDSC (as such terms are defined in
"Contingent Deferred Sales Charge" in the Prospectus). The CDSC will be waived
in the case of redemptions of Class B and Class C shares pursuant to a SWP,
but will not be waived in the case of SWP redemptions of Class A shares which
are subject to a CDSC. To the extent that redemptions for such periodic
withdrawals exceed dividend income reinvested in the account, such redemptions
will reduce and may eventually exhaust the number of shares in the
shareholder's account. All dividend and capital gain distributions for an
account with a SWP will be reinvested in additional full and fractional shares
of the Fund at the net asset value in effect at the close of business on the
record date for such distributions. To initiate this service, shares generally
having an aggregate value of at least $5,000 either must be held on deposit
by, or certificates for such shares must be deposited with, the Shareholder
Servicing Agent. With respect to Class A shares, maintaining a withdrawal plan
concurrently with an investment program would be disadvantageous because of
the sales charges included in share purchases and the imposition of a CDSC on
certain redemptions. The shareholder may deposit into the account additional
shares of the Fund, change the payee or change the dollar amount of each
payment. The Shareholder Servicing Agent may charge the account for services
rendered and expenses incurred beyond those normally assumed by the Fund with
respect to the liquidation of shares. No charge is currently assessed against
the account, but one could be instituted by the Shareholder Servicing Agent on
60 days' notice in writing to the shareholder in the event that the Fund
ceases to assume the cost of these services. The Fund may terminate any SWP
for an account if the value of the account falls below $5,000 as a result of
share redemptions (other than as a result of a SWP) or an exchange of shares
of the Fund for shares of another MFS Fund. Any SWP may be terminated at any
time by either the shareholder or the Fund.
INVEST BY MAIL: Additional investments of $50 or more may be made at any
time by mailing a check payable to the Fund directly to the Shareholder
Servicing Agent. The shareholder's account number and the name of his
investment dealer must be included with each investment.
GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group (1) gives its endorsement or authorization to the
investment program so it may be used by the investment dealer to facilitate
solicitation of the membership, thus effecting economies of sales effort; (2)
has been in existence for at least six months and has a legitimate purpose
other than to purchase mutual fund shares at a discount; (3) is not a group of
individuals whose sole organizational nexus is as credit cardholders of a
company, policyholders of an insurance company, customers of a bank or broker-
dealer, clients of an investment adviser or other similar groups; and (4)
agrees to provide certification of membership of those members investing money
in the MFS Funds upon the request of MFD.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares
of the other MFS Funds (if available for sale) under the Automatic Exchange
Plan. The Automatic Exchange Plan provides for automatic exchanges of funds
from the shareholder's account in an MFS Fund for investment in the same class
of shares of other MFS Funds selected by the shareholder. Under the Automatic
Exchange Plan, exchanges of at least $50 each may be made to up to six
different funds effective on the seventh day of each month or of every third
month, depending whether monthly or quarterly exchanges are elected by the
shareholder. If the seventh day of the month is not a business day, the
transaction will be processed on the next business day. Generally, the initial
transfer will occur after receipt and processing by the Shareholder Servicing
Agent of an application in good order. Exchanges will continue to be made from
a shareholder's account in any MFS Fund as long as the balance of the account
is sufficient to complete the exchanges. Additional payments made to a
shareholder's account will extend the period that exchanges will continue to
be made under the Automatic Exchange Plan. However, if additional payments are
added to an account subject to the Automatic Exchange Plan shortly before an
exchange is scheduled, such funds may not be available for exchanges until the
following month; therefore, care should be used to avoid inadvertently
terminating the Automatic Exchange Plan through exhaustion of the account
balance.
No transaction fee for exchanges will be charged in connection with the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market
Fund, MFS Government Money Market Fund and Class A shares of MFS Cash Reserve
Fund will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions
in writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record). Each Exchange Change Request (other than termination of participation
in the program) must involve at least $50. Generally, if an Exchange Change
Request is received by telephone or in writing before the close of business on
the last business day of a month, the Exchange Change Request will be
effective for the following month's exchanges.
A shareholder's right to make additional investments in any of the MFS Funds,
to make exchanges of shares from one MFS Fund to another and to withdraw from
an MFS Fund, as well as a shareholder's other rights and privileges are not
affected by a shareholder's participation in the Automatic Exchange Plan.
The Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding the Automatic Exchange Plan, including the treatment of
any CDSC, see "Exchange Privilege" below.
REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the
other MFS Funds (except MFS Money Market Fund, MFS Government Money Market
Fund and holders of Class A shares of MFS Cash Reserve Fund in the case where
the shares are acquired through direct purchase or reinvested dividends) who
have redeemed their shares have a one-time right to reinvest the redemption
proceeds in the same class of shares of any of the MFS Funds (if shares of the
fund are available for sale) at net asset value (without a sales charge) and,
if applicable, with credit for any CDSC paid. In the case of proceeds
reinvested in shares of MFS Money Market Fund, MFS Government Money Market
Fund and Class A shares of MFS Cash Reserve Fund, the shareholder has the
right to exchange the acquired shares for shares of another MFS Fund at net
asset value pursuant to the exchange privilege described below. Such a
reinvestment must be made within a certain period of time of the redemption
and is limited to the amount of the redemption proceeds. If the shares
credited for any CDSC paid are then redeemed within six years of the initial
purchase in the case of Class B shares or 12 months of the initial purchase in
the case of Class C shares and certain Class A shares, a CDSC will be imposed
upon redemption. Although redemptions and repurchases of shares are taxable
events, a reinvestment within a certain period of time in the same fund may be
considered a "wash sale" and may result in the inability to recognize
currently all or a portion of any loss realized on the original redemption for
federal income tax purposes. Please see your tax adviser for further
information.
EXCHANGE PRIVILEGE: Subject to the requirements set forth below, some or all
of the shares of the same class in an account with the Fund for which payment
has been received by the Fund (i.e. an established account) may be exchanged
for shares of the same class of any of the other MFS Funds (if available for
sale and if the purchaser is eligible to purchase the class of shares) at net
asset value. Exchanges will be made only after instructions in writing or by
telephone (an "Exchange Request") are received for an established account by
the Shareholder Servicing Agent.
Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record), and each exchange must involve either shares having an aggregate
value of at least $1,000 or all the shares in the account ($50 in the case of
retirement plan participants whose sponsoring organizations subscribe to the
MFS FUNDamental 401(k) Plan or another similar 401(k) recordkeeping system
made available by MFS Service Center, Inc.). Each exchange involves the
redemption of the shares of the Fund to be exchanged and the purchase at net
asset value (i.e., without a sales charge) of shares of the same class of the
other MFS Fund. Any gain or loss on the redemption of the shares exchanged is
reportable on the shareholder's federal income tax return, unless both the
shares received and the shares surrendered in the exchange are held in a tax-
deferred retirement plan or other tax-exempt account. No more than five
exchanges may be made in any one Exchange Request by telephone. If an Exchange
Request is received by the Shareholder Servicing Agent prior to the close of
regular trading on the New York Stock Exchange (the "Exchange"), the exchange
usually will occur on that day if all the requirements set forth above have
been complied with at that time. However, payment of the redemption proceeds
by the Fund, and thus the purchase of shares of the other MFS Fund, may be
delayed for up to seven days if the Fund determines that such a delay would be
in the best interest of all its shareholders. Investment dealers which have
satisfied criteria established by MFD may also communicate a shareholder's
Exchange Request to MFD by facsimile subject to the requirements set forth
above.
No CDSC is imposed on exchanges, although liability for the CDSC is carried
forward to the exchanged shares. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the purchase of shares acquired
in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares.
Additional information with respect to any of the MFS Funds, including a copy
of its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should
obtain and read the prospectus of the other fund and consider the differences
in objectives and policies before making any exchange. Shareholders of the
other MFS Funds (except shares of MFS Money Market Fund, MFS Government Money
Market Fund and Class A shares of MFS Cash Reserve Fund acquired through
direct purchase and dividends reinvested prior to June 1, 1992) have the right
to exchange their shares for shares of the Fund, subject to the conditions, if
any, set forth in their respective prospectuses. In addition, unitholders of
the MFS Fixed Fund (a bank collective investment Fund) have the right to
exchange their units (except units acquired through direct purchases) for
shares of the Fund, subject to the conditions, if any, imposed upon such
unitholders by the MFS Fixed Fund.
Any state income tax advantages for investment in shares of each state-
specific series of MFS Municipal Series Trust may only benefit residents of
such states. Investors should consult their own tax advisers to be sure this
is an appropriate investment, based on their residency and each state's income
tax laws.
The exchange privilege (or any aspect of it) may be changed or discontinued
and is subject to certain limitations, including certain restrictions on
purchases by market timer accounts (see "Purchases" in the Prospectus).
TAX-DEFERRED RETIREMENT PLANS: Shares of the Fund may be purchased by all
types of tax-deferred retirement plans. MFD makes available through investment
dealers plans and/or custody agreements for the following:
Individual Retirement Accounts (IRAs) (for individuals and their non-
employed spouses who desire to make limited contributions to a tax-deferred
retirement program and, if eligible, to receive a federal income tax
deduction for amounts contributed);
Simplified Employee Pension (SEP-IRA) Plans;
Retirement Plans Qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code");
403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and
Certain other qualified corporate pension and profit-sharing plans.
The plan documents provided by MFD designate a trustee or custodian (unless
another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested
automatically. For further details with respect to any plan, including fees
charged by the trustee, custodian or MFD, tax consequences and redemption
information, see the specific documents for that plan. Plan documents other
than those provided by MFD may be used to establish any of the plans described
above. Third party administrative services, available for some corporate
plans, may limit or delay the processing of transactions.
Investors should consult with their tax adviser before establishing any of the
tax-deferred retirement plans described above.
6. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code, by meeting all
applicable requirements of Subchapter M, including requirements as to the
nature of the Fund's gross income, the amount of Fund distributions, and the
composition and holding period of the Fund's portfolio assets. Because the
Fund intends to distribute all of its net investment income and net realized
capital gains to shareholders in accordance with the timing requirements
imposed by the Code, it is not expected that the Fund will be required to pay
any federal income or excise taxes, although the Fund's foreign-source income
may be subject to foreign withholding taxes. If the Fund should fail to
qualify as a "regulated investment company" in any year, the Fund would incur
a regular corporate federal income tax upon its taxable income and Fund
distributions would generally be taxable as ordinary dividend income to the
shareholders.
Shareholders of the Fund normally will have to pay federal income taxes, and
any state or local taxes, on the dividends and capital gain distributions they
receive from the Fund. Dividends from ordinary income and any distributions
from net short-term capital gains are taxable to shareholders as ordinary
income for federal income tax purposes whether paid in cash or additional
shares. A portion of the Fund's ordinary income dividends (but none of the
Fund's capital gains) is normally eligible for the dividends-received
deduction for corporations if the recipient otherwise qualifies for that
deduction with respect to its holding of Fund shares. Availability of the
deduction for particular shareholders is subject to certain limitations, and
deducted amounts may be subject to the alternative minimum tax or result in
certain basis adjustments. Distributions of net capital gains (i.e., the
excess of net long-term capital gains over net short-term capital losses),
whether paid in cash or reinvested in additional shares, are taxable to
shareholders as long-term capital gains for federal income tax purposes
without regard to the length of time the shareholders have held their shares.
Any Fund dividend that is declared in October, November or December of any
calender year that is payable to shareholders of record in such a month, and
that is paid the following January will be treated as if received by the
shareholders on December 31 of the year in which the dividend is declared. The
Fund will notify shareholders regarding the tax status of its distributions
after the end of each calendar year.
Any Fund distribution will have the effect of reducing the per share net asset
value of shares in the Fund by the amount of the distribution. Shareholders
purchasing shares shortly before the record date of any distribution may thus
pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for
more than 12 months and otherwise as short-term capital gain or loss. However,
any loss realized upon a disposition of shares in the Fund held for six months
or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of shares of the Fund within ninety days after their purchase
followed by any purchase (including purchases by exchange or by reinvestment)
without payment of an additional sales charge of Class A shares of the Fund or
of another MFS Fund (or any other shares of an MFS Fund generally sold subject
to a sales charge).
The Fund's current dividend and accounting policies will affect the amount,
timing and character of distributions to shareholders, and may under certain
circumstances make an economic return of capital taxable to shareholders. Any
investment in zero coupon bonds or certain securities purchased at a market
discount will cause the Fund to recognize income prior to the receipt of cash
payments with respect to those securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss to the Fund.
The Fund's transactions in options, Futures Contracts, and Forward Contracts
will be subject to special tax rules that may affect the amount, timing, and
character of Fund income and distributions to shareholders. For example,
certain positions held by the Fund on the last business day of each taxable
year will be marked to market (i.e., treated as if closed out) on that day,
and any gain or loss associated with the positions will be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held by
the Fund that substantially diminish its risk of loss with respect to other
positions in its portfolio may constitute "straddles," and may be subject to
special tax rules that would cause deferral of Fund losses, adjustments in the
holding periods of Fund securities, and conversion of short-term into long-
term capital losses. Certain tax elections exist for straddles that may alter
the effects of these rules. The Fund will limit its activities in options,
Futures Contracts, and Forward Contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses. Use of foreign currencies for non-
hedging purposes and investment by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid a tax on the Fund.
Investment income received by the Fund from foreign securities may be subject
to foreign taxes; the Fund does not expect to be unable to pass through to
shareholders foreign tax credits and deductions with respect to such foreign
taxes. The United States has entered into tax treaties with many foreign
countries that may entitle the Fund to a reduced rate of tax or an exemption
from tax on such income; the Fund intends to qualify for treaty reduced rates
where available. It is not possible, however, to determine the Fund's
effective rate of foreign tax in advance since the amount of the Fund's assets
to be invested within various countries is not known.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at a rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% on dividends and other
payments to Non-U.S. Persons that are subject to such withholding, regardless
of whether a lower rate may be permitted under an applicable treaty. Any
amounts overwithheld may be recovered by such persons by filing a claim for
refund with the U.S. Internal Revenue Service within the time period
appropriate to such claims. Distributions received from the Fund by Non-U.S.
Persons may also be subject to tax under the laws of their own jurisdictions.
The Fund is also required in certain circumstances to apply backup withholding
at the rate of 31% on taxable dividends and redemption proceeds paid to any
shareholder (including a Non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments that
have been subject to 30% withholding.
As long as it qualifies as a "regulated investment company" under the Code,
the Fund will not be required to pay Massachusetts income or excise taxes.
7. DETERMINATION OF NET ASSET VALUE AND
PERFORMANCE
NET ASSET VALUE: The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this SAI, the Exchange is open for trading every weekday except for
the following holidays (or days on which they are observed): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.) This determination is made once each day
as of the close of regular trading on the Exchange by deducting the amount of
the liabilities attributable to the class from the value of assets
attributable to the class and dividing the difference by the number of shares
of the class outstanding. Forward Contracts will be valued using a pricing
model taking into consideration data from an external pricing source. Use of
the pricing services has been approved by the Fund's Board of Trustees. All
other securities, futures contracts and options in the Fund's portfolio (other
than short-term obligations) for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign) will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available,
be valued at current bid prices, unless such securities are reported on the
NASDAQ system, in which case they are valued at the last sale price or, if no
sales occurred during the day, at the last quoted bid price.
Bonds and other fixed income securities, including listed issues, in the
Fund's portfolio are valued on the basis of valuations furnished by a pricing
service which utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institution-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,
since such valuations are believed to reflect the fair value of such
securities. Use of the pricing service has been approved by the Fund's Board
of Trustees. Short-term obligations with a remaining maturity in excess of 60
days will be valued based upon dealer supplied valuations. Other short-term
obligations are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Portfolio securities for which there are
no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for
each class of shares for certain periods by determining the average annual
compounded rates of return over those periods that would cause an investment
of $1,000 (made with all distributions reinvested and reflecting the CDSC or
the maximum public offering price) to reach the value of that investment at
the end of the periods. The Fund may also calculate (i) a total rate of
return, which is not reduced by the CDSC (4% maximum for Class B shares and 1%
maximum for Class C shares) and therefore may result in a higher rate of
return, (ii) a total rate of return assuming an initial account value of
$1,000, which will result in a higher rate of return on Class A shares since
the value of the initial account will not be reduced by the maximum sales
charge (currently 5.75% on Class A shares) and/or (iii) total rates of return
which represent aggregate performance over a period or year-by-year
performance, and which may or may not reflect the effect of the maximum or
other sales charge or CDSC.
The Fund offers multiple classes of shares which were initially offered for
sale to the public on different dates. The calculation of total rate of return
for a class of shares which initially was offered for sale to the public
subsequent to another class of shares of the Fund is based both on (i) the
performance of the Fund's newer class from the date it initially was offered
for sale to the public and (ii) the performance of the Fund's oldest class
from the date it initially was offered for sale to the public up to the date
that the newer class initially was offered for sale to the public.
As discussed in the Prospectus, the sales charges, expenses and expense
ratios, and therefore the performance, of the Fund's classes of shares differ.
In calculating total rate of return for a newer class of shares in accordance
with certain formulas required by the SEC, the performance will be adjusted to
take into account the fact that the newer class is subject to a different
sales charge than the oldest class (e.g., if the newer class is Class A
shares, the total rate of return quoted will reflect the deduction of the
initial sales charge applicable to Class A shares; if the newer class is Class
B shares, the total rate of return quoted will reflect the deduction of the
CDSC applicable to Class B shares). However, the performance will not be
adjusted to take into account the fact that the newer class of shares bears
different class specific expenses than the oldest class of shares (e.g., Rule
12b-1 fees). Therefore, the total rate of return quoted for a newer class of
shares will differ from the return that would be quoted had the newer class of
shares been outstanding for the entire period over which the calculation is
based (i.e., the total rate of return quoted for the newer class will be
higher than the return that would have been quoted had the newer class of
shares been outstanding for the entire period over which the calculation is
based if the class specific expenses for the newer class are higher than the
class specific expenses of the oldest class, and the total rate of return
quoted for the newer class will be lower than the return that would be quoted
had the newer class of shares been outstanding for this entire period if the
class specific expenses for the newer class are lower than the class specific
expenses of the oldest class).
Total rate of return quotations for each class are presented in Appendix A
attached hereto under the heading "Performance Quotations."
PERFORMANCE RESULTS: The performance results for Class A shares presented in
Appendix A attached hereto under the heading "Performance Results" assume an
initial investment of $10,000 in Class A shares, and cover the period from
January 1, 1987 through December 31, 1996. It has been assumed that dividends
and capital gain distributions were reinvested in additional shares. These
performance results, as well as any total rate of return quotations provided
by the Fund, should not be considered as representative of the performance of
the Fund in the future since the net asset value and public offering price of
shares of the Fund will vary based not only on the type, quality and
maturities of the securities held in the Fund's portfolio, but also on changes
in the current value of such securities and on changes in the expenses of the
Fund. These factors and possible differences in the methods used to calculate
total rates of return should be considered when comparing the total rate of
return of the Fund to total rates of return published for other investment
companies or other investment vehicles. Total rate of return reflects the
performance of both principal and income. Current net asset value and account
balance information may be obtained by calling 1-800-MFS-TALK (637-8255).
YIELD: Any yield quotation for a class of shares of the Fund is based on the
annualized net investment income per share of that class for the 30-day
period. The yield for each class of the Fund is calculated by dividing the net
investment income allocated to that class earned during the period by the
maximum offering price per share of that class of the Fund on the last day of
the period. The resulting figure is then annualized. Net investment income per
share of a class is determined by dividing (i) the dividends and interest
allocated to that class during the period, minus accrued expenses of that
class for the period by (ii) the average number of shares of the class
entitled to receive dividends during the period multiplied by the maximum
offering price per share on the last day of the period. The Fund's yield
calculations for Class A shares assume a maximum sales charge of 5.75%. The
yield calculation for Class B and Class C shares assumes no CDSC is paid.
Yield quotations for each class of shares are presented in Appendix A attached
hereto under the heading "Performance Quotations."
CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the Securities and Exchange Commission, is not indicative of the
amounts which were or will be paid to the Fund's shareholders. Amounts paid to
shareholders of each class are reflected in the quoted "current distribution
rate" for that class. The current distribution rate for a class is computed by
dividing the total amount of dividends per share paid by the Fund to
shareholders of that class during the past twelve months by the maximum public
offering price of that class at the end of such period. Under certain
circumstances, such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might be
appropriate to annualize the dividends paid over the period such policies were
in effect, rather than using the dividends during the past twelve months. The
current distribution rate differs from the yield computation because it may
include distributions to shareholders from sources other than dividends and
interest, such as premium income for option writing, short-term capital gains
and return of invested capital, and is calculated over a different period of
time. Current distribution rate quotations for each class of shares are
presented in Appendix A attached hereto under the heading "Performance
Quotations."
From time to time the Fund may, as appropriate, quote fund rankings or reprint
all or a portion of evaluations of fund performance and operations appearing
in various independent publications, including but not limited to the
following: Money, Fortune, U.S. News and World Report, Kiplinger's Personal
Finance, The Wall Street Journal, Barron's, Investors Business Daily,
Newsweek, Financial World, Financial Planning, Investment Advisor, USA Today,
Pensions and Investments, SmartMoney, Forbes, Global Finance, Registered
Representative, Institutional Investor, the Investment Company Institute,
Johnson's Charts, Morningstar, Lipper Analytical Services, Inc., CDA
Wiesenberger, Shearson Lehman and Salomon Bros. Indices, Ibbotson, Business
Week, Lowry Associates, Media General, Investment Company Data, The New York
Times, Your Money, Strangers Investment Advisor, Financial Planning on Wall
Street, Standard and Poor's, Individual Investor, The 100 Best Mutual Funds
You Can Buy, by Gordon K. Williamson, Consumer Price Index, and Sanford C.
Bernstein & Co. Fund performance may also be compared to the performance of
other mutual funds tracked by financial or business publications or
periodicals.
From time to time, the Fund may discuss or quote its current portfolio manager
as well as other investment personnel, including such persons' views on: the
economy; securities markets; portfolio securities and their issuers;
investment philosophies, strategies, techniques and criteria used in the
selection of securities to be purchased or sold for the Fund; the Fund's
portfolio holdings; the investment research and analysis process; the
formulation and evaluation of investment recommendations; and the assessment
and evaluation of credit, interest rate, market and economic risks, and
similar or related matters.
The Fund may also quote evaluations mentioned in independent radio or
television broadcasts.
From time to time the Fund may use charts and graphs to illustrate the past
performance of various indices such as those mentioned above and illustrations
using hypothetical rates of return to illustrate the effects of compounding
and tax-deferral.
From time to time the Fund may also discuss or quote the views of its
distributor, its investment adviser and other financial planning, legal, tax,
accounting, insurance, estate planning and other professionals, or from
surveys, regarding individual and family financial planning. Such views may
include information regarding: retirement planning; tax management strategies;
estate planning; general investment techniques (e.g., asset allocation and
disciplined saving and investing); business succession; ideas and information
provided through the MFS Heritage Planningsm program, an inter-generational
financial planning assistance program; issues with respect to insurance (e.g.,
disability and life insurance and Medicare supplemental insurance); issues
regarding financial and health care management for elderly family members; and
similar or related matters.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against a loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals.
The Fund was established by three securities executives -- L. Sherman Adams,
Charles H. Learoyd and Alston L. Carr. The Fund began operation in 1924 and
established its own in-house research department in 1932. From 1932 to 1953,
the Fund was managed by Merrill Griswold, its Chairman. Mr. Griswold helped to
change the U.S. tax law in order to permit income and capital gains to be
passed along to mutual fund shareholders without a separate tax at the fund
level. In 1936, the Fund began offering shareholders the ability to take
capital gain distributions in cash or additional shares. The Fund issued
shareholders full, periodic reports disclosing portfolio holdings, fees and
expenses a decade before it was required to do so under the Securities Act of
1933, as amended. The fund has been actively managed for the last 70 years
responding to major historical events which have affected the stock market
(such as the Great Depression, World War II, the post-war economic boom, the
1970s' oil crisis and inflationary periods, and the "boom market" of the
1980s).
In 1969, the Fund's Trustees created a management company, MFS, to externalize
the investment management function and to permit the firm to offer additional
funds. MFS introduced several mutual funds in 1970 and hired the current
chairman of MFS, A. Keith Brodkin, as a bond fund portfolio manager.
As of March 31, 1997, the Fund had total net assets of approximately $3.5
billion and had approximately 186,329 shareholders.
From time to time, MFD, may, as appropriate, quote Fund-related comments from
existing shareholders.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Fund is established as
the first open-end mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first
mutual fund to make full public disclosure of its
operations in shareholder reports.
-- 1932 -- One of the first internal research departments
is established to provide in-house analytical
capability for an investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first
mutual fund to register under the Securities Act of
1933 (the "Truth in Securities Act" or the "Full
Disclosure Act").
-- 1936 -- Massachusetts Investors Trust is the first
mutual fund to allow shareholders to take capital gain
distributions either in additional shares or in cash.
-- 1976 -- MFS(R) Municipal Bond Fund is among the first
municipal bond funds established.
-- 1979 -- Spectrum becomes the first combination fixed/
variable annuity with no initial sales charge.
-- 1981 -- MFS(R) World Governments Fund is established as
America's first globally diversified fixed-income
mutual fund.
-- 1984 -- MFS(R) Municipal High Income Fund is the first
open-end mutual fund to seek high tax-free income from
lower-rated municipal securities.
-- 1986 -- MFS(R) Managed Sectors Fund becomes the first
mutual fund to target and shift investments among
industry sectors for shareholders.
-- 1986 -- MFS(R) Municipal Income Fund is the first
closed-end, high-yield municipal bond fund traded on
the New York Stock Exchange.
-- 1987 -- MFS(R) Multimarket Income Fund is the first
closed-end, multimarket high income fund listed on the
New York Stock Exchange.
-- 1989 -- MFS(R) Regatta becomes America's first non-
qualified market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS(R) World Total Return Fund is the first
global balanced fund.
-- 1993 -- MFS(R) World Growth Fund is the first global
emerging markets fund to offer the expertise of two
sub-advisers.
-- 1993 -- MFS becomes money managers of MFS(R) Union
Standard Trust, the first trust to invest solely in
companies deemed to be union-friendly by an Advisory
Board of senior labor officials, senior managers of
companies with significant labor contracts, academics
and other national labor leaders or experts.
8. DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for each of the Fund's Class A,
Class B and Class C shares (the "Distribution Plan") pursuant to Section 12(b)
of the 1940 Act and Rule 12b-1 thereunder (the "Rule") after having concluded
that there is a reasonable likelihood that the Distribution Plan would benefit
the Fund and each respective class of shareholders. The provisions of the
Distribution Plan are severable with respect to each class of shares offered
by the Fund. The Distribution Plan is designed to promote sales, thereby
increasing the net assets of the Fund. Such an increase may reduce the expense
ratio to the extent the Fund's fixed costs are spread over a larger net asset
base. Also, an increase in net assets may lessen the adverse effects that
could result were the Fund required to liquidate portfolio securities to meet
redemptions. There is, however, no assurance that the net assets of the Fund
will increase or that the other benefits referred to above will be realized.
The Distribution Plan is described in the Prospectus under the caption
"Distribution Plan," which is incorporated herein by reference. The following
information supplements this Prospectus discussion.
SERVICE FEES: With respect to Class A shares, no service fees will be paid:
(i) to any dealer who is the holder or dealer of record for investors who own
Class A shares having an aggregate net asset value less than $750,000, or such
other amount as may be determined from time to time by MFD (MFD, however, may
waive this minimum amount requirement from time to time); or (ii) to any
insurance company which has entered into an agreement with the Fund and MFD
that permits such insurance company to purchase Class A shares from the Fund
at their net asset value in connection with annuity agreements issued in
connection with the insurance company's separate accounts. Dealers may from
time to time be required to meet certain other criteria in order to receive
service fees.
With respect to Class B shares, except in the case of the first year service
fee, no service fees will be paid to any securities dealer who is the holder
or dealer of record for investors who own Class B shares having an aggregate
net asset value of less than $750,000 or such other amount as may be
determined by MFD from time to time. MFD, however, may waive this minimum
amount requirement from time to time. Dealers may from time to time be
required to meet certain other criteria in order to receive service fees.
MFD or its affiliates shall be entitled to receive any service fee payable
under the Distribution Plan for which there is no dealer of record or for
which qualification standards have not been met as partial consideration for
personal services and/or account maintenance services performed by MFD or its
affiliates for shareholder accounts.
DISTRIBUTION FEES: The purpose of distribution payments to MFD under the
Distribution Plan is to compensate MFD for its distribution services to the
Fund. MFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel, office expenses and
equipment.
DISTRIBUTION AND SERVICE FEES PAID DURING THE FUND'S LAST FISCAL YEAR: During
the fiscal year ended December 31, 1996, the Fund paid the following
Distribution Plan expenses:
AMOUNT OF AMOUNT OF AMOUNT OF
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEES PAID FEES RETAINED FEES RECEIVED
CLASSES OF SHARES BY FUND BY MFD BY DEALERS
- ----------------- ------------ ------------- -------------
Class A Shares $7,583,868 $3,178,149 $4,405,719
Class B Shares $2,773,037 $2,107,767 $ 665,270
Class C Shares $ 23,395 $ 13 $ 23,382
GENERAL: The Distribution Plan will remain in effect until August 1, 1997, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by vote of both the Trustees and a majority of the
Trustees who are not "interested persons" or financially interested parties of
such Plan ("Distribution Plan Qualified Trustees"). The Distribution Plan also
requires that the Fund and MFD each shall provide the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended (and purposes therefor) under such Plan. The Distribution
Plan may be terminated at any time by vote of a majority of the Distribution
Plan Qualified Trustees or by vote of the holders of a majority of the
respective class of the Fund's shares (as defined in "Investment
Restrictions"). All agreements relating to the Distribution Plan entered into
between the Fund or MFD and other organizations must be approved by the Board
of Trustees, including a majority of the Distribution Plan Qualified Trustees.
Agreements under the Distribution Plan must be in writing, will be terminated
automatically if assigned, and may be terminated at any time without payment
of any penalty, by vote of a majority of the Distribution Plan Qualified
Trustees or by vote of the holders of a majority of the respective class of
the Fund's shares. The Distribution Plan may not be amended to increase
materially the amount of permitted distribution expenses without the approval
of a majority of the respective class of the Fund's shares (as defined in
"Investment Restrictions") or may not be materially amended in any case
without a vote of the Trustees and a majority of the Distribution Plan
Qualified Trustees. The selection and nomination of Distribution Plan
Qualified Trustees shall be committed to the discretion of the non-interested
Trustees then in office. No Trustee who is not an "interested person" has any
financial interest in the Distribution Plan or in any related agreement.
9. INDEPENDENT AUDITORS AND
FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's independent auditors, providing audit
services, assistance with tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
The Portfolio of Investments at December 31, 1996, the Statement of Assets and
Liabilities at December 31, 1996, the Statement of Operations for the year
ended December 31, 1996, the Statement of Changes in Net Assets for each of
the two-year period ended December 31, 1996, the Notes to Financial
Statements and the Independent Auditors' Report, each of which is included in
the Annual Report to shareholders of the Fund, are incorporated by reference
into this SAI and have been so incorporated in reliance upon the report of
Deloitte & Touche LLP, independent auditors, as experts in accounting and
auditing. A copy of the Annual Report accompanies this SAI.
<PAGE>
APPENDIX A
PERFORMANCE INFORMATION
The performance results and quotations below should not be considered as
representative of the performance of the Fund in the future since the net
asset value and public offering price of shares of the Fund will vary. See
"Determination of Net Asset Value and Performance" in the SAI.
<TABLE>
<CAPTION>
PERFORMANCE RESULTS -- CLASS A SHARES
VALUE OF VALUE OF VALUE OF
INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
YEAR ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
---------- ------------ --------------- ----------- -----
<S> <C> <C> <C> <C>
December 31, 1987........ $ 8,776 $ 1,102 $ 248 $10,126
December 31, 1988........ 8,745 1,843 589 11,177
December 31, 1989........ 10,561 3,477 1,177 15,215
December 31, 1990........ 9,571 4,101 1,528 15,200
December 31, 1991........ 10,810 6,378 2,218 19,406
December 31, 1992........ 9,594 8,830 2,414 20,838
December 31, 1993........ 8,963 11,089 2,876 22,928
December 31, 1994........ 7,848 11,873 2,974 22,695
December 31, 1995........ 9,906 16,876 4,842 31,624
December 31, 1996........ 11,270 22,200 6,344 39,814
</TABLE>
Explanatory Notes: The results in the table assume that income dividends and
capital gain distributions were invested in additional shares. The results
also assume that the initial investment in Class A shares was reduced by the
current maximum applicable sales charge. No adjustment has been made for any
income taxes, if any, payable by shareholders.
PERFORMANCE QUOTATIONS
All performance quotations are for the period ended December 31, 1996.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS CURRENT
------------------------------------- 30-DAY YIELD DISTRIBUTION
1 YEAR 5 YEAR 10 YEAR (WITHOUT ANY WAIVERS) RATE
------ ------ ------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Fund Class A shares with sales charge ......... 18.62% 14.10% 14.82% 1.19% 1.33%
Fund Class A shares without sales charge ...... 25.90% 15.46% 15.50%
Fund Class B shares with CDSC ................. 21.05% 14.59%(1) 15.18%(1)
Fund Class B shares without CDSC .............. 25.05% 14.82%(1) 15.18%(1) 0.77% 0.74%
Fund Class C shares with CDSC ................. 23.73%(2) 15.24%(2) 15.39%(2)
Fund Class C shares without CDSC .............. 24.73%(2) 15.24%(2) 15.39%(2) 0.87% 1.17%
</TABLE>
(1) Class B share performance includes the performance of the Fund's Class A
shares for periods prior to the commencement of offering of Class B shares
on September 7, 1993. Sales charges, expenses and expense ratios, and
therefore performance, for Class A and Class B shares differ. Class B
share performance has been adjusted to reflect that Class B shares
generally are subject to a CDSC (unless the performance quotation does not
give effect to the CDSC) whereas Class A shares generally are subject to
an initial sales charge. Class B share performance has not, however, been
adjusted to reflect differences in operating expenses (e.g., Rule 12b-1
fees), which generally are lower for Class A shares.
(2) Class C share performance includes the performance of the Fund's Class A
shares for periods prior to the commencement of offering of Class C shares
on July 2, 1996. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class C shares differ. Class C share
performance has been adjusted to reflect that Class C shares generally are
subject to a CDSC (unless the performance quotation does not give effect
to the CDSC) whereas Class A shares generally are subject to an initial
sales charge. Class C share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class A shares.
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606
MAILING ADDRESS:
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
MASSACHUSETTS INVESTORS TRUST
500 Boylston Street
Boston, MA 02116
MIT-13-5/97/775 12/212/312
<PAGE>
<PAGE>
[logo] Annual Report
INVESTMENT MANAGEMENT for Year Ended
December 31, 1996
MASSACHUSETTS INVESTORS TRUST
[graphic omitted]
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman ................................................... 1
A Discussion with the Portfolio Managers ................................... 2
Portfolio Managers' Profiles ............................................... 4
Trust Facts ................................................................ 5
Performance Summary ........................................................ 5
Portfolio of Investments ................................................... 9
Financial Statements .......................................................16
Notes to Financial Statements ..............................................22
Independent Auditors' Report ...............................................28
Trustees and Officers ......................................................29
- ------------------------------------------------------------------------------
HIGHLIGHTS
o FOR THE 12 MONTHS ENDED DECEMBER 31, 1996, CLASS A SHARES OF THE TRUST
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF 25.90%, WHILE CLASS B SHARES
RETURNED 25.05%.
o THE TRUST LOOKS FOR LARGE- CAPITALIZATION, HIGH-QUALITY GROWTH COMPANIES THAT
ARE EXPECTED TO MEET OR EXCEED THEIR GROWTH TARGETS AND SELL FOR VALUATIONS
THAT WILL MAKE THEM ATTRACTIVE FOR SOME TIME TO COME.
o FINANCIAL SERVICES STOCKS MAKE UP THE LARGEST SECTOR IN THE TRUST. THESE
STOCKS HAVE BENEFITED FROM A NUMBER OF FAVORABLE DEVELOPMENTS, INCLUDING
CONSOLIDATION, IN WHICH COMPANIES GAIN BROADER MARKETS AND IMPROVED ECONOMIES
OF SCALE.
o THE DEFENSE AND AEROSPACE INDUSTRY IS ALSO GOING THROUGH MASSIVE
CONSOLIDATION AS THE DEFENSE INDUSTRY SHRINKS. IN MOST CASES, THE RESULTING
MERGERS ARE ENHANCING, NOT DILUTING, EARNINGS AS THESE COMPANIES ALSO ENJOY
INCREASED ECONOMIES OF SCALE, PURCHASING POWER, AND GLOBAL STRENGTH.
- ------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of A. Keith Brodkin]
Dear Shareholders:
After more than six years of expansion, the U.S. economy appears headed toward
another year of at least moderate growth in 1997, although a few signs point to
the possibility of a modest rise in inflation during the year. On the positive
side, the pattern of moderate growth and inflation set over the past few years
now seems fairly well entrenched in the economy and, short of a major
international or domestic crisis, appears to have enough momentum to remain on
track for some time. Also, recent gains in such important sectors as housing,
automobiles, industrial production, and exports indicate a fair amount of
underlying strength in the economy. However, some reason for caution can be seen
in the continuing high level of consumer debt and the attendant rise in personal
bankruptcies, as well as in the modestly disappointing levels of holiday sales.
Furthermore, the ongoing tightness in labor markets, and price rises in such
important sectors as energy, could add some inflationary pressures to the
economy. Given these somewhat conflicting indicators, we expect real
(inflation-adjusted) growth to revolve around 2% in 1997, which would represent
a modest decline from 1996.
We continue to urge U.S. equity investors to lower their expectations for 1997
and to point out that the impressive gains of the past two years are not
sustainable. Just as the slowdown in corporate earnings growth and increases in
interest rates in 1996 raised some near-term concerns, further interest rate
increases and an acceleration of inflation could negatively affect the stock
market in 1997. However, to the extent that some slowdown in earnings means that
the economy is not overheating, this may be beneficial for the equity market in
the long run. Also, we believe many of the technology-driven productivity gains
that U.S. companies have made in recent years will continue to enhance corporate
America's competitiveness and profitability. While we have some near-term
concerns, we remain reasonably positive about the long-term viability of the
equity market.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
January 16, 1997
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGERS
For the year ended December 31, 1996, Class A shares of the Trust provided a
total return of 25.90%, while Class B shares returned 25.05% and Class C shares
provided a total return of 24.73%. These returns, which include the reinvestment
of distributions but exclude the effects of any sales charges, exceeded the
22.64% return of the Standard & Poor's 500 Composite Index (the S&P 500) a
popular, unmanaged index of common stock performance.
Q. WHAT DO YOU SEE AS SOME OF THE REASONS FOR THE TRUST'S PERFORMANCE?
A. The Trust benefited from a very favorable investment environment, in which
low interest rates led to improved valuations, and corporate earnings continued
to improve. The Trust was also helped because we were overweighted in sectors
that outperformed the market, and underweighted in those that lagged the market.
For example, financial services stocks, which made up 22% of the portfolio,
versus 15% of the S&P 500, gained almost 36% in 1996. We also had overweightings
in industrial goods and services, particularly aerospace and defense stocks,
which also outperformed the market, while we were underweighted in sectors like
utilities and leisure, both of which underperformed.
Q. HOW WOULD YOU DESCRIBE THE OVERALL BUSINESS AND ECONOMIC ENVIRONMENT YOU
FACED OVER THE PAST YEAR, PARTICULARLY AS IT RELATES TO THE TRUST?
A. It was a pretty benign investment environment, with continuing growth, but at
a reasonably slow rate. This allowed interest rates to stay low, which led to
improved valuations. At the same time, many companies continued to report
significant gains in earnings.
Q. WE NOTICED THAT FINANCIAL SERVICES STOCKS MAKE UP THE LARGEST SECTOR IN THE
TRUST. WHAT IS IT YOU LIKE ABOUT THIS SECTOR, AND COULD YOU DISCUSS ANY
SUBGROUPS WITHIN FINANCIAL SERVICES THAT YOU FIND PARTICULARLY ATTRACTIVE?
A. These stocks have benefited from a number of favorable developments. First,
some companies, such as First Bank Systems and Norwest, have been selling at
significant discounts to the market, discounts which we feel are not warranted
given the underlying strength of these companies. Second, the ongoing and
necessary consolidation of the banking industry benefits the acquiring
companies, which are able to reach broader markets and realize economies of
scale, as well as the stocks of companies being taken over, as they have been
bought at significant premiums.
Q. YOU ALSO HAVE FAIRLY LARGE WEIGHTINGS IN INDUSTRIAL GOODS AND SERVICES AND
CONSUMER STAPLES. COULD YOU TALK ABOUT THE KINDS OF COMPANIES THAT ONE TYPICALLY
FINDS IN THESE SECTORS AND TELL US WHAT YOU LIKE ABOUT THEM?
A. Industrial goods and services is a very broad category that includes defense
and aerospace companies. This industry is going through massive consolidation as
the defense industry shrinks. In most cases, the resulting acquisitions and
mergers are enhancing, not diluting earnings as these companies also enjoy
increased economies of scale, purchasing power, and global strength. We think
there will be more mergers in the future. As for consumer goods and services,
any large fund almost has to have some exposure to this sector, although at 26%
of the portfolio, versus 24% for the S&P 500, our allocation is not that
different from the market as a whole.
Q. IN GENERAL, WHAT CHARACTERISTICS OR QUALITIES DO YOU LOOK FOR IN SELECTING
STOCKS FOR THE TRUST?
A. We look for large-capitalization, high-quality growth companies that we think
can meet or exceed their growth targets and sell for valuations that will make
them attractive for some time to come. Basically, we're looking for high-quality
growth at the right price.
Q. COULD YOU TALK ABOUT SOME STOCKS OR SECTORS THAT DID NOT PERFORM AS WELL AS
YOU EXPECTED LAST YEAR?
A. Going into the year, we were overweighted in the retail stocks. These stocks
had performed poorly both in 1994 and 1995, and their valuations were at fairly
attractive levels. However, as 1996 progressed, we reduced our positions in the
retail sector as these companies continued to underperform. Part of the reason
for this underperformance was the continuing high levels of consumer debt and
also the fact that there are still too many stores out there.
Q. CAN YOU TELL US ABOUT SOME SECTORS YOU MIGHT BE AVOIDING, AND WHY?
A. We have avoided utilities, particularly electric utilities and long-distance
telephone companies. The long-distance companies have had to keep cutting their
rates as competition for what is essentially the same number of telephone calls
increases. Meanwhile, the electric utilities are facing more competition from
suppliers outside their territories who have been able to line up some of the
larger users of electricity, such as large offices and manufacturers. Partly as
a result of these trends, electric utilities had a 0% return in 1996 and
long-distance phone companies did slightly better, at 2.9%, while the S&P 500
was up almost 23%.
Q. AS YOU LOOK AHEAD, WHAT CHANGES DO YOU SEE IN THE OVERALL MARKET OR ECONOMIC
ENVIRONMENT, PARTICULARLY AS IT RELATES TO THE TRUST, AND HOW ARE YOU
POSITIONING THE TRUST TO TRY AND TAKE ADVANTAGE OF THOSE CHANGES?
A. The most significant thing we're concerned about is the ability of the S&P
500 to continue to increase earnings at the same pace as the last couple of
years. As the economy slows, the ability of companies to achieve their earnings
estimates will become more and more significant. As a result, stock selection
will become even more important. In this environment, we believe that our
emphasis on original research, combined with our bottom-up approach to stock
selection, should continue to benefit the Trust over the long term.
Respectfully,
/s/ Mitchell D. Dynan /s/John D. Laupheimer, Jr. /s/Kevin R. Parke
Mitchell D. Dynan John D. Laupheimer, Jr. Kevin R. Parke
Portfolio Manager Portfolio Manager Portfolio Manager
- ------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
MITCHELL D. 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 PORTFOLIO MANAGER OF
MASSACHUSETTS INVESTORS TRUST IN 1995.
JOHN D. LAUPHEIMER, JR. 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 1995. MR. LAUPHEIMER BECAME
PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS TRUST IN 1993.
KEVIN R. 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
IN 1993, AND DIRECTOR OF RESEARCH IN 1995. MR. PARKE BECAME PORTFOLIO MANAGER OF
MASSACHUSETTS INVESTORS TRUST IN 1992.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
TRUST FACTS
STRATEGY: THE TRUST'S INVESTMENT OBJECTIVES ARE TO PROVIDE
REASONABLE CURRENT INCOME AND LONG-TERM GROWTH OF
CAPITAL AND INCOME.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JULY 15, 1924
SIZE: $3.1 BILLION NET ASSETS AS OF DECEMBER 31, 1996
- ------------------------------------------------------------------------------
PERFORMANCE SUMMARY
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. Class A share performance results reflect the
deduction of the 5.75% maximum sales charge; benchmark comparisons are unmanaged
and do not reflect any fees or expenses. The performance of other share 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. You
cannot invest in an index. All results are historical and assume the
reinvestment of dividends and capital gains.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 5-Year Period Ended December 31, 1996)
Massachusetts S&P 500 Consumer Price
Investors Trust Composite Index --
Class A Index U.S.
--------------- --------- --------------
12/91 9,423 10,000 10,000
12/92 10,118 10,760 10,287
12/93 11,133 11,843 10,573
12/94 11,020 11,992 10,856
12/95 15,355 16,483 11,124
12/96 19,332 20,249 11,523
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-Year Period Ended December 31, 1996)
Massachusetts S&P 500 Consumer Price
Investors Trust Composite Index --
Class A Index U.S.
--------------- --------- --------------
12/86 9,423 10,000 10,000
12/88 11,178 12,255 10,899
12/90 15,200 15,622 12,102
12/92 20,839 21,922 12,831
12/94 22,695 24,432 13,541
12/96 39,814 41,254 14,373
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1996
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Investors Trust (Class A)
including 5.75% sales charge +18.62% +17.85% +14.10% +14.82%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class A) at net asset value +25.90% +20.20% +15.46% +15.50%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class B) with CDSC +21.05% +18.50% +14.59% +15.18%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class B) without CDSC +25.05% +19.20% +14.82% +15.18%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class C) with CDSC +23.73% +19.82% +15.24% +15.39%
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Trust (Class C) without CDSC +24.73% +19.82% +15.24% +15.39%
- ------------------------------------------------------------------------------------------------------------------------------
Average growth and income fund+ +20.78% +16.15% +13.87% +13.13%
- ------------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index** +22.64% +19.58% +15.15% +15.23%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Price Index* + 3.56% + 2.91% + 2.88% + 3.69%
- ------------------------------------------------------------------------------------------------------------------------------
* The Consumer Price Index is a popular measure of change in prices.
** Source: CDA/Wiesenberger.
+ Source: Lipper Analytical Services.
</TABLE>
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
Class B results, including the contingent deferred sales charge (CDSC), reflect
the applicable CDSC which declines over six years as follows: 4%, 4%, 3%, 3%,
2%, 1%, 0%. Class C shares have no initial sales charge but, along with Class B
shares, have higher annual fees and expenses than Class A shares. As of April 1,
1996, Class C shares redeemed within 12 months of purchase will be subject to a
1% CDSC.
Class B and Class C share performance includes the performance of the Trust's
Class A shares for periods prior to the commencement of offering of Class B
shares on September 7, 1993 and of Class C shares on July 2, 1996. Sales charges
and operating expenses for Class A, Class B, and Class C shares differ. The
Class A share performance, which is included within the Class B and Class C
share performance, including the CDSC, has been adjusted to reflect the CDSC
generally applicable to Class B and Class C shares rather than the initial sales
charge generally applicable to Class A shares. Class B and Class C share
performance has not been adjusted, however, to reflect differences in operating
expenses (e.g., Rule 12b-1 fees), which generally are lower for Class A shares.
Trust results reflect any applicable expense subsidies and waivers, without
which the performance results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF DECEMBER 31, 1996
LARGEST SECTORS
Miscellaneous 30.7%
Financial Services 21.9%
Consumer Staples 15.5%
Industrial Goods and Services 14.0%
Health Care 10.1%
Energy 7.8%
*For a more complete breakdown refer to Portfolio of Investments.
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
PHILIP MORRIS COS., INC. COLGATE-PALMOLIVE CO.
Tobacco, food, and beverage conglomerate Cosmetics and toiletries company
GILLETTE CO. MCDONNELL-DOUGLAS CORP.
Manufacturer of cosmetics, personal care Commercial and defense aircraft manufacturer
products, and office products
LOCKHEED MARTIN CORP.
GENERAL ELECTRIC CO. Aerospace/defense contractor
Diversified manufacturing and services
conglomerate TEXACO, INC.
International oil and gas company
NORWEST CORP.
Commercial and retail banking company FIRST BANK SYSTEMS, INC.
Bank with operations in Midwest and Rocky
MOBIL CORP. Mountain states
International oil and gas company
</TABLE>
- -------------------------------------------------------------------------------
TAX FORM SUMMARY
IN JANUARY 1997, SHAREHOLDERS WERE MAILED A TAX FORM SUMMARY REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1996.
THE TRUST HAS DESIGNATED $239,557,936 AS A LONG-TERM CAPITAL GAIN DISTRIBUTION
FOR TAX PURPOSES. THIS DISTRIBUTION WAS MADE TO SHAREHOLDERS OF RECORD AS OF
DECEMBER 23, 1996, PAYABLE JANUARY 2, 1997.
FOR THE YEAR ENDED DECEMBER 31, 1996, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS CAME TO
77.05%.
- -------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS - December 31, 1996
Stocks - 93.9%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
U.S. Stocks - 89.8%
Aerospace - 7.7%
Allied Signal, Inc. 520,000 $ 34,840,000
General Dynamics Corp. 344,000 24,252,000
Lockheed Martin Corp. 566,521 51,836,671
McDonnell-Douglas Corp. 830,000 53,120,000
Raytheon Co. 661,300 31,825,063
United Technologies Corp. 668,000 44,088,000
--------------
$ 239,961,734
- -----------------------------------------------------------------------------
Agricultural Products - 0.5%
Case Corp. 271,100 $ 14,774,950
- -----------------------------------------------------------------------------
Apparel and Textiles - 1.7%
Nike, Inc., "B" 480,000 $ 28,680,000
Reebok International Ltd. 175,000 7,350,000
VF Corp. 240,000 16,200,000
--------------
$ 52,230,000
- -----------------------------------------------------------------------------
Automotive - 0.9%
Goodrich (B.F.) Co. 700,000 $ 28,350,000
- -----------------------------------------------------------------------------
Banks and Credit Companies - 9.0%
Bank of Boston Corp. 223,900 $ 14,385,575
Chase Manhattan Corp. 125,500 11,200,875
Comerica, Inc. 375,000 19,640,625
Corestates Financial Corp. 36,750 1,906,406
Crestar Financial Corp. 275,000 20,453,125
First Bank Systems, Inc. 710,000 48,457,500
First Chicago NBD Corp. 160,000 8,600,000
Firstar Corp. 310,000 16,275,000
National City Corp. 425,000 19,071,875
Northern Trust Corp. 600,000 21,750,000
Norwest Corp. 1,377,000 59,899,500
SunTrust Banks, Inc. 500,000 24,625,000
U.S. Bancorp 320,000 14,380,000
--------------
$ 280,645,481
- -----------------------------------------------------------------------------
Business Machines - 0.6%
International Business Machines Corp. 118,000 $ 17,818,000
Xerox Corp. 30,000 1,578,750
--------------
$ 19,396,750
- -----------------------------------------------------------------------------
Business Services - 1.8%
ALCO Standard Corp. 506,200 $ 26,132,575
Ceridian Corp.* 35,000 1,417,500
Computer Sciences Corp.* 287,500 23,610,938
DST Systems, Inc.* 60,000 1,882,500
Sabre Group Holding, Inc., "A"* 138,000 3,846,750
--------------
$ 56,890,263
- -----------------------------------------------------------------------------
Cellular Telephones
AirTouch Communications, Inc.* 60,000 $ 1,515,000
- -----------------------------------------------------------------------------
Chemicals - 2.8%
Air Products & Chemicals, Inc. 420,000 $ 29,032,500
Betzdearborn, Inc. 20,100 1,175,850
du Pont (E.I.) de Nemours & Co., Inc. 295,000 27,840,625
Monsanto Co. 382,500 14,869,687
Praxair, Inc. 340,000 15,682,500
--------------
$ 88,601,162
- -----------------------------------------------------------------------------
Computer Software - Personal Computers - 1.4%
First Data Corp. 463,000 $ 16,899,500
Microsoft Corp.* 328,000 27,101,000
--------------
$ 44,000,500
- -----------------------------------------------------------------------------
Computer Software - Systems - 1.6%
Computer Associates International, Inc. 642,000 $ 31,939,500
Electronic Data Systems Corp. 27,000 1,167,750
Oracle Systems Corp.* 375,000 15,656,250
--------------
$ 48,763,500
- -----------------------------------------------------------------------------
Consumer Goods and Services - 9.0%
Colgate-Palmolive Co. 584,100 $ 53,883,225
Gillette Co. 865,000 67,253,750
Philip Morris Cos., Inc. 770,000 86,721,250
Procter & Gamble Co. 249,000 26,767,500
Service Corp. International 54,000 1,512,000
Sherwin Williams Co. 285,000 15,960,000
Tyco International Ltd. 246,000 13,007,250
UST, Inc. 500,000 16,187,500
--------------
$ 281,292,475
- -----------------------------------------------------------------------------
Defense Electronics - 0.3%
Loral Space & Communications Corp.* 450,000 $ 8,268,750
- -----------------------------------------------------------------------------
Electrical Equipment - 3.3%
General Electric Co. 646,000 $ 63,873,250
Honeywell, Inc. 610,000 40,107,500
--------------
$ 103,980,750
- -----------------------------------------------------------------------------
Electronics - 0.9%
Intel Corp. 220,000 $ 28,806,250
- -----------------------------------------------------------------------------
Entertainment - 0.3%
Viacom, Inc., "B"* 240,000 $ 8,370,000
- -----------------------------------------------------------------------------
Financial Institutions - 4.4%
American Express Co. 200,000 $ 11,300,000
Beneficial Corp. 761,300 48,247,387
Federal Home Loan Mortgage Corp. 149,000 16,408,625
MBNA Corp. 43,500 1,805,250
Merrill Lynch & Co., Inc. 100,000 8,150,000
State Street Boston Corp. 680,000 43,860,000
Union Planters Corp. 200,000 7,800,000
--------------
$ 137,571,262
- -----------------------------------------------------------------------------
Food and Beverage Products - 5.0%
Archer-Daniels-Midland Co. 540,000 $ 11,880,000
Coca-Cola Co. 200,000 10,525,000
CPC International, Inc. 300,000 23,250,000
General Mills, Inc. 495,000 31,370,625
McCormick & Co., Inc. 70,000 1,649,375
PepsiCo, Inc. 1,055,000 30,858,750
Ralston-Ralston Purina Co. 240,000 17,610,000
Tyson Foods, Inc. - Delaware 400,000 13,700,000
Wrigley (Wm) Junior Co. 250,000 14,062,500
--------------
$ 154,906,250
- -----------------------------------------------------------------------------
Forest and Paper Products - 1.4%
Kimberly-Clark Corp. 460,000 $ 43,815,000
- -----------------------------------------------------------------------------
Insurance - 6.9%
AFLAC, Inc. 460,000 $ 19,665,000
Allstate Corp. 436,800 25,279,800
Chubb Corp. 100,000 5,375,000
Cigna Corp. 266,500 36,410,563
ITT Hartford Group, Inc. 341,900 23,078,250
MBIA, Inc. 28,000 2,835,000
Progressive Corp. - Ohio 585,000 39,414,375
St. Paul Cos., Inc. 300,000 17,587,500
Torchmark Corp. 360,000 18,180,000
Transamerica Corp. 245,000 19,355,000
Travelers, Inc. 166,667 7,562,500
UNUM Corp. 26,000 1,878,500
--------------
$ 216,621,488
- -----------------------------------------------------------------------------
Machinery - 1.7%
Deere & Co., Inc. 300,000 $ 12,187,500
Ingersoll Rand Co. 480,000 21,360,000
York International Corp. 350,000 19,556,250
--------------
$ 53,103,750
- -----------------------------------------------------------------------------
Medical and Health Products - 6.0%
American Home Products Corp. 227,000 $ 13,307,875
Johnson & Johnson 890,000 44,277,500
Lilly (Eli) & Co. 229,766 16,772,918
Pfizer, Inc. 255,000 21,133,125
Pharmacia & Upjohn, Inc. 240,000 9,510,000
Rhone-Poulenc Rorer, Inc. 516,000 40,312,500
Warner-Lambert Co. 560,000 42,000,000
--------------
$ 187,313,918
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 2.2%
Medtronic Inc. 150,000 $ 10,200,000
Pacificare Health Systems, Inc., "B"* 220,000 18,755,000
St. Jude Medical, Inc.* 700,000 29,837,500
United Healthcare Corp. 252,000 11,340,000
--------------
$ 70,132,500
- -----------------------------------------------------------------------------
Oil Services - 0.3%
Schlumberger Ltd. 94,000 $ 9,388,250
- -----------------------------------------------------------------------------
Oils - 5.5%
Amoco Corp. 120,000 $ 9,660,000
Chevron Corp. 280,300 18,219,500
Exxon Corp. 403,000 39,494,000
Mobil Corp. 445,000 54,401,250
Texaco, Inc. 498,000 48,866,250
--------------
$ 170,641,000
- -----------------------------------------------------------------------------
Photographic Products - 0.8%
Eastman Kodak Co. 320,000 $ 25,680,000
- -----------------------------------------------------------------------------
Precious Metals and Minerals - 0.5%
Phelps Dodge Corp. 240,000 $ 16,200,000
- -----------------------------------------------------------------------------
Printing and Publishing - 1.6%
Gannett Co., Inc. 375,000 $ 28,078,125
Tribune Co. 297,800 23,488,975
--------------
$ 51,567,100
- -----------------------------------------------------------------------------
Railroads - 2.2%
Burlington Northern Santa Fe Railway Co. 198,000 $ 17,102,250
Conrail, Inc. 176,061 17,540,077
CSX Corp. 472,000 19,942,000
Illinois Central Corp. 400,000 12,800,000
--------------
$ 67,384,327
- -----------------------------------------------------------------------------
Special Products and Services - 0.3%
McDonalds Corp. 66,000 $ 2,986,500
Stanley Works 250,000 6,750,000
--------------
$ 9,736,500
- -----------------------------------------------------------------------------
Stores - 2.4%
Circuit City Stores, Inc. 200,000 $ 6,025,000
CVS Corp. 150,000 6,206,250
Home Depot, Inc. 270,000 13,533,750
Lowes Co., Inc. 400,000 14,200,000
Penney (J.C.), Inc. 360,000 17,550,000
Sears, Roebuck & Co. 225,000 10,378,125
Staples, Inc.* 95,000 1,715,938
Talbots, Inc. 168,050 4,810,431
--------------
$ 74,419,494
- -----------------------------------------------------------------------------
Supermarkets - 0.9%
Kroger Co.* 40,000 $ 1,860,000
Safeway, Inc.* 357,300 15,274,575
Vons Cos., Inc.* 174,800 10,466,150
--------------
$ 27,600,725
- -----------------------------------------------------------------------------
Telecommunications - 0.4%
Lucent Technologies, Inc. 292,900 $ 13,546,625
- -----------------------------------------------------------------------------
Utilities - Electric - 1.7%
Allegheny Power Systems, Inc. 200,000 $ 6,075,000
Cinergy Corp. 204,600 6,828,525
CMS Energy Corp. 42,000 1,412,250
DPL, Inc. 209,500 5,132,750
FPL Group, Inc. 350,000 16,100,000
GPU, Inc. 50,000 1,681,250
Illinova Corp. 46,000 1,265,000
Pinnacle West Capital Corp. 50,000 1,587,500
Portland General Corp. 300,000 12,600,000
--------------
$ 52,682,275
- -----------------------------------------------------------------------------
Utilities - Gas - 0.8%
Consolidated Natural Gas Co. 175,000 $ 9,668,750
Pacific Enterprises 180,000 5,467,500
PanEnergy Eastern Corp. 250,000 11,250,000
--------------
$ 26,386,250
- -----------------------------------------------------------------------------
Utilities - Telephone - 3.0%
Ameritech Corp. 24,000 $ 1,455,000
BellSouth Corp. 43,000 1,736,125
GTE Corp. 739,000 33,624,500
MCI Communications Corp. 1,223,700 39,999,694
Pacific Telesis Group 200,000 7,350,000
SBC Communications, Inc. 190,000 9,832,500
--------------
$ 93,997,819
- -----------------------------------------------------------------------------
Total U.S. Stocks $2,808,542,098
- -----------------------------------------------------------------------------
Foreign Stocks - 4.1%
Germany - 0.1%
Hoechst AG (Consumer Goods and
Services) 90,000 $ 4,252,844
- -----------------------------------------------------------------------------
Hong Kong - 0.6%
Hong Kong Land Holdings Ltd. (Real
Estate) 2,000,000 $ 5,560,000
Wharf Holdings Ltd. (Real Estate) 1,400,000 6,987,329
Swire Pacific Air Ltd., "A"
(Transportation) 600,000 5,721,489
--------------
$ 18,268,818
- -----------------------------------------------------------------------------
Japan - 0.2%
Canon, Inc. (Consumer Goods and
Services) 319,000 $ 7,058,254
- -----------------------------------------------------------------------------
Netherlands - 0.2%
Royal Dutch Petroleum Co., ADR (Oils) 42,000 $ 7,171,500
- -----------------------------------------------------------------------------
New Zealand - 0.2%
Lion Nathan Ltd. (Beverages) 2,000,000 $ 4,790,071
- -----------------------------------------------------------------------------
Singapore - 0.1%
Mandarin Oriental International, Ltd.
(Restaurants and Lodging)* 2,057,000 $ 2,900,370
- -----------------------------------------------------------------------------
South Korea - 0.2%
Korea Mobile Telecom, ADR
(Telecommunications) 412,000 $ 5,304,500
- -----------------------------------------------------------------------------
Sweden - 0.9%
Astra AB, "B" (Pharmaceuticals) 430,000 $ 20,758,620
Sparbanken Sverige AB (Aerospace) 420,100 7,212,282
--------------
$ 27,970,902
- -----------------------------------------------------------------------------
Switzerland - 0.3%
Novartis AG (Pharmaceuticals)* 7,786 $ 8,920,937
- -----------------------------------------------------------------------------
United Kingdom - 1.3%
British Petroleum PLC, ADR (Oils) 115,809 $ 16,372,498
PowerGen PLC (Utilities - Electric) 2,246,300 22,012,626
Smithkline Beecham PLC, ADR
(Medical and Health Products) 25,000 1,700,000
--------------
$ 40,085,124
- -----------------------------------------------------------------------------
Total Foreign Stocks $ 126,723,320
- -----------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,004,704,071) $2,935,265,418
- -----------------------------------------------------------------------------
Preferred Stock - 0.1%
- -----------------------------------------------------------------------------
Henkel Kgaa (Identified Cost,
$3,827,405) 75,000 $ 3,768,281
- -----------------------------------------------------------------------------
Convertible Preferred Stocks - 0.1%
- -----------------------------------------------------------------------------
Atlantic Richfield Co. (Apparel and
Textiles) 120,000 $ 2,580,000
Tosco Financing Trust (Financial
Institutions)##* 26,700 1,371,712
- -----------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost,
$4,305,000) $ 3,951,712
- -----------------------------------------------------------------------------
Convertible Bonds - 0.3%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Roche Holdings, Inc., 0s, 2010 (Medical and
Health Technology and Services)## $10,256 $ 4,640,840
Sandoz Capital BVI Ltd., 2s, 2002
(Chemicals)## 4,750 5,106,250
- -----------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $8,158,701) $ 9,747,090
- -----------------------------------------------------------------------------
Short-Term Obligations - 6.9%
- -----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 1/08/97 - 1/17/97 $44,950 $ 44,856,399
Federal National Mortgage Assn.,
due 1/06/97 - 1/16/97 38,900 38,841,209
Ford Motor Credit Corp., due 1/02/97 -
1/10/97 91,875 91,849,509
General Electric Capital Corp., due
1/15/97 10,000 9,978,922
General Electric Co., due 1/07/97 11,000 10,990,118
General Motors Acceptance Corp., due
1/08/97 13,485 13,470,343
Pacific Gas and Electric Co., due 1/09/97 5,400 5,393,280
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 215,379,780
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $2,236,374,957) $3,168,112,281
Other Assets, Less Liabilities - (1.3)% (41,462,548)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $3,126,649,733
- -----------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
December 31, 1996
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,236,374,957) $3,168,112,281
Cash 20,832
Foreign currency, at value (identified cost, $491,350) 504,814
Net receivable for open forward foreign currency
exchange contracts sold 437,070
Net receivable for closed forward foreign currency
exchange contracts 570,555
Receivable for Trust shares sold 18,818,049
Dividends and interest receivable 4,901,293
Other assets 77,466
--------------
Total assets $3,193,442,360
==============
Liabilities:
Distributions payable $ 56,987,466
Payable for investments purchased 1,045,892
Payable for Trust shares reacquired 6,645,333
Payable to affiliates -
Management fee 99,046
Shareholder servicing agent fee 31,636
Distribution fee 1,519,826
Accrued expenses and other liabilities 463,428
--------------
Total liabilities $ 66,792,627
--------------
Net assets $3,126,649,733
==============
Net assets consists of:
Paid-in capital $2,194,207,300
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 932,756,981
Accumulated distributions in excess of net realized
gain on investments and foreign currency transactions (216,416)
Accumulated distributions in excess of net
investment income (98,132)
--------------
Total $3,126,649,733
==============
Shares of beneficial interest outstanding 216,401,008
===========
Class A shares:
Net asset value per share
(net assets of $2,677,618,280 / 185,126,301 shares
of beneficial interest outstanding) $14.46
======
Offering price per share (100 / 94.25) $15.34
======
Class B shares:
Net asset value and offering price per share
(net assets of $436,559,312 / 30,404,176 shares
of beneficial interest outstanding) $14.36
======
Class C shares:
Net asset value and offering price per share
(net assets of $12,472,141 / 870,531 shares of
beneficial interest outstanding) $14.33
======
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, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended December 31, 1996
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 54,073,802
Interest 5,534,841
Foreign taxes withheld (522,645)
--------------
Total investment income $ 59,085,998
--------------
Expenses -
Management fee $ 5,982,062
Trustees' compensation 88,526
Shareholder servicing agent fee (Class A) 2,570,406
Shareholder servicing agent fee (Class B) 610,052
Shareholder servicing agent fee (Class C) 3,509
Distribution and service fee (Class A) 7,583,868
Distribution and service fee (Class B) 2,773,037
Distribution and service fee (Class C) 23,395
Custodian fee 704,697
Postage 352,352
Printing 168,468
Auditing fees 37,145
Legal fees 11,465
Miscellaneous 966,822
--------------
Total expenses $ 21,875,804
Fees paid indirectly (262,516)
--------------
Net expenses $ 21,613,288
--------------
Net investment income $ 37,472,710
==============
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 265,112,501
Foreign currency transactions (466,491)
--------------
Net realized gain on investments and foreign
currency transactions $ 264,646,010
--------------
Change in unrealized appreciation -
Investments $ 310,600,919
Translation of assets and liabilities in
foreign currencies 1,194,977
--------------
Net unrealized gain on investments and
foreign currency translation $ 311,795,896
--------------
Net realized and unrealized gain on
investments and foreign currency $ 576,441,906
--------------
Increase in net assets from operations $ 613,914,616
==============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------
Year Ended December 31, 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 37,472,710 $ 39,964,770
Net realized gain on investments and foreign currency
transactions 264,646,010 172,091,827
Net unrealized gain on investments and foreign
currency translation 311,795,896 421,749,883
-------------- --------------
Increase in net assets from operations $ 613,914,616 $ 633,806,480
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (34,290,506) $ (38,309,881)
From net investment income (Class B) (2,257,259) (1,554,192)
From net investment income (Class C) (41,906) --
From net realized gain on investments and foreign
currency transactions (Class A) (227,454,227) (158,264,565)
From net realized gain on investments and foreign
currency transactions (Class B) (36,115,432) (12,389,102)
From net realized gain on investments and foreign
currency transactions (Class C) (967,699) --
-------------- --------------
Total distributions declared to shareholders $ (301,127,029) $ (210,517,740)
-------------- --------------
Trust share (principal) transactions -
Net proceeds from sale of shares $ 835,578,893 $ 286,048,738
Net asset value of shares issued to shareholders in
reinvestment of distributions 232,834,058 154,187,632
Cost of shares reacquired (493,934,622) (227,698,069)
-------------- --------------
Increase in net assets from Trust share
transactions $ 574,478,329 $ 212,538,301
-------------- --------------
Total increase in net assets $ 887,265,916 $ 635,827,041
Net assets:
At beginning of period 2,239,383,817 1,603,556,776
-------------- --------------
At end of period (including distributions in excess
of net investment income of $(98,132) and $(75,463),
respectively) $3,126,649,733 $2,239,383,817
============== ==============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.71 $10.07 $11.50 $12.31 $13.87
------ ------ ------ ------ ------
Income from investment operations -
Net investment income# $ 0.21 $ 0.25 $ 0.25 $ 0.39 $ 0.32
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.07 3.67 (0.36) 0.86 0.69
------ ------ ------ ------ ------
Total from investment operations $ 3.28 $ 3.92 $(0.11) $ 1.25 $ 1.01
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income++ $(0.21) $(0.46) $(0.25) $(0.39) $(0.33)
From net realized gain on investments and
foreign currency transactions (1.32) (0.82) (1.05) (1.67) (2.22)
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 $(1.53) $(1.28) $(1.32) $(2.06) $(2.57)
------ ------ ------ ------ ------
Net asset value - end of period $14.46 $12.71 $10.07 $11.50 $12.31
====== ====== ====== ====== ======
Total return(+) 25.90% 39.34% (1.02)% 10.03% 7.68%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.74% 0.70% 0.71% 0.68% 0.62%
Net investment income 1.51% 2.13% 2.20% 3.04% 2.30%
Portfolio turnover 47% 54% 87% 41% 46%
Average commission rate### $0.0520 -- -- -- --
Net assets at end of period (000,000 omitted) $ 2,678 $2,074 $1,535 $1,626 $1,548
++ 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 fee paid indirectly.
### Average commission rate is calculated for the Trust for fiscal years beginning on or after September 1, 1995.
(+) 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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.28 $13.55 $11.22 $11.26 $12.09
------ ------ ------ ------ ------
Income from investment operations -
Net investment income $ 0.38 $ 0.43 $ 0.45 $ 0.40 $ 0.38
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.95 (0.45) 3.56 0.76 0.57
------ ------ ------ ------ ------
Total from investment operations $ 3.33 $(0.02) $ 4.01 $ 1.16 $ 0.95
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.39) $(0.43) $(0.45) $(0.39) $(0.39)
From net realized gain on investments and
foreign currency transactions (1.32) (0.82) (1.22) (0.81) (1.39)
In excess of net realized gain on investments
and foreign currency transactions++ 0.00 -- -- -- --
From paid-in capital+ (0.03) -- (0.01) 0.00 --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.74) $(1.25) $(1.68) $(1.20) $(1.78)
------ ------ ------ ------ ------
Net asset value - end of period $13.87 $12.28 $13.55 $11.22 $11.26
====== ====== ====== ====== ======
Total return(+) 27.41% (0.33)% 35.80% 10.12% 7.25%
Ratios (to average net assets)/Supplemental data:
Expenses 0.62% 0.47% 0.50% 0.55% 0.45%
Net investment income 2.73% 3.28% 3.40% 3.39% 2.63%
Portfolio turnover 44% 26% 20% 19% 23%
Net assets at end of period (000,000 omitted) $1,530 $1,265 $1,382 $1,139 $1,177
+ For the year ended December 31, 1988, the per share distribution from paid-in capital was $0.001.
++ For the year ended December 31, 1991, the per share distribution in excess of net realized gain on investments was $0.0041.
(+) 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.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996 1995 1994 1993* 1996**
- --------------------------------------------------------------------------------------------------------------
Class B Class C
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $12.63 $10.03 $11.48 $13.02 $13.93
------ ------ ------ ------ ------
Income from investment operations -
Net investment income# $ 0.10 $ 0.15 $ 0.15 $ 0.04 $ 0.05
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 3.06 3.64 (0.36) 0.32 1.76
------ ------ ------ ------ ------
Total from investment operations $ 3.16 $ 3.79 $(0.21) $ 0.36 $ 1.81
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income+++ $(0.11) $(0.37) $(0.17) $(0.23) $(0.09)
From net realized gain on investments
and
foreign currency transactions (1.32) (0.82) (1.05) (1.67) (1.32)
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.43) $(1.19) $(1.24) $(1.90) $(1.41)
------ ------ ------ ------ ------
Net asset value - end of period $14.36 $12.63 $10.03 $11.48 $14.33
====== ====== ====== ====== ======
Total return 25.05% 38.05% (1.88)% 2.62% 12.74%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.54% 1.56% 1.61% 1.56%+ 1.49%+
Net investment income 0.72% 1.25% 1.37% 1.05%+ 0.77%+
Portfolio turnover 47% 54% 87% 41% 47%
Average commission rate### $0.0520 -- -- -- $0.0520
Net assets at end of period (000,000
omitted) $437 $165 $69 $15 $12
* For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1993.
** For the period from the commencement of offering of Class C shares,
July 2, 1996, to December 31, 1996.
+A nnualized.
++ Not annualized.
+++ For the year ended December 31, 1994, the per share distribution in excess of net investment income was $0.0003
for Class B shares.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for fee
paid indirectly.
### Average commission rate is calculated for the Trust for fiscal years beginning on or after September 1, 1995.
</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
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result 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. The Trust 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 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.
Expense Reductions - MFS has directed certain portfolio trades to brokers who
paid a portion of the Trust's expenses. For the period, the Trust's expenses
were reduced by $40,609 under this agreement.
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 tax 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, 1996, $905,708 was reclassified from
accumulated undistributed net investment income to accumulated net realized gain
on investments and foreign currency transactions 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,
Class B, and Class C shares. The three 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
0.15% of average daily net assets and 3.52% of gross 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 officers and
Trustees of the Trust are officers or directors of MFS, MFS Trust 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 $28,326
for the year ended December 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$852,527 for the year ended December 31, 1996, 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, Class B and
Class C 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 who 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 $1,398,429 for the year ended December 31, 1996. Payment of the remaining
portion of the 0.10% per annum distribution fee equal to 0.025% per annum will
commence on such date as the Trustees of the Trust may determine. The 0.25% per
annum service fee is reduced to 0.15% per annum for shares purchased prior to
January 2, 1991. Fees incurred under the distribution plan during the year ended
December 31, 1996 were 0.315% of average daily net assets attributable to Class
A shares on an annualized basis.
The Class B and Class C distribution plans provide 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 and Class C
shares. MFD will pay to securities dealers who enter into a sales agreement with
MFD all or a portion of the service fee attributable to Class B and Class C
shares, and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be additional
consideration for services rendered by the dealer with respect to Class B and
Class C shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $27,988 and $13 for Class B and Class C
shares, respectively, for the year ended December 31, 1996. Fees incurred under
the distribution plans during the year ended December 31, 1996 were 1.00% of
average daily net assets attributable to Class B and Class C shares on an
annualized basis.
Purchases over $1 million of Class A shares and certain purchases into
retirement plans are subject to a contingent deferred sales charge in the event
of a shareholder redemption within 12 months following such 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.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class C shares in the event of a shareholder redemption within 12 months of
purchases made on or after April 1, 1996. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
December 31, 1996 were $39,432, $325,303, and $550 for Class A, Class B, and
Class C 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%, up to 0.22%, and up to 0.15% attributable
to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$1,391,813,618 and $1,203,752,187, 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 $2,236,374,957
==============
Gross unrealized appreciation $ 938,410,160
Gross unrealized depreciation (6,672,836)
--------------
Net unrealized appreciation $ 931,737,324
==============
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
Year Ended December 31, 1996 Year Ended December 31, 1995
---------------------------------- ----------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Shares sold 40,132,064 $567,992,774 17,087,194 $204,278,899
Shares issued to shareholders in
reinvestment of distributions 13,545,436 196,263,540 11,238,706 141,190,710
Shares reacquired (31,823,640) (448,678,542) (17,466,366) (207,986,831)
---------- ------------ ---------- ------------
Net increase 21,853,860 $315,577,772 10,859,534 $137,482,778
========== ============ ========== ============
Class B Shares
Year Ended December 31, 1996 Year Ended December 31, 1995
---------------------------------- ----------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------- ----------------------------------
Shares sold 18,025,772 $255,006,792 6,848,511 $ 81,769,839
Shares issued to shareholders in
reinvestment of distributions 2,481,401 35,764,019 1,037,328 12,996,922
Shares reacquired (3,152,904) (44,728,804) (1,667,587) (19,711,238)
---------- ------------ ---------- ------------
Net increase 17,354,269 $246,042,007 6,218,252 $ 75,055,523
========== ============ ========== ============
Class C Shares
Year Ended December 31, 1996*
----------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------
Shares sold 849,655 $12,579,327
Shares issued to shareholders in reinvestment of distributions 56,001 806,499
Shares reacquired (35,125) (527,276)
------ -----------
Net increase 870,531 $12,858,550
======= ===========
* For the period from the commencement of investment operations, July 2, 1996 to December 31, 1996.
</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, 1996 was $28,462.
(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. A summary of obligations under these
financial instruments at December 31, 1996, is as follows:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Contracts to Contracts Net Unrealized
Settlement Date Deliver/Receive In Exchange for at Value Appreciation
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 2/03/97 SEK 88,704,000 $13,470,615 $13,033,545 $437,070
========
SEK = Swedish Kronor
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net receivable with Morgan Stanley of $570,555 at December 31, 1996. At
December 31, 1996, the Trust had sufficient cash and/or securities to cover any
commitments under these contracts.
<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, 1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended December 31, 1996 and
1995, and the financial highlights for each of the years in the ten-year period
ended December 31, 1996. These financial statements 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, 1996 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, 1996, 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 7, 1997
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MASSACHUSETTS INVESTORS TRUST
<TABLE>
<S> <C>
TRUSTEES AUDITORS
A. Keith Brodkin* - Chairman and President Deloitte & Touche LLP
Richard B. Bailey* - Private Investor; INVESTOR INFORMATION
Former Chairman and Director (until 1991), For MFS stock and bond market outlooks,
Massachusetts Financial Services Company; call toll free: 1-800-637-4458 anytime
Director, Cambridge Bancorp; Director, from a touch-tone telephone.
Cambridge Trust Company
For information on MFS mutual funds, call
Peter G. Harwood - Private Investor your financial adviser or, for an information
kit, call toll free: 1-800-637-2929 any
J. Atwood Ives - Chairman and Chief Executive business day from 9 a.m. to 5 p.m.
Officer, Eastern Enterprises Eastern time (or leave a message anytime).
Lawrence T. Perera - Partner, INVESTOR SERVICE
Hemenway & Barnes MFS Service Center, Inc.
P.O. Box 2281
William J. Poorvu - Adjunct Professor, Boston, MA 02107-9906
Harvard University Graduate School of
Business Administration For general information, call toll free:
1-800-225-2606 any business day from
Charles W. Schmidt - Private Investor 8 a.m. to 8 p.m. Eastern time.
Arnold D. Scott* - Senior Executive For service to speech- or hearing-impaired,
Vice President, Director and Secretary, call toll free: 1-800-637-6576 any business day from
Massachusetts Financial Services Company 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must
Jeffrey L. Shames* - President and Director, be equipped with a Telecommunications
Massachusetts Financial Services Company Device for the Deaf.)
Elaine R. Smith - Independent Consultant For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a
David B. Stone - Chairman, North American touch-tone telephone.
Management Corp. (investment advisers)
WORLD WIDE WEB
INVESTMENT ADVISER www.mfs.com
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* [Dalbar logo]
For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
SECRETARY Broker/Dealer Survey, Main Office Operations Service Quality Category. The
Stephen E. Cavan* firm achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey.
A total of 110 firms responded, offering input on the qulaity of service
ASSISTANT SECRETARY they received from 29 mutual fund companies nationwide. The survey contained
James R. Bordewick, Jr.* questions about service quality in 15 categories, including "knowledge of phone
service contacts," "accracy of transaction processing," and "overall ease of
CUSTODIAN doing business with the firm."
State Street Bank & Trust Company
* Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MASSACHUSETTS
INVESTORS TRUST
[graphic omitted]
- --------------------
BULK RATE
U.S. POSTAGE
P A I D
PERMIT #55638
BOSTON, MA
- --------------------
500 Boylston Street
Boston, MA 02116
[MFS logo]
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
(C)1997 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116
MIT-2 2/97 175M 12/212/312
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
For the ten years ended December 31, 1996:
Financial Highlights
FINANCIAL STATEMENTS INCLUDED IN PART B:
At December 31, 1996:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the two years ended December 31, 1996:
Statement of Changes in Net Assets*
For the year ended December 31, 1996:
Statement of Operations*
- ---------------------
* Incorporated herein by reference to the Trust's Annual Report to
shareholders dated December 31, 1996, filed with the SEC via EDGAR on
March 3, 1997.
<TABLE>
<C> <C> <S>
(B) EXHIBITS
1 (a) Agreement and Declaration of Trust, dated March 21, 1924, as amended
through September 29, 1994. (3)
(b) Certification of Amendment to the Agreement and Declaration of Trust dated
May 15, 1996. (8)
(c) Certification of Amendment to the Agreement and Declaration of Trust, dated
June 20, 1996. (10).
(d) Certification of Amendment to the
Agreement and Declaration of Trust, dated
December 19, 1996; filed herewith.
2 Not Applicable.
3 Not Applicable.
4 Form of Share Certificate for Classes of Shares. (9)
5 Investment Advisory Agreement, dated May 20, 1982. (6)
6 (a) Distribution Agreement dated January 1, 1995. (3)
(b) Dealer Agreement between MFS Fund Distributors, Inc. ("MFD") and a dealer,
dated December 28, 1994 and Form of Mutual Fund Agreement between MFS
Financial Services, Inc. and a bank or NASD affiliate, dated December 28,
1994. (1)
7 Retirement Plan for Non-Interested Person Trustees, dated January 1, 1991.
(6)
8 (a) Custodian Agreement, dated December 6, 1934. (6)
(b) Amendment to Custodian Agreement, dated February 22, 1978. (6)
(c) Amendment to Custodian Agreement, dated February 29, 1988. (6)
(d) Amendment to Custodian Agreement, dated October 1, 1989. (6)
(e) Amendment to Custodian Agreement, dated October 21, 1993. (6)
(f) Amendment to Custodian Agreement, dated December 15, 1993. (3)
9 (a) Shareholder Servicing Agent Agreement, dated August 1, 1985. (6)
(b) Amendment to Shareholder Servicing Agreement, dated January 1, 1997; filed
herewith.
(c) Exchange Privilege Agreement, dated September 1, 1993 as amended and
restated as of January 1, 1997. (7)
(d) Dividend Disbursing Agency Agreement, dated February 1, 1986. (4)
(e) Loan Agreement Among MFS Borrowers and the First National Bank of Boston,
as of February 21, 1995. (2)
(f) Master Administrative Services Agreement, dated March 1, 1997. (11)
10 Consent and Opinion of Counsel filed with the Registrant's 24f-1 Notification on
March 24, 1997 for the fiscal year ended December 31, 1996.
11 Consent of Deloitte & Touche LLP; filed herewith.
12 Not Applicable.
13 Not Applicable.
14 (a) Forms for Individual Retirement Account Disclosure Statement as currently
in effect. (5)
(b) Forms for MFS 403(b) Custodial Account Agreement as currently in effect.
(5)
(c) Forms for MFS Prototype Paired Defined Contribution Plans and Trust
Agreement as currently in effect. (5)
15 Master Distribution Plan pursuant to 12b-1 under the Investment Companay
Act of 1940, effective January 1, 1997. (12)
16 Schedule for Computation of Performance Quotations - Average Annual Total
Rate of Return, Aggregate Total Rate of Return and Standardized Yield. (1)
17 Financial Data Schedules; filed herewith.
18 Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940.
(9)
Power of Attorney, dated September 21, 1994. (3)
- -----------------------------
(1) Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915 and 811-4096) Post-Effective
Amendment No. 26 filed with the SEC via EDGAR on February 22, 1995.
(2) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS Municipal Income Trust (File No. 811-4841)
filed with the SEC via EDGAR on February 28, 1995.
(3) Incorporated by reference to Post-Effective Amendment No. 68 to the Trust's Registration Statement on Form
N-1A, filed with the SEC via EDGAR on April 28, 1995.
(4) Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915 and 811-4096) Post-Effective
Amendment No. 28, filed with the SEC via EDGAR on July 28, 1995.
(5) Incorporated by reference to MFS Series Trust IX (File Nos. 2-50409 and 811-2464) Post-Effective Amendment
No. 32 filed with the SEC via EDGAR on August 28, 1995.
(6) Incorporated by reference to Post-Effective Amendment No. 69 to the Trust's Registration Statement on Form
N-1A, filed with the SEC via EDGAR on October 13, 1995.
(7) Incorporated by reference to MFS Series Trust VIII (File Nos. 33-37972 and 811-5262) Post-Effective
Amendment No. 13, filed with the SEC via EDGAR on February 27, 1997.
(8) Incorporated by reference to Post-Effective Amendment No. 71 to the Trust's Registration Statement on Form
N-1A, filed with the SEC via EDGAR on May 28, 1996.
(9) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and 811-4777) Post-Effective Amendment
No. 25 to the Trust's Registration Statement on Form N-1A, filed with the SEC via EDGAR on August 27, 1996.
(10) Incorporated by reference to Post-Effective Amendment No. 72 to the Trust's Registration Statement on Form
N-1A, filed with the SEC via EDGAR on August 29, 1996.
(11) Incorporated by reference to MFS/Sun Life Series Trust (File Nos. 2-83616 and 811-3732) Post-Effective
Amendment No. 19, filed with the SEC via EDGAR on March 18, 1997.
(12) Incorporated by reference to MFS Series Trust IV (File Nos. 2-54607 and 811-2594) Post-Effective Amendment
No. 30, filed with the SEC via EDGAR on December 27, 1996.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C>
Class A Shares of Beneficial Interest 130,659
($0.33 1/3 par value) (as of March 31, 1997)
Class B Shares of Beneficial Interest 53,207
($0.33 1/3 par value) (as of March 31, 1997)
Class C Shares of Beneficial Interest 2,458
($0.33 1/3 par value) (as of March 31, 1997)
Class I Shares of Beneficial Interest 5
($0.33 1/3 par value) (as of March 31, 1997)
</TABLE>
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Section VI of the Trust's Declaration
of Trust, incorporated by reference to the Registrant's Post-Effective Amendment
No. 68, filed with the SEC on April 28, 1995 and (b) Section 9 of the
Shareholder Servicing Agent Agreement, incorporated by reference to Registrant's
Post-Effective Amendment No. 69, filed with the SEC via EDGAR on October 13,
1995.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser and distributor are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the Investment
Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds: Massachusetts Investors Trust, Massachusetts
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Government
Securities Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has thirteen series: MFS Managed Sectors Fund, MFS Cash Reserve Fund, MFS World
Asset Allocation Fund, MFS Aggressive Growth Fund, MFS Research Growth and
Income Fund, MFS Core Growth Fund, MFS Equity Income Fund, MFS Special
Opportunities Fund, MFS Convertible Securities Fund, MFS Blue Chip Fund, MFS New
Discovery Fund, MFS Science and Technology Fund and MFS Research International
Fund), MFS Series Trust II (which has four series: MFS Emerging Growth Fund, MFS
Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold & Natural
Resources Fund), MFS Series Trust III (which has two series: MFS High Income
Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has four
series: MFS Money Market Fund, MFS Government Money Market Fund, MFS Municipal
Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series: MFS Total
Return Fund and MFS Research Fund), MFS Series Trust VI (which has three series:
MFS World Total Return Fund, MFS Utilities Fund and MFS World Equity Fund), MFS
Series Trust VII (which has two series: MFS World Governments Fund and MFS Value
Fund), MFS Series Trust VIII (which has two series: MFS Strategic Income Fund
and MFS World Growth Fund), MFS Series Trust IX (which has three series: MFS
Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited Maturity Fund),
MFS Series Trust X (which has four series: MFS Government Mortgage Fund,
MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth Fund and MFS/Foreign & Colonial International Growth and
Income Fund), and MFS Municipal Series Trust (which has 16 series: MFS Alabama
Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California Municipal
Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS
Maryland Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS
Mississippi Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North
Carolina Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South
Carolina Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Virginia
Municipal Bond Fund, MFS West Virginia Municipal Bond Fund and MFS Municipal
Income Fund) (the "MFS Funds"). The principal business address of each of the
MFS Funds is 500 Boylston Street, Boston, Massachusetts 02116.
MFS also serves as investment adviser of the following no-load,
open-end Funds: MFS Institutional Trust ("MFSIT") (which has seven series), MFS
Variable Insurance Trust ("MVI") (which has twelve series) and MFS Union
Standard Trust ("UST"). The principal business address of each of the
aforementioned funds is 500 Boylston Street, Boston, Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the MFS Closed-End Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL"), Money Market Variable Account, High Yield Variable Account, Capital
Appreciation Variable Account, Government Securities Variable Account, World
Governments Variable Account, Total Return Variable Account and Managed Sectors
Variable Account. The principal business address of each of the aforementioned
funds is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company organized
under the laws of Bermuda and a subsidiary of MFS, whose principal business
address is Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda, serves as
investment adviser to and distributor for MFS American Fund (which has six
portfolios: MFS American Funds-U.S. Equity Fund, MFS American Funds-U.S.
Emerging Growth Fund, MFS American Funds-U.S. High Yield Bond Fund, MFS American
Funds - U.S. Dollar Reserve Fund, MFS American Funds-Charter Income Fund and MFS
American Funds-U.S. Research Fund) (the "MIL Funds"). The MIL Funds are
organized in Luxembourg and qualify as an undertaking for collective investments
in transferable securities (UCITS). The principal business address of the MIL
Funds is 47, Boulevard Royal, L-2449 Luxembourg.
MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund, MFS Meridian U.S. Equity Fund, MFS Meridian Research Fund and MFS
Emerging Markets Debt Fund (collectively the "MFS Meridian Funds"). Each of the
MFS Meridian Funds is organized as an exempt company under the laws of the
Cayman Islands. The principal business address of each of the MFS Meridian Funds
is P.O. Box 309, Grand Cayman, Cayman Islands, British West Indies.
MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned subsidiary
of MFS, serves as distributor for certain life insurance and annuity contracts
issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFSIT, MVI and UST.
MFS Institutional Advisors, Inc. ("MFSI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold
D. Scott, Donald A. Stewart and John D. McNeil. Mr. Brodkin is the Chairman, Mr.
Shames is the President, Mr. Scott is a Senior Executive Vice President and
Secretary, Bruce C. Avery, William S. Harris, William W. Scott, Jr., and
Patricia A. Zlotin are Executive Vice Presidents, Stephen E. Cavan is a Senior
Vice President, General Counsel and an Assistant Secretary, Robert T. Burns is a
Senior Vice President, Associate General Counsel and an Assistant Secretary of
MFS, and Thomas B. Hastings is a Vice President and Treasurer of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS SERIES TRUST VI
MFS SERIES TRUST X
MFS GOVERNMENT LIMITED MATURITY FUND
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is the Assistant Treasurer, James R. Bordewick, Jr., Senior Vice
President and Associate General Counsel of MFS, is the Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T. Swanson,
Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan, Assistant Vice President of MFS, and Daniel E. McManus, Vice
President of MFS, are Assistant Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A. Dennis and
Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is
the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D. Laupheimer,
Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L. Schechter and
David R. King, Vice Presidents of MFS, are Vice Presidents, Daniel E. McManus,
Vice President of MFS, is an Assistant Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS UNION STANDARD TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
James T. Swanson are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, Vice President of MFS, is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary.
MFS/SUN LIFE SERIES TRUST
John D. McNeil, Chairman and Director of Sun Life Assurance Company of
Canada, is the Chairman, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, is the Assistant Treasurer and James R. Bordewick,
Jr., is the Assistant Secretary.
MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT
John D. McNeil is the Chairman, Stephen E. Cavan is the Secretary, and
James R. Bordewick, Jr., is the Assistant Secretary.
MIL
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott and
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is
the President, Thomas J. Cashman, Jr., a Senior Vice President of MFS, is a
Senior Vice President, Stephen E. Cavan is a Director, Senior Vice President and
the Clerk, James R. Bordewick, Jr. is a Director, Vice President and an
Assistant Clerk, Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo,
Senior Vice President and Chief Financial Officer of MFS, is the Treasurer and
Thomas B. Hastings is the Assistant Treasurer.
MIL-UK
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E. Cavan
is a Director and the Secretary, Ziad Malek is the President, James E. Russell
is the Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker and William F. Waters are
Directors, Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost is the Assistant Treasurer and James R. Bordewick, Jr., is the
Assistant Secretary, and Ziad Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker, Arnold D. Scott, Jeffrey L. Shames
and William F. Waters are Directors, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James R. Bordewick, Jr., is the Assistant
Secretary, James O. Yost is the Assistant Treasurer, and Ziad Malek is a Senior
Vice President.
MFD
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, William W. Scott, Jr., an Executive Vice
President of MFS, is the President, Stephen E. Cavan is the Secretary, Robert T.
Burns is the Assistant Secretary, Joseph W. Dello Russo is the Treasurer, and
Thomas B. Hastings is the Assistant Treasurer.
CIAI
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery is
the Vice President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings
is the Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T.
Burns is the Assistant Secretary.
MFSC
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Joseph A. Recomendes, a Senior Vice President
of MFS, is Vice Chairman and a Director, Janet A. Clifford is the Executive Vice
President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T. Burns is
the Assistant Secretary.
MFSI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L. Shames,
and Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President and
a Director, Leslie J. Nanberg is a Senior Vice President, a Managing Director
and a Director, George F. Bennett, Carol A. Corley, John A. Gee, Brianne Grady
and Kevin R. Parke are Senior Vice Presidents and Managing Directors, Joseph W.
Dello Russo is the Treasurer, Thomas B. Hastings is the Assistant Treasurer and
Robert T. Burns is the Secretary.
RSI
William W. Scott, Jr. and Bruce C. Avery are Directors, Arnold D.
Scott is the Chairman and a Director, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is the
Secretary, Robert T. Burns is the Assistant Secretary and Sharon A. Brovelli and
Martin E. Beaulieu are Senior Vice Presidents.
In addition, the following persons, Directors or officers of MFS, have
the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company
of Canada (U.S.), One Sun Life
Executive Park, Wellesley Hills,
Massachusetts
Director, Sun Life Insurance and
Annuity Company of New York,
67 Broad Street, New York, New York
Donald A. Stewart President and a Director, Sun Life
Assurance Company of Canada,
Sun Life Centre, 150 King Street
West, Toronto, Ontario, Canada
(Mr. Stewart is also an officer
and/or Director of various
subsidiaries and affiliates of Sun
Life)
John D. McNeil Chairman, Sun Life Assurance Company
of Canada, Sun Life Centre, 150
King Street West, Toronto, Ontario,
Canada (Mr. McNeil is also an
officer and/or Director of various
subsidiaries and affiliates of Sun
Life)
Joseph W. Dello Russo Director of Mutual Fund Operations,
The Boston Company, Exchange Place,
Boston, Massachusetts (until August,
1994)
ITEM 29. DISTRIBUTORS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal
business address of each of these persons is 500 Boylston Street, Boston,
Massachusetts 02116.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in
whole or in part, at the office of the Registrant at the following locations:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Massachusetts Financial Services 500 Boylston Street
Company (investment adviser) Boston, MA 02116
MFS Funds Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116
State Street Bank and Trust Company State Street South
(custodian) 5 - West
North Quincy, MA 02171
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116
</TABLE>
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
upon request and without charge.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being Registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 18th day of April, 1997.
MASSACHUSETTS INVESTORS TRUST
By: JAMES R. BORDEWICK, JR.
------------------------
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on April 18, 1997.
SIGNATURE TITLE
--------- -----
A. KEITH BRODKIN* Chairman, President (Principal Executive
- ----------------- Officer) and Trustee
A. Keith Brodkin
W. THOMAS LONDON* Treasurer (Principal Financial Officer
- ----------------- and Principal Accounting Officer)
W. Thomas London
RICHARD B. BAILEY* Trustee
- ------------------
Richard B. Bailey
PETER G. HARWOOD* Trustee
- ------------------
Peter G. Harwood
J. ATWOOD IVES* Trustee
- ------------------
J. Atwood Ives
LAWRENCE T. PERERA* Trustee
- ------------------
Lawrence T. Perera
WILLIAM J. POORVU* Trustee
- ------------------
William J. Poorvu
CHARLES W. SCHMIDT* Trustee
- ------------------
Charles W. Schmidt
ARNOLD D. SCOTT* Trustee
- ------------------
Arnold D. Scott
JEFFREY L. SHAMES* Trustee
- ------------------
Jeffrey L. Shames
ELAINE R. SMITH* Trustee
- ------------------
Elaine R. Smith
DAVID B. STONE* Trustee
- ------------------
David B. Stone
*By: JAMES R. BORDEWICK, JR.
--------------------------
Name: James R. Bordewick, Jr.
as Attorney-in-fact
Executed by James R. Bordewick, Jr. on
behalf of those indicated pursuant to a
Power of Attorney dated September 21,
1994, incorporated by reference to the
Registrant's Post-Effective Amendment
No. 68 filed with the Securities and
Exchange Commission on April 28, 1995.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
<C> <S> <C>
1 (d) Certification of Amendment to the Agreement and
Declaration of Trust, dated December 19, 1996.
9 (b) Amendment to Shareholder Servicing Agreement, dated
January 1, 1997.
11 Consent of Deloitte & Touche LLP.
17 Financial Data Schedules.
</TABLE>
<PAGE>
EXHIBIT NO. 99.1(d)
MASSACHUSETTS INVESTORS TRUST
CERTIFICATION OF AMENDMENT
TO THE DECLARATION OF TRUST
ESTABLISHMENT AND DESIGNATION
OF CLASSES
The undersigned, being a majority of the Trustees of Massachusetts
Investors Trust (the "Trust"), a common law trust organized under the laws of
The Commonwealth of Massachusetts pursuant to a Declaration of Trust dated March
21, 1924, as amended (the "Declaration"), acting pursuant to Article VIII,
Section 1A of the Declaration, do hereby redesignate the shares previously
designated as Class P shares of the Trust as Class I shares.
IN WITNESS WHEREOF, a majority of the Trustees of the Trust have executed
this amendment, in one or more counterparts, all constituting a single
instrument, as an instrument under seal in The Commonwealth of Massachusetts, as
of this 18th day of December, 1996.
A. KEITH BRODKIN CHARLES W. SCHMIDT
- ------------------------- ---------------------------
A. Keith Brodkin Charles W. Schmidt
76 Farm Road 63 Claypit Hill Road
Sherborn, MA 01770 Wayland, MA 01778
RICHARD B. BAILEY ARNOLD D. SCOTT
- ------------------------- ---------------------------
Richard B. Bailey Arnold D. Scott
63 Atlantic Avenue 20 Rowes Wharf
Boston, MA 02110 Boston, MA 02110
PETER G. HARWOOD
- ------------------------- ---------------------------
Peter G. Harwood Jeffrey L. Shames
211 Lindsay Pond Road 36 Lake Avenue
Concord, MA 01742 Newton, MA 02159
J. ATWOOD IVES ELAINE R. SMITH
- ------------------------- ---------------------------
J. Atwood Ives Elaine R. Smith
1 Bennington Road 75 Scotch Pine Road
Lexington, MA 02173 Weston, MA 02193
LAWRENCE T. PERERA DAVID B. STONE
- ------------------------- ---------------------------
Lawrence T. Perera David B. Stone
18 Marlborough Street 282 Beacon Street
Boston, MA 02116 Boston, MA 02116
WILLIAM J. POORVU
- -------------------------
William J. Poorvu
975 Memorial Drive
Cambridge, MA 02138
<PAGE>
EXHIBIT NO. 99.9(b)
MASSACHUSETTS INVESTORS TRUST
500 Boylston Street o Boston o Massachusetts o 02116
(617) o 954-5000
January 1, 1997
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Dear Sir/Madam:
This will confirm our understanding that Exhibit B to the Shareholder Servicing
Agent Agreement between us, dated August 1, 1985, as amended, is hereby amended,
effective immediately, to read in its entirety as set forth on Attachment 1
hereto.
Please indicate your acceptance of the foregoing by signing below.
Sincerely,
MASSACHUSETTS INVESTORS TRUST
By: W. THOMAS LONDON
------------------------
W. Thomas London
Treasurer
Accepted and Agreed:
MFS SERVICE CENTER, INC.
By: JOSEPH W. DELLO RUSSO
---------------------------------
Joseph W. Dello Russo
Treasurer
<PAGE>
ATTACHMENT 1
January 1, 1997
EXHIBIT B TO THE SHAREHOLDER
SERVICING AGENT AGREEMENT BETWEEN
MFS SERVICE CENTER, INC. ("MFSC")
AND MASSACHUSETTS INVESTORS TRUST (the "Fund")
The fees to be paid by the Fund on behalf of its series with respect to all
shares of each series of the Fund to MFSC, for MFSC's services as shareholder
servicing agent, shall be 0.13% of the average daily net assets of the Fund.
<PAGE>
EXHIBIT NO. 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 74 to Registration Statement No. 2-11401 of Massachusetts Investors Trust of
our report dated February 7, 1997, appearing in the annual report to
shareholders for the year ended December 31, 1996 and to the references to us
under the headings "Condensed Financial Information" in the Prospectus and
"Independent Auditors and Financial Statements" in the Statement of Additional
Information, both of which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 28, 1997
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