<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