<PAGE>
[logo] M F S (R)
INVESTMENT MANGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MASSACHUSETTS
INVESTORS TRUST
SEMIANNUAL REPORT o JUNE 30, 1999
DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 31)
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
MFS' Year 2000 Readiness Disclosure ....................................... 30
Trustees and Officers ..................................................... 33
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
It has been almost two years since financial turmoil began to rock markets in
Asia, Russia, and Latin America. Even developed markets such as Europe and the
United States were not immune. In the U.S. equity market, for example, investors
focused on a narrow group of 50 of the largest-company growth stocks because
they seemed to offer less volatility in uncertain times. Fixed-income investors
also became more concerned about risk, moving money into U.S. Treasury
securities and out of corporate and municipal bonds and mortgage-backed
securities.
The narrowness of the market was just one of three broad issues that dominated
the U.S. equity market until recently. The other two were a slowdown in
corporate earnings growth and high valuations, with stocks of many companies
selling at extremely high prices relative to their earnings.
Although these have been challenging issues, we now see signs that we feel
demonstrate each one is changing for the better. Today, we believe the markets
are presenting more opportunities for investors to diversify, for our portfolio
managers to find good values, and for us to show the benefits of staying with
our long-term objectives and strategies. Investors seem to be regaining
confidence in a wider range of companies. Stocks of some small and mid-sized
companies, as well as some large industrial companies, have begun to perform
better in the past few months than they had for the previous year or so. These
companies appear to have benefited from early signs of stability in emerging
markets and a continuation of economic growth in the United States.
U.S. companies also have produced better earnings. Corporate earnings were, on
average, relatively flat in 1998. However, we expect earnings to grow 12% to 14%
this year because more companies have benefited from the strong economy and from
aggressive consolidation and cost-cutting measures they have taken over the past
several years.
Based on their earnings projections, our analysts estimate that the U.S. stock
market is still about 30% overvalued. While there has been some shift to a wider
group of stocks, many investors are still focusing on the large-company stocks.
As a result, most of the overvaluation is in the 50 largest stocks in the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance. That means about 450 stocks are
selling at more attractive prices, particularly given what we see as the
improved earnings outlooks for these and many small and mid-sized companies not
in the S&P 500. These companies also benefit from consolidation, cost cutting,
and global growth. Because they are smaller, they may be able to respond to
these changes more quickly, and thus they have the potential to grow faster than
the big companies.
The fixed-income markets, meanwhile, seem to be approaching the level of
relative stability they enjoyed before the Asian turmoil. Some credit for this
stability goes to the Federal Reserve Board (the Fed), which has reassured
investors that it will act to prevent rapid economic growth from causing higher
inflation and reduced purchasing power. Also, once investors saw that the
overseas turmoil had little, if any, effect on the financial strength of most
domestic bond issuers, the major non-Treasury markets -- corporate, municipal,
and mortgage -- began to rebound. Our portfolio managers are now finding more
opportunities to buy bonds with relatively stable prices and attractive yields.
The past two years have challenged investors. However, we believe we are well
positioned for the current environment because our analysts and portfolio
managers continue to rely on MFS(R) Original Research(SM) to help evaluate the
long-term investment potential of each holding being considered for our
portfolios. Also, we believe our discipline of staying with our clearly defined
investment strategies can help us offer investment products with the potential
to sustain returns over a variety of market cycles.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
July 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
For the six months ended June 30, 1999, Class A shares of the Trust provided a
total return of 5.71%, Class B shares 5.34%, Class C shares 5.38%, and Class I
shares 5.93%. These returns include the reinvestment of distributions but
exclude the effects of any sales charges.
During the same period, the average growth and income fund tracked by Lipper
Analytical Services, Inc., an independent firm that reports mutual fund
performance, returned 10.91%. The Trust's returns also compare to 12.23% for the
Standard & Poor's 500 Composite Index (the S&P 500). The S&P 500 is a popular,
unmanaged index of common stock total return performance.
Q. CAN YOU TALK ABOUT SOME OF THE FACTORS THAT CONTRIBUTED TO THE TRUST'S
UNDERPERFORMANCE?
A. The Trust's underweightings in technology and cyclical stocks, combined with
some individual stocks that did not perform well, hurt performance. This
fund seeks a balance between risk and reward. Historically it has been
underweighted in technology because we felt that the sector's potential for
risk was higher than its potential for reward. Unfortunately, with the
technology sector's recent strong performance, this strategy has not worked
out in the short term.
Similarly, the Trust has been underweighted in cyclicals over the period,
including basic materials, industrial goods and services, and energy.
Recently, many cyclical stocks have performed well; therefore, our
underweighting hurt performance. Although these industries can sometimes
offer pockets of strength, price fluctuations in their stocks are usually
volatile. We feel this characteristic is not in line with the Trust's
long-term conservative growth investment style.
Q. WHAT INDIVIDUAL STOCKS HURT PERFORMANCE?
A. There were several stocks that did not perform well and ultimately affected
the Trust's performance. Two examples were Rite Aid, a drug store chain, and
Service Corp., a funeral services company. This year's market has had wide
differences in price-to-earnings ratios between stocks of companies
perceived to be doing well and those perceived to be doing poorly. When
stocks fail to meet their earnings projections -- as was the case with these
two stocks -- their prices tend to suffer steep drops. Therefore, we believe
the cost of being wrong is higher today.
Q. WHAT WORKED WELL FOR THE TRUST?
A. Newell Rubbermaid was added recently and helped performance. Newell bought
Rubbermaid in the first quarter of this year, and we believe the combined
company could have a near monopoly on a range of consumer staples, including
Rolodexes. It also sells home products such as drapery, hardware, and
kitchen accessories. Rubbermaid had a broad product line that was very
popular, but its reputation for customer satisfaction was poor, while Newell
brings a strong customer orientation to the table. Wells Fargo & Co., a
California-based bank that is now among our top-10 holdings, also performed
well. Last fall, it acquired Norwest Corp., a Minnesota-based bank, bringing
together two complementary financial services companies: one with good cost
controls and another with, in our opinion, growth potential.
Also, we have large weightings in companies that we think have more
favorable price-to-earnings ratios than those of the market as a whole,
including United Technologies, an aerospace, defense, and building equipment
company; Xerox, an office equipment company; AlliedSignal, an aerospace,
automotive, and environmental controls company; and Bell Atlantic, a
telecommunications company. We think these companies have sustainable
long-term earnings growth potential.
Q. ONE OF THE PORTFOLIO'S BEST-PERFORMING SECTORS IS UTILITIES AND
COMMUNICATIONS. WHAT COMPANIES IN THIS SECTOR DO YOU LIKE?
A. The five biggest positions in this sector are telecommunications companies,
including Bell Atlantic, MCI WorldCom, and Sprint's long-distance telephone
group. Sales growth for these companies and for telecommunications companies
in general have been very strong. The Internet has driven demand for
telecommunications services, and both telecommunications equipment and
service companies have performed well as a result.
Q. IN LIGHT OF THE CURRENT MARKET ENVIRONMENT, HAVE YOU CHANGED YOUR STRATEGY?
A. As the first U.S. mutual fund, Massachusetts Investors Trust has a 75-year
history to go by, and we have not achieved our record by chasing hot stocks.
Instead, we blend investments in value and growth stocks while trying to
manage risk. Rather than follow market trends, we will continue to buy what
we think are reasonably priced companies with promising futures. We believe
the best thing we can do for shareholders is to continue to stick to our
investment discipline -- investing in high-quality, large-cap, blue-chip
companies.
/s/ Mitchell D. Dynan /s/ John D. Laupheimer, Jr.
Mitchell D. Dynan John D. Laupheimer, Jr.
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
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MITCHELL D. DYNAN IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF MFS(R) UNION STANDARD(R) EQUITY FUND. HE IS ALSO A
PORTFOLIO MANAGER OF MASSACHUSETTS INVESTORS TRUST, AMERICA'S OLDEST MUTUAL
FUND, AND THE MASSACHUSETTS INVESTORS TRUST SERIES OFFERED THROUGH MFS(R)/SUN
LIFE ANNUITY PRODUCTS. HE JOINED MFS IN 1986 AS A RESEARCH ANALYST AND WAS NAMED
ASSISTANT VICE PRESIDENT IN 1987, VICE PRESIDENT IN 1988, PORTFOLIO MANAGER IN
1995, AND SENIOR VICE PRESIDENT IN 1999. FROM 1983 TO 1986, MR. DYNAN WORKED AS
A SECURITIES ANALYST ON WALL STREET. HE STARTED HIS CAREER AS A BANK LENDING
OFFICER IN 1979. A GRADUATE OF TUFTS UNIVERSITY, HE IS A MEMBER OF THE BOSTON
SOCIETY OF SECURITY ANALYSTS FEDERATION AND IS A CHARTERED FINANCIAL ANALYST.
JOHN D. LAUPHEIMER, JR., IS SENIOR VICE PRESIDENT AND DIRECTOR OF EQUITY
RESEARCH OF MFS INVESTMENT MANAGEMENT(R). HE IS ALSO LEAD PORTFOLIO MANAGER OF
MASSACHUSETTS INVESTORS TRUST, AMERICA'S OLDEST MUTUAL FUND. HE ALSO MANAGES
MFS(R) INSTITUTIONAL CORE EQUITY FUND, THE MASSACHUSETTS INVESTORS TRUST SERIES
OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS, AND MFS(R) GROWTH WITH INCOME
SERIES (PART OF MFS(R) VARIABLE INSURANCE TRUST(SM)). MR. LAUPHEIMER JOINED THE
MFS RESEARCH DEPARTMENT IN 1981 AS A RESEARCH ANALYST. HE WAS NAMED INVESTMENT
OFFICER IN 1983, ASSISTANT VICE PRESIDENT IN 1984, VICE PRESIDENT IN 1986,
PORTFOLIO MANAGER IN 1987, SENIOR VICE PRESIDENT IN 1995, AND DIRECTOR OF EQUITY
RESEARCH IN 1999. MR. LAUPHEIMER IS A GRADUATE OF BOSTON UNIVERSITY AND THE
SLOAN SCHOOL OF MANAGEMENT OF THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY. HE IS A
CHARTERED FINANCIAL ANALYST AND A MEMBER OF THE BOSTON SECURITY ANALYSTS
SOCIETY, INC.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS(R) ORIGINAL
RESEARCH(SM), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS REASONABLE CURRENT INCOME AND LONG-TERM GROWTH OF
CAPITAL AND INCOME.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JULY 15, 1924
CLASS INCEPTION: CLASS A JULY 15, 1924
CLASS B SEPTEMBER 7, 1993
CLASS C JULY 1, 1996
CLASS I JANUARY 2, 1997
SIZE: $15.5 BILLION NET ASSETS AS OF JUNE 30, 1999
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in net
asset value, including reinvestment of dividends. (See Notes to Performance
Summary for more information.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +5.71% +11.66% +94.90% +204.37% +419.44%
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Average Annual Total Return -- +11.66% +24.91% + 24.93% + 17.91%
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SEC Results -- + 5.24% +22.47% + 23.46% + 17.21%
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<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +5.34% +10.89% +91.01% +193.07% +396.77%
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Average Annual Total Return -- +10.89% +24.07% + 23.99% + 17.39%
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SEC Results -- + 6.89% +23.42% + 23.82% + 17.39%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +5.38% +10.91% +91.07% +198.39% +409.22%
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Average Annual Total Return -- +10.91% +24.09% + 24.44% + 17.68%
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SEC Results -- + 9.91% +24.09% + 24.44% + 17.68%
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<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +5.93% +12.08% +96.64% +207.10% +424.09%
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Average Annual Total Return -- +12.08% +25.28% + 25.16% + 18.02%
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</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 5.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months. Class I shares ("I") have no sales charge or Rule 12b-1 fees and are
only available to certain institutional investors.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, I performance generally would have been higher
than A performance. The A performance included in the I performance has been
adjusted to reflect the fact that I have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
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.
<PAGE>
PORTFOLIO CONCENTRATION AS OF JUNE 30, 1999
FINANCIAL SERVICES 17.5%
UTILITIES & COMMUNICATIONS 13.8%
TECHNOLOGY 12.5%
HEALTH CARE 11.9%
CONSUMER STAPLES 9.7%
TOP 10 STOCK HOLDINGS
<TABLE>
<S> <C>
MICROSOFT CORP. 2.9%
U.S computer software and systems company TYCO INTERNATIONAL LTD. 1.8%
U.S. security systems, packaging, and
UNITED TECHNOLOGIES CORP. 2.2% electronic equipment conglomerate
U.S. aerospace, defense, and building equipment
company MCI WORLDCOM, INC. 1.7%
U.S. telecommunications company
XEROX CORP. 2.1%
U.S. document products and services provider ANHEUSER-BUSCH COS., INC. 1.6%
U.S. brewery
BELL ATLANTIC CORP. 2.0%
U.S. integrated telecommunications company HARTFORD FINANCIAL SERVICES GROUP, INC. 1.6%
U.S. multiline insurance company
BP AMOCO PLC 1.8%
British oil and petrochemical company WELLS FARGO & CO. 1.6%
Western U.S. bank
</TABLE>
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 1999
<TABLE>
<CAPTION>
Stocks - 95.3%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 89.8%
Aerospace - 4.5%
AlliedSignal, Inc. 3,094,000 $ 194,922,000
General Dynamics Corp. 911,900 62,465,150
Lockheed-Martin Corp. 608,400 22,662,900
Raytheon Co., "A" 1,309,500 90,191,812
United Technologies Corp. 4,555,700 326,586,744
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$ 696,828,606
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Automotive - 1.0%
Federal-Mogul Corp. 1,345,300 $ 69,955,600
Ford Motor Co. 1,062,600 59,970,487
TRW, Inc. 508,100 27,881,988
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$ 157,808,075
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Banks and Credit Companies - 5.1%
Bank America Corp. 1,978,100 $ 145,019,456
Comerica, Inc. 542,150 32,224,041
Fleet Financial Group, Inc. 422,100 18,730,688
National City Corp. 493,200 32,304,600
Northern Trust Corp. 901,100 87,406,700
PNC Bank Corp. 359,003 20,687,548
State Street Corp. 1,033,300 88,217,987
US Bancorp 3,668,200 124,718,800
Wells Fargo & Co. 5,504,100 235,300,275
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$ 784,610,095
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Business Machines - 2.7%
International Business Machines Corp. 829,500 $ 107,212,875
Xerox Corp. 5,167,100 305,181,844
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$ 412,394,719
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Business Services - 1.7%
Computer Sciences Corp.* 1,269,000 $ 87,798,938
DST Systems, Inc.* 1,278,200 80,366,825
First Data Corp. 1,914,300 93,681,056
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$ 261,846,819
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Chemicals - 0.2%
E.I. du Pont de Nemours & Co., Inc. 212,400 $ 14,509,575
PPG Industries, Inc. 219,900 12,987,844
Rohm & Haas Co. 217,500 9,325,312
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$ 36,822,731
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Computer Hardware - Systems - 0.9%
Hewlett-Packard Co. 1,430,600 $ 143,775,300
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Computer Software - Personal Computers - 2.8%
Microsoft Corp.* 4,824,700 $ 435,127,631
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Computer Software - Services - 0.5%
Sun Microsystems, Inc.* 1,144,000 $ 78,793,000
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Computer Software - Systems - 2.1%
BMC Software, Inc.* 1,078,800 $ 58,255,200
Computer Associates International, Inc. 2,965,900 163,124,500
Oracle Corp.* 2,855,050 105,993,731
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$ 327,373,431
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Consumer Goods and Services - 6.5%
Clorox Co. 680,790 $ 72,716,882
Colgate-Palmolive Co. 1,185,400 117,058,250
Gillette Co. 3,335,500 136,755,500
Newell Rubbermaid, Inc. 3,245,400 150,911,100
Philip Morris Cos., Inc. 1,972,400 79,265,825
Procter & Gamble Co. 1,928,600 172,127,550
Tyco International Ltd. 2,845,400 269,601,650
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$ 998,436,757
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Electrical Equipment - 2.4%
Emerson Electric Co. 1,793,900 $ 112,791,463
General Electric Co. 2,009,500 227,073,500
Honeywell, Inc. 308,600 35,759,025
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$ 375,623,988
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Electronics - 0.6%
Intel Corp. 1,575,600 $ 93,748,200
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Entertainment - 2.6%
Disney (Walt) Co. 2,943,900 $ 90,708,919
MediaOne Group, Inc.* 1,333,900 99,208,812
Time Warner, Inc. 2,794,400 205,388,400
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$ 395,306,131
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Financial Institutions - 3.5%
American Express Co. 503,500 $ 65,517,938
Associates First Capital Corp., "A" 2,690,516 119,223,490
Citigroup, Inc. 4,268,000 202,730,000
Federal Home Loan Mortgage Corp. 2,458,800 142,610,400
Goldman Sachs Group, Inc.* 140,100 10,122,225
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$ 540,204,053
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Food and Beverage Products - 4.3%
Anheuser-Busch Cos., Inc. 3,321,700 $ 235,633,094
Bestfoods Co. 1,157,800 57,311,100
Coca-Cola Co. 1,061,300 66,331,250
Hershey Foods Corp. 430,560 25,564,500
Interstate Bakeries Corp. 1,021,900 22,928,881
Nabisco Holdings Corp., "A" 560,900 24,258,925
PepsiCo., Inc. 573,500 22,187,281
Quaker Oats Co. 878,400 58,303,800
Ralston-Ralston Purina Co. 4,939,200 150,336,900
---------------
$ 662,855,731
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Forest and Paper Products - 0.1%
International Paper Co. 443,200 $ 22,381,600
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Insurance - 7.7%
Allstate Corp. 3,250,900 $ 116,626,038
American International Group, Inc. 1,128,900 132,151,856
Chubb Corp. 703,900 48,921,050
CIGNA Corp. 2,454,700 218,468,300
Equitable Cos., Inc. 819,700 54,919,900
Hartford Financial Services Group, Inc. 4,088,100 238,387,331
Lincoln National Corp. 2,351,400 123,007,612
MBIA, Inc. 792,240 51,297,540
Progressive Corp. 1,048,700 152,061,500
Torchmark Corp. 1,377,200 46,996,950
---------------
$ 1,182,838,077
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Manufacturing - 0.8%
Danaher Corp. 803,800 $ 46,720,875
Illinois Tool Works, Inc. 1,002,800 82,229,600
---------------
$ 128,950,475
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Medical and Health Products - 8.4%
American Home Products Corp. 2,924,700 $ 168,170,250
Becton, Dickinson & Co. 1,591,700 47,751,000
Bristol-Myers Squibb Co. 3,205,300 225,773,319
Johnson & Johnson Co. 1,837,100 180,035,800
Merck & Co., Inc. 1,373,540 101,641,960
Pfizer, Inc. 1,791,700 196,639,075
Pharmacia & Upjohn, Inc. 2,751,370 156,312,208
Schering Plough Corp. 1,795,060 95,138,180
Warner-Lambert Co. 1,856,300 128,780,812
---------------
$ 1,300,242,604
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Medical and Health Technology and Services - 2.7%
Guidant Corp. 2,671,700 $ 137,425,569
HEALTHSOUTH Corp.* 1,977,551 29,539,668
Medtronic, Inc. 1,704,782 132,759,898
United HealthCare Corp. 1,806,600 113,138,325
---------------
$ 412,863,460
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Oils - 2.9%
Chevron Corp. 711,800 $ 67,754,463
Exxon Corp. 2,679,400 206,648,725
Mobil Corp. 1,563,500 154,786,500
USX-Marathon Group 654,500 21,312,156
---------------
$ 450,501,844
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Printing and Publishing - 1.5%
Gannett Co., Inc. 1,053,000 $ 75,157,875
New York Times Co. 1,632,800 60,107,450
Tribune Co. 1,075,400 93,694,225
---------------
$ 228,959,550
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Restaurants and Lodging - 1.4%
McDonald's Corp. 5,118,700 $ 211,466,294
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Special Products and Services - 0.2%
Carnival Corp. 583,400 $ 28,294,900
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Stores - 5.3%
CVS Corp. 3,374,900 $ 171,276,175
Dayton Hudson Corp. 1,594,700 103,655,500
Home Depot, Inc. 1,407,700 90,708,669
Nordstrom, Inc. 1,323,000 44,320,500
Office Depot, Inc.* 2,451,300 54,081,806
Rite Aid Corp. 1,807,000 44,497,375
TJX Cos., Inc. 3,930,400 130,931,450
Wal-Mart Stores, Inc. 3,844,600 185,501,950
---------------
$ 824,973,425
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Supermarkets - 3.2%
Albertsons, Inc. 2,478,577 $ 127,801,627
Kroger Co.* 6,235,000 174,190,312
Safeway, Inc.* 3,914,600 193,772,700
---------------
$ 495,764,639
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Telecommunications - 9.4%
Alltel Corp. 2,581,300 $ 184,562,950
Ameritech Corp. 1,082,100 79,534,350
Bell Atlantic Corp. 4,609,800 301,365,675
Cisco Systems, Inc.* 1,697,600 109,389,100
MCI WorldCom, Inc.* 2,974,444 255,988,087
Motorola, Inc. 1,579,100 149,619,725
Nortel Networks Corp. 475,400 41,270,662
SBC Communications, Inc. 3,297,900 191,278,200
Sprint Corp. 2,045,100 108,006,844
Sprint Corp. (PCS Group) 455,050 25,994,731
---------------
$ 1,447,010,324
- --------------------------------------------------------------------------------------------------
Utilities - Electric - 3.7%
CMS Energy Corp. 1,342,400 $ 56,213,000
Duke Energy Corp. 1,385,700 75,347,437
FirstEnergy Corp. 1,400,200 43,406,200
GPU, Inc. 1,085,600 45,798,750
New Century Energies, Inc. 587,900 22,817,869
NiSource, Inc. 1,750,500 45,184,781
Peco Energy Co. 1,372,900 57,490,188
Pinnacle West Capital Corp. 1,551,800 62,459,950
Texas Utilities Co. 2,584,500 106,610,625
Unicom Corp. 1,251,000 48,241,688
---------------
$ 563,570,488
- --------------------------------------------------------------------------------------------------
Utilities - Gas - 0.9%
Coastal Corp. 629,600 $ 25,184,000
Columbia Energy Group 1,888,500 118,385,344
---------------
$ 143,569,344
- --------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.2%
BellSouth Corp. 773,800 $ 36,271,875
- --------------------------------------------------------------------------------------------------
Total U.S. Stocks $13,879,214,166
- --------------------------------------------------------------------------------------------------
Foreign Stocks - 5.5%
Canada - 0.5%
Canadian National Railway Co. (Railroads) 1,150,200 $ 77,063,400
- --------------------------------------------------------------------------------------------------
France - 0.2%
Axa (Insurance) 208,660 $ 25,437,347
- --------------------------------------------------------------------------------------------------
Germany - 0.9%
HypoVereinsbank (Banks and Credit Cos.) 385,300 $ 25,014,246
Mannesmann AG (Conglomerate) 767,300 114,651,851
---------------
$ 139,666,097
- --------------------------------------------------------------------------------------------------
Japan - 0.2%
AFLAC, Inc. (Insurance) 638,200 $ 30,553,825
- --------------------------------------------------------------------------------------------------
Netherlands - 0.2%
Wolters Kluwer N.V. (Publishing) 629,100 $ 25,344,630
- --------------------------------------------------------------------------------------------------
Sweden - 0.4%
Ericsson LM, ADR (Telecommunications) 1,943,100 $ 64,000,856
- --------------------------------------------------------------------------------------------------
Switzerland - 0.3%
Nestle S.A. (Food and Beverage Products) 27,600 $ 49,728,290
- --------------------------------------------------------------------------------------------------
United Kingdom - 2.8%
BP Amoco PLC, ADR (Oils) 2,398,431 $ 260,229,764
Rentokil Initial PLC (Environmental Services) 5,767,400 22,359,971
Reuters Group PLC (Business Services) 4,848,331 63,763,868
Reuters Group PLC, ADR (Business Services) 562,565 45,602,925
Zeneca Group PLC (Medical and Health Products) 1,288,700 49,820,196
---------------
$ 441,776,724
- --------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 853,571,169
- --------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $11,606,460,864) $14,732,785,335
- --------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.3%
- --------------------------------------------------------------------------------------------------
Utilities - Electric - 0.3%
Houston Industries, Inc., 7.00% 269,700 $ 32,161,725
Texas Utilities Co., 3.315% 335,000 14,781,875
---------------
$ 46,943,600
- --------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $26,639,647) $ 46,943,600
- --------------------------------------------------------------------------------------------------
Convertible Bonds - 0.1%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------
Financial Services - 0.1%
Bell Atlantic Financial Services, Inc., 4.25s,
2005## (Identified Cost, $21,217,312) $ 18,870 $ 19,294,575
- --------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.5%
- --------------------------------------------------------------------------------------------------
Bellsouth Telecomm, Inc., due 8/03/99 $ 25,000 $ 24,883,583
Federal Agricultural Mortgage Corp.,
due 7/01/99 - 7/15/99 75,000 74,976,817
Federal Farm Credit Bank Corp., due 8/16/99 20,000 19,875,545
Federal Home Loan Bank, due 7/16/99 - 7/28/99 52,000 51,847,946
Federal Home Loan Mortgage Corp.,
due 7/07/99 - 8/24/99 249,097 248,036,515
Federal National Mortgage Assn., due 7/15/99 - 9/
20/99 232,289 231,078,334
Goldman Sachs Group LP, due 7/29/99 10,000 9,962,900
Morgan (J.P.) & Co., Inc., due 7/14/99 - 9/22/99 40,325 39,950,895
- --------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 700,612,535
- --------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $12,354,930,358) $15,499,636,045
Other Assets, Less Liabilities - (0.2)% (37,646,104
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% $15,461,989,941
- --------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -----------------------------------------------------------------------------
JUNE 30, 1999
- -----------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $12,354,930,358) $15,499,636,045
Cash 299,705
Foreign currency, at value (identified cost, $2,520) 2,513
Net receivable for foreign currency exchange contracts
subject to master netting agreements 13,708
Receivable for Trust shares sold 57,635,584
Receivable for investments sold 116,077,738
Dividends and interest receivable 12,432,663
Other assets 98,745
---------------
Total assets $15,686,196,701
---------------
Liabilities:
Payable for Trust shares reacquired $ 17,573,677
Payable for investments purchased 205,154,251
Payable to affiliates -
Management fee 138,156
Shareholder servicing agent fee 41,865
Distribution and service fee 259,573
Administrative fee 1,027
Accrued expenses and other liabilities 1,038,211
---------------
Total liabilities $ 224,206,760
---------------
Net assets $15,461,989,941
===============
Net assets consist of:
Paid-in capital $11,885,806,529
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 3,144,491,531
Accumulated undistributed net realized gain on
investments and foreign currency transactions 432,973,132
Accumulated distributions in excess of net investment
income (1,281,251)
---------------
Total $15,461,989,941
===============
Shares of beneficial interest outstanding 731,444,433
===========
Class A shares:
Net asset value per share
(net assets of $8,647,853,891 / 406,908,270 shares
of beneficial interest outstanding) $21.25
======
Offering price per share (100 / 94.25 of net asset
value per share) $22.55
======
Class B shares:
Net asset value and offering price per share
(net assets of $5,270,222,266 / 250,907,347 shares
of beneficial interest outstanding) $21.00
======
Class C shares:
Net asset value and offering price per share
(net assets of $1,294,257,656 / 61,891,693 shares of
beneficial interest outstanding) $20.91
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $249,656,128 / 11,737,123 shares of
beneficial interest outstanding) $21.27
======
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
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 82,000,526
Interest 15,324,200
Foreign taxes withheld (497,705)
-------------
Total investment income $ 96,827,021
-------------
Expenses -
Management fee $ 22,337,384
Trustees' compensation 79,948
Shareholder servicing agent fee 7,181,915
Distribution and service fee (Class A) 13,674,828
Distribution and service fee (Class B) 22,388,636
Distribution and service fee (Class C) 5,238,485
Administrative fee 185,959
Custodian fee 1,201,933
Printing 266,089
Postage 597,203
Auditing fees 17,655
Legal fees 17,677
Miscellaneous 4,170,378
-------------
Total expenses $ 77,358,090
Fees paid indirectly (460,600)
-------------
Net expenses $ 76,897,490
-------------
Net investment income $ 19,929,531
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 448,016,940
Foreign currency transactions 442,921
-------------
Net realized gain on investments and foreign
currency transactions $ 448,459,861
-------------
Change in unrealized appreciation (depreciation) -
Investments $ 330,272,432
Translation of assets and liabilities in foreign
currencies (380,545)
-------------
Net unrealized gain on investments and foreign
currency translation $ 329,891,887
-------------
Net realized and unrealized gain on investments
and foreign currency $ 778,351,748
-------------
Increase in net assets from operations $ 798,281,279
=============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 19,929,531 $ 55,718,341
Net realized gain on investments and foreign
currency transactions 448,459,861 553,340,597
Net unrealized gain on investments and foreign
currency translation 329,891,887 1,202,394,756
--------------- ---------------
Increase in net assets from operations $ 798,281,279 $ 1,811,453,694
--------------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (18,557,677) $ (47,277,704)
From net investment income (Class B) (1,120,839) (6,574,313)
From net investment income (Class C) (397,240) (1,450,350)
From net investment income (Class I) (962,112) (990,881)
From net realized gain on investments and foreign
currency transactions (Class A) (39,050,042) (338,382,495)
From net realized gain on investments and foreign
currency transactions (Class B) (22,566,380) (173,242,177)
From net realized gain on investments and foreign
currency transactions (Class C) (5,381,906) (35,278,921)
From net realized gain on investments and foreign
currency transactions (Class I) (1,192,769) (9,493,659)
In excess of net investment income (Class A) -- (689,782)
In excess of net investment income (Class B) -- (95,919)
In excess of net investment income (Class C) -- (21,161)
In excess of net investment income (Class I) -- (14,457)
--------------- ---------------
Total distributions declared to shareholders $ (89,228,965) $ (613,511,819)
--------------- ---------------
Net increase in net assets from Trust share
transactions $ 2,648,713,577 $ 4,827,471,013
--------------- ---------------
Total increase in net assets $ 3,357,765,891 $ 6,025,412,888
Net assets:
At beginning of period 12,104,224,050 6,078,811,162
--------------- ---------------
At end of period (including accumulated distributions
in excess of net investment income of $1,281,251
and $172,914, respectively) $15,461,989,941 $12,104,224,050
=============== ===============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ------------------------------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.25 $17.52 $14.46 $12.71 $10.07 $11.50
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.06 $ 0.17 $ 0.18 $ 0.21 $ 0.25 $ 0.25
Net realized and unrealized
gain (loss) on investments
and foreign currency 1.09 3.77 4.33 3.07 3.67 (0.36)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.15 $ 3.94 $ 4.51 $ 3.28 $ 3.92 $(0.11)
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.05) $(0.16) $(0.17) $(0.21) $(0.46) $(0.25)
From net realized gain on
investments and foreign
currency transactions (0.10) (1.05) (1.27) (1.32) (0.82) (1.05)
In excess of net investment income -- (0.00)+++ (0.01) -- -- (0.00)+++
In excess of net realized gain
on investments and foreign
currency transactions -- -- -- -- -- (0.02)
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.15) $(1.21) $(1.45) $(1.53) $(1.28) $(1.32)
------ ------ ------ ------ ------ ------
Net asset value - end of period $21.25 $20.25 $17.52 $14.46 $12.71 $10.07
====== ====== ====== ====== ====== ======
Total return(+) 5.71%++ 22.95% 31.69% 25.90% 39.34% (1.02)%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.88%+ 0.73% 0.74% 0.74% 0.70% 0.71%
Net investment income 0.55%+ 0.86% 1.09% 1.51% 2.13% 2.20%
Portfolio turnover 28% 54% 44% 47% 54% 87%
Net assets at end of period
(000,000 omitted) $8,648 $7,188 $4,323 $2,678 $2,074 $1,535
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Trust has an expense offset arrangement which reduces the Trust's custodian fee based upon the amount of cash maintained
by the Trust with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Trust's
expenses are calculated without reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. 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,
SIX MONTHS ENDED ------------------------------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.04 $17.36 $14.36 $12.63 $10.03 $11.48
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.01) $ 0.04 $ 0.07 $ 0.10 $ 0.15 $ 0.15
Net realized and unrealized
gain (loss) on investments
and foreign currency 1.08 3.74 4.28 3.06 3.64 (0.36)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.07 $ 3.78 $ 4.35 $ 3.16 $ 3.79 $(0.21)
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.05) $(0.08) $(0.11) $(0.37) $(0.17)
From net realized gain on
investments and foreign
currency transactions (0.10) (1.05) (1.27) (1.32) (0.82) (1.05)
In excess of net investment income -- (0.00)+++ (0.00)+++ -- -- (0.00)+++
In excess of net realized gain
on investments and foreign
currency transactions -- -- -- -- -- (0.02)
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.11) $(1.10) $(1.35) $(1.43) $(1.19) $(1.24)
------ ------ ------ ------ ------ ------
Net asset value - end of period $21.00 $20.04 $17.36 $14.36 $12.63 $10.03
====== ====== ====== ====== ====== ======
Total return 5.34%++ 22.16% 30.75% 25.05% 38.05% (1.88)%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.53%+ 1.39% 1.41% 1.54% 1.56% 1.61%
Net investment income (loss) (0.10)%+ 0.20% 0.42% 0.72% 1.25% 1.37%
Portfolio turnover 28% 54% 44% 47% 54% 87%
Net assets at end of period
(000,000 omitted) $5,270 $3,862 $1,522 $437 $165 $69
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Trust has an expense offset arrangement which reduces the Trust's custodian fee based upon the amount of cash
maintained by the Trust with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Trust's expenses are calculated without reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, PERIOD ENDED
SIX MONTHS ENDED -------------------------------- DECEMBER 31,
JUNE 30, 1999 1998 1997 1996*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $19.95 $17.30 $14.33 $13.93
------ ------ ------ ------
Income from investment operations# -
Net investment income (loss) $(0.01) $ 0.04 $ 0.07 $ 0.05
Net realized and unrealized gain on
investments and foreign currency 1.08 3.72 4.27 1.76
------ ------ ------ ------
Total from investment operations $ 1.07 $ 3.76 $ 4.34 $ 1.81
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.06) $(0.10) $(0.09)
From net realized gain on investments and
foreign currency transactions (0.10) (1.05) (1.27) (1.32)
In excess of net investment income -- (0.00)+++ (0.00)+++ --
------ ------ ------ ------
Total distributions declared to
shareholders $(0.11) $(1.11) $(1.37) $(1.41)
------ ------ ------ ------
Net asset value - end of period $20.91 $19.95 $17.30 $14.33
====== ====== ====== ======
Total return 5.38%++ 22.11% 30.76% 12.74%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.53%+ 1.40% 1.41% 1.49%+
Net investment income (loss) (0.10)%+ 0.20% 0.42% 0.77%+
Portfolio turnover 28% 54% 44% 47%
Net assets at end of period (000,000 omitted) $1,294 $824 $211 $12
* For the period from the inception of Class C, July 1, 1996, through December 31, 1996.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Trust has an expense offset arrangement which reduces the Trust's custodian fee based upon the amount of cash
maintained by the Trust with its custodian and dividend disbursing agent. The Trust's expenses are calculated without
reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
SIX MONTHS ENDED ---------------------------------
JUNE 30, 1999 1998 1997*
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $20.26 $17.52 $14.33
------ ------ ------
Income from investment operations# -
Net investment income $ 0.09 $ 0.24 $ 0.26
Net realized and unrealized gain on investments and
foreign currency 1.10 3.77 4.44
------ ------ ------
Total from investment operations $ 1.19 $ 4.01 $ 4.70
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.08) $(0.22) $(0.23)
From net realized gain on investments and foreign
currency transactions (0.10) (1.05) (1.27)
In excess of net investment income -- (0.00)+++ (0.01)
------ ------ ------
Total distributions declared to shareholders $(0.18) $(1.27) $(1.51)
------ ------ ------
Net asset value - end of period $21.27 $20.26 $17.52
====== ====== ======
Total return 5.93%++ 23.40% 33.30%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.53%+ 0.41%+ 0.41%+
Net investment income 0.90%+ 1.19% 1.42%+
Portfolio turnover 28% 54% 44%
Net assets at end of period (000,000 omitted) $250 $230 $23
* For the period from the inception of Class I, January 2, 1997, through December 31, 1997.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## The Trust has an expense offset arrangement which reduces the Trust's custodian fee based upon the amount of cash
maintained by the Trust with its custodian and dividend disbursing agent. The Trust's expenses are calculated without
reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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 an 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. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using 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 the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Security Loans - The Trust may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by the
Trust. The loans are collateralized at all times by U.S. Treasury securities in
an amount at least equal to the market value of the securities loaned. State
Street provides the Trust with indemnification against Borrower default.
At June 30, 1999, the value of securities loaned was $15,186,069. These loans
were collateralized by U.S. Treasury securities of $19,684,954. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the Trust and State Street. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
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 may 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 as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend or ex-interest date in an amount equal to the value
of the security on such date.
Fees Paid Indirectly - The Trust's custody fee is calculated as a percentage of
the Trust's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Trust. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 distributions from paid-in
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 net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Trust offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Trust based on 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. Class B shares will convert to Class A
shares approximately eight years after purchase.
(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 annual rate of 0.33% of
the Trust's average daily net assets.
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 Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trust has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $26,673
for the six months ended June 30, 1999.
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Trust pays MFS an administrative fee
at the following annual percentages of the Trust's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$3,869,960 for the six months ended June 30, 1999, as its portion of the sales
charge on sales of Class A shares of the Trust.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Trust's 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
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum (reduced to 0.15% per annum for assets sold prior to January
2, 1991) of the Trust's average daily net assets attributable to Class A shares
which are attributable to that securities dealer and 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. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $1,003,921 for the six months ended June
30, 1999. Fees incurred under the distribution plan during the six months ended
June 30, 1999, were 0.35% of average daily net assets attributable to Class A
shares on an annualized basis.
The Trust's distribution plan provides that the Trust will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per annum,
of the Trust's average daily net assets attributable to Class B and Class C
shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B 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 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 $38,956 and $2,598 for Class B and Class C shares,
respectively, for the six months ended June 30, 1999. Fees incurred under the
distribution plan during the six months ended June 30, 1999, were 1.00% and
1.00% of average daily net assets attributable to Class B and Class C shares,
respectively, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended June 30,
1999, were $47,085, $3,857,926, and $267,561 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 Trust's average daily net assets at an effective annual rate
of 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage of the
Trust's average daily net assets at an effective annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
PURCHASES SALES
- ---------------------------------------------------------------------------
U.S. government securities $ 52,432,090 $ 47,399,707
-------------- --------------
Investments (non-U.S. government
securities) $6,098,691,290 $3,543,172,557
-------------- --------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $12,354,930,358
---------------
Gross unrealized appreciation $ 3,290,991,449
Gross unrealized depreciation (146,285,762)
---------------
Net unrealized appreciation $ 3,144,705,687
===============
(5) Shares of Beneficial Interest
The Trustees have authorized 1,000,000,000 full and fractional shares of
beneficial interest. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 97,439,473 $1,987,859,480 188,053,209 $3,608,217,877
Shares issued to shareholders in
reinvestment of distributions 2,129,434 43,265,091 15,584,563 299,682,621
Shares reacquired (47,646,272) (976,008,731) (95,426,304) (1,827,133,744)
----------- -------------- ----------- --------------
Net increase 51,922,635 $1,055,115,840 108,211,468 $2,080,766,754
=========== ============== =========== ==============
<CAPTION>
Class B Shares
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 73,476,108 $1,483,545,483 116,467,254 $2,214,401,035
Shares issued to shareholders in
reinvestment of distributions 1,007,875 20,226,623 8,179,698 155,643,628
Shares reacquired (16,312,283) (330,182,508) (19,577,588) (367,348,197)
----------- -------------- ----------- --------------
Net increase 58,171,700 $1,173,589,598 105,069,364 $2,002,696,466
=========== ============== =========== ==============
<CAPTION>
Class C Shares
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 26,146,660 $ 525,091,148 32,700,952 $ 620,311,183
Shares issued to shareholders in
reinvestment of distributions 200,450 4,006,802 1,334,955 25,279,036
Shares reacquired (5,774,474) (116,302,420) (4,935,864) (92,639,154)
----------- -------------- ----------- --------------
Net increase 20,572,636 $ 412,795,530 29,100,043 $ 552,951,065
=========== ============== =========== ==============
<CAPTION>
Class I Shares
SIX MONTHS ENDED JUNE 30, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,716,025 $ 34,569,016 10,276,343 $ 195,389,933
Shares issued to shareholders in
reinvestment of distributions 86,328 1,757,512 485,401 9,318,575
Shares reacquired (1,419,861) (29,113,919) (694,274) (13,651,780)
----------- -------------- ----------- --------------
Net increase 382,492 $ 7,212,609 10,067,470 $ 191,056,728
=========== ============== =========== ==============
</TABLE>
(6) Line of Credit
The Trust and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. 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 six months ended June 30, 1999, was $53,582.
(7) Financial Instruments
The Trust trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include forward foreign currency exchange contracts. The notional or
contractual amounts of these instruments represent the investment the Trust has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Forward foreign currency purchases and sales under master netting agreements
amounted to a net receivable of $13,708 with First Boston Corp. at June 30,
1999.
At June 30, 1999, the Trust had sufficient cash and/or securities to cover any
commitments under these contracts.
<PAGE>
<TABLE>
MASSACHUSETTS INVESTORS TRUST
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified services CUSTODIAN
company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway INVESTOR INFORMATION
& Barnes (attorneys) For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
William J. Poorvu - Adjunct Professor, Harvard a touch-tone telephone.
University Graduate School of Business
Administration For information on MFS mutual funds, call your
financial adviser or, for an information kit, call
Charles W.Schmidt - Private Investor toll free: 1-800-637-2929 any business day from
9 a.m. to 5 p.m. Eastern time (or leave a message
Arnold D. Scott* - Senior Executive anytime).
Vice President, Director, and Secretary,
MFS Investment Management INVESTOR SERVICE
MFSService Center, Inc.
Jeffrey L. Shames* - Chairman, Chief P.O. Box 2281
Executive Officer, and Director, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Elaine R. Smith - Independent Consultant 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
David B. Stone - Chairman and Director,
North American Management Corp. For service to speech- or hearing-impaired, call
(investment advisers) toll free: 1-800-637-6576 any business day from
9 a.m. to 5 p.m. Eastern time. (To use this service,
INVESTMENT ADVISER your phone must be equipped with a
Massachusetts Financial Services Company Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
DISTRIBUTOR anytime from a touch-tone telephone.
MFS Fund Distributors, Inc.
500 Boylston Street WORLD WIDE WEB
Boston, MA 02116-3741 www.mfs.com
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGERS
Mitchell D. Dynan*
John D. Laupheimer, Jr.*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MASSACHUSETTS ------------
INVESTORS TRUST BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MIT-3 8/99 751M 13/213/313/813
