<PAGE>
MFS(R) GOVERNMENT LIMITED MATURITY FUND
SUPPLEMENT TO THE PROSPECTUS
DATED MAY 1, 1993 AS REVISED AUGUST 17, 1993
Class A shares of the Fund may also be purchased at net asset value where the
purchase is in an amount of $3 million or more and where, at the invitation of
MFS Financial Services, Inc. ("FSI"), the dealer and FSI enter into an agreement
in which the dealer agrees that the commission paid to it on the sale will be
paid in four quarterly installments with each installment being paid on the
average daily net asset value of the account for the prior ninety day period.
THE DATE OF THIS SUPPLEMENT IS APRIL 14, 1994
MGL-16-4/94/19.5M
<PAGE>
MFS GOVERNMENT LIMITED MATURITY FUND
SUPPLEMENT TO THE PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION DATED MAY 1, 1994
The following information should be read in conjunction with the Fund's
Prospectus and Statement of Additional Information dated May 1, 1994 and
contains a description of Class C shares.
THE FUND
Three classes of shares of the Fund currently are offered to the general
public. Class A shares are offered at net asset value plus an initial sales
charge (or a contingent deferred sales charge (a "CDSC") in the case of certain
purchases of $1 million or more) and subject to a Distribution Plan, providing
for an annual distribution fee and service fee. Class B shares are offered at
net asset value without an initial sales charge but subject to a CDSC and a
Distribution Plan providing for an annual distribution fee and service fee which
are greater than the Class A distribution fee and service fee; Class B shares
will convert to Class A shares approximately eight years after purchase. Class C
shares are offered at net asset value without an initial sales charge or a CDSC
but subject to a Distribution Plan providing for an annual distribution fee and
service fee which are equal to the Class B distribution fee and service fee.
Class C shares do not convert to any other class of shares of the Fund.
EXPENSE SUMMARY
CLASS A CLASS B CLASS C
------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on
Purchases of Fund Shares
(as a percentage of offering price).......... 2.50% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable) ....... See Below(1) 4.00% 0.00%
ANNUAL OPERATING EXPENSES OF THE FUND
(AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees(2) ............................ 0.40% 0.40% 0.40%
Rule 12b-1 Fees (after applicable fee reduction) 0.15%(3) 1.00%(4) 1.00%(4)
Other Expenses(5) ............................. 0.31% 0.38% 0.31%
----- ----- -----
Total Operating Expenses (after applicable
fee reduction) .............................. 0.86%(6) 1.78% 1.71%
- ----------
(1) Purchases of $1 million or more are not subject to an initial sales charge;
however, a CDSC of 1% will be imposed on such purchases in the event of
certain redemption transactions within 12 months following such purchases
(see "Purchases").
(2) Effective April 1, 1994, the Fund's Advisory Agreement has been amended to
establish the management fee as the lesser of (i) 0.40% of the Fund's
average daily net assets or (ii) 0.38% of the Fund's average daily net
assets plus 5.36% of the Fund's gross income (i.e., income other than from
the sale of securities, and short term gains from futures transactions), in
each case on an annualized basis for the Fund's then-current fiscal year.
(3) The Fund has adopted a Distribution Plan for its Class A shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to the Class A
shares (See "Distribution Plans"). Currently the 0.10% distribution/service
fee paid to MFS Financial Services, Inc. ("FSI") is being waived. FSI will
not accept future payments of this fee unless it first obtains the approval
of the Board of Trustees. Commencing as of May 1, 1993, service fee payments
have been reduced to 0.15% of the average daily net assets of the Fund
attributable to the Class A shares for an indefinite period. This reduction
may be amended or terminated at any time without notice to shareholders.
After a substantial period of time, distribution expenses paid under this
Plan, together with the initial sales charge, may total more than the
maximum sales charge that would have been permissible if imposed entirely as
an initial sales charge.
(4) The Fund has adopted separate Distribution Plans for its Class B and its
Class C shares in accordance with Rule 12b-1 under the 1940 Act, which
provide that it will pay distribution/service fees aggregating up to (but
not necessarily all of) 1.00% per annum of the average daily net assets
attributable to the Class B shares under the Class B Distribution Plan and
the Class C shares under the Class C Distribution Plan (see "Distribution
Plans"). Except in the case of the first year service fee, the 0.25% per
annum service fee is currently reduced to 0.15% per annum of the average
daily net assets of the Fund attributable to Class B shares for an
indefinite period. This reduction may be amended or terminated at any time
without notice to shareholders. After a substantial period of time,
distribution expenses paid under these Plans, together with any CDSC payable
upon redemption of Class B shares, may total more than the maximum sales
charge that would have been permissible if imposed entirely as an initial
sales charge.
CLSC-16MGL-7/94/123M
<PAGE>
(5) Except for the shareholder servicing agent fee component, "Other Expenses"
is based on Class A expenses incurred during the fiscal year ended December
31, 1993. The shareholder servicing agent fee component of "Other Expenses"
is a predetermined percentage based on the Fund's net assets attributable to
each class.
(6) Absent any reductions, "Total Operating Expenses" would have been 0.96% for
Class A shares.
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):
PERIOD CLASS A CLASS B CLASS C
- ------ ------- ------- -------
(1)
1 year ................... $ 34 $ 58 $ 18 $ 17
3 years .................. 52 86 56 54
5 years .................. 71 116 96 93
10 years ................. 128 185(2) 185(2) 202
- ----------
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after
purchase; therefore, years nine and ten reflect Class A expenses.
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. More complete descriptions of the following Fund
expenses are set forth in the following sections of the Prospectus: (i) varying
sales charges on share purchases--"Purchases"; (ii) varying CDSCs-- "Purchases";
(iii) management fees--"Investment Adviser"; and (iv) Rule 12b-1 (i.e.,
distribution plan) fees--"Distribution Plans."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
The Fund offers three classes of shares which bear sales charges and
distribution fees in different forms and amounts:
CLASS C SHARES: Class C shares are offered at net asset value without an
initial sales charge or a CDSC. Class C shares do not
convert to any other class of shares of the Fund.
GENERAL: Securities dealers and other financial institutions may
receive different compensation with respect to sales of
Class A, Class B and Class C shares.
<PAGE>
EXCHANGES
Subject to the requirements regarding exchanges set forth in the Prospectus,
Class C shares may be exchanged for shares of the same class of any of the other
MFS Funds (if available for sale) and for shares of MFS Money Market Fund at net
asset value.
REDEMPTIONS AND REPURCHASES
REDEMPTION BY CHECK
Only Class A and Class C shares may be redeemed by check. A shareholder
(except a "$3 Million Shareholder") owning Class A or Class C shares of the Fund
may elect to have a special account with State Street Bank and Trust Company
(the "Bank") for the purpose of redeeming Class A or Class C shares from his or
her account by check. The Bank will provide each Class A and Class C
shareholder, upon request, with forms of checks drawn on the Bank. Shareholders
wishing to avail themselves of this redemption by check privilege should so
request on their Account Application, must execute signature cards (for
additional information, see the Account Application) with signature guaranteed
in the manner set forth under the caption "Signature Guarantee", and must return
any Class A or Class C share certificates issued to them. SHAREHOLDERS WHO
PURCHASE CLASS A OR CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS OR
CASHIER'S CHECKS) MAY WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY HAVE
BEEN ON THE FUND'S BOOKS FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO THE BANK
FOR PAYMENT, A SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL BE REDEEMED
TO COVER THE AMOUNT OF THE CHECK, ANY APPLICABLE CDSC (IN THE CASE OF CLASS A
SHARES) AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD. IF THE AMOUNT
OF THE CHECK, PLUS ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED
TO BE WITHHELD, IS GREATER THAN THE VALUE OF THE CLASS A OR CLASS C SHARES HELD
IN THE SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND THE
SHAREHOLDER MAY BE SUBJECT TO EXTRA CHARGES. See the Prospectus for further
information on Redemption by Check.
DISTRIBUTIONS
Distributions paid by the Fund with respect to Class A shares will generally
be greater than those paid with respect to Class B and Class C shares because
expenses attributable to Class B and Class C shares will generally be higher.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has three classes of shares entitled Class A, Class B and Class C
Shares of Beneficial Interest (without par value).
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A, Class B
and Class C shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (the "Rule"), after having concluded that there is a reasonable
likelihood that the plans would benefit the Fund and its shareholders.
CLASS C DISTRIBUTION PLAN. The Class C Distribution Plan provides that the
Fund will pay FSI a distribution fee of up to 0.75% per annum of the Fund's
average daily net assets attributable to Class C shares and will pay FSI a
service fee of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class C shares (which FSI will in turn pay to securities dealers
which enter into a sales agreement with FSI at a rate of up to 0.25% per annum
of the Fund's daily net assets attributable to Class C shares owned by investors
for whom that securities dealer is the holder or dealer of record).
The distribution/service fees attributable to Class C shares are designed to
permit an investor to purchase such shares through a broker-dealer without the
assessment of an initial sales charge or a CDSC while allowing FSI to compensate
broker dealers in connection with the sale of such shares.
The service fee is intended to be additional consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. FSI or its affiliates are entitled to retain all service fees
payable under the Class C Distribution Plan with respect to accounts for which
there is no dealer of record as partial consideration for personal services
and/or account maintenance services performed by FSI or its affiliates for
shareholder accounts.
The purpose of the distribution payments paid to FSI under the Class C
Distribution Plan is to compensate FSI for its distribution services to the
Fund. Distribution fee payments under the Plan will be used by FSI to pay
securities dealers a distribution fee in an amount equal on an annual basis to
0.75% of the Fund's average daily net assets attributable to Class C shares
owned by investors for whom that securities dealer is the holder or dealer of
record. (Therefore, the total amount of distribution/service fees paid to a
dealer on an annual basis is 1.00% of the Fund's average daily net assets
attributable to Class C shares owned by investors for whom the securities dealer
is the holder or dealer of record.) FSI also pays expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution related
expenses, including, without limitation, the compensation of personnel and all
costs of travel, office expense and equipment. Since FSI's compensation is not
directly tied to its expenses, the amount of compensation received by FSI during
any year may be more or less than its actual expenses. For this reason, this
type of distribution fee arrangement is characterized by the staff of the SEC as
being of the "compensation" variety. However, the Fund is not liable for any
expenses incurred by FSI in excess of the amount of compensation it receives.
Certain banks and other financial institutions that have agency agreements with
FSI will receive agency transaction and service fees that are the same as
distribution and service fees paid to dealers. Fees payable under the Class C
Distribution Plan are charged to, and therefore reduce, income allocated to
Class C shares.
In accordance with the Rule, all agreements relating to the Class C
Distribution Plan entered into between the Fund or FSI and other organizations
must be approved by the Fund's Board of Trustees, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Class C
Distribution Plan or in any agreement related to such Plan ("Class C
Distribution Plan Qualified Trustees"). The Class C Distribution Plan further
provides that the selection and nomination of Class C Distribution Plan
Qualified Trustees shall be committed to the discretion of the non-interested
Trustees then in office. The Class C Distribution Plan will remain in effect
until August 1, 1994, and will continue in effect thereafter only if such
continuance is specifically approved at least annually by vote of both the
Trustees and a majority of Class C Distribution Plan Qualified Trustees. The
Class C Distribution Plan requires that the Fund and FSI shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under such Plan. The Class C
Distribution Plan may be terminated at any time by vote of a majority of the
Class C Distribution Plan Qualified Trustees or by vote of the holders of a
majority of the Class C shares of the Fund (as defined in "Investment
Restrictions" in the Statement of Additional Information). The Class C
Distribution Plan may not be amended to increase materially the amount of
permitted distribution expenses without the approval of Class C shareholders and
may not be materially amended in any case without a vote of the majority of both
the Trustees and the Class C Distribution Plan Qualified Trustees. No Trustee
who is not an interested person of the Fund has any financial interest in the
Class C Distribution Plan or in any related agreement.
DISTRIBUTOR
CLASS C SHARES: FSI acts as agent in selling Class C shares of the Fund to
dealers. The public offering price of Class C shares is their net asset value
next computed after the sale.
SHAREHOLDER SERVICES
LETTER OF INTENT -- Purchases of Class C shares will apply toward the
completion of a Letter of Intent with respect to Class A shares. See the
Prospectus for further information on the Letter of Intent.
RIGHT OF ACCUMULATION -- The current offering price value of an investor's
holdings of Class C shares will apply toward cumulative quantity discounts on
purchases of Class A shares. See the Prospectus for further information on the
Right of Accumulation.
MANAGEMENT OF THE FUND
As of May 1, 1994, all Trustees and officers as a group owned less than 1%
of the Fund's Class A or Class B shares outstanding on that date.
As of May 2, 1994, Merrill Lynch Pierce Fenner & Smith Inc. MFBFX 98437,
P.O. Box 45286, Jacksonville, FL 32232-5286 was the record owner of
approximately 5.39% and 5.09% of the outstanding Class A and Class B shares of
the Fund, respectively.
FEDERAL CREDIT UNIONS
The Fund will comply with all investment limitations applicable to Federal
Credit Unions ("FCUs"), including the requirement that a FCU may only purchase
collateralized mortgage obligations which would meet the high risk securities
test of Part 703 of the National Credit Union Administration Rules and
Regulations or would be held solely to reduce interest rate risk.
The second paragraph under "Investment Objective and Policies" in the
Statement of Additional Information is amended and restated as follows: "The
Fund may invest in collateralized mortgage obligations, multiclass pass through
securities issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities and in zero coupon Government Securities (as
defined in the Prospectus)."
THE DATE OF THIS SUPPLEMENT IS AUGUST 1, 1994
<PAGE>
MFS(R) GOVERNMENT LIMITED MATURITY FUND
SUPPLEMENT TO THE CURRENT PROSPECTUS
In order to make the Fund an eligible investment for Federal Credit Unions
("FCUs") and national banks, the Fund will invest only in those Government
Securities (as defined in the Prospectus) that are eligible for investment by
such institutions without limitation, and will also generally be managed so as
to qualify as an eligible investment for such institutions. The Fund will comply
with all investment limitations applicable to FCUs including the requirement
that a FCU may only purchase Collateralized Mortgage Obligations (as described
in the Prospectus) which would be eligible under the high risk securities test
of Part 703 of the National Credit Union Administration Rules and Regulations.
THE DATE OF THIS SUPPLEMENT IS
OCTOBER 28, 1994.
LNC099 MGL-16FCU-11/94/43M
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MFS(R) TOTAL RETURN FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) GROWTH OPPORTUNITIES FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) EMERGING GROWTH FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) MANAGED SECTORS FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) UTILITIES FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) WORLD TOTAL RETURN FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) BOND FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) LIMITED MATURITY FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MORTGAGE FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) GOVERNMENT LIMITED MATURITY FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) GOVERNMENT SECURITIES FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) MUNICIPAL LIMITED MATURITY FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) MUNICIPAL BOND FUND
MFS(R) WORLD GROWTH FUND MFS(R) MUNICIPAL INCOME FUND
MFS(R) OTC FUND MFS(R) RESEARCH FUND
MFS(R) MUNICIPAL HIGH INCOME FUND MFS(R) WORLD ASSET ALLOCATION FUND
MASSACHUSETTS INVESTORS TRUST
</TABLE>
SUPPLEMENT TO THE CURRENT PROSPECTUS
During the period from January 3, 1995 through April 28, 1995 (the "Sales
Period") (unless extended by MFS Fund Distributors, Inc. ("MFD"), the funds'
principal underwriter), MFD will pay A. G. Edwards and Sons, Inc., ("A. G.
Edwards") 100% of the applicable sales charge on sales of Class A shares of each
of the funds listed above (the "Funds") sold for investment in Individual
Retirement Accounts ("IRAs") (excluding SEP-IRAs). In addition, MFD will pay A.
G. Edwards an additional commission equal to 0.50% of the net asset value of all
of the Class B shares of the Funds sold by A. G. Edwards during the Sales
Period.
THE DATE OF THIS SUPPLEMENT IS JANUARY 3, 1995.
MFS-16AG-1/95/3.5M
<PAGE>
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS CAPITAL GROWTH FUND
MFS EMERGING GROWTH FUND
MFS GOLD & NATURAL RESOURCES FUND
MFS GROWTH OPPORTUNITIES FUND
MFS MANAGED SECTORS FUND
MFS OTC FUND
MFS RESEARCH FUND
MFS VALUE FUND
MFS TOTAL RETURN FUND
MFS UTILITIES FUND
MFS BOND FUND
MFS GOVERNMENT MORTGAGE FUND
MFS GOVERNMENT SECURITIES FUND
MFS HIGH INCOME FUND
MFS INTERMEDIATE INCOME FUND
MFS STRATEGIC INCOME FUND
MFS GOVERNMENT LIMITED MATURITY FUND
MFS LIMITED MATURITY FUND
MFS WORLD EQUITY FUND
MFS WORLD GOVERNMENTS FUND
MFS WORLD GROWTH FUND
MFS WORLD TOTAL RETURN FUND
MFS WORLD ASSET ALLOCATION FUND
MFS CASH RESERVE FUND
MFS GOVERNMENT MONEY MARKET FUND
MFS MONEY MARKET FUND
SUPPLEMENT TO THE CURRENT PROSPECTUS
Class A shares of the Fund may be purchased at net asset value by
retirement plans whose third party administrators have entered into an agreement
with MFS Fund Distributors, Inc. ("MFD") or one or more of its affiliates to
perform certain administrative services, subject to certain operational
requirements specified from time to time by MFD or its affiliates.
In lieu of the sales commission and service fees normally paid by MFD to
broker-dealers of record as described in the Prospectus, MFD has agreed to pay
Bear, Stearns & Co. Inc. the following amounts with respect to Class A shares of
the Fund purchased through a special retirement plan program offered by a third
party administrator: (i) an amount equal to 0.05% per annum of the average daily
net assets invested in shares of the Fund pursuant to such program, and (ii) an
amount equal to 0.20% of the net asset value of all new purchases of shares of
the Fund made through such program, subject to a refund in the event that such
shares are redeemed within 36 months.
THE DATE OF THIS SUPPLEMENT IS FEBRUARY 1, 1995.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MFS(R) MANAGED SECTORS FUND MFS(R) MUNICIPAL LIMITED MATURITY FUND
MFS(R) CASH RESERVE FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MFS(R) WORLD ASSET ALLOCATION FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) EMERGING GROWTH FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) MUNICIPAL HIGH INCOME FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) MONEY MARKET FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MONEY MARKET FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) MUNICIPAL BOND FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) OTC FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) TOTAL RETURN FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) RESEARCH FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) WORLD TOTAL RETURN FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) UTILITIES FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) GROWTH OPPORTUNITIES FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) GOVERNMENT MORTGAGE FUND
MFS(R) WORLD GROWTH FUND MFS(R) GOVERNMENT SECURITIES FUND
MFS(R) BOND FUND MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS(R) LIMITED MATURITY FUND MFS(R) GOVERNMENT LIMITED MATURITY FUND
MASSACHUSETTS INVESTORS TRUST
</TABLE>
SUPPLEMENT TO THE CURRENT PROSPECTUS
Effective as of January 1, 1995, MFS Fund Distributors, Inc. ("MFD") has
replaced MFS Financial Services, Inc. ("FSI") as the Fund's distributor. Both
MFD and FSI are wholly-owned subsidiaries of Massachusetts Financial Services
Company ("MFS"), the Fund's investment adviser.
-----------------------------------------------
Class A shares of the Fund may be purchased at net asset value by certain
retirement plans subject to the Employee Retirement Income Security Act of 1974,
as amended, subject to the following:
(i) The sponsoring organization must demonstrate to the satisfaction of
MFD that either (a) the employer has at least 25 employees or (b) the
aggregate purchases by the retirement plan of Class A shares of the
Funds will be in an amount of at least $250,000 within a reasonable
period of time, as determined by MFD in its sole discretion; and
(ii) A contingent deferred sales charge of 1% will be imposed on such
purchases in the event of certain redemption transactions within 12
months following such purchases.
-----------------------------------------------
Class A shares may be sold at net asset value, subject to appropriate
documentation, through a dealer where the amount invested represents redemption
proceeds from a registered open-end management investment company not
distributed or managed by MFD or its affiliates if: (i) the redeemed shares were
subject to an initial sales charge or a deferred sales charge (whether or not
actually imposed); (ii) such redemption has occurred no more than 90 days prior
to the purchase of Class A shares of the Fund; and (iii) the Fund, MFD or its
affiliates have not agreed with such company or its affiliates, formally or
informally, to sell Class A shares at net asset value or provide any other
incentive with respect to such redemption and sale.
-----------------------------------------------
Class A shares of the Fund may be purchased at net asset value by
retirement plans whose third party administrators have entered into an
administrative services agreement with MFD or one or more of its affiliates to
perform certain administrative services, subject to certain operational
requirements specified from time to time by MFD or one or more of its
affiliates.
-----------------------------------------------
(Over)
<PAGE>
Class A shares of the Fund (except of the MFS municipal bond funds
identified above) may be purchased at net asset value by retirement plans
qualified under Section 401(k) of the Code through certain broker-dealers and
other financial institutions which have entered into an agreement with MFD which
includes certain minimum size qualifications for such retirement plans and
provides that the broker-dealer or other financial institution will perform
certain administrative services with respect to the plan's account.
-----------------------------------------------
The CDSC on Class A and Class B shares will be waived upon redemption by a
retirement plan where the redemption proceeds are used to pay expenses of the
retirement plan or certain expenses of participants under the retirement plan
(e.g., participant account fees), provided that the retirement plan's sponsor
subscribes to the MFS Fundamental 401(k) Plan(sm) or another similar
recordkeeping system made available by MFS Service Center, Inc. (the
"Shareholder Servicing Agent").
-----------------------------------------------
The CDSC on Class A and B shares will be waived upon the transfer of
registration from shares held by a retirement plan through a single account
maintained by the Shareholder Servicing Agent to multiple Class A and B share
accounts, respectively, maintained by the Shareholder Servicing Agent on behalf
of individual participants in the retirement plan, provided that the retirement
plan's sponsor subscribes to the MFS Fundamental 401(k) Plan(sm) or another
similar recordkeeping system made available by the Shareholder Servicing Agent.
-----------------------------------------------
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except that, with respect to transfers of registration to an IRA
rollover account, the CDSC will be waived if the shares being reregistered would
have been eligible for a CDSC waiver had they been redeemed.
-----------------------------------------------
The current Prospectus discloses that "Class A shares of the Fund may also
be purchased at net asset value where the purchase is in an amount of $3 million
or more and where the dealer and FSI enter into an agreement in which the dealer
agrees to return any commission paid to it on the sale (or a pro rata portion
thereof) as described above if the shareholder redeems his or her shares within
one year of purchase. (Shareholders who purchase shares at NAV pursuant to these
conditions are called ("$3 Million Shareholders"). This policy is terminated
effective as of the date of this Supplement and the above-referenced language,
and all references to "$3 Million Shareholders," are deleted from the
Prospectus.
-----------------------------------------------
From time to time, MFD may pay dealers 100% of the applicable sales charge
on sales of Class A shares of certain specified Funds sold by such dealer during
a specified sales period. In addition, MFD or its affiliates may, from time to
time, pay dealers an additional commission equal to 0.50% of the net asset value
of all of the Class B shares of certain specified Funds sold by such dealer
during a specified sales period.
-----------------------------------------------
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to reinvest all dividends
and other distributions reinvested in additional shares.
-----------------------------------------------
From time to time, MFS may direct certain portfolio transactions to
broker-dealer firms which, in turn, have agreed to pay a portion of the Fund's
operating expenses (e.g., fees charged by the custodian of the Fund's assets).
THE DATE OF THIS SUPPLEMENT IS JANUARY 13, 1995.
MFS-16-1/95/605M
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MASSACHUSETTS INVESTORS TRUST MFS(R) WORLD TOTAL RETURN FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS(R) MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) MUNICIPAL HIGH INCOME FUND
MFS(R) EMERGING GROWTH FUND MFS(R) MUNICIPAL INCOME FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MFS(R) GROWTH OPPORTUNITIES FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) MANAGED SECTORS FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) OTC FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) RESEARCH FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) TOTAL RETURN FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) UTILITIES FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) BOND FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MORTGAGE FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) GOVERNMENT SECURITIES FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) STRATEGIC INCOME FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) GOVERNMENT LIMITED MATURITY FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) LIMITED MATURITY FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) MUNICIPAL LIMITED MATURITY FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) WORLD ASSET ALLOCATION FUND
MFS(R) WORLD GROWTH FUND
</TABLE>
SUPPLEMENT TO THE CURRENT PROSPECTUS
During the period from February 1, 1995 through April 14, 1995 (the "Sales
Period") (unless extended by MFS Fund Distributors, Inc. ("MFD"), the Funds'
distributor), MFD will pay Corelink Financial Inc. ("Corelink") an additional
commission equal to 0.10% of the gross commissonable sales for Class A shares
and Class B shares and the net asset value for Class C shares (if applicable) of
the Funds sold by Corelink during the Sales Period.
THE DATE OF THIS SUPPLEMENT IS FEBRUARY 1, 1995.
MFS-16CL-2/95/5M
<PAGE>
PROSPECTUS
MFS(R) GOVERNMENT May 1, 1994
LIMITED MATURITY FUND Class A Shares of Beneficial Interest
(A Member of the MFS Family of Funds(R) Class B Shares of Beneficial Interest
- --------------------------------------------------------------------------------
Page
----
1. The Fund ................................................................ 2
2. Expense Summary ......................................................... 2
3. Condensed Financial Information ......................................... 4
4. Investment Objective and Policies ....................................... 5
5. Management of the Fund .................................................. 8
6. Information Concerning Shares of the Fund ............................... 9
Purchases ............................................................ 9
Exchanges ............................................................ 14
Redemptions and Repurchases .......................................... 14
Distribution Plans ................................................... 17
Distributions ........................................................ 18
Tax Status ........................................................... 18
Net Asset Value ...................................................... 19
Description of Shares, Voting Rights and Liabilities ................. 19
Performance Information .............................................. 20
7. Shareholder Services .................................................... 20
Appendix A ........................................................... 23
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MFS GOVERNMENT LIMITED MATURITY FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
The investment objective of MFS Government Limited Maturity Fund (the "Fund") is
to preserve capital and provide high current income (compared to a portfolio
entirely invested in money market instruments). The Fund will seek to achieve
this investment objective by investing in obligations issued or guaranteed by
the U.S. Government, its agencies, authorities or instrumentalities. Under
normal market conditions, substantially all of the securities in the Fund's
portfolio will have remaining maturities of five years or less. See "Investment
Objective and Policies." The minimum initial investment generally is $1,000 per
account (see "Purchases").
The investment adviser and distributor are Massachusetts Financial Services
Company and MFS Financial Services, Inc., respectively, both of which are
located at 500 Boylston Street, Boston, Massachusetts 02116.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information, dated May 1, 1994, which contains more detailed information about
the Fund and is incorporated into this Prospectus by reference. See page 22 for
a further description of the information set forth in the Statement of
Additional Information. A copy of the Statement of Additional Information may be
obtained without charge by contacting the Shareholder Servicing Agent (see back
cover for address and phone number).
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
1. THE FUND
MFS(R) Government Limited Maturity Fund (the "Fund") is an open-end, diversified
management investment company which was originally organized as a business trust
under the laws of The Commonwealth of Massachusetts in 1985 and reorganized in
July, 1988. Shares of the Fund are sold continuously to the public and the Fund
uses the proceeds to buy securities (issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities)
for its portfolio. Shares of the Fund are not government guaranteed and will
fluctuate in value, whereas bank certificates of deposit are insured and offer a
fixed return and U.S. Treasury notes guarantee a return of principal and an
income return if held to maturity. Two classes of shares of the Fund are
currently offered to the general public. Class A shares are offered at net asset
value plus an initial sales charge (or a contingent deferred sales charge (a
"CDSC") in the case of certain purchases of $1 million or more) and are subject
to a Distribution Plan providing for a distribution fee and a service fee. Class
B shares are offered at net asset value without an initial sales charge but
subject to a CDSC and a Distribution Plan providing for a distribution fee and a
service fee which are greater than the Class A distribution fee and service fee;
Class B shares will convert to Class A shares approximately eight years after
purchase.
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. Massachusetts Financial Services Company, a Delaware corporation ("MFS"
or the "Adviser"), is the Fund's investment adviser. A majority of the Trustees
of the Fund are not affiliated with the Adviser. The Adviser is responsible for
the management of the Fund's assets and manages the Fund's portfolio from day to
day in accordance with its investment objective and policies. The selection of
investments and the way they are managed depend upon the conditions and trends
in the economy and the financial market places. The Fund also offers to buy back
(redeem) its shares from its shareholders at any time at net asset value, less
the applicable CDSC.
2. EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B
------- -------
Maximum Initial Sales Charge Imposed on
Purchases of Fund Shares (as a percentage
of public offering price) ..................... 2.50% 0.00%
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable).............. See Below(1) 4.00%(2)
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS):(3)
Management Fees (after applicable fee
reduction)(4) 0.40% 0.40%
Rule 12b-1 Fees (after applicable fee reduction).. 0.15%(5) 1.00%(6)
Other Expenses ................................... 0.31% 0.38%(7)
----- -----
Total Operating Expenses (after applicable fee
reduction)(8) ................................ 0.86% 1.78%
- -------------
(1) Purchases of $1 million or more are not subject to an initial sales charge;
however, a CDSC of 1% will be imposed on such purchases in the event of
certain redemption transactions within 12 months following such purchases
(see "Purchases").
(2) Shares purchased prior to September 1, 1993 will be subject to a CDSC of 5%
in the event of a redemption within the first year after purchase.
(3) Except in the case of the management fee (see footnote 4), for Class A
shares, percentages are based on expenses incurred during the fiscal year
ended December 31, 1993. For Class B shares, which were initially offered on
September 7, 1993, percentages are based on Class A fees and expenses
adjusted for class specific expenses incurred during such partial fiscal
year.
(4) Effective April 1, 1994, the Fund's Advisory Agreement has been amended to
establish the management fee as the lesser of (i) 0.40% of the Fund's
average daily net assets or (ii) 0.38% of the Fund's average daily net
assets plus 5.36% of the Fund's gross income (i.e., income other than from
the sale of securities, and short term gains from futures transactions), in
each case on an annualized basis for the Fund's then-current fiscal year.
<PAGE>
(5) The Fund has adopted a Distribution Plan for its Class A shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to the Class A
shares (see "Distribution Plans"). Currently the 0.10% distribution/service
fee paid to MFS Financial Services, Inc. ("FSI") is being waived. FSI will
not accept future payments of this fee unless it first obtains the approval
of the Board of Trustees. Commencing as of May 1, 1993, service fee payments
have been reduced to 0.15% of the average daily net assets of the Fund
attributable to the Class A shares for an indefinite period. This reduction
may be amended or terminated at any time without notice to shareholders.
After a substantial period of time, distribution expenses paid under this
Plan, together with the initial sales charge, may total more than the
maximum sales charge that would have been permissible if imposed entirely as
an initial sales charge.
(6) The Fund has adopted a Distribution Plan for its Class B shares in
accordance with Rule 12b-1 under the 1940 Act, which provides that it will
pay distribution/service fees aggregating up to 1.00% per annum of the
average daily net assets attributable to the Class B shares (see
"Distribution Plans"). Except in the case of the first year service fee,
the 0.25% per annum service fee is currently reduced to 0.15% per annum of
the average daily net assets of the Fund attributable to Class B shares for
an indefinite period. This reduction may be amended or terminated at any
time without notice to shareholders. After a substantial period of time,
distribution expenses paid under this Plan, together with any CDSC, may
total more than the maximum sales charge that would have been permissible
if imposed entirely as an initial sales charge.
(7) Based on Class A expenses incurred during the fiscal year ended December
31,1993, except for the shareholder servicing agent fee component of "Other
Expenses".
(8) Absent any reductions, "Total Operating Expenses" would have been 1.33% for
Class A shares and 2.05% for Class B shares, respectively.
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):
PERIOD CLASS A CLASS B
- ------ ------- -------
(1)
1 year ...................... $ 34 $ 68 $ 18
3 years ..................... 52 86 56
5 years ..................... 71 116 96
10 years .................... 128 185(2) 185(2)
- --------------
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after
purchase; therefore, years nine and ten reflect Class A expenses.
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. More complete descriptions of the following expenses are set
forth in the following sections of this Prospectus: (i) varying sales charges on
share purchases--"Purchases"; (ii) varying CDSCs--"Purchases"; (iii) management
fee--"Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution plan)
fees--"Distribution Plans."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
<PAGE>
3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders, which is
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Coopers & Lybrand, independent accountants, for the
fiscal years ended February 28, 1989 and 1990, and December 31, 1990, 1991, 1992
and 1993, as experts in accounting and auditing. For the fiscal years ended
after December 31, 1993, Ernst & Young will audit the Fund's financial
statements and will issue reports on those future fiscal years.
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, FEBRUARY 28, DECEMBER 31,
--------------------------------------- ---------------- -------
1993 1992 1991 1990<F1> 1990 1989<F2> 1993<F5>
--------------------------------------- ---------------- -------
CLASS A CLASS B
- --------------------------------------------------------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value-beginning of period $ 8.98 $ 9.06 $ 9.09 $ 9.33 $ 9.51 $ 9.63 $ 9.17
------ ------ ------ ------ ------ ------ ------
Income from investment operations --
Net investment income $ 0.52 $ 0.49 $ 0.52 $ 0.53 $ 0.69 $ 0.23 $ 0.12
Net realized and unrealized gain (loss)
on investments 0.10 0.07 0.21 -- 0.10 (0.11) (0.17)
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.62 $ 0.56 $ 0.73 $ 0.53 $ 0.79 $ 0.12 $(0.05)
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income $(0.51) $(0.45) $(0.49) $(0.48) $(0.67) $(0.17) $(0.11)
From net realized gain on investments (0.10) (0.14) -- -- (0.14) (0.02) (0.03)
From paid-in capital -- (0.05) (0.27) (0.29) (0.16) (0.05) --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.61) $(0.64) $(0.76) $(0.77) $(0.97) $(0.24) $(0.14)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 8.99 $ 8.98 $ 9.06 $ 9.09 $ 9.33 $ 9.51 $ 8.98
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN<F4> 7.00%<F6> 6.51% 8.44% 7.39%<F3> 8.43% 3.02%<F3> (1.54)%<F3><F6>
RATIOS (TO AVERAGE DAILY NET ASSETS)/SUPPLEMENTAL DATA:
Expenses 1.14%<F6> 1.38% 1.33% 1.40%<F3> 1.43% 1.41%<F3> 1.83%<F3><F6>
Net investment income 5.62%<F6> 5.50% 5.89% 7.01%<F3> 7.16% 6.97%<F3> 4.58%<F3><F6>
PORTFOLIO TURNOVER 247% 391% 1,256% 845% 615% 170% 247%
NET ASSETS AT END OF PERIOD (000 OMITTED) $345,597 $296,788 $365,644 $427,849 $350,011 $117,584 $11,268
<FN>
<F1> For the ten months ended December 31, 1990.
<F2> For the period from September 26, 1988 (commencement of investment
operations) to February 28, 1989.
<F3> Annualized.
<F4> Total returns for Class A shares do not include the sales charge. If the
charge had been included, the results would have been lower.
<F5> For the period from the commencement of offering of Class B shares,
September 7, 1993, to December 31, 1993.
<F6> The investment adviser and the distributor did not impose a portion of
their management fee and distribution fee, respectively, for the period
indicated. If these fees had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment income $ 0.50 -- -- -- -- -- $0.11
RATIOS (TO AVERAGE DAILY NET ASSETS):
Expenses 1.34% -- -- -- -- -- 2.60%<F3>
Net investment income 5.42% -- -- -- -- -- 3.82%<F3>
</TABLE>
Further information about the performance of the Fund is contained in the Fund's
Annual Report to shareholders, which can be obtained from the Shareholder
Servicing Agent (see back cover for address and phone number) without charge.
<PAGE>
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE--The investment objective of the Fund is to preserve
capital and provide high current income (compared to a portfolio entirely
invested in money market instruments). Any investment involves risk and there
can be no assurance that the Fund will achieve its objective.
INVESTMENT POLICIES--The Fund seeks to achieve its objective by investing in
obligations issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities ("Government Securities"). Under normal market
conditions, substantially all of the securities in the Fund's portfolio will
have remaining maturities of five years or less.
For purposes of the foregoing investment policy, securities having a certain
maturity will be deemed to include securities with an equivalent "duration" of
such securities. "Duration" is a commonly used measure of the longevity of a
debt instrument that takes into account the full stream of payments received on
the instrument, including both interest and principal payments, based on their
present values. A debt instrument's duration is derived by discounting principal
and interest payments to their present value using the instrument's current
yield to maturity and taking the dollar-weighted average time until those
payments will be received. Contractual rights to dispose of a security, call
options and prepayment assumptions may be considered in calculating duration
because such rights limit the period during which the Fund bears a market risk
with respect to the security.
U.S. GOVERNMENT SECURITIES: The Government Securities in which the Fund intends
to invest include (i) U.S. Treasury obligations, which differ only in their
interest rates, maturities and times of issuance: U.S. Treasury bills
(maturities of one year or less) and U.S. Treasury notes (maturities of one to
ten years), all of which are backed by the full faith and credit of the United
States; and (ii) obligations issued or guaranteed by U.S. Government agencies,
authorities or instrumentalities, some of which are backed by the full faith and
credit of the U.S. Treasury, e.g., direct pass-through certificates of the
Government National Mortgage Association ("GNMA"); some of which are supported
by the right of the issuer to borrow from the U.S. Government, e.g., obligations
of Federal Home Loan Banks; and some of which are backed only by the credit of
the issuer itself, e.g., obligations of the Student Loan Marketing Association
("SLMA"). For a description of obligations issued or guaranteed by U.S.
Government agencies, authorities or instrumentalities, see Appendix A.
Government Securities do not generally involve the credit risks associated with
other types of fixed income securities, although, as a result, the yields
available from Government Securities are generally lower than the yields
available from corporate interest-bearing securities. Like other fixed income
securities, however, the values of Government Securities change as interest
rates fluctuate. THEREFORE, THE NET ASSET VALUE OF THE SHARES OF AN OPEN-END
INVESTMENT COMPANY SUCH AS THE FUND, WHICH INVESTS IN FIXED INCOME SECURITIES,
CHANGES AS THE GENERAL LEVELS OF INTEREST RATES FLUCTUATE. WHEN INTEREST RATES
DECLINE, THE VALUE OF A PORTFOLIO INVESTED IN SUCH SECURITIES CAN BE EXPECTED TO
RISE. CONVERSELY, WHEN INTEREST RATES RISE, THE VALUE OF A PORTFOLIO INVESTED IN
SUCH SECURITIES CAN BE EXPECTED TO DECLINE. Although changes in the value of the
Fund's portfolio securities subsequent to their acquisition are reflected in the
net asset value of shares of the Fund, such changes will not affect the income
received by the Fund from such securities. While the Fund seeks to maintain a
relatively high, stable dividend, no specific level of income or yield
differential can ever be assured since available yields vary over time.
When and if available, Government Securities may be purchased at a discount from
face value. However, the Fund does not intend to hold such securities to
maturity for the purpose of achieving potential capital gains, unless current
yields on these securities remain attractive.
Government Securities that the Fund may invest in also include zero coupon
Government Securities. The Fund will not invest in zero coupon Government
Securities with maturities that exceed 10 years and, under normal market
conditions, will not invest in zero coupon Government Securities with remaining
maturities that exceed five years. Zero coupon Government Securities are debt
obligations which are issued or purchased at a significant discount from face
value. The discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first interest payment
date at a rate of interest reflecting the market rate of the security at the
time of issuance. Zero coupon Government Securities do not require the periodic
payment of interest. Such investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of such cash. Such
investments may experience greater volatility in market value than Government
Securities which make regular payments of interest. The Fund will accrue income
on such investments for tax and accounting purposes, as required, which is
distributable to shareholders and which, because no cash is received at the time
of accrual, may require the liquidation of other portfolio securities to satisfy
the Fund's distribution obligations.
In order to make the Fund an eligible investment for federal credit unions and
national banks, the Fund will invest in Government Securities that are eligible
for investment by such institutions without limitation, and will generally be
managed so as to qualify as an eligible investment for such institutions.
MORTGAGE PASS-THROUGH SECURITIES: The Fund may invest in mortgage pass-through
securities that are Government Securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgage loans. Monthly payments
of interest and principal by the individual borrowers on mortgages are passed
through to the holders of the securities (net of fees paid to the issuer or
guarantor of the securities) as the mortgages in the underlying mortgage pools
are paid off. The average lives of mortgage pass-throughs are variable when
issued because their average lives depend on prepayment rates. The average life
of these securities is likely to be substantially shorter than their stated
final maturity as a result of unscheduled principal prepayments. Prepayments on
underlying mortgages result in a loss of anticipated interest, and all or part
of a premium, if any has been paid, and the actual yield (or total return) to
the Fund may be different than the quoted yield on the securities. Mortgage
prepayments generally increase with falling interest rates and decrease with
rising interest rates. Like other fixed income securities, when interest rates
rise the value of a mortgage pass-through security generally will decline;
however, when interest rates are declining, the value of mortgage pass-through
securities with prepayment features may not increase as much as that of other
fixed income securities. For a further description of mortgage pass-through
securities, see the Statement of Additional Information.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs," which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities (such collateral collectively herein referred
to as "Mortgage Assets"). Mortgage Assets underlying CMOs purchased by the Fund
must be Government Securities. The Fund may also invest a portion of its assets
in multiclass pass-through securities which are interests in a trust composed of
Mortgage Assets. The Fund may only invest in CMOs and multiclass pass-through
securities which are issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities.
In a CMO, a series of bonds or certificates is usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates, resulting in a loss of all
or part of the premium, if any has been paid.
The Fund may also invest in parallel pay CMOs and Planned Amortization Class
CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of
principal on each payment date to more than one class. PAC Bonds generally
require payments of a specified amount of principal on each payment date. PAC
Bonds are always parallel pay CMOs with the required principal payment on such
securities having the highest priority after interest has been paid to all
classes.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Fund's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize any risk.
"WHEN-ISSUED" SECURITIES: Some Government Securities may be purchased on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
will be delivered to the Fund at a future date usually beyond customary
settlement time. The commitment to purchase an obligation for which payment will
be made on a future date may be deemed a separate security. Although the Fund is
not limited as to the amount of Government Securities for which it has such
commitments, it is expected that under normal circumstances not more than 30% of
the Fund's total assets will be committed to such purchases. The Fund does not
pay for such obligations until received and does not start earning interest on
the obligations until the contractual settlement date. The Fund will establish a
segregated account consisting of cash, short-term money market instruments or
Government Securities equal to the amount of its commitments to purchase
securities issued on such basis.
MORTGAGE "DOLLAR ROLL" TRANSACTIONS: The Fund may enter into mortgage "dollar
roll" transactions with selected banks and broker-dealers pursuant to which the
Fund sells mortgage-backed securities for delivery in the future (generally
within 30 days) and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date. The Fund
will only enter into covered rolls. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction.
LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. Such loans will usually be made only to member banks of
the Federal Reserve System and member firms (and subsidiaries thereof) of the
New York Stock Exchange and would be required to be secured continuously by
collateral in cash, cash equivalents, or Government Securities maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Fund will continue to collect the equivalent of interest on the
securities loaned and will also receive either interest (through investment of
cash collateral) or a fee (if the Collateral is Government Securities).
------------------------------
For additional information concerning the use, risks and costs of "when-issued"
and "forward delivery" securities, mortgage "dollar roll" transactions, CMOs and
Mortgage Pass-Through Securities and the lending of securities, see the
Statement of Additional Information.
PORTFOLIO TRADING--The Fund intends to fully manage its portfolio by buying and
selling Government Securities, as well as holding selected obligations to
maturity. In managing its portfolio, the Fund seeks to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. For a description of the strategies which may be used by the Fund in
managing its portfolio, which may include adjusting the average duration of the
portfolio in anticipation of a change in interest rates, see the Statement of
Additional Information. For the fiscal years ended December 31, 1992 and
December 31, 1993, the rates of portfolio turnover were 391% and 247%,
respectively, with less volatile markets accounting for the decrease in the
portfolio turnover rate for the fiscal year ended December 31, 1993. Such high
turnover rate involves greater expenses, including higher brokerage and
transaction costs, to the Fund.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD"),
and such other policies as the Trustees may determine, the Adviser may consider
sales of shares of the Fund and of the other investment company clients of MFS
Financial Services, Inc. ("FSI"), the Fund's distributor, as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions. For a
further discussion of portfolio transactions, see the Statement of Additional
Information.
------------------------------
The objective and policies described in this Prospectus are not fundamental and
may be changed without shareholder approval.
The Statement of Additional Information includes a listing of investment
restrictions which govern the investment policies of the Fund. The Fund's
investment limitations and policies are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy.
5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER--The Adviser manages the assets of the Fund pursuant to an
Investment Advisory Agreement, dated August 10, 1988 (the "Advisory Agreement").
The Adviser provides the Fund with investment advisory and administrative
services as well as office facilities. Steven E. Nothern, a Senior Vice
President of the Adviser, has been the Fund's portfolio manager since 1992. Mr.
Nothern has been employed by the Adviser since 1986. Subject to such policies as
the Trustees may determine, the Adviser makes investment decisions for the Fund.
For these services and facilities, the Adviser receives a management fee equal
to the lesser of (i) 0.40% of the Fund's average daily net assets or (ii) 0.38%
of the Fund's average daily net assets plus 5.36% of the Fund's gross income
(i.e., income other than from the sale of securities, and short term gains from
futures transactions), in each case on an annualized basis for the Fund's
then-current fiscal year. Prior to April 1, 1994, the Adviser received a
management fee from the Fund computed and paid monthly in an amount equal to the
sum of 0.38% of the Fund's average daily net assets plus 5.36% of the Fund's
gross income (i.e., income other than from the sale of securities, and
short-term gains from futures transactions), in each case on an annualized basis
for the Fund's then current fiscal year. (For the period from May 1, 1993 to
April 1,1994, however, the Adviser had voluntarily agreed to establish its
management fee as the lesser of (i) 0.55% of the Fund's average daily net assets
or (ii) the amount of such fee as otherwise calculated in accordance with the
Advisory Agreement with the Fund.) For the fiscal year ended December 31, 1993
MFS received its management fees of $1,857,409 equivalent on an annualized basis
to 0.55% of the Fund's average daily net assets. If MFS had not reduced its
management fee, MFS would have received management fees under a prior investment
advisory agreement of $2,264,078 (of which $1,163,050 would have been based on
average daily net assets and $1,101,028 on gross income), equivalent to 0.69% of
the Fund's net assets on an average daily annualized basis.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS Union
Standard Trust, MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun
Life Series Trust, Sun Growth Variable Annuity Fund, Inc. and seven variable
accounts, each of which is a registered investment company established by Sun
Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)") in
connection with the sale of Compass-2 and Compass-3 combination fixed/variable
annuity contracts. The MFS Asset Management Group, a division of the Adviser,
provides investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under management of the MFS organization were approximately
$33.6 billion on behalf of approximately 1.4 million investor accounts as of
March 31, 1994. As of such date, the MFS organization managed approximately
$19.6 billion of assets in fixed income portfolios and fixed income portfolios
of the MFS Asset Management Group. MFS is a subsidiary of Sun Life of Canada
(U.S.) which in turn is a subsidiary of Sun Life Assurance Company of Canada
("Sun Life"). The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames,
Arnold D. Scott, John D. McNeil and John R. Gardner. Mr. Brodkin is the
Chairman, Mr. Shames is the President and Mr. Scott is the Secretary and a
Senior Executive Vice President of MFS. Messrs. McNeil and Gardner are the
Chairman and the President, respectively, of Sun Life. Sun Life, a mutual life
insurance company, is one of the largest international life insurance companies
and has been operating in the United States since 1895, establishing a
headquarters here in 1973. The executive officers of MFS report to the Chairman
of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is the Chairman, President
and a Trustee of the Fund. W. Thomas London, James O. Yost, Stephen E. Cavan,
James R. Bordewick, Jr., and Linda J. Hoard, all of whom are officers of MFS,
are officers of the Fund.
DISTRIBUTOR--FSI, a wholly owned subsidiary of MFS, is the distributor of shares
of the Fund and also serves as distributor for each of the other MFS Funds.
SHAREHOLDER SERVICING AGENT--MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency,
certain dividend disbursing agency and other services for the Fund.
6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased at the public offering price through any
securities dealer, certain banks and other financial institutions having selling
agreements with FSI. Non-securities dealer financial institutions will receive
transaction fees that are the same as commission fees to dealers. Securities
dealers and other financial institutions may also charge their customers fees
relating to investments in the Fund.
The Fund offers two classes of shares which bear sales charges and distribution
fees in different forms and amounts:
CLASS A SHARES. Class A shares are offered at net asset value per share plus an
initial sales charge (or CDSC in the case of certain purchases of $1 million or
more) as follows:
- --------------------------------------------------------------------------------
SALES CHARGE* AS
PERCENTAGE OF:
-------------------------- DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
Less than $50,000 .................. 2.50% 2.56% 2.25%
$50,000 but less than $100,000 ..... 2.25 2.30 2.00
$100,000 but less than $250,000 .... 2.00 2.04 1.75
$250,000 but less than $500,000 .... 1.75 1.78 1.50
$500,000 but less than $1,000,000... 1.50 1.52 1.25
$1,000,000 or more None** None** (See Below)**
- -----------
* Because of rounding in the calculation of offering price, actual sales
charges may be more or less than those calculated using the percentages
above.
** A CDSC may apply in certain instances. FSI will pay a commission on purchases
of $1 million or more.
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC shall be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% on the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.
In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment occurred, will age one month on the last day of the month and
each subsequent month. Except as noted below, the CDSC on Class A shares will be
waived in the case of: (i) exchanges (except that if the shares acquired by
exchange were then redeemed within 12 months of the initial purchase (other than
in connection with subsequent exchanges to other MFS Funds), the charge would
not be waived); (ii) distributions to participants from a retirement plan
qualified under Section 401(a) of the internal Revenue Code of 1986, as amended
(the "Code") (a "Retirement Plan"), due to: (a) a loan from the plan (repayments
of loans, however, will constitute new sales for purposes of assessing the
CDSC); (b) "financial hardship" of the participant in the plan, as that term is
defined in Treasury Regulation Section 1.401(k)-1(d)(2), as amended from time to
time; or (c) the death of a participant in such a plan; (iii) distributions from
a 403(b) plan or an Individual Retirement Account ("IRA") due to death,
disability or attainment of age 59-1/2; (iv) tax-free returns of excess
contributions to an IRA; (v) distributions by other employee benefit plans to
pay benefits; and (vi) certain involuntary redemptions and redemptions in
connection with certain automatic withdrawals from a qualified retirement plan.
The CDSC on Class A shares will not be waived however, if the retirement plan
withdraws from the Fund except if the retirement plan has invested its assets in
Class A shares of one or more of the MFS Funds for more than 10 years from the
later to occur of (i) January 1, 1993 or (ii) the date such retirement plan
first invests its assets in Class A shares of one or more of the MFS Funds, the
CDSC on Class A shares will be waived in the case of a redemption of all of the
Retirement Plan's shares (including shares of any other class) in all MFS Funds
(i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), unless, immediately prior to the redemption, the aggregate amount
invested by the Retirement Plan in Class A shares of the MFS Funds (excluding
the reinvestment of distributions) during the prior four year period equals 50%
or more of the total value of the Retirement Plan's assets in the MFS Funds, in
which case the CDSC will not be waived. Any applicable CDSC will be deferred
upon an exchange of Class A shares of the Fund for units of participation of the
MFS Fixed Fund (a bank collective investment fund) (the "Units"), and the CDSC
will be deducted from the redemption proceeds when such Units are subsequently
redeemed (assuming the CDSC is then payable). No CDSC will be assessed upon an
exchange of Units for Class A shares of the Fund. For purposes of calculating
the CDSC payable upon redemption of Class A shares of the Fund or Units acquired
pursuant to one or more exchanges, the period during which the Units are held
will be aggregated with the period during which the Class A shares are held. The
applicability of the CDSC will be unaffected by transfers of registration. FSI
will receive all CDSCs which it intends to apply for the benefit of the Fund.
FSI allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 2-1/4% and FSI retains
approximately 1/4 of 1% of the public offering price. The sales charge may vary
depending on the number of shares of the Fund as well as certain MFS Funds and
other Funds owned or being purchased, the existence of an agreement to purchase
additional shares during a 13 month period (or a 36-month period for purchases
of $1 million or more) or other special purchase programs. A description of the
Right of Accumulation, Letter of Intent and Group Purchases privileges by which
the sales charge may be reduced is set forth in the Statement of Additional
Information. In addition, FSI pays a commission to dealers who initiate and are
responsible for purchases of $1 million or more as follows: 1.00% on sales up to
$5 million; plus 0.25% on the amount in excess of $5 million. Purchases of $1
million or more for each shareholder account will be aggregated over a 12-month
period (commencing from the date of the first such purchase) for purposes of
determining the level of commissions to be paid during that period with respect
to such account.
Class A shares of the Fund may be sold at their net asset value to the officers
of the Fund, to any of the subsidiary companies of Sun Life, to eligible
Directors, officers, employees (including retired employees) and agents of MFS,
Sun Life or any of their subsidiary companies, to any trust, pension,
profit-sharing or any other benefit plan for such persons, to any trustees and
retired trustees of any investment company for which FSI serves as distributor
or principal underwriter, and to certain family members of such individuals and
their spouses, provided such shares will not be resold except to the Fund. Class
A shares of the Fund may be sold at net asset value to any employee, partner,
officer or trustee of any sub-adviser to any MFS Fund and to certain family
members of such individuals and their spouses, or to any trust, pension,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative, provided such shares will not be resold except to the Fund.
Class A shares of the Fund may also be sold at their net asset value to any
employee or registered representative of any dealer or other financial
institution which has a sales agreement with FSI or its affiliates, to certain
family members of such employees or representatives and their spouses, or to any
trust, pension, profit-sharing or other retirement plan for the sole benefit of
such employee or representative, as well as to clients of the MFS Asset
Management Group. In addition, Class A shares of the Fund may be sold at net
asset value in connection with the acquisition or liquidation of the assets of
other investment companies or personal holding companies. Insurance company
separate accounts may also purchase Class A shares of the Fund at their net
asset value. Class A shares of the Fund may also be purchased at their net asset
value by retirement plans where third party administrators of such plans have
entered into certain arrangements with FSI or its affiliates, provided that no
commission is paid to dealers. Class A shares of the Fund also may be sold at
net asset value, subject to appropriate documentation, through a dealer where
the amount invested represents redemption proceeds from a registered open-end
management investment company not distributed or managed by FSI or its
affiliates, if such redemption has occurred no more than 60 days prior to the
purchase of Class A shares of the Fund and the shareholder either (i) paid an
initial sales charge or (ii) was at some time subject to, but did not actually
pay, a deferred sales charge with respect to the redemption proceeds. Class A
shares of the Fund may also be sold at net asset value where the amount invested
represents redemption proceeds from the MFS Fixed Fund. Class A shares of the
Fund may also be sold at net asset value through the automatic reinvestment of
Class A and Class B distributions which constitute required withdrawals from
qualified retirement plans. Class A shares of the Fund may also be purchased at
net asset value where the purchase is in an amount of $3 million or more and
where the dealer and FSI enter into an agreement in which the dealer agrees to
return any commission paid to it on the sale (or on a pro rata portion thereof)
as described above if the shareholder redeems his or her shares within a year of
purchase (shareholders who purchase shares at net asset value pursuant to these
conditions are called "$3 Million Shareholders").
Class A shares of the Fund may be purchased at net asset value by retirement
plans qualified under Section 401(a) or 403(b) of the Code which are subject to
the Employee Retirement Income Security Act of 1974, as amended, as follows:
(i) the retirement plan and/or the sponsoring organization must subscribe
to the MFS FUNDamental 401(k) Plan or another similar Section 401(a) or
403(b) recordkeeping program made available by MFS Service Center, Inc.;
(ii) either (a) the sponsoring organization must have at least 25 employees
or (b) the aggregate purchases by the retirement plan of Class A shares of
the MFS Funds must be in an amount of at least $250,000 within a reasonable
period of time, as determined by FSI in its sole discretion; and
(iii) a CDSC of 1% will be imposed on such purchases in the event of
certain redemption transactions within 12 months following such purchases.
Dealers who initiate and are responsible for purchases of Class A shares of the
Fund in this manner will be paid a commission by FSI, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, that FSI may pay a commission, on sales in excess of $5 million to
certain retirement plans, of 1.00% to certain dealers which, at FSI's
invitation, enter into an agreement with FSI in which the dealer agrees to
return any commission paid to it on the sale (or on a pro rata portion thereof)
if the shareholder redeems his or her shares within a period of time after
purchase as specified by FSI. Purchases of $1 million or more for each
shareholder account will be aggregated over a 12-month period (commencing from
the date of the first such purchase) for purposes of determining the level of
commissions to be paid during that period with respect to such account.
Class A shares of the Fund may be purchased at net asset value through certain
broker-dealers and other financial institutions which have entered into an
agreement with FSI, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar progam
under which such clients pay a fee to such broker-dealer or other financial
institution. Furthermore, Class A shares of the Fund may be sold at net asset
value through the automatic reinvestment of distributions of dividends and
capital gains of other MFS Funds pursuant to the Distribution Investment Program
(see "Shareholder Services" in the Statement of Additional Information).
CLASS B SHARES: Class B shares are offered at net asset value without an initial
sales charge but subject to a CDSC as follows:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- -------------- --------------
First ............................................................ 4%*
Second ........................................................... 4%
Third ............................................................ 3%
Fourth ........................................................... 3%
Fifth ............................................................ 2%
Sixth ............................................................ 1%
Seventh and following ............................................ 0%
- ----------
* Class B shares purchased between January 1, 1993 and September 1, 1993 will be
subject to a CDSC of 5% in the event of a redemption within the first year
after purchase.
For Class B shares purchased prior to January 1, 1993, the Fund imposes a CDSC
as a percentage of redemption proceeds as follows:
<PAGE>
YEAR OF CONTINGENT
REDEMPTION DETERRED SALES
AFTER PURCHASE CHARGE
- -------------- --------------
First ............................................................ 6%
Second ........................................................... 5%
Third ............................................................ 4%
Fourth ........................................................... 3%
Fifth ............................................................ 2%
Sixth ............................................................ 1%
Seventh and following ............................................ 0%
No CDSC is paid upon an exchange of shares. For purposes of calculating the CDSC
upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. See "Redemptions and
Repurchases--Contingent Deferred Sales Charge" for further discussion of the
CDSC.
The CDSC on Class B shares will be waived upon the death or disability (as
defined in section 72(m)(7) of the Code) of any investor, provided the account
is registered (i) in the case of a deceased individual, solely in the deceased
individual's name, (ii) in the case of a disabled individual, solely or jointly
in the disabled individual's name or (iii) in the name of a living trust for the
benefit of the deceased or disabled individual. The CDSC on Class B shares will
also be waived in the case of redemptions of shares of the Fund pursuant to a
systematic withdrawal plan. In addition, the CDSC on Class B shares will be
waived in the case of distributions from an IRA, SAR-SEP or any other retirement
plan qualified under Section 401(a) or 403(b) of the Code, due to death or
disability, or in the case of required minimum distributions from any such
retirement plan due to attainment of age 70 1/2. The CDSC on Class B shares will
be waived in the case of distributions from a retirement plan qualified under
Section 401(a) of the Code due to (i) returns of excess contribution to the
plan, (ii) retirement of a participant in the plan, (iii) a loan from the plan
(repayments of loans, however, will constitute new sales for purposes of
assessing the CDSC), (iv) "financial hardship" of the participant in the plan,
as that term is defined in Treasury Regulation 1.401(k)-1(d)(2), as amended from
time to time; and (v) termination of employment of the participant in the plan
(excluding, however, a partial or other termination of the plan). The CDSC on
Class B shares will also be waived upon redemptions by (i) officers of the Fund,
(ii) any of the subsidiary companies of Sun Life, (iii) eligible Directors,
officers, employees (including retired and former employees) and agents of MFS,
Sun Life or any of their subsidiary companies, (iv) any trust, pension,
profit-sharing or any other benefit plan for such persons, (v) any trustees and
retired trustees of any investment company for which FSI serves as distributor
or principal underwriter, and (vi) certain immediate family members of such
individuals and their spouses, provided in each case that the shares will not be
resold except to the Fund. The CDSC on Class B shares will also be waived in the
case of redemptions by any employee or registered representative of any dealer
or other financial institutions which has a sales agreement with FSI, by certain
family members of any such employee or representative and their spouses or by
any trust, pension, profit-sharing or other retirement plan for the sole benefit
of such employee or representative and by clients of the MFS Asset Management
Group. A retirement plan qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (a "Retirement Plan") that has invested its assets in
Class B shares of one or more of the MFS Funds for more than 10 years from the
later to occur of (i) January 1, 1993 or (ii) the date the Retirement Plan first
invests its assets in Class B shares of one or more of the funds in the MFS
Funds will have the CDSC on Class B shares waived in the case of a redemption of
all the Retirement Plan's shares (including any Class A shares) in all MFS Funds
(i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), except that if, immediately prior to the redemption, the aggregate
amount invested by the Retirement Plan in Class B shares of the MFS Funds
(excluding the reinvestment of distributions) during the prior four year period
equals 50% or more of the total value of the Retirement Plan's assets in the MFS
Funds, then the CDSC will not be waived. The CDSC on Class B shares may also be
waived in connection with the acquisition or liquidation of the assets of other
investment companies or personal holding companies. The CDSC on Class B shares
will not be waived in the case of distributions from a SAR-SEP due to (i)
returns of excess contribution to the; fit in the plan or (iii) termination of
employment of the participant in the plan except in the case of redemption Us
shares purchased on and after the date of the current Prospectus of the Fund
(the date of the current Prospectus as revised where applicable) but prior to
the date of this supplement (in the case of the waiver of the CDSC due to
termination of employment, a partial or other termination of the plan is
excluded from the CDSC waiver).
CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain
outstanding for approximately eight years will convert to Class A shares of the
Fund. Shares purchased through the reinvestment of distributions paid in respect
of Class B shares will be treated as Class B shares for purposes of the payment
of the distribution and service fees under the Distribution Plan applicable to
Class B shares. However, for purposes of conversion to Class A shares, all
shares in a shareholder's account that were purchased through the reinvestment
of dividends and distributions paid in respect of Class B shares (and which have
not converted to Class A shares as provided in the following sentence) will be
held in a separate sub-account. Each time any Class B shares in the
shareholder's account (other than those in the sub-account) convert to Class A
shares, a portion of the Class B shares then in the sub-account will also
convert to Class A shares. The portion will be determined by the ratio that the
shareholder's Class B shares not acquired through reinvestment of dividends and
distributions that are converting to Class A shares bear to the shareholder's
total Class B shares not acquired through reinvestment. The conversion of Class
B shares to Class A shares is subject to the continuing availability of a ruling
from the Internal Revenue Service or an opinion of counsel that such conversion
will not constitute a taxable event for Federal tax purposes. There can be no
assurance that such ruling or opinion will be available, and the conversion of
Class B shares to Class A shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be subject to higher
expenses than Class A shares for an indefinite period.
GENERAL: Except as described below, the minimum initial investment is $1,000 per
account and the minimum additional investment is $50 per account. Accounts being
established for monthly automatic investments and under payroll savings programs
and tax-deferred retirement programs (other than IRAs) involving the submission
of investments by means of group remittal statements are subject to a $50
minimum on initial and additional investments per account. The minimum initial
investment for IRAs is $250 per account and the minimum additional investment is
$50 per account. Accounts being established for participation in the Automatic
Exchange Plan are subject to a $50 minimum on initial and additional investments
per account. There are also other limited exceptions to these minimums for
certain tax-deferred retirement programs. Any minimums may be changed at any
time at the discretion of FSI. The Fund reserves the right to cease offering its
shares at any time.
For shareholders who elect to participate in certain investment programs (i.e.,
the automatic investment plan) or other shareholder services, FSI or its
affiliates may either (i) give a gift of nominal value, such as a hand-held
calculator, or (ii) make a nominal charitable contribution on their behalf.
A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from the
Fund (such as Right of Accumulation, Letter of Intent and certain recordkeeping
services) that the Fund ordinarily provides.
Purchases and exchanges should be made for investment purposes only. The Fund
and FSI each reserve the right to reject any specific purchase order or to
restrict purchases by a particular purchaser (or group of related purchasers).
The Fund or FSI may reject or restrict any purchases by a particular purchaser
or group, for example, when such purchase is contrary to the best interests of
the Fund's other shareholders or otherwise would disrupt the management of the
Fund.
FSI may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by FSI) which follow a
timing pattern, and with individuals or entities acting on such shareholders'
behalf (collectively, "market timers"), setting forth the terms, procedures and
restrictions with respect to such exchanges. In the absence of such an
agreement, it is the policy of the Fund and FSI to reject or restrict purchases
by market timers if (i) more than two exchange purchases are effected in a timed
account in the same calendar quarter or (ii) a purchase would result in shares
being held in timed accounts by market timers representing more than (x) one
percent of the Fund's net assets or (y) specified dollar amounts in the case of
certain MFS Funds which may include the Fund and which may change from time to
time. The Fund and FSI each reserve the right to request market timers to redeem
their shares at net asset value, less any applicable CDSC, if either of these
restrictions is violated.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares.
The Glass-Steagall Act prohibits national banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of the
prohibition has not been clearly defined, FSI believes that such Act should not
preclude banks from entering into agency agreements with FSI (as described
above). if, however, a bank were prohibited from so acting, the Trustees would
consider what actions, if any, would be necessary to continue to provide
efficient and effective shareholder services. It is not expected that
shareholders would suffer any adverse financial consequence as a result of these
occurrences. State laws on this issue may differ from the interpretation of
federal law expressed herein. In addition, banks and financial institutions may
be required to register as broker-dealers pursuant to state securities laws.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of the same class of any of the
other MFS Funds (if available for sale) at net asset value. Shares of one class
may not be exchanged for shares of any other class. Exchanges will be made only
after instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Shareholder Servicing Agent in proper
form (i.e., if in writing--signed by the record owner(s) exactly as the shares
are registered; if by telephone--proper account identification is given by the
dealer or shareholder of record) and each exchange must involve either shares
having an aggregate value of at least $1,000 ($50 in the case of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by MFS
Service Center, Inc.) or all the shares in the account. If an Exchange Request
is received by the Shareholder Servicing Agent on any business day prior to the
close of regular trading on the New York Stock Exchange (the "Exchange"), the
exchange usually will occur on that day if all the requirements set forth above
have been complied with at that time. No more than five exchanges may be made in
any one Exchange Request by telephone. Additional information concerning this
exchange privilege and prospectuses for any of the other MFS Funds may be
obtained from investment dealers or the Shareholder Servicing Agent. A
shareholder should read the prospectus of the other MFS Fund and consider the
differences in objectives and policies before making any exchange. For federal
and (generally) state income tax purposes, an exchange is treated as a sale of
the shares exchanged and, therefore, an exchange could result in a gain or loss
to the shareholder making the exchange. Exchanges by telephone are automatically
available to most non-retirement plan accounts and certain retirement plan
accounts. For further information regarding exchanges by telephone see
"Redemptions By Telephone". The exchange privilege (or any aspect of it) may be
changed or discontinued and is subject to certain limitations, including certain
restrictions on purchases by market timers special procedures, privileges and
restrictions with respect to exchanges may apply to market timers who enter into
an agreement with FSI, as set forth in such agreement (see "Purchases").
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which the Fund is open for business by redeeming shares at their net
asset value or by selling such shares to the Fund through a dealer (a
repurchase). Since the net asset value of shares of the account fluctuate,
redemptions or repurchases, which are taxable transactions are likely to result
in gains or losses to the shareholder. When a shareholder withdraws an amount
from his account, the shareholder is deemed to have tendered for redemption a
sufficient number of full and fractional shares in his account to cover the
amount withdrawn. The proceeds of a redemption (except, in certain cases,
redemptions of Class A shares made by check, see below) or repurchase will
normally be available within seven days, except for shares purchased, or
received in exchange for shares purchased, by check (including certified checks
or cashier's checks); payment of redemption proceeds may be delayed for 15 days
from the purchase date in an effort to assure that such check has cleared.
Payment of redemption proceeds ma delayed for up to seven days if the Fund
determines that such a delay would be in the best interest of all its
shareholders.
A. REDEMPTION BY MAIL--Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption, or letter of instruction, together with his share
certificates (if any were issued) all in "good order" for transfer. "Good order"
generally means that the stock power, written request for redemption, letter of
instruction or certificate must be endorsed by the record owner(s) exactly as
the shares are registered and the signature(s) must be guaranteed in the manner
set forth below under the caption "Signature Guarantee." In addition, in some
cases, "good order" may require the furnishing of additional documents. The
Shareholder Servicing Agent may make certain de minimis exceptions to the above
requirements for redemption. Within seven days after receipt of a redemption
request by the Shareholder Servicing Agent in "good order," the Fund will make
payment in cash of the net asset value of the shares next determined after such
redemption request was received, reduced by the amount of any applicable CDSC
described above and the amount of any income tax required to be withheld, except
during any period in which the right of redemption is suspended or date of
payment is postponed because the Exchange is closed or trading on the Exchange
is restricted, or, to the extent otherwise permitted by the 1940 Act, if an
emergency exists (see "Tax Status").
B. REDEMPTION BY TELEPHONE--Each Class A shareholder may redeem an amount from
his account by telephoning toll free at (800) 225-2606. Shareholders wishing to
avail themselves of this telephone redemption privilege must so elect on their
Account Application, designate thereon a commercial bank and account number to
receive the proceeds of such redemption, and sign the Account Application Form
with the signature(s) guaranteed in the manner set forth below under the caption
"Signature Guarantee." The proceeds of such a redemption, reduced by any
applicable CDSC described above and the amount of any income tax required to be
withheld, are mailed by check to the designated account, without charge. As a
special service, investors may arrange to have proceeds in excess of $1,000
wired in federal funds to the designated account. If a telephone redemption
request is received by the Shareholder Servicing Agent by the close of regular
trading on the Exchange on any business day, shares will be redeemed at the
closing net asset value of the shares on that day. Subject to the conditions
described in this section, proceeds of a redemption are normally mailed or wired
on the next business day following the date of receipt of the order for
redemption. The Shareholder Servicing Agent will not be responsible for any
losses resulting from unauthorized telephone transactions if it follows
reasonable procedures designed to verify the identify of the caller. The
Shareholder Servicing Agent will request personal or other information from the
caller, and will normally also record calls. Shareholders should verify the
accuracy of confirmation statements immediately after their receipt.
C. REPURCHASE THROUGH A DEALER--If a shareholder desires to sell his shares at
their net asset value through his securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. IF THE DEALER RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE
CLOSE OF REGULAR TRADING ON THE EXCHANGE AND COMMUNICATES IT TO FSI ON THE SAME
DAY BEFORE FSI CLOSES FOR BUSINESS, THE SHAREHOLDER WILL RECEIVE THE NET ASSET
VALUE CALCULATED ON THAT DAY.
D. REDEMPTION BY CHECK--Only Class A shares may be redeemed by check. A
shareholder (except a $3 Million Shareholder) owning Class A shares of the Fund
may elect to have a special account with State Street Bank and Trust Company
(the "Bank") for the purpose of redeeming Class A shares from his or her account
by check. The Bank will provide each Class A shareholder, upon request, with
forms of checks drawn on the Bank. Only shareholders having accounts in which no
share certificates have been issued will be permitted to redeem shares by check.
Checks may be made payable in any amount not less than $500 and redemptions by
check made prior to September 1, 1993 may not exceed $100,000. Shareholders
wishing to avail themselves of this redemption by check privilege should so
request on their Account Application, must execute signature cards (for
additional information, see the Account Application) with signature(s)
guaranteed in the manner set forth under the caption "Signature Guarantee," and
must return any Class A share certificates issued to them. Additional
documentation will be required from corporations, partnerships, fiduciaries or
other such institutional investors. All checks must be signed by the
shareholder(s) of record exactly as the account is registered before the Bank
will honor them. The shareholders of joint accounts may authorize each
shareholder to redeem by check. The check may not draw on monthly dividends
which have been declared but not distributed. SHAREHOLDERS WHO PURCHASE CLASS A
SHARES BY CHECK (INCLUDING CERTIFIED CHECKS OR CASHIER'S CHECKS) MAY WRITE
CHECKS AGAINST THOSE SHARES ONLY AFTER THEY HAVE BEEN ON THE FUND'S BOOKS FOR 15
DAYS. WHEN SUCH A CHECK IS PRESENTED TO THE BANK FOR PAYMENT, A SUFFICIENT
NUMBER OF FULL AND FRACTIONAL SHARES WILL BE REDEEMED TO COVER THE AMOUNT OF THE
CHECK, ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE
WITHHELD. IF THE AMOUNT OF THE CHECK PLUS ANY APPLICABLE CDSC AND THE AMOUNT OF
ANY INCOME TAX REQUIRED TO BE WITHHELD IS GREATER THAN THE VALUE OF THE CLASS A
SHARES HELD IN THE SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND
THE SHAREHOLDER MAY BE SUBJECT TO EXTRA CHARGES TO AVOID DISHONOR OF CHECKS DUE
TO FLUCTUATION IN ACCOUNT VALUE, SHAREHOLDERS ARE ADVISED AGAINST REDEEMING ALL
OR MOST OF THEIR ACCOUNT BY CHECK. Checks should not be used to close a Fund
account because when the check is written, the shareholder will not know the
exact total value of the account on the day the check clears. There is presently
no charge to the shareholder for the maintenance of this special account or for
the clearance of any checks, but the Fund and the Bank reserve the right to
impose such charges or to modify or terminate the redemption-by-check privilege
at any time.
SIGNATURE GUARANTEE: In order to protect shareholders against fraud to the
greatest extent possible, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent.
Shareholders of the Fund who have redeemed their shares have a one-time right to
reinvest the redemption proceeds in the same class of shares of any of the MFS
Funds (if shares of such Fund are available for sale) at net asset value (with a
credit for any CDSC paid) within 90 days of the redemption pursuant to the
Reinstatement Privilege. If the shares credited for any CDSC paid are then
redeemed within six years of the initial purchase in the case of Class B shares,
or within 12 months of the initial purchase for certain Class A share purchases,
a CDSC will be imposed upon redemption. Such purchases under the Reinstatement
Privilege are subject to all limitations in the Statement of Additional
Information regarding this privilege.
Subject to the Fund's compliance with applicable regulations, the Fund has
reserved the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder receives a distribution in kind, the
shareholder could incur brokerage or transaction charges in converting the
securities to cash.
Due to the relatively high cost of maintaining small accounts, the Fund reserves
the right to redeem shares in any account for their then-current value (which
will be promptly paid to the shareholder) if at any time the total investment in
such account drops below $500 because of redemptions, except in the case of
accounts being established for monthly automatic investments and certain payroll
savings programs, Automatic Exchange Plan accounts, and tax-deferred retirement
plans, for which there is a lower minimum investment requirement. See
"Purchases." Shareholders will be notified that the value of their account is
less than the minimum investment requirement and allowed 60 days to make an
additional investment before the redemption is processed. No CDSC will be
imposed with respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE: Investments ("Direct Purchases") will be
subject to a CDSC for a period of 12 months (in the case of purchases of $1
million or more of Class A shares) or six years (in the case of purchases of
Class B shares). Purchases of Class A shares made during a calendar month,
regardless of when during the month the investment occurred, will age one month
on the last day of the month and each subsequent month. Class B shares purchased
on or after January 1, 1993 will be aggregated on a calendar month basis--all
transactions made during a calendar month, regardless of when during the month
they have occurred, will age one year at the close of business on the last day
of such month in the following calendar year and each subsequent year. For Class
B shares of the Fund purchased prior to January 1, 1993, transactions will be
aggregated on a calendar year basis--all transactions made during a calendar
year, regardless of when during the year they have occurred, will age one year
at the close of business on December 31 of that year and each subsequent year
At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class represented by Direct Purchases exceeds the sum
of the six calendar year aggregations (12 months in the case of purchase of $1
million or more of Class A shares) of Direct Purchases may be redeemed without
charge ("Free Amount"). Moreover, no CDSC is ever assessed on additional shares
acquired through the automatic reinvestment of dividends or capital gain
distributions ("Reinvested Shares").
Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC, and (ii) the amount of the redemption
equal to the then-current value of Reinvested Shares is not subject to the CDSC,
but (iii) any amount of redemption in excess of the aggregate of the
then-current value of Reinvested Shares and the Free Amount is subject to a
CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible rate.
The CDSC to be imposed upon redemptions will be calculated as set forth in
"Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration.
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A and Class B
shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Rule"), after having concluded that there is a reasonable likelihood that the
plans would benefit the Fund and its shareholders.
CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the
Fund will pay FSI a distribution/service fee aggregating up to (but not
necessarily all of) 0.35% of the average daily net assets attributable to Class
A shares annually in order that FSI may pay expenses on behalf of the Fund
related to the distribution and servicing of Class A shares. The expenses to be
paid by FSI on behalf of the Fund include a service fee to securities dealers
which enter into a sales agreement with FSI of up to 0.25% of the Fund's average
daily net assets attributable to Class A shares that are owned by investors for
whom such securities dealer is the holder or dealer of record. This fee is
intended to be partial consideration for all personal services and/or account
maintenance services rendered by the dealer with respect to Class A shares. FSI
may from time to time reduce the amount of the service fee paid for shares sold
prior to a certain date. FSI may also retain a distribution fee of 0.10% of the
Fund's average daily net assets attributable to Class A shares as partial
consideration for services performed and expenses incurred in the performance of
FSI's obligations under its distribution agreement with the Fund. FSI, however,
is currently waiving this 0.10% distribution fee and will not in the future
accept payment of this fee unless it first obtains the approval of the Board of
Trustees. In addition, to the extent that the aggregate of the foregoing fees
does not exceed 0.35% per annum of the average daily net assets of the Fund
attributable to Class A shares, the Fund is permitted to pay other distribution
related expenses, including commissions to dealers and payments to wholesalers
employed by FSI for sales at or above a certain dollar level. Service fee
payments under the Class A Distribution Plan have been reduced for an indefinite
period of time to 0.15% of the net assets of the Fund attributable to Class A
shares. This reduction may be amended or terminated at any time without notice
to shareholders. This fee will be paid periodically to dealers described above
with respect to shares owned by investors for whom such dealers are the holder
or dealer of record. Fees payable under the Class A Distribution Plan are
charged to, and therefore reduce, income allocated to Class A shares. Service
fees may be reduced for a securities dealer that is the holder or dealer of
record for an investor who owns shares of the Fund having a net asset value at
or above a certain dollar level. Dealers may from time to time be required to
meet certain criteria in order to receive service fees. FSI or its affiliates
are entitled to retain all service fees payable under the Class A Distribution
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial consideration for personal services and/or account
maintenance services performed by FSI or its affiliates to shareholder accounts.
Certain banks and other financial institutions that have agency agreements with
FSI will receive service fees that are the same as service fees to dealers.
CLASS B DISTRIBUTION PLAN. The Class B Distribution Plan provides that the
Fund will pay FSI a daily distribution fee equal on an annual basis to 0.75% of
the Fund's average daily net assets attributable to Class B shares and will pay
FSI a service fee of up to 0.25% per annum of the Fund's average daily net
assets attributable to Class B shares (which FSI will in turn pay to securities
dealers which enter into a sales agreement with FSI at a rate of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be additional consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to Class B shares. Fees payable under the Class B Distribution Plan
are charged to, and therefore reduce, income allocated to Class B shares. Except
in the case of the first year service fee, the service fee is reduced to 0.15%
of the Fund's average daily net assets attributable to Class B shares that are
owned by investors for whom that securities dealer is the holder or dealer of
record. This reduction may be amended or terminated without notice to
shareholders. The first year service fee will be paid as noted below. The Class
B Distribution Plan also provides that FSI will receive all CDSCs attributable
to Class B shares (see "Redemptions and Repurchases" above) which do not reduce
the distribution fee. FSI will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. FSI will also
advance to dealers the first year service fee at a rate equal to 0.25% of the
purchase price of such shares and, as compensation therefor, FSI may retain the
service fee paid by the Fund with respect to such shares for the first year
after purchase. Therefore, the total amount paid to a dealer upon the sale of
shares is 4.00% of the purchase price of the shares (commission rate of 3.75%
plus service fee equal to 0.25% of the purchase price). Dealers will become
eligible for additional service fees with respect to such shares commencing in
the 13th month following the purchase. Dealers may from time to time be required
to meet certain criteria in order to receive service fees. FSI or its affiliates
are entitled to retain all service fees payable under the Class B Distribution
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial consideration for personal services and/or account
maintenance services performed by FSI or its affiliates to shareholder accounts.
The purpose of the distribution payments to FSI under the Class B Distribution
Plan is to compensate FSI for its distribution services to the Fund. Since FSI's
compensation is not directly tied to its expenses, the amount of compensation
received by FSI during any year may be more or less than its actual expenses.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the SEC as being of the "compensation" variety. However, the Fund
is not liable for any expenses incurred by FSI in excess of the amount of
compensation it receives. The expenses incurred by FSI, including commissions to
dealers, are likely to be greater than the distribution fees for the next
several years, but thereafter such expenses may be less than the amount of the
distribution fees. Certain banks and other financial institutions that have
agency agreements with FSI will receive agency transaction and service fees that
are the same as commissions and service fees to dealers.
DISTRIBUTIONS
Substantially all of the Fund's net investment income for any calendar year is
declared as dividends daily and paid to its shareholders as dividends on a
monthly basis. Dividends generally are distributed on the first business day of
the following month. The Fund may make one or more distributions during the
calendar year to its shareholders from any long-term capital gains, and may also
make one or more distributions during the calendar year to its shareholders from
short-term capital gains. Shareholders may elect to receive dividends and
capital gain distributions in either cash or additional shares of the same class
to which a distribution is made. see "Tax Status" and "Shareholder
Services--Distribution Options" below. Distributions paid by the Fund with
respect to Class A shares will generally be greater than those paid with respect
to Class B shares because expenses attributable to Class B shares will generally
be higher.
TAX STATUS
In order to minimize the taxes the Fund would otherwise be required to pay, the
Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Code, and to make distributions to its shareholders in
accordance with the timing requirements set out in the Code. It is expected that
the Fund will not be required to pay entity level federal income or excise
taxes. Shareholders of the Fund normally will have to pay federal income taxes,
and (except as discussed below) any state or local taxes, on the dividends and
capital gain distributions they receive from the Fund, whether paid in cash or
additional shares. The Fund expects that none of its dividends and distributions
will be eligible for the dividends-received deduction for corporations. A
statement setting forth the federal income tax status of all dividends and
distributions for each calendar year, including any portion taxable as long-term
capital gain, the portion, if any, representing a return of capital (which is
generally free of current taxes but results in a basis reduction), and the
amount, if any, of federal income tax withheld, will be sent to each shareholder
promptly after the end of such year.
The Fund intends to withhold U.S. federal income tax at the rate of 30% on
dividends and other payments that are subject to such withholding and that are
made to persons who are neither citizens nor residents of the U.S., regardless
of whether a lower rate may be permitted under an applicable treaty. The Fund is
also required in certain circumstances to apply backup withholding of 31% of
taxable dividends and redemption proceeds paid to any shareholder (including a
shareholder who is neither a citizen nor a resident of the U.S.) who does not
furnish to the Fund certain information and certifications or who is otherwise
subject to backup withholding. However, backup withholding will not be applied
to payments which have been subject to 30% withholding.
Prospective investors should read the Fund's Account Application for additional
information regarding backup withholding of federal income tax and should
consult their own tax advisors as to the tax consequences to them of an
investment in the Fund.
STATE AND LOCAL TAXES. Distributions of the Fund which are derived from interest
on obligations of the U.S. Government and certain of its agencies, authorities
and instrumentalities (but generally not from capital gains realized upon the
disposition of such obligations) may be exempt from state and local taxes in
certain states. In other states, arguments can be made on the basis of a U.S.
Supreme Court decision to the effect that such distributions should be exempt
from state and local taxes. The Fund intends to advise shareholders of the
proportion of its distributions which consists of such interest. Shareholders
should consult their tax advisors regarding the possible exclusion of such
portion of their distributions from the Fund for state and local income tax
purposes.
NET ASSET VALUE
The net asset value per share of each class of shares of the Fund is determined
each day during which the Exchange is open for trading. This determination is
made once each day as of the close of regular trading on the Exchange by
deducting the amount of the liabilities attributable to the class from the value
of the assets attributable to the class and dividing the difference by the
number of shares of the class outstanding. Assets in the Fund's portfolio are
valued on the basis of their market or other fair value, as described in the
Statement of Additional Information. The net asset value per share of each class
of shares is effective for orders received by the dealer prior to its
calculation and received by FSI prior to the close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has two classes of shares, entitled Class A and Class B Shares of
Beneficial Interest (without par value). Each share of a class represents an
equal proportionate interest in the Fund with each other share of that class
subject to any liabilities of the particular class. Shareholders are entitled to
one vote for each share held and may vote in the election of Trustees and on
other matters submitted to meetings of shareholders. Each class of shares of the
Fund will vote separately on any material increase in the fees under its
Distribution Plan or on any other matter that affects solely that class of
shares, but will otherwise vote together with all other classes of shares of the
Fund on all other matters. The Fund has reserved the right to create series of
shares and to issue additional classes of shares. Each class of shares of a
series would participate equally in the earnings, dividends and assets
attributable to that class of that particular series. Shareholders of each
series would be entitled to vote separately to approve investment advisory
agreements or changes in investment restrictions, but shares of all series would
vote together in the election of Trustees and selection of accountants. The Fund
does not intend to hold annual shareholder meetings. The Fund's Declaration of
Trust provides that a Trustee may be removed from office in certain instances
(see "Description of Shares, Voting Rights and Liabilities" in the Statement of
Additional Information).
Shares have no pre-emptive or conversion rights (except as set forth above in
"Purchases--Conversion of Class B Shares"). Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed (e.g., fidelity bonding and errors and omissions insurance)
and the Fund itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of shares and may also quote fund
rankings in the relevant fund category from various sources, such as the Lipper
Analytical Services, Inc. and Wiesenberger Investment Companies Service. Yield
quotations are based on the annualized net investment income per share of each
class over a 30-day period stated as a percent of the maximum public offering
price of the shares of that class on the last day of that period. The yield
calculation for Class B shares assumes no CDSC is paid. The current distribution
rate for each class is generally based upon the total amount of dividends per
share paid by the Fund to shareholders of that class during the past 12 months
and is computed by dividing the amount of such dividends by the maximum public
offering price of that class at the end of such period. Current distribution
rate calculations for Class B shares assume no CDSC is paid. The current
distribution rate differs from the yield calculation because it may include
distributions to shareholders from sources other than dividends and interest,
such as premium income from option writing, short-term capital gains, and return
of invested capital, and is calculated over a different period of time. Total
rate of return quotations reflect the average annual percentage change over
stated periods in the value of an investment in a class of shares of the Fund
made at the maximum public offering price of the shares of that class with all
distributions reinvested and which, if quoted for periods of six years or less,
will give effect to the imposition of the CDSC assessed upon redemptions of the
Fund's Class B shares. Such total rate of return quotations may be accompanied
by quotations which do not reflect the deduction of an initial sales charge and
which will thus be higher. All performance quotations are based on historical
performance and are not intended to indicate future performance. Yield reflects
only net portfolio income as of a stated time and current distribution rate
reflects only the rate of distributions paid by the Fund over a stated period of
time, while total rate of return reflects all components of investment return
over a stated period of time. The Fund's quotations may from time to time be
used in advertisements, shareholder reports or other communications to
shareholders. For a discussion of the manner in which the Fund will calculate
its yield, current distribution rate and total rate of return, see the Statement
of Additional Information. In addition to information provided in shareholder
reports, the Fund may, in its discretion, from time to time, make a list of all
or a portion of its portfolio holdings available to investors upon request.
7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund should contact the Shareholder Servicing
Agent (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS--Each shareholder will receive confirmation
statements showing the transaction activity in his account. Cancelled checks, if
any, will be sent to shareholders monthly. At the end of each calendar year,
each shareholder will receive information regarding the tax status of reportable
dividends and distributions for that year (see "Tax Status").
DISTRIBUTION OPTIONS--The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified;
-- Dividends (including short-term capital gains) in cash; long-term capital
gain distributions reinvested in additional shares;
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gain
distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. Any request to change a distribution option must
be received by the Shareholder Servicing Agent by the record date for a dividend
or distribution in order to be effective for that dividend or distribution. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS--For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the Statement of Additional Information) anticipates purchasing
$50,000 or more of Class A shares of the Fund alone or in combination with
shares of all classes of all MFS Funds or the MFS Fixed Fund (a bank collective
investment fund) within a 13-month period (or 36-month period for purchases of
$1 million or more), the shareholder may obtain such shares at the same reduced
sales charge as though the total quantity were invested in one lump sum, subject
to escrow arrangements and the appointment of an attorney for redemptions from
the escrow amount if the intended purchases are not completed, by completing the
Letter of Intent section of the Account Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of all classes of shares of
that shareholder in the MFS Funds or the MFS Fixed Fund (a bank collective
investment fund) reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder (except a $3 Million Shareholder)
may direct the Shareholder Servicing Agent to send him (or anyone he designates)
regular periodic payments, as designated on the Account Application and based
upon the value of his account. Each payment under a Systematic Withdrawal Plan
(a "SWP") must be at least $100, except in certain limited circumstances. The
aggregate withdrawals of Class B shares in any year pursuant to a SWP will not
be subject to a CDSC and are generally limited to 10% of the value of the
account at the time of the establishment of the SWP. The CDSC will not be waived
in the case of SWP redemptions of Class A shares which are subject to a CDSC.
DOLLAR COST AVERAGING PROGRAMS--
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds under the Automatic Exchange Plan, a dollar cost averaging
program. The Automatic Exchange Plan provides for automatic monthly or quarterly
transfers of funds from the shareholder's account in an MFS Fund for investment
in the same class of shares of other MFS Funds selected by the shareholder.
Under the Automatic Exchange Plan, transfers of at least $50 each may be made to
up to four different funds. A shareholder should consider the objectives and
policies of a fund and review its prospectus before electing to transfer money
into such fund through the Automatic Exchange Plan. No transaction fee is
imposed in connection with transfer transactions under the Automatic Exchange
Plan. However, transfers from MFS Money Market Fund, MFS Government Money Market
Fund or Class A shares of MFS Cash Reserve Fund will be subject to any
applicable sales charge. For federal and (generally) state income tax purposes,
a transfer is treated as a sale of the shares transferred and, therefore, could
result in a capital gain or loss to the shareholder making the transfer. See the
Statement of Additional Information for further information concerning the
Automatic Exchange Plan. Investors should consult their tax advisers for
information regarding the potential capital gain and loss consequences of
transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of
shares regardless of fluctuating share offering prices, a shareholder should
consider his financial ability to continue his purchases through periods of low
price levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS--Shares of the Fund may be purchased by all types
of tax-deferred retirement plans, including IRAs, SEP-IRA plans, 401(k) plans,
403(b) plans and other corporate pension and profit-sharing plans. Investors
should consult with their tax adviser before establishing any of the
tax-deferred retirement plans described above.
------------------
The Fund's Statement of Additional Information, dated May 1, 1994, contains more
detailed information about the Fund, including information related to: (i)
investment policies and restrictions; (ii) Trustees, officers and investment
adviser; (iii) portfolio transactions; (iv) the method used to calculate
performance quotations of the Fund; (v) various services and privileges provided
for the benefit of shareholders; (vi) the Distribution Plans; (vii)
determination of net asset value of shares of the Fund; and (viii) certain
voting rights of shareholders.
<PAGE>
APPENDIX A
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES, AUTHORITIES OR INSTRUMENTALITIES
FHA DEBENTURES -- are debentures issued by the Federal Housing Administration
and fully and unconditionally guaranteed by the U.S. Government.
GNMA CERTIFICATES -- are mortgage-backed securities, with timely payment
guaranteed by the full faith and credit of the U.S. Government which represent
partial ownership interests in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is also insured or guaranteed by the Federal
Housing Administration, the Veterans Administration or the Farmers Home
Administration.
FHLMC BONDS -- are bonds issued and guaranteed by the Federal Home Loan Mortgage
Corporation and are not guaranteed by the U.S. Government.
FNMA BONDS -- are bonds issued and guaranteed by the Federal National Mortgage
Association and are not guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and long-term
bonds issued by public housing and urban renewal agencies in connection with
programs administered by the Department of Housing and Urban Development of the
U.S. Government, the payment of which Is guaranteed by the full faith and credit
of the U.S. Government.
SBA DEBENTURES -- are debentures issued and guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association and are not guaranteed by the U.S. Government.
TITLE XI BONDS -- are ship financing bonds issued under Title XI of the Merchant
Marine Act of 1936, as amended, and guaranteed by the Maritime Administration of
the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by the
Washington Metropolitan Area Transit Authority and guaranteed by the full faith
and credit of the U.S. Government.
The list of securities set forth above does not purport to be an exhaustive
compilation of all debt obligations issued or guaranteed by U.S. Government
agencies, authorities or instrumentalities. The Fund reserves the right to
invest in debt obligations issued or guaranteed by U.S. Government agencies,
authorities or instrumentalities in addition to those listed above.
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Financial Services, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll-free: (800) 225-2606
MAILING ADDRESS
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT ACCOUNTANTS
Ernst & Young
200 Clarendon Street, Boston, MA 02116
MFS(R) GOVERNMENT
LIMITED MATURITY
FUND
500 Boylston Street, Boston, MA 02116
MGL-1-5/94/137M 28/228
MFS(R)
GOVERNMENT
LIMITED
MATURITY
FUND
PROSPECTUS
MAY 1, 1994
