MFS(R) Managed Sectors Fund MFS(R) Growth Opportunities Fund
MFS(R) Emerging Growth Fund MFS(R) High Income Fund
MFS(R) Capital Growth Fund MFS(R) Municipal Bond Fund
MFS(R) Gold & Natural Resources Fund MFS(R) Research Fund
MFS(R) World Total Return Fund MFS(R) Value Fund
MFS(R) World Equity Fund MFS(R) Bond Fund
MFS(R) Utilities Fund MFS(R) Limited Maturity Fund
MFS(R) Strategic Income Fund MFS(R) Municipal Limited Maturity Fund
MFS(R) Municipal Income Fund MFS(R) Municipal Series Trust
Supplement to be affixed to the current Prospectus for distribution in Ohio
Prospective Ohio investors should note the following:
a) This Prospectus must be delivered to the investor prior to consummation of
the sale;
b) The Fund may invest up to 50% of its assets in restricted securities,
including Rule 144A securities which have been deemed to be liquid by the Board
of Trustees.
The date of this Supplement is February 1, 1995. MFS-16OH-2/95/19.5M
<PAGE>
<TABLE>
<S> <S>
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 commissionable 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>
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
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>
<S> <S>
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>
<TABLE>
<S> <S>
MASSACHUSETTS INVESTORS TRUST MFS(R) TOTAL RETURN FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS(R) GOVERNMENT MONEY MARKET FUND
MFS(R) GROWTH OPPORTUNITIES FUND MFS(R) CASH RESERVE FUND
MFS(R) EMERGING GROWTH FUND MFS(R) ALABAMA MUNICIPAL BOND FUND
MFS(R) CAPITAL GROWTH FUND MFS(R) ARKANSAS MUNICIPAL BOND FUND
MFS(R) INTERMEDIATE INCOME FUND MFS(R) CALIFORNIA MUNICIPAL BOND FUND
MFS(R) GOLD & NATURAL RESOURCES FUND MFS(R) FLORIDA MUNICIPAL BOND FUND
MFS(R) MANAGED SECTORS FUND MFS(R) GEORGIA MUNICIPAL BOND FUND
MFS(R) VALUE FUND MFS(R) LOUISIANA MUNICIPAL BOND FUND
MFS(R) WORLD EQUITY FUND MFS(R) MARYLAND MUNICIPAL BOND FUND
MFS(R) WORLD TOTAL RETURN FUND MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
MFS(R) BOND FUND MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
MFS(R) LIMITED MATURITY FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) GOVERNMENT MORTGAGE FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) GOVERNMENT LIMITED MATURITY FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) GOVERNMENT SECURITIES FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) HIGH INCOME FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) INCOME & OPPORTUNITY FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) WORLD GOVERNMENTS FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) WORLD GROWTH FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
MFS(R) MONEY MARKET FUND MFS(R) MUNICIPAL LIMITED MATURITY FUND
MFS(R) RESEARCH FUND MFS(R) MUNICIPAL BOND FUND
MFS(R) MUNICIPAL HIGH INCOME FUND MFS(R) MUNICIPAL INCOME FUND
</TABLE>
Supplement to the Current Prospectus
Effective immediately, the Funds have expanded their policies with respect to
exchanges effected by market timers to be as follows:
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 i5 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.
The date of this Supplement is April 1, 1994.
MFS-16F-4/94/500M
<PAGE>
MFS(R) MANAGED SECTORS FUND
(a series of MFS SERIES TRUST I)
Supplement to be affixed to the current
Prospectus for distribution in Iowa
For Class B shares purchased after September 1, 1993, a contingent deferred
sales charge declining from 4% to 0% will be imposed if the investor redeems
within six years from the date of purchase. In addition, the Class is subject to
an annual distribution and service fee of 1% of its average daily net assets.
The date of this Supplement is April 1, 1994.
MMS-16IA-4/94/7M
<PAGE>
MFS(R) MANAGED
SECTORS FUND
(A member of the MFS Family of Funds(R))
PROSPECTUS
April 1, 1994
Class A Shares of Beneficial Interest
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 4
5. Investment Techniques 8
6. Management of the Fund 12
7. Information Concerning Shares of the Fund 13
Purchases 13
Exchanges 18
Redemptions and Repurchases 18
Distribution Plans 21
Distributions 22
Tax Status 22
Net Asset Value 22
Description of Shares, Voting Rights and Liabilities 22
Performance Information 23
8. Shareholder Services 23
Appendix A 26
Appendix B 29
Appendix C 31
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 MANAGED SECTORS FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
The investment objective of MFS Managed Sectors Fund (the "Fund") is to
provide capital appreciation by varying the weighting of its portfolio among
15 equity sectors. The Fund is a non-diversified series of MFS Series Trust I
(the "Trust"), an open-end management investment company. The Fund is
intended for investors who understand and are willing to accept the risks
entailed in seeking long-term growth of capital (see "Investment Objective
and Policies"). The minimum initial investment generally is $1,000 per
account (see "Purchases"). The Fund's investment adviser and principal
underwriter 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 Trust and
Fund that a prospective investor ought to know before investing. The Trust,
on behalf of the Fund, has filed with the Securities and Exchange Commission
a Statement of Additional Information, dated April 1, 1994, which contains
more detailed information about the Trust and the Fund and is incorporated
into this Prospectus by reference. See page 25 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 Managed Sectors Fund (the "Fund") is a non-diversified series of MFS
Series Trust I (the "Trust"), an open-end management investment company which
was organized as a business trust under the laws of The Commonwealth of
Massachusetts on July 30, 1986. The Trust presently consists of two series of
shares, each of which represents a portfolio with separate investment
policies. Shares of the Fund are continuously sold to the public and the Fund
then uses the proceeds to buy securities for its portfolio. Two 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 automatically to Class A shares approximately eight years
after purchase.
The Trust'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. Prior to
September 1, 1993, Lifetime Advisers, Inc. ("LAI"), a Delaware corporation
and a wholly owned subsidiary of MFS, was the investment adviser for the
Fund. The Adviser is responsible for the management of the Fund's assets and
the officers of the Trust are responsible for the Fund's operations. The
Adviser manages the portfolio from day to day in accordance with the Fund's
investment objective and policies. A majority of the Trustees are not
affiliated with the Adviser. The selection of investments and the way they
are managed depend on the conditions and trends in the economy and the
financial marketplaces. The Trust also offers to buy back (redeem) shares of
the Fund from Fund shareholders at any time at net asset value, less any
applicable CDSC.
2. EXPENSE SUMMARY
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Class A Class B
-------------- ------------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares (as a percentage
of offering price) 5.75% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) See Below(1) 4.00%
Annual Operating Expenses of the Fund (as a percentage of average net assets): (2)
Management Fees 0.75% 0.75%
Rule 12b-1 Fees 0.35%(3) 1.00%(4)
Other Expenses 0.39%(5) 0.46%(6)
------------ ----------
Total Operating Expenses. 1.49% 2.21%
<FN>
(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" below).
(2) For Class B shares, percentages are based on fees incurred during the
fiscal year ended November 30, 1993. For Class A shares, which were initially
offered on September 20, 1993, percentages are based on Class B expenses
adjusted for Class A specific expenses.
(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"). 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.
2
<PAGE>
(4) 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 net assets attributable to the Class B shares (see "Distribution
Plans"). 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.
(5) Based on Class B expenses incurred during the last fiscal year except for
the shareholder servicing agent fees component of "Other Expenses" which has
been estimated for Class A shares.
(6) "Other Expenses" have been calculated based on current shareholder
servicing fees.
</FN>
</TABLE>
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):
<TABLE>
<CAPTION>
Period Class A Class B
- ------------- --------- ---------------------
<S> <C> <C> <C>
(1)
1 year $ 72 $ 62 $ 22
3 years 102 99 69
5 years 134 138 118
10 years 225 236(2) 236(2)
<FN>
(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.
</FN>
</TABLE>
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund
will bear directly or indirectly. More complete descriptions of the following
Fund expenses are set forth in the following sections: (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.
3
<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 Deloitte & Touche, independent certified public
accountants, as experts in accounting and auditing.
Financial Highlights
<TABLE>
<CAPTION>
Year Ended November 30, 1993++ 1993 1992 1991 1990 1989 1988 1987+
- ---------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout each
period):
Net asset value--beginning of
period $15.68 $15.42 $13.00 $ 9.23 $11.32 $ 7.86 $ 6.94 $ 6.50
------ ------ ------ ------ ------- ------ ------ --------
Income from investment
operations--
Net investment income (loss) $(0.02) $(0.25) $(0.24) $(0.12) $(0.03) $ 0.03 $ 0.09 $ 0.03
Net realized and unrealized
gain (loss) on investments (0.16) 0.94 2.66 3.89 (2.06) 3.51 0.89 0.42
------ ------ ------ ------ ------- ------ ------ --------
Total from investment
operations $(0.18) $ 0.69 $ 2.42 $ 3.77 $(2.09) $ 3.54 $ 0.98 $ 0.45
------ ------ ------ ------ ------- ------ ------ --------
Less distributions declared
to shareholders--
From net investment income $ -- $ -- $ -- $ -- $ -- $(0.08) $(0.06) $(0.01)
From realized gains -- (0.62) -- -- -- -- -- --
------ ------ ------ ------ ------- ------ ------ --------
Total distributions declared
to shareholders $ -- $(0.62) $ -- $ -- $ -- $(0.08) $(0.06) $(0.01)
------ ------ ------ ------ ------- ------ ------ --------
Net asset value--end of
period $15.50 $15.49 $15.42 $13.00 $ 9.23 $11.32 $ 7.86 $ 6.94
====== ====== ====== ====== ======= ====== ====== ========
Total return# (5.99)%* 4.50% 18.62% 40.85% (18.46)% 45.35% 14.06% 7.47%*
Ratios (to average net
assets)/Supplemental data:
Expenses 1.59%* 2.21% 2.37% 2.44% 2.50% 2.52% 2.31% 2.25%*
Net investment income (loss) (0.75)%* (1.55)% (1.85)% (1.00)% (0.27)% 0.37% 1.08% 0.09%*
Portfolio turnover 106% 106% 22% 59% 79% 84% 146% 163%
Net assets at end of period
(000 omitted) $136,179 $232,982 $249,493 $190,232 $152,132 $180,416 $137,311 $134,762
<FN>
* Annualized
+ For the period from the commencement of investment operations, December 29, 1986 to November 30, 1987.
++ For the period from commencement of offering of Class A shares, September 20, 1993, to November 30, 1993.
# Total returns for Class A shares do not include the sales charge. If the charge had been included, the
results would have been lower.
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.
</FN>
</TABLE>
4. INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide capital appreciation. Dividend income, if any, is a
consideration incidental to the Fund's objective of capital appreciation.
The Fund seeks to achieve its investment objective by varying the weighting
of its portfolio among 15 equity sectors. The 15 sectors from among which the
Fund chooses its investments are: autos and housing; consumer goods and
services; defense and aerospace; energy; financial services; health care;
heavy industry; leisure; machinery and equipment; precious metals and natural
resources; retailing; technology; transportation; utilities; and foreign
securities. (For a description of the scope of each of these industry
sectors, see Appendix A to this Prospectus.) Certain sectors may overlap; for
example, the defense and aerospace sector and the technology sector both
include companies involved in the development of computer-related products.
Therefore, securities of certain companies or industries may simultaneously
be held in more than one industry sector. Generally,
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at least 90% of the assets of the Fund will be invested in securities in up
to five such sectors or cash. Occasionally, the number of sectors may be
increased if deemed appropriate by the Adviser due to the lack of desirable,
concentrated investment opportunities at a particular time.
In response to changes or anticipated changes in the general economy or
within one or more particular industry sectors, the Fund may increase,
decrease or eliminate entirely a particular sector's representation in the
Fund's portfolio; similarly, the Fund may acquire securities of a sector not
then represented in its portfolio. A sector or stock of a particular company
will be added to or eliminated from the Fund's portfolio based upon such
factors as such sector's or such company's economic cycle and sensitivity to
interest rates. For example, as interest rates rise and the performance of
interest-sensitive stocks declines, the Fund expects to remove such stocks
from its portfolio. Any one sector or cash may comprise up to 50% of the
Fund's portfolio. The Fund has registered as a "non-diversified" investment
company so that more than 5% of the Fund's assets may be invested (subject to
the tax limitations described below) in the securities of any one or more
issuers. As a result of its non-diversified status, the Fund's shares may be
more susceptible to adverse changes in the value of securities of a
particular company than would be the shares of a diversified investment
company. Similarly, due to the Fund's policy of generally concentrating in no
more than five industry sectors at any one time, some of which may overlap,
the value of the Fund's shares may be more susceptible to any single
economic, political or regulatory occurrence than would be the shares of an
investment company without a policy of concentration in particular industry
sectors.
While the Fund's policy is to invest primarily in common stocks, it may seek
appreciation in other types of securities such as non-convertible and
convertible bonds, convertible preferred stocks and warrants to purchase
common stock, when relative values make such investments appear attractive
either as individual issues or as types of securities in certain economic
environments (see "Additional Information as to Investment Objective and
Policies--Additional Risk Factors" and "--Risk Factors Regarding Lower Rated
Securities" below). The non-convertible bonds invested in by the Fund may
include (i) obligations issued or guaranteed by the U.S. Treasury or U.S.
Government agencies, authorities or instrumentalities, and (ii) obligations
of the U.S. Treasury that have been issued without interest coupons or
stripped of their unmatured interest coupons, interest coupons that have been
stripped from such debt obligations, and receipts and certificates for such
stripped debt obligations and stripped coupons. U.S. Government securities
also include interests in trusts or other entities representing interests in
obligations that are issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities. The Fund may invest in foreign
securities and hold foreign currency (see "Additional Risk Factors" below).
The Fund may also enter into forward foreign currency exchange contracts for
the purchase or sale of foreign currency for hedging purposes and non-hedging
purposes, including transactions entered into for the purpose of profiting
from anticipated changes in foreign currency exchange rates, as well as
options on foreign currencies (see "Investment Techniques--Forward Contracts
on Foreign Currency" and "--Options on Foreign Currencies" below).
The Fund may invest in corporate asset-backed securities (see "Investment
Techniques--Corporate Asset-Backed Securities" below). The Fund may write
covered call and put options and purchase call and put options on securities
and stock indexes in an effort to increase current income and for hedging
purposes (see "Investment Techniques--Options" below). The Fund may also
purchase and sell stock index and interest rate futures contracts and may
write and purchase options thereon for hedging purposes and for non-hedging
purposes, subject to applicable law (see "Investment Techniques--Futures
Contracts and Options on Futures Contracts" below). In addition, the Fund may
purchase portfolio securities on a "when-issued" or on a "forward delivery"
basis (see "Investment Techniques--When-Issued Securities" below).
Subject to tax requirements, portfolio changes are made without regard to the
length of time a security has been held, or whether a sale would result in a
profit or loss.
Additional Information as to Investment Objective and Policies
Fixed Income Securities--When and if available, the Fund may purchase fixed
income securities 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.
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Risk Factors Regarding Lower Rated Securities--The Fund may invest to a
limited extent in lower rated fixed income securities or comparable unrated
securities. Investments in such securities while generally providing greater
income and opportunity for gain than investments in higher rated securities,
usually entail greater risk of principal and income (including the
possibility of default or bankruptcy of the issuers of such securities), and
involve greater volatility of price (especially during periods of economic
uncertainty or change) than investments in higher rated securities and
because yields may vary over time, no specified level of income can ever be
assured. In particular, securities rated lower than Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P")
or comparable unrated securities (commonly known as "junk bonds") are
considered speculative. For a description of these ratings, see Appendix B to
this Prospectus. These lower rated high yielding fixed income securities
generally tend to reflect economic changes (and the outlook for economic
growth), short-term corporate and industry developments and the market's
perception of their credit quality (especially during times of adverse
publicity) to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates (although
these lower rated fixed income securities are also affected by changes in
interest rates). In the past, economic downturns or an increase in interest
rates have under certain circumstances caused a higher incidence of default
by the issuers of these securities and may do so in the future, especially in
the case of highly leveraged issuers. During certain periods, the higher
yields on the Fund's lower rated high yielding fixed income securities are
paid primarily because of the increased risk of loss of principal and income,
arising from such factors as the heightened possibility of default or
bankruptcy of the issuers of such securities. Due to the fixed income
payments of these securities, the Fund may continue to earn the same level of
interest income while its net asset value declines due to portfolio losses,
which could result in an increase in the Fund's yield despite the actual loss
of principal. The prices for these securities may be affected by legislative
and regulatory developments. For example, federal rules require that savings
and loan associations gradually reduce their holdings of high-yield
securities. An effect of such legislation may be to depress the prices of
outstanding lower rated high yielding fixed income securities. Changes in the
value of securities subsequent to their acquisition will not affect cash
income or yield to maturity to the Fund but will be reflected in the net
asset value of shares of the Fund. The market for these lower rated fixed
income securities may be less liquid than the market for investment grade
fixed income securities. Furthermore, the liquidity of these lower rated
securities may be affected by the market's perception of their credit
quality. Therefore, the Adviser's judgment may at times play a greater role
in valuing these securities than in the case of investment grade fixed income
securities, and it also may be more difficult during times of certain adverse
market conditions to sell these lower rated securities at their fair value to
meet redemption requests or to respond to changes in the market. No minimum
rating standard is required by the Fund. To the extent the Fund invests in
these lower rated fixed income securities, the achievement of its investment
objective may be more dependent on the Adviser's own credit analysis than in
the case of fund investing in higher quality bonds. While the Adviser may
refer to ratings issued by established credit rating agencies, it is not a
policy of the Fund to relay exclusively on ratings issued by these agencies,
but rather to supplement such ratings with the Adviser's own independent and
ongoing review of credit quality.
The Fund may also invest in fixed income securities rated Baa by Moody's or
BBB by S&P and comparable unrated securities. These securities, while
normally exhibiting adequate protection parameters, may have speculative
characteristics and changes in economic conditions and other circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher grade fixed income securities.
Additional Risk Factors--The net asset value of the shares of an open-end
investment company which may invest to a limited extent in fixed income
securities changes as the general levels of interest rates fluctuate. When
interest rates decline, the value of a fixed income portfolio can be expected
to rise. Conversely, when interest rates rise, the value of a fixed income
portfolio can be expected to decline.
Although changes in the value of 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. However, the
dividends paid by the Fund, if any, will increase or decrease in relation to
the income received by the Fund from its investments, which would in any case
be reduced by the Fund's expenses before it is distributed to shareholders.
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<PAGE>
In addition, the use of options, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies (see
"Investment Techniques" below) may result in the loss of principal,
particularly where such instruments are traded for other than hedging
purposes (e.g., to enhance current yield).
The portfolio of the Fund is aggressively managed and, therefore, the value
of its shares is subject to greater fluctuation and investments in its shares
involve the assumption of a higher degree of risk than would be the case with
an investment in a conservative equity fund or a growth fund investing
entirely in proven growth equities.
The Fund may also invest in foreign securities, which may be traded on
foreign exchanges. The Fund may invest up to 50% (and expects generally to
invest between 15% and 35%) of its total assets in foreign securities (not
including American Depositary Receipts). Investing in foreign securities or
on foreign exchanges may present a greater degree of risk than investing in
domestic issuers. These risks include changes in currency rates, exchange
control regulations, governmental administration, economic or monetary policy
(in this country or abroad), war or expropriation. In particular, the dollar
value of portfolio securities of non-U.S. issuers fluctuates with changes in
market and economic conditions abroad and with changes in relative currency
values (when the value of the dollar increases as compared to a foreign
currency, the dollar value of a foreign-denominated security decreases, and
vice versa). Costs may be incurred in connection with conversions between
various currencies. Special considerations may also include more limited
information about foreign issuers, higher brokerage costs, different
accounting standards and thinner trading markets. Foreign securities markets
may also be less liquid, more volatile and less subject to government
supervision than in the United States. Investments in foreign countries could
be affected by other factors including confiscatory taxation and potential
difficulties in enforcing contractual obligations and could be subject to
extended settlement periods. Therefore, an investment in shares of the Fund
may be subject to a greater degree of risk than investments in other
investment companies which invest exclusively in domestic securities.
As a result of its investments in foreign securities, the Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of
such securities, in the foreign currencies in which such securities are
denominated. In that event, the Fund may promptly convert such currencies
into dollars at the then current exchange rate. Under certain circumstances,
however, such as where the Adviser believes that the applicable exchange rate
is unfavorable at the time the currencies are received or the Adviser
anticipates, for any other reason, that the exchange rate will improve, the
Fund may hold such currencies for an indefinite period of time.
In addition, the Fund may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into.
This could occur, for example, if an option written by the Fund is exercised
or the Fund is unable to close out a forward contract it has entered into.
The Fund may also hold foreign currency in anticipation of purchasing foreign
securities. The Fund may also elect to take delivery of the currencies
underlying options or forward contracts if, in the judgment of the Adviser,
it is in the best interest of the Fund to do so. In such instances as well,
the Fund may promptly convert the foreign currencies to dollars at the then
current exchange rate, or may hold such currencies for an indefinite period
of time.
While the holding of currencies will permit the Fund to take advantage of
favorable movements in the applicable exchange rate, it also exposes the Fund
to risk of loss if such rates move in a direction adverse to the Fund's
position. Such losses could reduce any profits or increase any losses
sustained by the Fund from the sale or redemption of securities, and could
reduce the dollar value of interest of securities, and could reduce the
dollar value of interest or dividend payments received. In addition, the
holding of currencies could adversely affect the Fund's profit or loss on
currency options or forward contracts, as well as its hedging strategies.
Costs may be incurred in connection with conversions between various
currencies. Foreign brokerage commissions are generally higher than in the
United States and foreign securities markets may be less liquid, more
volatile and less subject to governmental supervision than in the United
States. See the Statement of Additional Information for further discussion of
foreign securities and the holding of foreign currency as well as the
associated risks.
The Fund may also invest in American Depositary Receipts ("ADRs") which are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with
a custodian bank as col-
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lateral. Although ADRs are issued by a U.S. depository, they are subject to
many of the risks of foreign securities such as exchange rates and more
limited information about foreign issuers.
The Fund has registered as a "non-diversified" investment company. As a
result, the Fund is limited as to the percentage of its assets that may be
invested in the securities of any one issuer only by its own investment
restrictions and the diversification requirements of the Internal Revenue
Code of 1986, as amended (the "Code"). U.S. Government securities are not
subject to any investment limitation. Since the Fund may invest a relatively
high percentage of its assets in the obligations of a limited number of
issuers, the Fund may be more susceptible to any single economic, political
or regulatory occurrence.
Given the above average investment risk inherent in the Fund, investment in
shares of the Fund should not be considered a complete investment program and
may not be appropriate for all investors.
Short-Term Investments for Defensive Purposes--During periods of unusual
market conditions when the Adviser believes that investing for defensive
purposes is appropriate, or in order to meet anticipated redemption requests,
a large portion or all of the assets of the Fund may be invested in cash or
cash equivalents including, but not limited to, obligations of banks
(including certificates of deposit bankers' acceptances and repurchase
agreements) with assets of $1 billion or more, commercial paper, short-term
notes, obligations issued or guaranteed by the U.S. Government or any of its
agencies, authorities or instrumentalities and related repurchase agreements.
See Appendix C to this Prospectus for a description of certain short-term
obligations.
The investment objective and policies discussed above may be changed without
shareholder approval.
5. INVESTMENT TECHNIQUES
Lending of Securities: The Fund may make loans of its 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 U.S. Government Securities maintained on a current
basis at an amount at least equal to the market value of the securities
loaned. The Fund would continue to collect the equivalent of the dividends or
interest on the securities loaned and would also receive either interest
(through investment of cash collateral) or a fee (if the collateral is U S.
Government Securities).
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 which are intended to
minimize any such risk.
When-Issued Securities: In order to help ensure the availability of suitable
securities for its portfolio, the Fund may purchase securities on a "when-
issued" or on a "forward delivery" basis, which means that the obligations
will be delivered to the Fund at a future date usually beyond customary
settlement time. It is expected that, under normal circumstances, the Fund
will take delivery of such securities. In general, the Fund does not pay for
the securities until received and does not start earning interest on the
obligations until the contractual settlement date. While awaiting delivery of
the obligations purchased on such bases, the Fund will establish a segregated
account consisting of cash, short-term money market instruments or high
quality debt securities equal to the amount of the commitments to purchase
"when-issued" securities. See the Statement of Additional Information.
Restricted Securities--The Fund may also purchase securities that are not
registered under the Securities Act of 1933 (the "1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). The Trust's Board of Trustees determines, based upon a
continuing review of the trading markets for a specific Rule 144A security,
whether such security is illiquid and thus subject to the Fund's limitation
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<PAGE>
on investing not more than 15% of its net assets in illiquid investments, or
liquid and thus not subject to such limitation. The Board of Trustees has
adopted guidelines and delegated to MFS the daily function of determining and
monitoring the liquidity of Rule 144A securities. The Board, however, will
retain sufficient oversight and be ultimately responsible for the
determinations. The Board will carefully monitor the Fund's investments in
Rule 144A securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity in a
Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing Rule 144A securities held in the Fund's portfolio.
Subject to the Fund's 15% limitation on investments in illiquid investments,
the Fund may also invest in restricted securities that may not be sold under
Rule 144A, which presents certain risks. As a result, the Fund might not be
able to sell these securities when the Adviser wishes to do so, or might have
to sell them at less than fair value. In addition, market quotations are less
readily available. Therefore, judgment may at times play a greater role in
valuing these securities than in the case of unrestricted securities.
Corporate Asset-Backed Securities: The Fund may invest in corporate
asset-backed securities. These securities, issued by trusts and special
purpose corporations, are backed by a pool of assets, such as credit card or
automobile loan receivables, representing the obligations of a number of
different parties. Corporate asset-backed securities present certain risks.
For instance, in the case of credit card receivables, these securities may
not have the benefit of any security interest in the related collateral. See
the Statement of Additional Information for further information on these
securities.
Transactions in Options, Futures and Forward Contracts: The Fund may enter
into transactions in options, futures and forward contracts on a variety of
instruments and indexes, in order to protect against declines in the value of
portfolio securities or increases in the cost of securities or other assets
to be acquired and, subject to applicable law, to increase the Fund's gross
income. The types of instruments to be purchased and sold by the Fund are
described in the Statement of Additional Information, which should be read in
conjunction with the following section. In addition, the Statement of
Additional Information contains a further discussion of the nature of the
transactions which may be entered into and the risks associated therewith.
Options
Options on Securities--The Fund may write (sell) covered call and put options
and purchase call and put options on securities. The Fund will write options
on securities for the purpose of increasing its return on such securities
and/or to protect the values of its portfolio. In particular, where the Fund
writes an option which expires unexercised or is closed out by the Fund at a
profit, it will retain the premium paid for the option which will increase
its gross income and will offset in part the reduced value of the portfolio
security underlying the option, or the increased cost of portfolio securities
to be acquired. In contrast, however, if the price of the underlying security
moves adversely to the Fund's position, the option may be exercised and the
Fund will be required to purchase or sell the underlying security at a
disadvantageous price, which may only be partially offset by the amount of
the premium. The Fund may also write combinations of put and call options on
the same security, known as "straddles." Such transactions can generate
additional premium income but also present increased risk.
By writing a call option on a security, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security,
since the holder will usually exercise the call option when the market value
of the underlying security exceeds the exercise price of the call. However,
the Fund retains the risk of depreciation in value of securities on which it
has written call options.
The Fund may also purchase put or call options in anticipation of market
fluctuations which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. In the
event that the expected market fluctuations occur, the Fund may be able to
offset the resulting adverse effect on its portfolio, in whole or in part,
through the options purchased. The premium paid for a put or call option plus
any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise or liquidation of the option, and, unless the price of the
underlying security changes sufficiently, the option may expire without value
to the Fund.
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In certain instances, the Fund may enter into options on Treasury securities
which may be referred to as "reset" options or "adjustable strike" options.
These options provide for periodic adjustment of the strike price and may
also provide for the periodic adjustment of the premium during the term of
the option.
Options on Stock Indices--The Fund may write (sell) covered call and put
options and purchase call and put options on stock indices. The Fund may
write options on stock indices for the purpose of increasing its gross income
and to protect its portfolio against declines in the value of securities it
owns or increases in the value of securities to be acquired. When the Fund
writes an option on a stock index, and the value of the index moves adversely
to the holder's position, the option will not be exercised, and the Fund will
either close out the option at a profit or allow it to expire unexercised.
The Fund will thereby retain the amount of the premium, less related
transaction costs, which will increase its gross income and offset part of
the reduced value of portfolio securities or the increased cost of securities
to be acquired. Such transactions, however, will constitute only partial
hedges against adverse price fluctuations, since any such fluctuations will
be offset only to the extent of the premium received by the Fund for the
writing of the option, less related transaction costs. In addition, if the
value of an underlying index moves adversely to the Fund's option position,
the option may be exercised, and the Fund will experience a loss which may
only be partially offset by the amount of the premium received.
The Fund may also purchase put or call options on stock indices in order,
respectively, to hedge its investments against a decline in value or to
attempt to reduce the risk of missing a market or industry segment advance.
The Fund's possible loss in either case will be limited to the premium paid
for the option, plus related transaction costs.
Futures Contracts and Options on Futures Contracts
Futures Contracts--The Fund may enter into interest rate futures contracts,
stock index futures contracts and foreign currency futures contracts. (Unless
otherwise specified, interest rate futures contracts, futures contracts on
indices and foreign currency futures contracts are collectively referred to
as "Futures Contracts.") The Fund will utilize Futures Contracts for hedging
and non-hedging purposes, subject to applicable law. Purchases or sales of
stock index futures contracts for hedging purposes are used to attempt to
protect the Fund's current or intended stock investments from broad
fluctuations in stock prices, and foreign currency futures contracts are
purchased or sold to attempt to hedge against the effects of exchange rate
charges on a Fund's current or intended investments in fixed income or
foreign securities. In the event that an anticipated decrease in the value of
portfolio securities occurs as a result of a general stock market decline, a
general increase in interest rates or a decline in the dollar value of
foreign currencies in which portfolio securities are denominated, the adverse
effects of such changes may be offset, in whole or part, by gains on the sale
of Futures Contracts. Conversely, the increased cost of portfolio securities
to be acquired, caused by a general rise in the stock market, a general
decline in interest rates or a rise in the dollar value of foreign
currencies, may be offset, in whole or part, by gains on Futures Contracts
purchased by the Fund. The Fund will incur brokerage fees when it purchases
and sells Futures Contracts, and it will be required to make and maintain
margin deposits.
Options on Futures Contracts--The Fund may purchase and write options to buy
or sell interest rate futures contracts and options on stock index futures
contracts. (Unless otherwise specified, options on interest rate futures
contracts and options on stock index futures contracts are collectively
referred to as "Options on Futures Contracts.") Such investment strategies
will be used for hedging and non-hedging purposes, subject to applicable law.
Put and call Options on Futures Contracts may be traded by the Fund in order
to protect against declines in the values of portfolio securities or against
increases in the cost of securities to be acquired. Purchases of Options on
Futures Contracts may present less risk in hedging the portfolios of the Fund
than the purchase or sale of the underlying Futures Contracts since the
potential loss is limited to the amount of the premium plus related
transaction costs. The writing of such options, however, does not present
less risk than the trading of Futures Contracts and will constitute only a
partial hedge, up to the amount of the premium received. In addition, if an
option is exercised, the Fund may suffer a loss on the transaction.
Forward Contracts on Foreign Currency--The Fund may enter into contracts for
the purchase or sale of a specific currency at a future date at a price set
at the time of the contract (a "Forward Contract"). The Fund will enter into
Forward Contracts
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for hedging and non-hedging purposes including transactions entered into for
the purpose of profiting from anticipated changes in foreign currency
exchange rates. Transactions in Forward Contracts entered into for hedging
purposes may include forward purchases or sales of foreign currencies for the
purpose of protecting the dollar value of securities denominated in a foreign
currency or protecting the dollar equivalent of interest or dividends to be
paid on such securities. The Fund may also enter into Forward Contracts for
"cross hedging" purposes, e.g., the purchase or sale of a Forward Contract on
one type of currency as a hedge against adverse fluctuations in the value of
a second type of currency. By entering into such transactions, however, the
Fund may be required to forgo the benefits of advantageous changes in
exchange rates. The Fund may also enter into transactions in Forward
Contracts for other than hedging purposes. For example, if the Adviser
believes that the value of a particular foreign currency will increase or
decrease relative to the value of the U.S. dollar, the Fund may purchase or
sell such currency, respectively, through a Forward Contract. If the expected
changes in the value of the currency occur, the Fund will realize profits
which will increase its gross income. Such transactions, however, may be
considered speculative and could involve significant risk of loss, as set
forth below. The Fund has established procedures consistent with statements
of the Securities and Exchange Commission (the "SEC") and its staff regarding
the use of Forward Contracts by registered investment companies, which
requires use of segregated assets or "cover" in connection with the purchase
and sale of such contracts.
Forward Contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, such contracts operate in a
manner distinct from exchange-traded instruments, and their use involves
certain risks beyond those associated with transactions in the Futures and
Options contracts described above.
Options on Foreign Currencies: The Fund may purchase and write put and call
options on foreign currencies for the purpose of protecting against declines
in the dollar value of portfolio securities, and against increases in the
dollar cost of securities to be acquired. As in the case of other types of
options, however, the writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received,
and the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. As in the case of Forward Contracts,
certain options on foreign currencies are traded over-the-counter and involve
risks which may not be present in the case of exchange-traded instruments.
Risks of Transactions in Options, Futures Contracts and Forward
Contracts: Although the Fund will enter into certain transactions in Futures
Contracts, Options on Futures Contracts, Forward Contracts and options for
hedging purposes, such transactions do involve certain risks. For example, a
lack of correlation between the index or instrument underlying an option,
Futures Contract of Forward Contract and the assets being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and could result in losses. "Cross hedging" transactions may
involve greater correlation risks. In addition, there can be no assurance
that a liquid secondary market will exist for any contract purchased or sold,
and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses. As noted, the Fund may also enter
into transactions in such instruments (except for options on foreign
currencies) for other than hedging purposes (subject to applicable law),
including speculative transactions, which involve greater risk. In
particular, in entering into such transactions, the Fund may experience
losses which are not offset by gains on other portfolio positions, thereby
reducing its gross income. In addition, the markets for such instruments may
be extremely volatile from time to time, as discussed in the Statement of
Additional Information, which could increase the risks incurred by the Fund
in entering into such transactions.
Transactions in options may be entered into on U.S. exchanges regulated by
the SEC, in the over-the-counter market and on foreign exchanges, while
Forward Contracts may be entered into only in the over-the-counter market.
Futures Contracts and Options on Futures Contracts may be entered into on
U.S. exchanges regulated by the Commodity Futures Trading Commission (the
"CFTC") and on foreign exchanges. The securities underlying options and
Futures Contracts traded by the Fund may include domestic as well as foreign
securities. Investors should recognize that transactions involving foreign
securities or foreign currencies, and transactions entered into in foreign
countries, may involve considerations and risks not typically associated with
investing in U.S. markets.
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<PAGE>
Transactions in options, Futures Contracts, Options on Futures Contracts and
Forward Contracts entered into for non-hedging purposes involve greater risk
and could result in losses which are not offset by gains on other portfolio
assets. For example, the Fund may sell Futures Contracts on an index of
securities in order to profit from any anticipated decline in the value of
the securities comprising the underlying index. In such instances, any losses
on the Futures transaction will not be offset by gains on any portfolio
securities comprising such index, as might occur in connection with a hedging
transaction. The risks related to transactions in options, Futures Contracts,
Options on Futures Contracts and Forward Contracts entered into by the Fund
are set forth in greater detail in the Statement of Additional Information,
which should be reviewed in conjunction with the foregoing discussion.
Portfolio Trading
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the 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 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 trading, see the
Statement of Additional Information.
Since shares of the Fund represent an investment in securities with
fluctuating market prices, shareholders should understand that the value of
their shares will vary as the aggregate value of the Fund's portfolio
securities increases or decreases. Moreover, any dividends the Fund pays will
increase or decrease in relation to the income received from its investments.
The Statement of Additional Information includes a discussion of other
investment policies and a listing of specific investment restrictions which
govern the Fund's investment policies. The specific investment restrictions
listed in the Statement of Additional Information may not be changed without
shareholder approval (see "Investment Restrictions" in the Statement of
Additional Information). The Fund's investment limitations, policies and
rating standards 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.
6. MANAGEMENT OF THE FUND
Investment Adviser--MFS manages the Fund pursuant to an Investment Advisory
Agreement dated September 1, 1993 (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative
services, as well as general office facilities. Kenneth J. Enright, a Vice
President of the Adviser, has been the Fund's portfolio manager since
September 1, 1993. Mr. Enright 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 its services and facilities, the
Adviser receives a management fee, computed and paid monthly, in an amount
equal to 0.75% of the Fund's average daily net assets for its then-current
fiscal year.
For the Fund's fiscal year ended November 30, 1993 the Fund's current
investment adviser, MFS, together with the Fund's former investment adviser,
Lifetime Advisers, Inc. (a wholly owned subsidiary of MFS) received
management fees under the Fund's Advisory Agreements of $2,065,624.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Union Standard Trust, MFS Institutional Trust, MFS/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.
12
<PAGE>
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 the management of the MFS organization were
approximately $34.9 billion on behalf of approximately 1.4 million investor
accounts as of February 28, 1994. As of such date, the MFS organization
managed approximately $9.9 billion of assets invested in equity securities
and approximately $21.5 billion of assets invested in fixed income
securities. Approximately $4.3 billion of the assets managed by MFS are
invested in securities of foreign issuers and non-U.S. dollar denominated
securities of U.S. issuers. 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 President, respectively, of Sun Life. Sun Life, a mutual life insurance
company, is one of the largest international life insurance companies and has
been operating in the United States since 1895, establishing a headquarters
office here in 1973. The executive officers of MFS report to the Chairman of
Sun Life.
A. Keith Brodkin, the Chairman of MFS, is the Chairman and President of the
Trust. W. Thomas London, Stephen E. Cavan, James R. Bordewick, Jr., James O.
Yost and Linda J. Hoard, all of whom are officers of MFS, are officers of the
Trust.
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.
7. 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 plus an initial
sales charge (or CDSC in the case of certain purchases of $1 million or more)
as follows:
<TABLE>
<CAPTION>
Sales Charge* as
Percentage of:
----------------------------- Dealer Allowance
Net Amount as a Percentage
Amount of Purchase Offering Price Invested of Offering Price
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75 4.99 4.00
$100,000 but less than $250,000 4.00 4.17 3.20
$250,000 but less than $500,000 2.95 3.04 2.25
$500,000 but less than $1,000,000 2.20 2.25 1.70
$1,000,000 or more None** None** See Below**
<FN>
*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 circumstances. FSI will pay a commission on purchases of
$1 million or more.
</FN>
</TABLE>
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.
13
<PAGE>
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 that 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 shall
receive all CDSCs.
FSI allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the table above. In the case of
the maximum sales charge, the dealer retains 5% and FSI retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending
on the number of shares of the Fund as well as certain MFS Funds and other
Funds owned or being purchased, the existence of an agreement to purchase
additional shares during a 13-month period (or 36-month period for purchases
of $1 million or more) or other special purchase programs. A description of
the Right of Accumulation, Letter of Intent and Group Purchases privileges by
which the sales charge may be reduced is set forth in the Statement of
Additional Information. In addition, FSI, will pay 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 Trust, 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 the 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
14
<PAGE>
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
employee or representative 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.
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. In addition, Class A
shares may be sold at their 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 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((SM)) 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 program 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).
15
<PAGE>
Class B shares: Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC as follows:
<TABLE>
<CAPTION>
Contingent
Year of Deferred
Redemption Sales
After Purchase Charge
------------------------------------------ ---------
<S> <C>
First 4%*
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
<FN>
*Class B shares purchased between January 1, 1993 and August 31, 1993, are
subject to a CDSC of 5% in the event of a redemption within the first year
after purchase.
</FN>
</TABLE>
For Class B shares purchased prior to January 1, 1993, the Fund imposes a
CDSC as a percentage of redemption proceeds as follows:
<TABLE>
<CAPTION>
Contingent
Year of Deferred
Redemption Sales
After Purchase Charge
------------------------------------------ ---------
<S> <C>
First 6%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
</TABLE>
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), 401(k)
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 borrowing from the plan (repayments of
borrowings, 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 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
Trust; (ii) any of the subsidiary companies of Sun Life; (iii) eligible
Directors, officers, employees, (including retired 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 family members of such
individuals and their spouses, provided in each case that
16
<PAGE>
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 institution which has a sales
agreement with FSI, by certain family members of any such employee or
representative and their spouses, 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.
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 such 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
for sale at any time.
For shareholders who elect to participate in certain investment programs
(e.g., 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.
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 purchases of the Fund's
shares by a particular purchaser or
17
<PAGE>
group, for example, when a pattern of frequent purchases and sales of shares
of the Fund is evident, or if the purchase and sale orders are, or a
subsequent abrupt redemption might be, of a size that would disrupt
management of the Fund. The Fund and FSI intend specifically to exercise this
right in order to reject or restrict purchases by market timers (including
asset allocators) and the shareholder(s) whose accounts are exchanged
periodically based on an arrangement with or advice from such persons or
whose transactions seem to follow a timing pattern. In particular, action may
be taken 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 an individual or firm representing
more than (x) one percent of the Fund's net assets or (y) specified dollar
amounts in the case of certain funds in the 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 holders of timed accounts to redeem their shares at net
asset value, less any CDSC otherwise applicable, 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. In addition, state securities laws on this issue may
differ from the interpretation of federal law expressed herein, and banks and
financial institutions may be required to register as broker-dealers pursuant
to state law.
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 the 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
timer accounts (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
18
<PAGE>
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.
Certain purchases may, however, be subject to a CDSC in the event of certain
redemption transactions (see "Contingent Deferred Sales Charge" below). For
the convenience of shareholders, the Fund has arranged for different
procedures for redemption and repurchase. The proceeds of a redemption or
repurchase will normally be available within seven days, except for shares
purchased, or received in exchange for shares purchased, by check (including
certified checks or cashier's checks); payment of redemption proceeds may be
delayed for 15 days from the purchase date in an effort to assure that such
check has cleared. Payment of redemption proceeds may be delayed for up to
seven days if the Fund determines that such a delay would be in the best
interest of all its shareholders.
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 a 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 and the amount of
any income tax required to be withheld, except during any period in which the
right of redemption is suspended or date of payment is postponed because the
Exchange is closed or trading on such Exchange is restricted or to the extent
otherwise permitted by the Investment Company Act of 1940 (the "1940 Act"),
if an emergency exists (see "Tax Status").
B. Redemption By Telephone--Each 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 the amount of 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 Fund on that day. Subject to the conditions described in this section,
proceeds of a redemption are normally mailed or wired on the next business
day following the date of receipt of the order for redemption. The
Shareholder Servicing Agent will not be responsible for any losses resulting
from unauthorized telephone transactions if it follows reasonable procedures
designed to verify the identity of the caller. The Shareholder Servicing
Agent will request personal or other information from the caller, and will
normally also record calls. Shareholders should verify the accuracy of
confirmation statements immediately after their receipt.
C. Repurchase Through a Dealer--If a shareholder desires to sell his shares
at 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. Net asset value is calculated on the day the dealer places
the order with FSI, as the Fund's agent. 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 reduced
by the amount of any applicable CDSC and the amount of any income tax
required to be withheld.
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
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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
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 received 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 established for monthly automatic investments
and certain payroll savings programs, Automatic Transfer 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 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 purchases 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 redemption
equal to the then-current value of Reinvested Shares is not subject to the
CDSC, but (iii) any amount of the redemption in excess of the aggregate of
the then-current value of Reinvested Shares and the Free Amount is subject to
a CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible
rate. The CDSC to be imposed upon redemptions will be calculated as set forth
in "Purchases" above.
The applicability of the CDSC will be unaffected by exchanges or transfers of
registration.
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Distribution Plans
The Trustees have adopted separate distribution plans for Class A and Class B
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 Rule 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
in the distribution of 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
will 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. 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. 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 for 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. The Class B Distribution Plan also provides that
FSI will receive all CDSCs attributable to Class B shares (see "Redemptions
and Repurchases of Shares"), 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
thirteenth 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 for shareholder accounts. The purpose of the 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
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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
The Fund intends to pay substantially all of its net investment income for
any calendar year to its shareholders as dividends on an annual basis. In
addition, the Fund may make one or more distributions during the calendar
year to its shareholders from any long-term capital gains. The Fund also may
make one or more distributions during the calendar year to its shareholders
from short- term capital gains. Shareholders may elect to receive dividends
and capital gain distributions in either cash or additional shares of the
same class in respect of which the 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
The Fund is treated as an entity separate from the other series of the Trust
for federal income tax purposes. 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
imposed by the Code. It is not expected that the Fund will be required to pay
any federal income or excise taxes, although foreign-source income earned by
the Fund may be subject to foreign withholding taxes. Shareholders of the
Fund normally will have to pay federal income taxes, and any state and local
taxes, on the dividends and capital gain distributions they receive from the
Fund, whether paid in cash or in additional shares. A portion of the
dividends received from the Fund (but none of the Fund's capital gain
distributions) may qualify for the dividends-received deduction for
corporations. A statement setting forth the federal income tax status of all
dividends and distributions for that calendar year, including the portion
taxable as ordinary income, the portion taxable as long-term capital gains,
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
any payments that are subject to such withholding and 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. Backup withholding, however, 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 advisor as to the tax consequences of an
investment in the Fund.
Net Asset Value
The net asset value per share of each class of the Fund is determined each
day during which the Exchange is open for trading. This determination is made
once each day as of the close of regular trading on such Exchange by
deducting the amount of the liabilities attributable to the class from the
value of the Fund's assets and dividing the difference by the number of
outstanding shares of the class outstanding. Assets in the Fund's portfolio
are valued on the basis of their current values or otherwise at their fair
values, as described in the Statement of Additional Information. All
investments and assets are expressed in U.S. dollars based upon current
currency exchange rates. The net asset value 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, one of two series of the Trust, has two classes of shares, entitled
Class A and Class B Shares of Beneficial Interest (without par value). The
Trust has reserved the right to create and issue additional classes and
series of shares, in which case
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each class of shares of a series would participate equally in the earnings,
dividends and assets attributable to that class of shares of that particular
series. Shareholders are entitled to one vote for each share held and shares
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 ratification of
selection of accountants. Additionally, each class of shares of a series will
vote separately on any material increases 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 series
on all other matters. The Trust does not intend to hold annual shareholder
meetings. The 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).
Each share of a class of the Fund represents an equal proportionate interest
in the Fund with each other class share, subject to the liabilities of the
particular class. Shares have no pre-emptive or conversion rights (except as
set forth above "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 Trust 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 (e.g., fidelity bonding and errors and omissions
insurance) existed and the Trust itself was unable to meet its obligations.
Performance Information
From time to time, the Fund will provide 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. Total rate of return
quotations will 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 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
reduction in value of the initial investment due to the sales charge or the
deduction of a CDSC, and which will thus be higher. The Fund's total rate of
return quotations are based on historical performance and are not intended to
indicate future performance. 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 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 holdings available to investors upon request.
8. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described
below or concerning other aspects of the Fund should contact the Shareholder
Servicing Agent (see back cover for address and phone number).
Account and Confirmation Statements--Each shareholder will receive
confirmation statements showing the transaction activity in his account. At
the end of each calendar year, each shareholder will receive income tax
information regarding reportable dividends and capital gain distributions for
that year (see "Tax Status").
Distribution Options--The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
--Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified;
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- --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 of the Fund at the
same reduced sales charge as though the total quantity were invested in one
lump sum, subject to escrow agreements and the appointment of an attorney for
redemptions from the escrow amount if the intended purchases are not
completed, by completing the Letter of Intent section of the Account
Application.
Right of Accumulation: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together
with the current offering price value of all holdings of any class 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 in shares of the same class
of another MFS Fund, if shares of such Fund are available for sale and
without any applicable CDSC).
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 ("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 participate in the Automatic Exchange Plan. The
Automatic Exchange Plan provides for automatic 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 of shares of MFS Money Market Fund, MFS Government Money
Market Fund or Class A
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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 April 1, 1994, contains
more detailed information about the Trust and the Fund, including information
related to (i) investment policies and restrictions, including the purchase
and sale of options, Futures Contracts, Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies, (ii) the Trustees, officers and
investment adviser, (iii) portfolio trading, (iv) the Fund's shares,
including rights and liabilities of shareholders, (v) tax status of dividends
and distributions, (vi) the Distribution Plans, (vii) the method used to
calculate total rate of return quotations and (viii) various services and
privileges provided by the Fund for the benefit of its shareholders,
including additional information with respect to the exchange privilege.
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APPENDIX A
DESCRIPTION OF INDUSTRY SECTORS
The Fund seeks to achieve its investment objective by varying the weighting
of its portfolio among the following 15 industry sectors (i.e., industry
groupings).
(1) Autos and Housing Sector: companies engaged in the design, production and
sale of automobiles, automobile parts, mobile homes and related products, and
in the design, construction, renovation and refurbishing of residential
dwellings. The value of automobile industry securities is affected by foreign
competition, consumer confidence, consumer debt and installment loan rates.
The housing construction industry is affected by the level of consumer
confidence, consumer debt, mortgage rates and the inflation outlook.
(2) Consumer Goods and Services Sector: companies engaged in providing
consumer goods and services such as: the design, processing, production and
storage of packaged, canned, bottled and frozen foods and beverages; and the
design, production and sale of home furnishings, appliances, clothing,
accessories, cosmetics and perfumes. Certain such companies are subject to
government regulation affecting the permissibility of using various food
additives and production methods, which regulations could affect company
profitability. Also, the success of food- and fashion-related products may be
strongly affected by fads, marketing campaigns and other factors affecting
supply and demand.
(3) Defense and Aerospace Sector: companies engaged in the research,
manufacture or sale of products or services related to the defense and
aerospace industries, such as: air transport; data processing or
computer-related services; communications systems; military weapons and
transportation; general aviation equipment, missiles, space launch vehicles
and spacecraft; units for guidance, propulsion and control of flight
vehicles; and airborne and ground-based equipment essential to the test,
operation and maintenance of flight vehicles. Since such companies rely
largely on U.S. (and other) governmental demand for their products and
services, their financial conditions are heavily influenced by federal (and
other governmental) defense spending policies.
(4) Energy Sector: companies in the energy field, including oil, gas,
electricity and coal as well as nuclear, geo- thermal, oil shale and solar
sources of energy. The business activities of companies comprising this
sector may include: production, generation, transmission, marketing, control
or measurement of energy or energy fuels; provision of component parts or
services to companies engaged in such activities; energy research or
experimentation; environmental activities related to the solution of energy
problems; and activities resulting from technological advances or research
discoveries in the energy field. The value of such companies' securities
varies based on the price and supply of energy fuels and may be affected by
events relating to international politics, energy conservation, the success
of exploration projects, and the tax and other regulatory policies of various
governments.
(5) Financial Services Sector: companies providing financial services to
consumers and industry, such as: commercial banks and savings and loan
associations; consumer and industrial finance companies; securities brokerage
companies; leasing companies; and firms in all segments of the insurance
field (such as multiline, property and casualty, and life insurance). These
kinds of companies are subject to extensive governmental regulations, some of
which regulations are currently being studied by Congress. The profitability
of these groups may fluctuate significantly as a result of volatile interest
rates and general economic conditions.
(6) Health Care Sector: companies engaged in the design, manufacture or sale
of products or services used in connection with health care or medicine, such
as: pharmaceutical companies; firms that design, manufacture, sell or supply
medical, dental and optical products, hardware or services; companies
involved in biotechnology, medical diagnostic and biochemical research and
development; and companies involved in the operation of health care
facilities. Many of these companies are subject to government regulation,
which could affect the price and availability of their products and services.
Also, products and services in this sector could quickly become obsolete.
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(7) Heavy Industry Sector: companies engaged in the research, development,
manufacture or marketing of products, processes or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals,
steel and pollution control industries, such as: synthetic and natural
materials, for example, chemicals, plastics, fertilizers, gases, fibers,
flavorings and fragrances; paper; wood products; steel and cement. Certain
companies in this sector are subject to regulation by state and federal
authorities, which could require alteration or cessation of production of a
product, payment of fines or cleaning of a disposal site. In addition, since
some of the materials and processes used by these companies involve hazardous
components, there are risks associated with their production, handling and
disposal. The risk of product obsolescence is also present.
(8) Leisure Sector: companies engaged in the design, production or
distribution of goods or services in the leisure industry, such as:
television and radio broadcast or manufacture; motion pictures and
photography; recordings and musical instruments; publishing; sporting goods,
camping and recreational equipment; sports arenas; toys and games; amusement
and theme parks; travel-related services and airlines; hotels and motels;
fast food and other restaurants; and gaming casinos. Many products produced
by companies in this sector--for example, video and electronic games--may
quickly become obsolete.
(9) Machinery and Equipment Sector: companies engaged in the research,
development or manufacture of products, processes or services relating to
electrical equipment, machinery, pollution control and construction services,
such as: transformers, motors, turbines, hand tools, earth-moving equipment
and waste disposal services. The profitability of most companies in this
group may fluctuate significantly in response to capital spending and general
economic conditions. Since some of the materials and processes used by these
companies involve hazardous components, there are risks associated with their
production, handling and disposal. The risk of product obsolescence is also
present.
(10) Natural Resources Sector: companies engaged in exploration, mining,
processing or dealing in gold, silver, platinum or other natural resources or
companies which, in turn, invest in companies engaged in these activities. A
significant portion of this sector may be represented by securities of
foreign companies, and investors should understand the special risks related
to such an investment emphasis. Also, such securities depend heavily on
prices in metals or other natural resources, some of which may experience
extreme price volatility based on international economic and political
developments.
(11) Retailing Sector: companies engaged in the retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products and
other consumer goods, such as: department stores; supermarkets; and retail
chains specializing in particular items such as shoes, toys or
pharmaceuticals. The value of securities in this sector will fluctuate based
on consumer spending patterns, which depend on inflation and interest rates,
level of consumer debt and seasonal shopping habits. The success or failure
of a particular company in this highly competitive sector will depend on such
company's ability to predict rapidly changing consumer tastes.
(12) Technology Sector: companies which are expected to have or develop
products, processes or services which will provide or will benefit
significantly from technological advances and improvements or future
automation trends in the office and factory, such as: semiconductors;
computers and peripheral equipment; scientific instruments; computer
software; telecommunications; and electronic components, instruments and
systems. Such companies are sensitive to foreign competition and import
tariffs. Also, many products produced by companies in this sector may quickly
become obsolete.
(13) Transportation Sector: companies involved in the provision of
transportation of people and products, such as: airlines, railroads and
trucking firms. Revenues of companies in this sector will be affected by
fluctuations in fuel prices resulting from domestic and international events,
and government regulation of fares.
(14) Utilities Sector: companies in the public utilities industry and
companies deriving a substantial majority of their revenues through supplying
public utilities such as: companies engaged in the manufacture, production,
generation,
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transmission and sale of gas and electric energy; and companies engaged in
the communications field, including telephone, telegraph, satellite,
microwave and the provision of other communication facilities to the public.
The gas and electric public utilities industries are subject to various
uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear
power facilities.
(15) Foreign Sector: companies whose primary business activity takes place
outside of the United States. The securities of foreign companies would be
heavily influenced by the strength of national economies, inflation levels
and the value of the U.S. dollar versus foreign currencies. Investments in
the Foreign Sector will be subject to certain risks not generally associated
with domestic investments.
Diversified companies will generally be included in the sector of their
predominant industry activity, as determined by the Adviser.
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APPENDIX B
DESCRIPTION OF BOND RATINGS
The ratings of Moody's and S&P represent their opinions as to the quality of
various debt instruments. It should be emphasized, however, that ratings are
not absolute standards of quality. Consequently, debt instruments with the
same maturity, coupon and rating may have different yields while debt
instruments of the same maturity and coupon with different ratings may have
the same yield.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium- grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment some time in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Absence of Rating: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality
of the issue. Should no rating be assigned, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
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Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated 'AAA' has the highest rating assigned by S&P's. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
BB: Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B: Debt rated 'B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'BB' or 'BB-' rating.
CCC: Debt rated 'CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The 'CCC' rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied 'B' or 'B-' rating.
CC: The rating 'CC' is typically applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
C: The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI: The rating 'CI' is reserved for income bonds on which no interest is
being paid.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.
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APPENDIX C
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES, AUTHORITIES OR INSTRUMENTALITIES
U.S. Government Obligations--are issued by the Treasury and include bills,
certificates of indebtedness, notes and bonds. Agencies and instrumentalities
of the U.S. Government are established under the authority of an act of
Congress and include, but are not limited to, the Tennessee Valley Authority,
the bank for Cooperatives, the Farmers Home Administration, Federal Home Loan
Banks, Federal Intermediate Credit Banks and Federal Land Banks, as well as
those listed below.
Federal Farm Credit Consolidated Systemwide Notes and Bonds--are bonds issued
by a cooperatively owned nationwide system of banks and associations
supervised by the Farm Credit Administration. These bonds are not guaranteed
by the U.S. Government.
Maritime Administration Bonds--are bonds issued by the Department of
Transportation of the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing Administration
of the U.S. Government and are 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 a partial ownership interest 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.
Federal Home Loan Mortgage Corporation Bonds--are bonds issued and guaranteed
by the Federal Home Loan Mortgage Corporation and are not guaranteed by the
U.S. Government.
Federal Home Loan Bank Bonds--are bonds issued by the Federal Home Loan Bank
System and are not guaranteed by the U.S. Government.
Financing Corporation Bonds and Notes--are bonds and notes issued and
guaranteed by the Financing Corporation.
Federal National Mortgage Association Bonds--are bonds issued and guaranteed
by the Federal National Mortgage Association and are not guaranteed by the
U.S. Government.
Resolution Funding Corporation Bonds and Notes--are bonds and notes issued
and guaranteed by the Resolution Funding Corporation.
Student Loan Marketing Association Debentures--are debentures backed by the
Student Loan Marketing Association and are not guaranteed by the U.S.
Government.
Tennessee Valley Authority Bonds and Notes--are bonds and notes issued and
guaranteed by the Tennessee Valley Authority.
Some of the foregoing obligations, such as Treasury bills and GNMA
pass-through certificates, are supported by the full faith and credit of the
U.S. Government; others, such as securities of FNMA, by the right of the
issuer to borrow from the U.S. Treasury; still others, such as bonds issued
by SLMA, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government will provide financial
support to instrumentalities sponsored by the U.S. Government as it is not
obligated by law, in certain instances, to do so.
Although this list includes a description of the primary types of U.S.
Government agency, authorities or instrumentality obligations in which the
Fund intends to invest, the Fund may invest in obligations of U.S. Government
agencies or instrumentalities other than those listed above.
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DESCRIPTION OF SHORT-TERM INVESTMENTS OTHER THAN
U.S. GOVERNMENT OBLIGATIONS
Certificates of Deposit--are certificates issued against funds deposited in a
bank (including eligible foreign branches of U.S. banks), are for a definite
period of time, earn a specified rate of return and are normally negotiable.
Bankers' Acceptances--are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Commercial Paper--refers to promissory notes issued by corporations in order
to finance their short-term credit needs.
Corporate Obligations--include bonds and notes issued by corporations in
order to finance long-term credit needs.
A-1 and P-1 Commercial Paper Ratings
Description of S&P and Moody's highest commercial paper ratings:
The rating "A" is the highest commercial paper rating assigned by S&P, and
issues so rated are regarded as having the greatest capacity for timely
payment. Issues in the "A" category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety. The A-1 designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. Those A-1 issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated P-1 have a superior ability for repayment. P-1 repayment
capacity will normally be evidenced by the following characteristics: (1)
leading market positions in well established industries; (2) high rates of
return on funds employed; (3) conservative capitalization structure with
moderate reliance on debt and ample asset protection; (4) broad margins in
earnings coverage of fixed financial charges and high internal cash
generation; and (5) well established access to a range of financial markets
and assured sources of alternate liquidity.
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- --------------------------------------------------------------------------------
The MFS Family of Funds(R) -- America's Oldest Mutual Fund Group
- --------------------------------------------------------------------------------
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call the MFS Service Center
at 1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time. This
material should be read carefully before investing or sending money.
- ------------------------------------------
Stock Funds
- ------------------------------------------
Massachusetts Investors Trust
- ------------------------------------------
Massachusetts Investors Growth Stock Fund
- ------------------------------------------
MFS(R) Capital Growth Fund
- ------------------------------------------
MFS(R) Emerging Growth Fund*
- ------------------------------------------
MFS(R) Gold & Natural Resources Fund
- ------------------------------------------
MFS(R) Growth Opportunities Fund
- ------------------------------------------
MFS(R) Managed Sectors Fund
- ------------------------------------------
MFS(R) OTC Fund
- ------------------------------------------
MFS(R) Research Fund
- ------------------------------------------
MFS(R) Value Fund
- ------------------------------------------
MFS(R) World Equity Fund
- ------------------------------------------
MFS(R) World Growth Fund
- ------------------------------------------
- ------------------------------------------
Stock and Bond Funds
- ------------------------------------------
MFS(R) Total Return Fund
- ------------------------------------------
MFS(R) Utilities Fund
- ------------------------------------------
MFS(R) World Total Return Fund
- ------------------------------------------
- ------------------------------------------
Bond Funds
- ------------------------------------------
MFS(R) Bond Fund
- ------------------------------------------
MFS(R) Government Limited Maturity Fund
- ------------------------------------------
MFS(R) Government Mortgage Fund
- ------------------------------------------
MFS(R) Government Securities Fund
- ------------------------------------------
MFS(R) High Income Fund
- ------------------------------------------
MFS(R) Income & Opportunity Fund
- ------------------------------------------
MFS(R) Intermediate Income Fund
- ------------------------------------------
MFS(R) Limited Maturity Fund
- ------------------------------------------
MFS(R) World Governments Fund
- ------------------------------------------
- ------------------------------------------
Tax-Free Bond Funds
- ------------------------------------------
MFS(R) Municipal Bond Fund
- ------------------------------------------
MFS(R) Municipal High Income Fund**
- ------------------------------------------
MFS(R) Municipal Income Fund
- ------------------------------------------
MFS(R) Municipal Limited Maturity Fund
- ------------------------------------------
MFS(R) Municipal Series Trust (AL, AR, CA, FL,
GA, LA, MD, MA, MS, NY, NC, PA, SC, TN, TX, VA, WA, WV)
- ------------------------------------------
- ------------------------------------------
Money Market Funds
- ------------------------------------------
MFS(R) Cash Reserve Fund
- ------------------------------------------
MFS(R) Government Money Market Fund
- ------------------------------------------
MFS(R) Money Market Fund
- ------------------------------------------
* Closed to new investors, commencing January 14, 1994.
** Closed to new investors.
<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
Deloitte & Touche
125 Summer Street, Boston, MA 02110
(MFS LOGO(R))
MFS(R) MANAGED
SECTORS FUND
500 Boylston Street, Boston, MA 02116
MMS-1-4/94/119M 08/208
MFS(R)
MANAGED
SECTORS
FUND
(ARTWORK)
PROSPECTUS
April 1, 1994
