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MFS EQUITY INCOME FUND
Supplement to the Prospectus and Statement of Additional
Information dated January 1, 1998.
The following information should be read in conjunction with the Fund's
Prospectus and Statement of Additional Information ("SAI"), dated January 1,
1998, and contains a description of Class I shares.
Class I shares are available for purchase only by certain investors as
described under the caption "Eligible Purchasers" below.
EXPENSE SUMMARY
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Shareholder Transaction Expenses: Class I
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price)........................................... None
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds, as applicable).................... None
Annual Operating Expenses of the Fund (as a percentage of average net assets):
Management Fees........................................................................ 0.60%
Rule 12b-1 Fees........................................................................ None
Other Expenses (after expense limitation)(1)(2)........................................ 0.40%
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Total Operating Expenses (after expense limitation)(2)................................. 1.00%
</TABLE>
.........................
(1) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."
(2) The Adviser has agreed to bear the Fund's expenses, subject to
reimbursement by the Fund, such that "Other Expenses" do not exceed 0.40%
per annum of its average daily net assets during the current fiscal year.
Otherwise, "Other Expenses" and "Total Operating Expenses" would be 2.15%
and 2.75%, respectively. See "Other Information" below.
Example of Expenses
An investor would pay the following dollar amounts of expenses on a $1,000
investment in Class I shares of the Fund, assuming (a) a 5% annual return and
(b) redemption at the end of each of the time periods indicated:
Period Class I
1 year...................... $10
3 years..................... 32
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. A more complete description of the Fund's
management fee is set forth under the caption "Management of the Fund" in the
Prospectus.
The "Example" set forth above should not be considered a representation of past
or future expenses of the Fund; actual expenses may be greater or less than
those shown.
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CONDENSED FINANCIAL INFORMATION
The following information has been audited and should be read in
conjunction with the financial statements included in the Fund's Annual Report
to Shareholders which are incorporated by reference into the SAI in reliance
upon the report of the Fund's independent auditors, given upon their authority
as experts in accounting and auditing. The Fund's independent auditors are Ernst
& Young LLP.
Financial Highlights - Class I Shares
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PERIOD ENDED
AUGUST 31, 1997*
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $12.20
Income from investment operations# -
Net investment incomess. $ 0.15
Net realized and unrealized gain on investments
and foreign currency transactions 2.46
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Total from investment operations $ 2.61
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Net asset value - end of period $14.81
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Total return 21.39%++
Ratios (to average net assets)/Supplemental datass.:
Expenses 1.50%+
Net investment income 1.51%+
Portfolio turnover 118%
Average commission rate $ 0.0393
Net assets at end of period (000 omitted) $ 964
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* For the period from the inception of Class I, January 2, 1997, through
August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
ss. The Adviser voluntarily agreed to maintain the expenses of the Fund at
not more than 1.50% of the Fund's average daily net assets. The
investment adviser, distributor and shareholder servicing agent did not
impose any of their fees for the period indicated. If these fees had not
been waived by the Fund and/or if actual expenses had been over/under
this limitation, the net investment income per share and the ratios
would have been:
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Net investment income $0.03 Ratios (to average net assets):
Expenses## 2.67%+
Net investment income 0.35%+
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ELIGIBLE PURCHASERS
Class I shares are available for purchase only by the following purchasers
("Eligible Purchasers"):
(i) certain retirement plans established for the benefit of employees of
Massachusetts Financial Services Company ("MFS"), the Fund's investment
adviser, and employees of MFS' affiliates;
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(ii) any fund distributed by MFS Fund Distributors, Inc. ("MFD"), the Fund's
distributor, if the fund seeks to achieve its investment objective by
investing primarily in shares of the Fund and other funds distributed by
MFD;
(iii)any retirement plan, endowment or foundation which (a) purchases shares
directly through MFD (rather than through a third party broker or dealer or
other financial intermediary); (b) has, at the time of purchase of Class I
shares, aggregate assets of at least $100 million; and (c) invests at least
$10 million in Class I shares of the Fund either alone or in combination
with investments in Class I shares of other MFS funds distributed by MFD
(additional investments may be made in any amount); provided that MFD may
accept purchases from smaller plans, endowments or foundations or in
smaller amounts if it believes, in its sole discretion, that such entity's
aggregate assets will equal or exceed $100 million, or that such entity
will make additional investments which will cause its total investment to
equal or exceed $10 million, within a reasonable period of time; and
(iv) bank trust departments or law firms acting as trustee or manager for trust
accounts which initially invest, on behalf of their trust clients, at least
$100,000 in Class I shares of the Fund (additional investments may be made
in any amount); provided that MFD may accept smaller initial purchases if
it believes, in its sole discretion, that the bank trust department or law
firm will make additional investments, on behalf of its trust clients,
which will cause its total investment to equal or exceed $100,000 within a
reasonable period of time.
In no event will the Fund, MFS, MFD or any of their affiliates pay any sales
commissions or compensation to any third party in connection with the sale of
Class I shares; the payment of any such sales commission or compensation would,
under the Fund's policies, disqualify the purchaser as an eligible investor in
Class I shares.
SHARE CLASSES OFFERED BY THE FUND
Four classes of shares of the Fund currently are offered for sale, Class A
shares, Class B shares, Class C shares and Class I shares. Class I shares are
available for purchase only by Eligible Purchasers, as defined above, and are
described in this Supplement. Class A shares, Class B shares and Class C shares
are described in the Fund's Prospectus and are available for purchase by the
general public.
Class A shares are offered at net asset value plus an initial sales charge
up to a maximum of 5.75% of the offering price (or a contingent deferred sales
charge (a "CDSC") of 1.00% upon redemption during the first year in the case of
purchases of $1 million or more and certain purchases by retirement plans), and
are subject to an annual distribution fee and service fee up to a maximum of
0.35% per annum. Class B shares are offered at net asset value without an
initial sales charge but are subject to a CDSC upon redemption (declining from
4.00% during the first year to 0% after six years) and an annual distribution
fee and service fee up to a maximum of 1.00% per annum; Class B shares convert
to Class A shares approximately eight years after purchase. Class C shares are
offered at net asset value without an initial sales charge but are subject to a
1.00% CDSC upon redemption during the first year and an annual distribution fee
and service fee up to a maximum of 1.00% per annum. Class I shares are offered
at net asset value without an initial sales charge or CDSC and are not subject
to a distribution or service fee. Class C shares and Class I shares do not
convert to any other class of shares of the Fund.
OTHER INFORMATION
Eligible Purchasers may purchase Class I shares only directly through MFD.
Eligible Purchasers may exchange Class I shares of the Fund for Class I shares
of any other MFS Fund available for purchase by such Eligible Purchasers at
their net asset value (if available for sale), and may exchange Class I shares
of the Fund for shares of the MFS Money Market Fund (if available for sale), and
may redeem Class I shares of the Fund at net asset value. Distributions paid by
the Fund with respect to Class I shares generally will be greater than those
paid with respect to Class A shares, Class B shares and Class C shares because
expenses attributable to Class A shares, Class B shares and Class C shares
generally will be higher.
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Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the Fund's expenses such that the Fund's "Other Expenses," which
are defined to include all Fund expenses except for management fees, Rule 12-b-1
fees, taxes, extraordinary expenses, brokerage and transactions costs and class
specific expenses, do not exceed 0.40% per annum of its average daily net assets
(the "Maximum Percentage"). The obligation of MFS to bear these expenses
terminates on the last day of the Fund's fiscal year in which the Fund's "Other
Expenses" are less than or equal to the Maximum Percentage. The payments made by
MFS on behalf of the Fund under this arrangement are subject to reimbursement by
the Fund to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the Fund to MFS computed and paid monthly at a percentage
of its average daily net assets for its then current fiscal year, with a
limitation that immediately after such payment the Fund's "Other Expenses" will
not exceed the Maximum Percentage. This expense reimbursement by the Fund to MFS
terminates on the earlier of the date on which payments made by the Fund equal
the prior payment of such reimbursable expenses by MFS or August 31, 2006.
The date of this Supplement is June 24, 1998
<PAGE>
MFS EQUITY INCOME FUND
Supplement to the January 1, 1998 Prospectus
This Supplement describes certain changes to the Fund's Prospectus to
reflect a management fee reduction as follows:
1. EXPENSE SUMMARY
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Shareholder Transaction Expenses: Class A Class B Class C
Maximum Initial Sales Charge Imposed on Purchases
of Fund Shares (as a percentage of offering price)......................... 5.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds,
as applicable)............................................................. See Below(1) 4.00% 1.00%
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Annual Operating Expenses of the Fund (as a percentage of average daily net
assets):
Management Fees(2)........................................................... 0.60% 0.60% 0.60%
Rule 12b-1 Fees.............................................................. 0.35%(3) 1.00%(4) 1.00%(4)
Other Expenses (after expense limitation)(5) (6)............................. 0.40% 0.40% 0.40%
----- ----- -----
Total Operating Expenses (after expense limitation)(6)....................... 1.35% 2.00% 2.00%
</TABLE>
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(1) Purchases of $1 million or more and certain purchases by retirement plans
are not subject to an initial sales charge; however, a contingent deferred
sales charge (a "CDSC") of 1% will be imposed on such purchases in the
event of certain redemption transactions within 12 months following such
purchases (see "Information Concerning Shares of the Fund - Purchases"
below).
(2) Effective July 1, 1998, the management fee is reduced from 0.75% per annum
of the Fund's average daily net assets to 0.60% per annum of the Fund's
average daily net assets.
(3) The Fund has adopted a distribution plan for its shares in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") (the "Distribution Plan"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to Class A
shares. Distribution expenses paid under this Plan, together with the
initial sales charge, may cause long-term shareholders to pay more than the
maximum sales charge that would have been permissible if imposed entirely
as an initial sales charge (see "Information Concerning Shares of the Fund
- Distribution Plan" below).
(4) The Fund's Distribution Plan provides that it will pay distribution/service
fees aggregating up to (but not necessarily all of) 1.00% per annum of the
average net assets attributable to Class B shares and Class C shares
respectively. Distribution expenses paid under the Distribution Plan with
respect to Class B or Class C shares, together with any CDSC payable upon
redemption of Class B and Class C shares, may cause long-term shareholders
to pay more than the maximum sales charge that would have been permissible
if imposed entirely as an initial sales charge (see "Information Concerning
Shares of the Fund - Distribution Plan" below).
(5) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."
(6) The Adviser has agreed to bear the Fund's expenses, subject to
reimbursement by the Fund, such that "Other Expenses" do not exceed 0.40%
per annum of the Fund's average daily net assets during the current fiscal
year. Otherwise, "Other Expenses" for each of Class A, Class B and Class C
shares would be 2.15% per annum, and "Total Operating Expenses" for Class
A, Class B and Class C shares would be 3.10%, 3.75% and 3.75%, respectively
(see "Information Concerning Shares of the Fund - Expenses" below).
<PAGE>
Example of Expenses
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):
Period Class A Class B Class C
(1) (1)
1 year.............. $ 70 $ 60 $ 20 $ 30 $ 20
3 years............. 98 93 63 63 63
5 years............. 127 128 108 108 108
10 years............. 211 216(2) 216(2) 233 233
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(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after
purchase; therefore, years nine and ten reflect Class A expenses.
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. More complete descriptions of the following Fund
expenses are set forth in the following sections in the Prospectus: (i) varying
sales charges on share purchases - "Information Concerning Shares of the Fund -
Purchases"; (ii) varying CDSCs - "Information Concerning Shares of the Fund -
Purchases"; (iii) management fees - "Management of the Fund - Investment
Adviser"; and (iv) Rule 12b-1 (i.e., distribution plan) fees "Information
Concerning Shares of the Fund - Distribution Plan".
The "Example" set forth above should not be considered a representation
of past or future expenses of the Fund; actual expenses may be greater or less
than those shown.
2. MANAGEMENT OF THE FUND - Investment Adviser
Effective as of July 1, 1998, the last two sentences of the first
paragraph in the section entitled "Management of the Fund - Investment Adviser"
on Page 20 of the Prospectus are hereby deleted and replaced in their entirety
as follows:
"For its services and facilities, the Adviser receives an annual
management fee, computed and paid monthly, in an amount equal to 0.60%
of the Fund's average daily net assets.
The date of this Supplement is June 24, 1998.
