<PAGE>
As filed with the Securities and Exchange Commission on February 13, 1998
1933 Act File No. 2-83616
1940 Act File No. 811-3732
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 21
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 25
MFS/SUN LIFE SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
500 Boylston, Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 954-5000
Stephen E. Cavan, Massachusetts Financial Services Company
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|_| on [date] pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|X| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
================================================================================
<PAGE>
MFS/SUN LIFE SERIES TRUST
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -----------------------
1 Front Cover Pages *
2 * *
3 Condensed Financial Information *
4 The Series Fund; Investment Objectives *
and Policies; Risk Factors
5 The Series Fund; Management of the *
Series Fund; Investment Objectives and
Policies; Back Cover Page
5(A) Information included in Registrant's *
Annual Report to Shareholders for
the year ended December 31, 1996
6 Additional Information with Respect to *
Shares of each Series
7 Additional Information with Respect to *
Shares of each Series
8 Additional Information with Respect to *
Shares of each Series
9 * *
<PAGE>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ----------------- ------------------ -----------------------
10 * Front Cover Page
11 * Table of Contents
12 * *
13 * Investment Objectives,
Policies and
Restrictions
14 * Management of the
Series Fund
15 * *
16 * Management of the
Series Fund (also,
see same caption in
the Prospectus);
Independent
Accountants and
Financial Statements;
Back Cover Page
17 * Portfolio Transactions
and Brokerage
Commissions
18 * Additional Information
with Respect to
Shares of each Series
19 * Additional Information
with Respect to
Shares of each Series
20 * Additional Information
with Respect to
Shares of each Series
21 * *
22 * *
23 * Independent
Accountants and
Financial Statements
- --------------------------
* Not Applicable
<PAGE>
MFS/SUN LIFE PROSPECTUS
SERIES TRUST May 1, 1997
- ------------------------------------------------------------------------------
Page
1. The Series Fund ..................................................... 3
2. Condensed Financial Information ..................................... 3
3. Investment Objectives and Policies .................................. 15
4. Management of the Series Fund ....................................... 39
5. Additional Information with Respect to Shares of Each Series ........ 44
Purchases ........................................................ 44
Net Asset Value, Dividends and Distributions ..................... 44
Tax Status ....................................................... 45
Redemptions ...................................................... 46
Exchange Privilege ............................................... 46
Description of Shares, Voting Rights and Liabilities ............. 46
Contents of SAI .................................................. 46
Appendix A ............................................................. A-1
Appendix B ............................................................. B-1
Appendix C ............................................................. C-1
Appendix D ............................................................. D-1
Appendix E ............................................................. E-1
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/Sun Life Series Trust (the "Series Fund"), 500 Boylston Street, Boston,
Massachusetts 02116, Telephone (617) 954-5000, is a no-load, open-end
management investment company which offers a choice of twenty-six separate
series of shares. The shares of each series will be sold only to variable
accounts (collectively, the "Variable Accounts") established by Sun Life
Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)"), Sun Life
Insurance and Annuity Company of New York ("Sun Life (N.Y.)") and their
affiliated companies to fund benefits under variable contracts (the
"Contracts") issued by such companies. The Variable Accounts will purchase
shares of each series in accordance with the allocation instructions received
from owners of the Contracts.
The twenty-six series and their investment objectives are as follows:
Bond Series will primarily seek as high a level of current income as is
believed to be consistent with prudent investment risk; its secondary
objective is to seek to protect shareholders capital (see page 15).
Capital Appreciation Series will seek capital appreciation by investing in
securities of all types, with major emphasis on common stocks (see page 15).
Conservative Growth Series will seek long-term growth of capital and future
income while providing more current dividend income than is normally
obtainable from a portfolio of only growth stocks by investing a substantial
proportion of its assets in the common stocks or securities convertible into
common stocks of companies believed to possess better than average prospects
for long-term growth and a smaller proportion of its assets in securities
whose principal characteristic is income production (see page 15).
Emerging Growth Series will seek long-term growth of capital by investing
primarily (i.e., at least 80% of its assets under normal circumstances) in
common stocks of emerging growth companies. Emerging growth companies include
companies that MFS believes are early in their life cycle but which have the
potential to become major enterprises. Dividend and interest income from
portfolio securities, if any, is incidental to its objective of long-term
growth of capital (see page 16).
Equity Income Series will primarily seek reasonable income by investing mainly
in income producing securities; its secondary objective is to seek capital
appreciation (see page 17).
Government Securities Series will seek current income and preservation of
capital by investing in U.S. Government and U.S. Government-related Securities
(see page 18).
High Yield Series will seek high current income and capital appreciation by
investing primarily in fixed income securities of United States and foreign
issuers which may be in the lower rated categories or unrated (commonly known
as "junk bonds") and may include equity features (see page 19). Securities
offering the high current income sought by the High Yield Series generally
involve greater volatility of price and risk of principal and income, and less
liquidity than securities in the higher rated categories of recognized rating
agencies.
Massachusetts Investors Growth Stock Series will seek to provide long-term
growth of capital and future income rather than current income (see page 20).
Managed Sectors Series will seek capital appreciation by varying the weighting
of its portfolio of common stocks among certain industry sectors. Dividend
income, if any, is incidental to its objective of capital appreciation (see
page 21).
(Continued on next page)
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
MFS/Foreign & Colonial Series. The following three series are currently
available for investment only under Regatta Gold contracts issued by Sun Life
of Canada (U.S.):
MFS/Foreign & Colonial International Growth Series will seek capital
appreciation by investing, under normal market conditions, at least 65% of its
total assets in equity securities of companies whose principal activities are
outside the U.S. growing at rates expected to be well above the growth rate of
the overall U.S. economy (see page 23).
MFS/Foreign & Colonial International Growth and Income Series will seek
capital appreciation and current income by investing, under normal market
conditions, at least 65% of its total assets in equity and fixed income
securities of issuers whose principal activities are outside the U.S. (see
page 23).
MFS/Foreign & Colonial Emerging Markets Equity Series will seek capital
appreciation by investing, under normal market conditions, at least 65% of its
total assets in equity securities of issuers whose principal activities are
located in emerging market countries (see page 24).
Money Market Series will seek maximum current income to the extent consistent
with stability of principal by investing exclusively in money market
instruments maturing in less than 13 months (see page 30). An investment in
this series is neither insured nor guaranteed by the U.S. Government. There
can be no assurance that the series will be able to maintain a stable net
asset value of $1.00 per share.
New Discovery Series will seek capital appreciation by investing in equity
securities of companies of any size which the Fund's investment adviser
believes offer superior prospects for growth, and in particular, emphasizes
companies in the developing stages of their life cycle that offer the
potential for accelerated earnings or revenue growth (see page 25).
Research Growth and Income Series will seek to provide long-term growth of
capital, current income and growth of income (see page 30).
Research International Series will seek capital appreciation by investing in
equity securities of companies whose principal activities are located outside
the United States as well as other securities offering an opportunity for
capital appreciation (see page 26).
Research Series will seek to provide long-term growth of capital and future
income (see page 31).
Strategic Income Series will seek to provide high current income by investing
in fixed income securities and will seek to take advantage of opportunities to
realize significant capital appreciation while maintaining a high level of
current income (see page 27).
Total Return Series will seek primarily to obtain above-average income
(compared to a portfolio entirely invested in equity securities) consistent
with prudent employment of capital; its secondary objective is to take
advantage of opportunities for growth of capital and income. Assets will be
allocated and reallocated from time to time between money market, fixed income
and equity securities. Under normal market conditions, at least 25% of the
series' assets will be invested in fixed income securities and at least 40%
and no more than 75% of its assets will be invested in equity securities (see
page 32).
Utilities Series will seek capital growth and current income (income above
that available from a portfolio invested entirely in equity securities) by
investing at least 65% of its assets under normal market conditions in equity
and debt securities issued by domestic and foreign utility companies (see page
33).
Value Series will seek capital appreciation (see page 36). This series is
currently available only in connection with Regatta Gold Contracts issued by
Sun Life of Canada (U.S.).
World Asset Allocation Series will seek total return over the long term
through investments in equity and fixed income securities and will also seek
to have low volatility of share price (i.e., net asset value per share) and
reduced risk (compared to an aggressive equity/fixed income portfolio) (see
page 38).
World Governments Series will seek moderate current income and preservation
and growth of capital by investing in a portfolio of U.S. and Foreign
Government Securities (see page 42).
World Growth Series will seek capital appreciation by investing in securities
of companies worldwide growing at rates expected to be well above the growth
rate of the overall U.S. economy (see page 44).
World Total Return Series will seek total return by investing in securities
which will provide above average current income (compared to a portfolio
invested entirely in equity securities) and opportunities for long-term growth
of capital and income. The series will invest primarily in global equity and
fixed income securities (i.e., those of U.S. and non-U.S. issuers) (see page
47).
Zero Coupon Series, Portfolio 2000 will seek the highest predictable
compounded investment return for a specific period of time, consistent with
the safety of invested capital, by investing primarily in debt obligations of
the United States 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. The liquidation date for the
Portfolio is November 15, 2000 (see page 50.) This series is currently
available only in connection with the purchase of variable life insurance
contracts issued by Sun Life of Canada (U.S.).
There can be no assurance that the investment objectives of any series will be
achieved. In addition, an investment in a Series fund may involve certain
additional risks, and may not be appropriate for all purchasers.
The investment adviser of each series is Massachusetts Financial Services
Company ("MFS" or the "Adviser"), 500 Boylston Street, Boston, Massachusetts
02116. MFS has retained, as sub-advisers to each of the MFS/Foreign & Colonial
Series and the World Growth Series, Foreign & Colonial Management Limited
("FCM") and its subsidiary, Foreign & Colonial Emerging Markets Limited
("FCEM"), both located at Exchange House, Primrose Street, London EC2A 2NY,
United Kingdom (together, with respect to these series, the "Sub-Advisers").
This Prospectus sets forth concisely the information concerning each series
that a prospective investor ought to know before investing. The Series Fund
has filed with the Securities and Exchange Commission a Statement of
Additional Information dated May 1, 1997, as amended or supplemented from time
to time (the "SAI"), which contains more detailed information about each
series and is incorporated into this Prospectus by reference. See page 65 for
a further description of the information set forth in the SAI. A copy of the
SAI may be obtained without charge by contacting the Sun Life Annuity Service
Center, P.O. Box 1024, Boston, Massachusetts 02103, telephone (800) 752-7215.
The information contained in this Prospectus should be read together with the
prospectus for the Contracts.
1. THE SERIES FUND
The Series Fund is a no-load, open-end management investment company which was
organized under the laws of The Commonwealth of Massachusetts in 1983. The
Series Fund has twenty-six separate portfolios, each of which is represented
by a separate series of shares: (1) the "Bond Series," (2) the "Capital
Appreciation Series," (3) the "Conservative Growth Series," (4) the "Emerging
Growth Series," (5) the "Equity Income Series," (6) the "Government Securities
Series," (7) the "High Yield Series," (8) the "Massachusetts Investors Growth
Stock Series," (9) the "Managed Sectors Series," (10) the "MFS/Foreign &
Colonial International Growth Series," (11) the "MFS/Foreign & Colonial
International Growth and Income Series," (12) the "MFS/Foreign & Colonial
Emerging Markets Equity Series," (13) the "Money Market Series," (14) the "New
Discovery Series," (15) the "Research Growth and Income Series," (16) the
"Research International Series," (17) the "Research Series," (18) the
"Strategic Income Series," (19) the "Total Return Series," (20) the "Utilities
Series," (21) the "Value Series," (22) the "World Asset Allocation Series,"
(23) the "World Governments Series," (24) the "World Growth Series," (25) the
"World Total Return Series" and (26) the "Zero Coupon Series". The High Yield
Series, Managed Sectors Series, Strategic Income Series, Utilities Series,
World Asset Allocation Series, World Governments Series, World Growth Series
and World Total Return Series are non-diversified as that term is defined in
the Investment Company Act of 1940.
The shares of each series will be sold only to Variable Accounts established
by Sun Life of Canada (U.S.), Sun Life (N.Y.) and their affiliated companies
to fund benefits under variable contracts (the "Contracts") issued by such
companies. The Zero Coupon Series will be sold only for the purpose of funding
benefits under variable life insurance contracts issued by Sun Life of Canada
(U.S.). The Variable Accounts will purchase shares of each series in
accordance with the allocation instructions received from owners of the
Contracts. The Series Fund then uses the proceeds to buy securities for the
portfolio for which such shares were sold. The investment adviser manages each
portfolio from day to day in accordance with its investment objectives. The
kinds of investments and the way they are managed depend on the conditions and
trends in the economy and the financial marketplaces. The Series Fund also
offers to redeem shares of each series from the Variable Accounts at any time
at net asset value.
2. CONDENSED FINANCIAL INFORMATION
The following information about each series (which commenced investment
operations prior to December 31, 1996) since its inception should be read in
conjunction with the financial statements included in the Series Fund's Annual
Report to shareholders for the year ended December 31, 1996, which are
incorporated by reference into the SAI. These financial statements have been
audited by Deloitte & Touche LLP, independent certified public accountants.
Additional information about the performance of the Series Fund is contained
in such Annual Report which may be obtained without charge from the Sun Life
Annuity Service Center, P.O. Box 1024, Boston, Massachusetts 02103, Telephone
(800) 752-7215.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CAPITAL APPRECIATION SERIES
--------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH YEAR):
Net asset value -
beginning of year $ 31.9878 $24.4076 $28.1892 $24.8989 $23.0886 $16.6242 $19.9804 $13.6006 $12.9601 $12.9025
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations# -
Net investment
income (loss) .. $ (0.0200) $ 0.0933 $ 0.0523 $ 0.1036 $ 0.0909 $ 0.1809 $ 0.2737 $ 0.3809 $ 0.2925 $ 0.1560
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions ... 6.7422 8.1619 (1.1104) 4.2197 2.9238 6.5415 (2.1219) 5.9989 0.6500 0.1596
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations . $ 6.7222 $ 8.2552 $(1.0581) $ 4.3233 $ 3.0147 $ 6.7224 $(1.8482) $ 6.3798 $ 0.9425 $ 0.3156
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net
investment income $ (0.0322) $(0.0568) $(0.1306) $(0.1095) $(0.1831) $(0.2580) $(0.3940) $ -- $(0.3020) $(0.2580)
From net realized
gain on
investments and
foreign currency
transactions ... (2.8462) (0.6182) (2.5929) (0.9235) (1.0213) -- (1.1140) -- -- --
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions $ (2.8784) $(0.6750) $(2.7235) $(1.0330) $(1.2044) $(0.2580) $(1.5080) $ -- $(0.3020) $(0.2580)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value -
end of year ...... $ 35.8316 $31.9878 $24.4076 $28.1892 $24.8989 $23.0886 $16.6242 $19.9804 $13.6006 $12.9601
========== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) ... 21.48% 34.46% (3.60)% 18.00% 13.61% 40.95% (9.69)% 46.91% 7.27% 2.40%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ....... 0.80% 0.83% 0.83% 0.83% 0.87% 0.85% 0.88% 0.81% 0.91% 0.89%
Net investment
income (loss) .. (0.05)% 0.32% 0.24% 0.48% 0.50% 1.20% 1.99% 2.25% 1.86% 1.47%
PORTFOLIO TURNOVER . 67% 89% 52% 70% 69% 92% 84% 123% 128% 140%
Average commission
rate### .......... $ 0.0463 -- -- -- -- -- -- -- -- --
NET ASSETS, END OF
YEAR (000 OMITTED) . $1,061,631 $797,102 $476,508 $420,552 $262,645 $180,846 $ 77,746 $ 51,092 $ 35,492 $ 42,388
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CONSERVATIVE GROWTH SERIES
------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH YEAR):
Net asset value -
beginning of year . $22.0182 $16.4563 $16.9289 $16.0717 $16.8547 $12.6137 $13.4162 $ 9.8745 $ 9.6097 $ 9.9999
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations# -
Net investment
income .......... $ 0.4100 $ 0.4318 $ 0.2942 $ 0.2041 $ 0.1810 $ 0.1515 $ 0.3027 $ 0.3110 $ 0.4448 440.2187
Net realized and
unrealized gain
(loss) on
investments ..... 5.0415 5.6172 (0.4790) 1.1280 0.6747 4.4025 (0.7712) 3.2307 0.2720 (0.4209)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations .. $ 5.4515 $ 6.0490 $(0.1848) $ 1.3321 $ 0.8557 $ 4.5540 $(0.4685) $ 3.5417 $ 0.7168 $(0.2022)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment
income .......... $(0.2936) $(0.3037) $(0.1996) $(0.1509) $(0.1387) $(0.3130) $(0.3340) $ -- $(0.4520) $(0.1880)
From net realized
gain on
investments and
foreign currency
transactions .... (0.6783) (0.1834) (0.0882) (0.3240) (1.5000) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions $(0.9719) $(0.4871) $(0.2878) $(0.4749) $(1.6387) $(0.3130) $(0.3340) $ -- $(0.4520) $(0.1880)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end
of year ........... $26.4978 $22.0182 $16.4563 $16.9289 $16.0717 $16.8547 $12.6137 $13.4162 $ 9.8745 $ 9.6097
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) .... 25.41% 37.41% (1.10)% 8.43% 5.71% 36.74% (3.48)% 35.97% 7.41% (2.02)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ........ 0.61% 0.64% 0.64% 0.66% 0.80% 0.98% 1.00% 1.02% 0.87% 0.95%
Net investment
income .......... 1.71% 2.25% 2.42% 2.05% 1.84% 1.07% 2.29% 2.38% 3.71% 3.61%
PORTFOLIO TURNOVER .. 51% 60% 146% 19% 40% 51% 82% 34% 78% 98%
Average commission
rate### ........... $ 0.0502 -- -- -- -- -- -- -- -- --
NET ASSETS, END OF
YEAR (000 OMITTED) $571,008 $302,024 $150,318 $ 95,770 $ 44,455 $ 15,818 $ 11,680 $ 13,323 $ 11,646 $ 13,573
- ----------
# Per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for Series with fiscal years beginning on or after September 1, 1995.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun Life
Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges would
reduce the tot al return figures for all periods shown.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
GOVERNMENT SECURITIES SERIES
-------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH YEAR):
Net asset value -
beginning of year . $13.3900 $12.1219 $13.0951 $13.0059 $13.0369 $12.0359 $11.9612 $10.6128 $10.7858 $12.1211
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment
income .......... $ 0.8445 $ 0.8311 $ 0.6366 $ 0.5742 $ 0.7170 $ 0.7835 $ 0.7723 $ 0.9270 $ 1.0085 $ 0.7284
Net realized and
unrealized
gain (loss) on
investments and
foreign currency
transactions .... (0.6620) 1.2183 (0.9238) 0.5220 0.0976 1.0115 0.1954 0.4324 (0.1825) (0.4047)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations .. $ 0.1825 $ 2.0494 $(0.2872) $ 1.0962 $ 0.8146 $ 1.7950 $ 0.9677 $ 1.3594 $ 0.8260 $ 0.3237
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment
income .......... $(0.7053) $(0.7813) $(0.4959) $(0.6603) $(0.8027) $(0.7940) $(0.8930) $(0.0110) $(0.9890) $(1.3840)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
From net realized
gain on investments
and foreign
currency
transactions .... -- -- (0.1901) (0.3467) (0.0429) -- -- -- -- (0.2750)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions $(0.7053) $(0.7813) $(0.6860) $(1.0070) $(0.8456) $(0.7940) $(0.8530) $(0.0110) $(0.9980) $(1.6590)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end
of year ........... $12.8672 $13.3900 $12.1219 $13.0951 $13.0059 $13.0369 $12.0359 $11.9612 $10.6128 $10.7858
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) .... 1.65% 17.66% (2.21)% 8.70% 6.81% 15.81% 8.92% 12.83% 7.59% 2.94%
RATIOS (TO AVERAGE
NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses## ........ 0.63% 0.63% 0.62% 0.63% 0.66% 0.64% 0.67% 0.61% 0.61% 0.60%
Net investment
income .......... 6.60% 6.59% 6.01% 5.92% 6.56% 7.60% 8.12% 8.47% 8.01% 8.28%
PORTFOLIO TURNOVER .. 57% 80% 90% 96% 304% 203% 62% 139% 386% 424%
NET ASSETS, END OF
YEAR (000 OMITTED) $383,107 $368,848 $347,150 $310,521 $203,739 $144,172 97,977 61,483 57,798 62,850
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
HIGH YIELD SERIES
------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH YEAR):
Net asset value -
beginning of year . $ 8.9222 $ 8.1860 $ 9.1120 $ 8.3279 $ 8.1299 $ 6.9758 $ 9.9462 $10.0835 $10.1008 $11.7988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment
income .......... $ 0.8012 $ 0.7891 $ 0.8226 $ 0.5915 $ 0.7314 $ 0.8230 $ 1.6596 $ 1.5234 $ 1.5331 $ 1.2281
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions .... 0.2131 0.5494 (1.0387) 0.8242 0.3823 1.9201 (2.9030) (1.6487) (0.0244) (1.0871)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations .. $ 1.0143 $ 1.3385 $(0.2161) $ 1.4157 $ 1.1137 $ 2.7431 $(1.2434) $(0.1253) $ 1.5087 $ 0.1410
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment
income .......... $(0.7234) $(0.6023) $(0.7099) $(0.6316) $(0.9157) $(1.5890) $(1.7270) $(0.0120) $(1.5260) $(1.8180)
From net realized
gain on
investments .... -- -- -- -- -- -- -- -- -- (0.0210)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions $(0.7234) $(0.6023) $(0.7099) $(0.6316) $(0.9157) $(1.5890) $(1.7270) $(0.0120) $(1.5260) $(1.8390)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end
of year $ 9.2131 $ 8.9222 $ 8.1860 $ 9.1120 $ 8.3279 $ 8.1299 $ 6.9758 $ 9.9462 $10.0835 $10.1008
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) .... 12.12% 16.93% (2.16)% 17.68% 14.99% 47.47% (14.16)% (1.17)% 14.91% 1.05%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ........ 0.84% 0.87% 0.86% 0.88% 0.97% 1.05% 1.05% 0.96% 0.89% 0.88%
Net investment
income .......... 9.01% 9.17% 8.94% 8.76% 9.07% 12.23% 17.07% 12.51% 12.83% 9.74%
PORTFOLIO TURNOVER .. 88% 66% 82% 53% 73% 45% 22% 25% 32% 54%
NET ASSETS, END OF
YEAR (000 OMITTED) $196,498 $153,800 $102,194 97,884 54,564 31,254 19,216 31,983 41,954 42,341
- ----------
# Per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid indirectly.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun Life
A ssurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges would
reduce the total return figures for all periods shown.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
MANAGED SECTORS SERIES
------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988+
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning of
year ....................... $25.4468 $19.8823 $23.2419 $22.3342 $21.0115 $13.0731 $15.1367 $10.4213 $10.0000(+)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations# -
Net investment income (loss) $ 0.0200 $ 0.0979 $ 0.0982 $ 0.0027 $(0.0565) $ 0.0337 $ 0.1163 $ 0.0831 $ 0.0653
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ............. 4.2817 6.1880 (0.6610) 0.9050 1.4184 8.0287 (1.6919) 4.6323 0.4150
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations .......... $ 4.3017 $ 6.2859 $(0.5628) $ 0.9077 $ 1.3619 $ 8.0624 $(1.5756) $ 4.7154 $ 0.4803
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment income . $(0.0758) $(0.0542) $(0.0239) $ -- $(0.0392) $(0.1240) $(0.0720) $ -- $(0.0590)
From net realized gain on
investments and foreign
currency transactions .... (3.4224) (0.6672) (2.7729) -- -- -- (0.4160) -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions .... $(3.4982) $(0.7214) $(2.7968) $ -- $(0.0392) $(0.1240) $(0.4880) $ -- $(0.0590)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end of year $26.2503 $25.4468 $19.8823 $23.2419 $22.3342 $21.0115 $13.0731 $15.1367 $10.4213
======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) ............. 17.58% 32.29% (1.94)% 4.08% 6.48% 62.15% (10.50)% 45.30% 7.32%*
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ................. 0.82% 0.84% 0.87% 0.84% 0.93% 1.03% 1.25% 1.25% 1.25%*
Net investment income (loss) 0.09% 0.42% 0.53% 0.01% (0.35)% 0.34% 1.52% 1.51% 1.90%*
PORTFOLIO TURNOVER ........... 121% 113% 103% 116% 22% 45% 51% 75% 122%
Average commission rate### ... $ 0.0475 -- -- -- -- -- -- -- --
NET ASSETS, END OF YEAR (000
OMITTED) ................... $266,368 $194,351 $118,987 $104,954 $ 83,413 $ 41,752 $ 15,290 $ 4,054 $ 507
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MONEY MARKET SERIES
------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH YEAR):
Net asset value -
beginning of year . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations ........ $ 0.0483 $ 0.0520 $ 0.0363 $ 0.0256 $ 0.0325 $ 0.0565 $ 0.0760 $ 0.0855 $ 0.0549 $ 0.0379
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions
from net
investment income . $(0.0483) $(0.0520) $(0.0363) $(0.0256) $(0.0325) $(0.0565) $(0.0760) $(0.0855) $(0.0549) $(0.0379)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end
of year ........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 1.0000
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) .... 4.95% 5.44% 3.69% 2.59% 3.30% 5.79% 7.81% 8.91% 7.13% 5.95%
RATIOS (TO AVERAGE
NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses## ........ 0.56% 0.59% 0.58% 0.58% 0.60% 0.59% 0.62% 0.72% 0.72% 0.80%
Net investment
income .......... 4.82% 5.30% 3.74% 2.60% 3.29% 5.64% 7.48% 8.60% 6.97% 6.26%
NET ASSETS, END OF
YEAR (000 OMITTED) $409,165 $282,754 $252,175 $142,464 $134,799 $129,683 $112,901 $ 40,015 $ 34,179 $ 23,711
- ----------
* Annualized.
+ From May 2, 1988 (commencement of investment operations) to December 31, 1988.
(+) Net asset value on date of commencement of operations.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun Life
A ssurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges would
reduce the total return figures for all periods shown.
# Per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for Series with fiscal years beginning on or after September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
TOTAL RETURN SERIES
----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988+
---------- --------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning
of year .................. $ 18.3848 $ 15.0862 $16.0946 $14.7219 $14.2209 $12.1220 $12.0912 $10.2903 $10.0000(+)
---------- --------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income .... $ 0.7677 $ 0.7824 $ 0.5639 $ 0.4319 $ 0.5389 $ 0.5646 $ 0.4091 $ 0.2898 $ 0.2445
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ........... 1.6795 3.1527 (0.9310) 1.5044 0.6247 1.9793 (0.0993) 1.5111 0.3298
---------- --------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations ......... $ 2.4472 $ 3.9351 $(0.3671) $ 1.9363 $ 1.1636 $ 2.5439 $ 0.3098 $ 1.8009 $ 0.5743
---------- --------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment income $ (0.7189) $ (0.6365) $(0.4344) $(0.4798) $(0.5673) $(0.4450) $(0.2360) $ -- $(0.2410)
From net realized gain on
investments and foreign
currency transactions .. (0.6734) -- (0.2069) (0.0838) (0.0953) -- (0.0430) -- (0.0430)
---------- --------- -------- -------- -------- -------- -------- -------- --------
Total distributions .. $ (1.3923) $ (0.6365) $(0.6413) $(0.5636) $(0.6626) $(0.4450) $(0.2790) $ -- $(0.2840)
---------- --------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end of year $ 19.4397 $ 18.3848 $15.0862 $16.0946 $14.7219 $14.2209 $12.1220 $12.0912 $10.2903
========== ========= ======== ======== ======== ======== ======== ======== ========
Total return(++) ........... 14.10% 26.71% (2.22)% 13.37% 8.57% 21.60% 2.69% 17.49% 8.77%*
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## ............... 0.72% 0.76% 0.76% 0.78% 0.85% 0.85% 0.91% 1.25% 1.25%*
Net investment income .... 4.15% 4.70% 4.34% 4.06% 4.96% 5.83% 6.48% 6.49% 6.08%*
PORTFOLIO TURNOVER ......... 134% 108% 66% 102% 71% 69% 42% 49% 31%
Average commission rate### . $ 0.0539 -- -- -- -- -- -- -- --
NET ASSETS, END OF YEAR (000
OMITTED) ................. $1,335,022 $1,099,887 $839,614 $696,496 $397,385 $224,216 $103,658 $ 18,001 $ 3,288
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
WORLD GOVERNMENTS SERIES
------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988+
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning of
year ....................... $12.4866 $11.3769 $13.0212 $11.7966 $12.7397 $11.5967 $11.0195 $10.0259 $10.0000(+)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations# -
Net investment income ...... $ 0.6882 $ 0.8031 $ 0.6095 $ 0.5352 $ 0.6429 $ 0.7024 $ 0.2649 $ 0.8680 $ 0.3595
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ............. (0.2081) 0.9511 (1.2295) 1.5819 (0.6141) 0.9616 1.0963 0.1256 0.0614
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations ........... $ 0.4801 $ 1.7542 $(0.6200) $ 2.1171 $ 0.0288 $ 1.6640 $ 1.3612 $ 0.9936 $ 0.4209
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment income . $(1.7085) $(0.0058) $(0.8823) $(0.8925) $(0.6581) $(0.5210) $(0.7840) $ -- $(0.3590)
From net realized gain on
investments and foreign
currency transactions .... -- (0.6387) (0.1420) -- (0.3138) -- -- -- (0.0360)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions .... $(1.7085) $(0.6445) $(1.0243) $(0.8925) $(0.9719) $(0.5210) $(0.7840) $ -- $(0.3950)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end of year $11.2582 $12.4866 $11.3769 $13.0212 $11.7966 $12.7397 $11.5967 $11.0195 $10.0259
======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) ............. 4.66% 15.69% (4.46)% 18.84% 0.54% 14.83% 13.37% 9.87% 6.49%*
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses## ................. 0.90% 0.89% 0.90% 0.95% 1.03% 1.12% 1.25% 1.25% 1.25%*
Net investment income ...... 6.00% 6.67% 6.06% 6.01% 7.02% 7.50% 7.51% 8.10% 8.91%*
PORTFOLIO TURNOVER ........... 390% 329% 269% 173% 147% 192% 165% 168% --
NET ASSETS, END OF YEAR (000
OMITTED) ................... $141,764 $152,487 $139,155 $135,085 $ 73,540 $ 36,566 $ 11,506 $ 1,951 $ 2,057
- ----------
* Annualized.
+ From May 2, 1988 (commencement of investment operations) to December 31, 1988.
(+) Net asset value on date of commencement of operations.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun Life
A ssurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges would
reduce the tot al return figures for all periods shown.
# Per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for Series with fiscal years beginning on or after September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
ZERO COUPON SERIES
------------------------------------------------------------------------------------------------------------
2000 PORTFOLIO
------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value -
beginning of year . $ 9.0619 $ 7.9573 $11.1167 $11.0966 $11.3060 $10.2772 $10.6719 $ 8.8187 $ 8.4758 $ 9.7300
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment
income(S) ....... $ 0.2094 $ 0.4340 $ 0.3807 $ 0.6921 $ 0.8970 $ 0.8217 $ 0.8473 $ 0.7145 $ 0.5361 $ 0.3011
Net realized and
unrealized gain
(loss) on
investments ..... (0.0528) 1.1038 (1.1094) 0.8997 (0.0904)** 1.1301 (0.3340) 1.1387 0.4928 (1.2533)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations .. $ 0.1566 $ 1.5378 $(0.7287) $ 1.5918 $ 0.8066 $ 1.9518 $ 0.5133 $ 1.8532 $ 1.0289 $(0.9522)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions -
From net investment
income .......... $(0.3363) $(0.4332) $(0.6250) $(0.8915) $(0.8539) $(0.7990) $(0.7620) $ -- $(0.5350) $(0.3020)
From net realized
gain on
investments ..... -- -- (1.8057) (0.6802) (0.1621) (0.1240) (0.1460) -- (0.1510) --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions $(0.3363) $(0.4332) $(2.4307) $(1.5717) $(1.0160) $(0.9230) $(0.9080) $ -- $(0.6860) $(0.3020)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - end
of year ........... $ 8.8822 $ 9.0619 $ 7.9573 $11.1167 $11.0966 $11.3060 $10.2772 $10.6719 $ 8.8187 $ 8.4758
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return(++) .... 1.91% 19.88% (6.99)% 15.03% 8.18% 20.54% 5.92% 20.98% 12.23% (9.85)%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## ........ 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.48% 0.50%
Net investment
income .......... 5.20% 5.16% 4.93% 5.48% 7.08% 7.63% 8.06% 7.88% 8.57% 8.62%
PORTFOLIO TURNOVER .. 2% 27% 12% 65% 16% 8% 24% 15% 39% 31%
NET ASSETS, END OF
YEAR (000 OMITTED) $ 4,337 $ 4,616 $ 3,280 $ 3,547 $ 3,713 $ 4,525 $ 4,381 $ 4,584 $ 3,050 $ 1,436
- ----------
** The per share amount is not in accord with the net realized and unrealized gain for the period because of the timing of sales
of Trust shares and the amount of per share realized and unrealized gains and losses at such time.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun
Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges
would reduce the total return figures for all periods shown.
# Per share data for the periods subsequent to December 31, 1992 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses should be calculated without reduction for fees paid indirectly,
however, the investment adviser has voluntarily agreed to maintain the net expenses of the Zero Coupon Series 2000 Portfolio
at not more than 0.50% of average daily net assets.
(S) The investment adviser assumed a portion of other expenses for the Zero Coupon Series 2000 Portfolio for the period
indicated. If the assumption had not been in place, the net investment income per share and the ratios would have been:
<CAPTION>
ZERO
COUPON
SERIES
2000
PORTFOLIO
---------
YEAR
ENDED
DECEMBER
31, 1996
---------
<S> <C>
Net investment income $ 0.2045
RATIOS (TO AVERAGE NET
ASSETS):
Expenses## .......... 0.62%
Net investment income 5.08%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
MFS/FOREIGN
& COLONIAL MFS/FOREIGN
EMERGING & COLONIAL
MARKETS INTERNATIONAL
EQUITY SERIES GROWTH SERIES
------------- -------------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1996*** 1996**
------------- -------------
<S> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning of year .............. $10.0000**** $10.0000****
-------- --------
Income from investment operations# -
Net investment income(S) ....................... $ 0.0706 $ 0.0748
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.0693) (0.2535)
-------- --------
Total from investment operations ................. $ 0.0013 $(0.1787)
-------- --------
Net asset value - end of year .................... $10.0013 $ 9.8213
======== ========
Total return(+) .................................. 0.00%++ (1.70)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## ..................................... 1.50%* 1.50%*
Net investment income .......................... 0.77%* 1.47%*
PORTFOLIO TURNOVER ............................... 4% 3%
Average commission rate .......................... $ 0.0011 $ 0.0252
NET ASSETS, END OF YEAR (000 OMITTED) ............ $ 3,271 $ 5,525
- ----------
* Annualized.
** From June 3, 1996 (commencement of investment operations) to December 31, 1996.
*** From June 5, 1996 (commencement of investment operations) to December 31, 1996.
**** Net asset value on date of commencement of operations.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Expenses are calculated without reduction for fees paid indirectly.
(+) The total return information shown above does not reflect expenses that apply to the
separate accounts established by Sun Life of Canada (U.S.) and Sun Life (N.Y.). Inclusion
of these charges would reduce the total return figures for all periods shown.
(S) The investment adviser voluntarily agreed to maintain the expenses of the MFS/Foreign &
Colonial Emerging Markets Equity Series and MFS/Foreign & Colonial International Growth
Series at not more than 1.50% of average daily net assets. In addition, the investment
adviser voluntarily waived all or a portion of its advisory fee for the periods indicated.
To the extent actual expenses were over these limitations, the net investment income (loss)
per share and the ratios would have been:
<CAPTION>
MFS/FOREIGN
& COLONIAL MFS/FOREIGN
EMERGING & COLONIAL
MARKETS INTERNATIONAL
EQUITY SERIES GROWTH SERIES
------------- -------------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1996*** 1996**
------------- -------------
<S> <C> <C>
Net investment income (loss) .................. $0.0975) $0.0265
RATIOS (TO AVERAGE NET ASSETS):
Expenses## .................................. 3.38%* 2.50%*
Net investment income (loss) ................ (1.12)%* 0.46%*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
VALUE SERIES
-------------
PERIOD ENDED
DECEMBER 31,
1996***
-------------
<S> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR):
Net asset value - beginning of year ........................................... $10.0000****
--------
Income from investment operations# -
Net investment income(S) .................................................... $ 0.0916
Net realized and unrealized gain on investments and foreign
currency transactions ..................................................... 0.9139
--------
Total from investment operations ........................................ $ 1.0055
--------
Less distributions -
From net investment income .................................................. $ --
From net realized gain on investments and foreign currency
transactions .............................................................. --
--------
Total distributions ..................................................... $ --
--------
Net asset value - end of year ................................................. $11.0055
========
Total return(+) ............................................................... 10.10%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## .................................................................. 0.60%+
Net investment income ....................................................... 1.75%+
PORTFOLIO TURNOVER ............................................................ 52%
Average commission rate### .................................................... $ 0.0228
NET ASSETS, END OF YEAR (000 OMITTED) .......................................... $ 16,700
- ----------
*** From June 3, 1996 (commencement of investment operations) to December 31, 1996.
**** Net asset value on date of commencement of operations.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for Series with fiscal years beginning on or after
September 1, 1995.
(+) The total return information shown above does not reflect expenses that apply to the
separate accounts established by Sun Life of Canada (U.S.) and Sun Life (N.Y.). Inclusion
of these charges would reduce the total return figures for all periods shown.
(S) The investment adviser voluntarily waived all of its advisory fee for the Value Series for
the period indicated. In addition, the investment adviser voluntarily agreed to maintain
the expenses of the Value Series at not more than 1.00% of average daily net assets. If the
waiver had not been in place and to the extent actual expenses were over these limitations,
the net investment income per share and the ratios would have been:
<CAPTION>
VALUE SERIES
-------------
PERIOD ENDED
DECEMBER 31,
1996***
-------------
<S> <C>
Net investment income ...................................................... $ 0.0537
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ............................................................... 1.35%+
Net investment income .................................................... 1.02%+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
MFS/FOREIGN COLONIAL
INTERNATIONAL GROWTH AND
EMERGING GROWTH SERIES INCOME SERIES
--------------------------------- --------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995** 1996 1995***
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning of
year ....................... $12.6867 $10.0000(+) $10.1282 $10.0000(+)
-------- -------- -------- --------
Income from investment operations#--
Net investment income(S) . $ 0.0175 $ 0.0788 $ 0.2326 $ 0.0295
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions ........... 2.1506 2.6079 0.2639 0.0987
-------- -------- -------- --------
Total from investment
operations ........... $ 2.1681 $ 2.6867 $ 0.4965 $ 0.1282
-------- -------- -------- --------
Less distributions from net
investment income .......... $(0.0243) $ -- $ -- $ --
Realized gain on investments
and foreign currency
transactions ............... -- -- -- --
-------- -------- -------- --------
Distributions ................ $(0.0243) $ -- $ -- $ --
-------- -------- -------- --------
Net asset value - end of year $14.8305 $12.6867 $10.6247 $10.1282
======== ======== ======== ========
Total return(++) ............. 17.15% 26.80%++ 4.84% 1.30%++
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA(S):
Expenses## ................. 0.70% 0.24%* 0.97% 1.50%*
Net investment income ...... 0.12% 1.13%* 2.21% 1.64%*
PORTFOLIO TURNOVER ........... 88% 28% 51% --
Average commission rate### ... $ 0.0346 -- $ 0.0173 --
NET ASSETS, END OF YEAR (000
OMITTED) ................... $250,826 $67,255 $35,710 $7,179
- ----------
* Annualized.
** From May 1, 1995 (commencement of investment operations) to December 31, 1995.
*** From October 2, 1995 (commencement of operations) to December 31, 1995.
+ Not annualized.
(+) Net asset value on date of commencement of operations.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts
established by Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New
York. Inclusion of these charges would reduce the total return figures for all periods shown.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid
indirectly.
### Average Commission rate is calculated for Series with fiscal years beginning on or after September 1, 1995.
(S) For the periods shown below the investment adviser voluntarily waived all or a portion of its advisory fee for
the Emerging Growth Series and the MFS/Foreign & Colonial International Growth and Income Series. If the
waiver had not been in place, the net investment income (loss) per share and ratios would have been:
<CAPTION>
MFS/FOREIGN COLONIAL
INTERNATIONAL GROWTH AND
EMERGING GROWTH SERIES INCOME SERIES
--------------------------------- --------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995** 1996 1995***
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
Net investment income (loss) . $ (0.0406) $ 0.0265 $ 0.2101 $ 0.0119
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ............... 0.84% 1.00%* 1.16% 2.48%*
Net investment income
(loss) ................. (0.02)% 0.38%* 2.02% 0.66%*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
RESEARCH SERIES UTILITIES SERIES
---------------------------------------- -----------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994** 1996 1995 1994 1993+
----------- ----------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning of
year ....................... $13.5777 $ 9.8761 $10.0000(+) $12.2598 $ 9.5209 $10.0164 $10.0000(+)
-------- -------- -------- -------- -------- -------- --------
Income from investment operations#--
Net investment income(S) . $ 0.0797 $ 0.1401 $ 0.0131 $ 0.5322 $ 0.4918 $ 0.2899 $ 0.0128
Net realized and
unrealized gain (loss) on
investments and foreign
currency transactions ... 3.1330 3.5651 (0.1370) 1.8548 2.5197 (0.7817) 0.0036
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations ........... $ 3.2127 $ 3.7052 $(0.1239) $ 2.3870 $ 3.0115 $(0.4918) $ 0.0164
-------- -------- -------- -------- -------- -------- --------
Less distributions:
From net investment income . $(0.0328) $(0.0036) $ -- $(0.3160) $(0.2726) $(0.0037) $ --
From net realized gain on
investments and foreign
currency transactions .... (0.1841) -- -- (0.3434) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions .......... $(0.2169) $(0.0036) $ -- $(0.6594) $(0.2726) $(0.0037) $ --
-------- -------- -------- -------- -------- -------- --------
Net asset value - end of year $16.5735 $13.5777 $ 9.8761 $13.9874 $12.2598 $ 9.5209 $10.0164
======== ======== ======== ======== ======== ======== ========
Total return(++) ............. 23.76% 37.50% (1.20)%++ 20.37% 32.36% (4.96)% 1.59%*
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA(S):
Expenses## ................. 0.84% 0.58% 1.50%* 0.88% 0.44% 0.39% 1.50%*
Net investment income ...... 0.52% 1.16% 1.80%* 4.23% 4.62% 4.59% 2/59%*
PORTFOLIO TURNOVER ........... 70% 81% 3% 131% 119% 103% --
Average commission rate### ... $ 0.0280 -- -- $ 0.0435 -- -- --
NET ASSETS, END OF YEAR (000
OMITTED) ................... $325,389 $ 71,828 $ 3,869 $70,680 $43,134 $21,448 $2,798
- ----------
* Annualized.
** From November 7, 1994 (commencement of investment operations) to December 31, 1994.
+ From May 1, 1995 (commencement of investment operations) to December 31, 1995.
++ Not annualized.
(+) Net asset value on date of commencement of operations.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun
Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges
would reduce the total return figures for all periods shown.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid indirectly.
### Average Commission rate is calculated for Series with fiscal years beginning on or after September 1, 1995.
(S) For the periods shown below the investment adviser voluntarily waived all or a portion of its advisory fee for the Research
Series and the Utilities Series. If the waiver had not been in place, the net investment income (loss) per share and ratios
would have been :
<CAPTION>
RESEARCH SERIES UTILITIES SERIES
-------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994** 1995 1994 1993+
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss) . $ 0.0954 $(0.0145) $ 0.4375 $ 0.2412 $(0.0407)
Ratios (to average net assets):
Expenses## ............... 0.95% 3.49%* 0.95% 1.14% 9.71%*
Net investment income
(loss) ................. 0.79% (0.19)%* 4.12% 3.84% (5.63)%*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
WORLD ASSET
ALLOCATION SERIES
-----------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994**
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH YEAR):
Net asset value - beginning of year ............ $12.2250 $10.0579 $10.0000(+)
-------- -------- --------
Income from investment operations#--
Net investment income(S) ................... $ 0.3731 $ 0.4205 $ 0.0220
Net realized and unrealized gain on
investments and foreign currency
transactions ............................. 1.5563 1.7540 0.0359
-------- -------- --------
Total from investment operations ......... $ 1.9294 $ 2.1745 $ 0.0579
-------- -------- --------
Less distributions from net investment income .. $(0.1300) $(0.0074) $ --
Realized gain on investments and foreign
currency transactions ........................ (0.2450) -- --
-------- -------- --------
Distributions .................................. $(0.3750) $(0.0074) $ --
-------- -------- --------
Net asset value - end of year .................. $13.7794 $12.2250 $10.0579
======== ======== ========
Total return(++) ............................... 16.04% 21.56% 0.60%+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA(S):
Expenses## ................................... 0.94% 0.67% 1.50%*
Net investment income ........................ 2.84% 3.70% 3.13%*
PORTFOLIO TURNOVER ............................. 154% 146% 2%
Average commission rate### ..................... $ 0.0233 -- --
NET ASSETS, END OF YEAR (000 OMITTED) .......... $77,016 $25,863 $3,003
- ----------
* Annualized.
** From November 7, 1994 (commencement of investment operations) to December 31, 1994.
+ Not annualized.
(+) Net asset value on date of commencement of operations.
(++) The total return information shown above does not reflect expenses that apply to the separate
accounts established by Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and
Annuity Company of New York. Inclusion of these charges would reduce the total return figures for
all periods shown.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for
fees paid indirectly.
### Average Commission rate is calculated for Series with fiscal years beginning on or after September
1, 1995.
(S) For the periods shown below the investment adviser voluntarily waived all or a portion of its
advisory fee for the World Asset Allocation Series. If the waiver had not been in place, the net
investment income (loss) per share and ratios would have been:
<CAPTION>
WORLD ASSET
ALLOCATION SERIES
--------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1995 1994**
-------------- -------------
<S> <C> <C>
Net investment income (loss) ............................ $ 0.3716 $ 0.0041
RATIOS (TO AVERAGE NET ASSETS):
Expenses## .......................................... 1.11% 4.05%*
Net investment income (loss) ........................ 3.27% 0.58%*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CONTINUED
WORLD GROWTH SERIES WORLD TOTAL RETURN SERIES
----------------------------------------------------- ----------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993+ 1996 1995 1994**
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH YEAR):
Net asset value - beginning of
year ......................... $12.3464 $10.9425 $10.6366 $10.0000)(+) $11.8346 $10.0405 $10.0000(+)
-------- -------- -------- -------- -------- -------- --------
Income from investment operations#--
Net investment income(S) ... $ 0.0232 $ 0.0689 $ 0.1506 $ 0.0088 $ 0.4131 $ 0.4437 $ 0.0247
Net realized and unrealized
gain on investments and
foreign currency
transactions .............. 1.5878 1.6388 0.1590 0.6278 1.2480 1.3564 0.0158
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations ............. $ 1.6110 $ 1.7077 $ 0.3096 $ 0.6366 $ 1.6611 $ 1.8001 $ 0.0405
-------- -------- -------- -------- -------- -------- --------
Less distributions:
From net investment income ... $(0.0886) $(0.1361) $(0.0037) $ -- $(0.2300) $(0.0060) $ --
From net realized gain on
investments and foreign
currency transactions ...... (0.8350) (0.1677) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions ............ $(0.9236) $(0.3038) $(0.0037) $ -- $(0.2300) $(0.0060) $ --
-------- -------- -------- -------- -------- -------- --------
Net asset value - end of year .. $13.0338 $13.3464 $10.9425 $10.6366 $13.2657 $11.8346 $10.0405
======== ======== ======== ======== ======== ======== ========
Total return++ ................. 13.02% 16.06% 2.86% 50.78% 14.33% 17.89% 0.40%++
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA(S):
Expenses## ................... 1.04% 1.07% 0.47% 1.02% 0.96% 0.77% 1.50%*
Net investment income ........ 0.18% 0.60% 2.20% 1.23% 3.33% 4.01% 3.31%*
PORTFOLIO TURNOVER ............. 81% 162% 231% 2% 148% 146% 1%
Average commission rate### ..... $ 0.0142 -- -- -- $ 0.0229 -- --
NET ASSETS, END OF YEAR (000
OMITTED) ..................... $203,106 $146,388 $100,045 $18,879 $37,638 $13,786 $1,384
- ----------
* Annualized.
** From November 7, 1994 (date of commencement of investment operations) to December 31, 1994.
+ From November 16, 1993 (date of commencement of investment operations) to December 31, 1993.
++ Not annualized.
(+) Net asset value on date of commencement of operations.
(++) The total return information shown above does not reflect expenses that apply to the separate accounts established by Sun
Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York. Inclusion of these charges
would reduce the total return figures for all periods shown.
# Per share data is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated without reduction for fees paid indirectly.
### Average Commission rate is calculated for Series with fiscal years beginning on or after September 1, 1995.
(S) For the periods shown below the investment adviser voluntarily waived all or a portion of its advisory fee for the World
Growth Series and the World Total Return Series. If the waiver had not been in place, the net investment income (loss) per
share and ratios would have been:
<CAPTION>
WORLD GROWTH SERIES WORLD TOTAL RETURN SERIES
------------------------------------- ------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993+ 1995 1994**
--------------- --------------- --------------- ---------------
Net asset income (loss) .... $ 0.0989 $ 0.0022 $ 0.3972 $(0.0405)
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ............. 1.20% 1.92%* 1.19% 6.93%*
Net investment income
(loss) ............... 1.47% 0.33%* 3.59% (2.12)%*
</TABLE>
<PAGE>
3. INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of all series of the Series Fund are
discussed below. Any investment involves risk and there can be no assurance
that the investment objectives of any series will be achieved. Shareholder
approval is not required to change the investment objectives of any series or
the manner in which each series seeks to achieve its objectives.
More than one series may invest in the same instruments and employ the same
investment techniques. For convenient reference and to avoid duplication,
descriptions of most of the instruments and techniques are centralized and
arranged in alphabetical order in Appendix A ("Description of Instruments")
and Appendix B ("Investment Techniques") to this Prospectus. A description of
ratings by Standard & Poor's Ratings Services ("S&P"), Fitch Investors
Service, Inc. ("Fitch"), Duff & Phelps Credit Rating Co. ("Duff & Phelps") and
Moody's Investors Service, Inc. ("Moody's") used to evaluate commercial paper,
bonds and debt is provided in Appendix C. More information concerning
instruments and investment techniques can be found in the Appendix to the SAI
(the "SAI Appendix"). THESE APPENDICES PROVIDE IMPORTANT INFORMATION
CONCERNING THE RISKS INVOLVED IN INVESTING IN A PARTICULAR SERIES. WE URGE YOU
TO REVIEW THEM BEFORE MAKING YOUR INVESTMENT DECISION.
(1) BOND SERIES
The Bond Series will primarily seek to provide as high a level of current
income as is believed to be consistent with prudent investment risk; its
secondary objective is to seek to protect shareholder's capital.
The Bond Series seeks to achieve its investment objective by investing, under
normal market conditions, at least 65% of its total assets in:
(1) convertible and non-convertible debt securities and preferred stocks;
(2) debt securities issued or guaranteed by the United States ("U.S.")
Government or its agencies, authorities or instrumentalities ("U.S.
Government Securities");
(3) commercial paper, repurchase agreements and cash or cash equivalents
(such as certificates of deposit and bankers' acceptances).
U.S. Government Securities also include interest in trusts or other entities
representing interests in obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities.
Not more than 20% of the Bond Series' net assets will be invested in
convertible and non-convertible securities rated below the four highest grades
of Standard & Poors Ratings Services ("S&P"), Fitch Investors Service, Inc.
("Fitch"), Duff & Phelps Credit Rating Co. ("Duff & Phelps") (AAA, AA, A or
BBB) or Moody's Investors Service, Inc. (Aaa, Aa or Baa) and comparable
unrated securities. For a description of these ratings see Appendix C to this
Prospectus. For a discussion of the risks of investing in these securities see
"Additional Risk Factors -- Lower Rated Fixed Income Securities" under "High
Yield Series" below.
Although the Bond Series may purchase Canadian and other foreign securities
including emerging market securities and Brady Bonds, under normal market
conditions, it may not invest more than 10% of its assets in non-dollar
denominated non-Canadian foreign securities. In addition, the Bond Series may
enter into forward foreign currency exchange contracts ("Forward Contracts")
for hedging purposes.
Consistent with its investment objectives and policies as described above, the
Bond Series may also invest in (1) corporate asset-backed securities; (2)
mortgage pass-through securities; (3) stripped mortgage-backed securities; (4)
fixed income securities which include zero coupon bonds, deferred interest
bonds and bonds on which the interest is payable in kind ("PIK bonds"); (5)
collateralized mortgage obligations ("CMOs") and multi-class pass through
securities; (6) mortgage "dollar roll" transactions; (7) repurchase agreements
in order to earn income on available cash or as a temporary defensive measure;
(8) "when issued" securities; (9) indexed securities and; (10) restricted
securities, subject to the Series' 15% limitation on investments in illiquid
investments.
The Bond Series may not directly purchase common stocks. However, the Bond
Series may retain up to 10% of its total assets in common stocks which were
acquired either by conversion of fixed income securities or by the exercise of
warrants attached thereto.
The Bond Series intends to write (sell) "covered" put and call options and
purchase put and call options on domestic and foreign fixed income securities
as well as on foreign currencies. In addition, the Series may purchase and
sell futures contracts on foreign and domestic fixed income securities or
indices of such securities, including municipal bond indices and any other
indices of foreign or domestic fixed income securities which may become
available for trading. The Bond Series may also purchase and write options on
such futures contracts. The Bond series may seek to increase its income by
lending Portfolio Securities and may engage in swaps and related transactions.
See Appendix A for a discussion of foreign securities, emerging market
securities and other instruments set forth above and the risks involved in
these investments. Options, futures contracts, options on futures contracts,
forward contracts and other investment techniques and their attendant risks
are discussed in Appendix B. Please refer to the SAI Appendix for further
discussion of these techniques.
(2) CAPITAL APPRECIATION SERIES
The Capital Appreciation Series will seek to maximize capital appreciation by
investing in securities of all types with a major emphasis on common stocks.
The Capital Appreciation Series seeks to achieve this objective by maintaining
a flexible approach toward the type of securities and the relative
attractiveness of the various securities markets. Securities are selected
based upon their potential for capital appreciation. Income is not a
significant factor in portfolio selection.
While the Capital Appreciation Series usually will invest primarily in common
stocks, the series will also seek capital appreciation in other types of
securities, including fixed-income securities, convertible bonds, preferred
stocks and warrants when they appear attractive for capital appreciation. The
Capital Appreciation Series may hold part or all of its assets in cash or
short-term obligations or other forms of debt securities for temporary
defensive purposes or as a reserve for future purchases. The Capital
Appreciation Series may enter into futures contracts and options on futures
contracts for hedging purposes, and 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.
The Capital Appreciation Series may invest up to 50% of its total assets in
foreign securities, which may include emerging market securities, may invest
in American Depositary Receipts ("ADRs") and may enter into forward foreign
currency exchange contracts ("forward contracts") for the purchase or sale of
foreign currency for hedging purposes. The series may invest in restricted
securities, subject to the limitation on investing more than 10% of its net
assets in securities that are not readily marketable.
The Capital Appreciation Series is focused on growth companies and may be
subject to fluctuations in the value of its shares during periods of stock
market volatility. The series involves the assumption of a higher degree of
risk as compared to a conservative equity fund. While it is not the series'
policy generally to invest or trade for short-term profits, portfolio
securities may be disposed of without regard to the length of time held
whenever the Adviser is of the opinion that a security no longer has an
appropriate appreciation potential or has reached its anticipated level of
performance, or when another security appears to offer relatively greater
appreciation potential or a relatively greater anticipated level of
performance. The rate of portfolio turnover is not a limiting factor when
changes are appropriate. Higher levels of portfolio activity result in higher
brokerage commissions.
See Appendix A for a discussion of restricted securities, foreign securities
and emerging market securities and the risks involved in these investments.
Options, futures contracts, options on futures contracts and forward contracts
and their attendant risks are discussed in Appendix B. Please refer to the SAI
Appendix for further discussion of these techniques.
(3) CONSERVATIVE GROWTH SERIES
The Conservative Growth Series will seek long-term growth of capital and
future income, while providing more current dividend income than is normally
obtainable from a portfolio of only growth stocks. The Conservative Growth
Series seeks to achieve this objective by investing a substantial proportion
of its assets in the common stocks or securities convertible into common
stocks of companies believed to possess better than average prospects for
long-term growth. A smaller proportion of the assets may be invested in bonds,
short-term obligations, preferred stocks or common stocks whose principle
characteristic is income production rather than growth. Such securities may
also offer opportunities for growth of capital as well as income. In the case
of both growth stocks and income issues, emphasis is placed on the selection
of progressive, well-managed companies. Most of the non-convertible long-term
debt investments of the Conservative Growth Series, if any, will consist of
"investment grade" securities (rated Baa or better by Moody's or BBB or better
by S&P or Fitch). (See Appendix C.) The Conservative Growth Series may enter
into repurchase agreements for U.S. Government Securities, may seek to
increase its income by lending its portfolio securities, to the extent
consistent with present regulatory policies, and may invest up to 35% (and
generally expects to invest between 0% and 15%) of its total assets in foreign
securities, which may include emerging market securities. From time to time,
the Adviser will exercise its judgment with respect to the proportions
invested in growth stocks, income-producing securities or cash and cash
equivalents depending on its view of their relative attractiveness. The series
may invest in restricted securities, subject to the limitation on investing
more than 10% of its net assets in securities that are not readily marketable.
Since shares of the Conservative Growth Series 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 portfolio
securities of the Conservative Growth Series increases or decreases. Moreover,
any dividend the Conservative Growth Series pays will increase or decrease in
relation to the income received from its investments. The Conservative Growth
Series does not intend to trade in securities for short-term profits. However,
the Conservative Growth Series will trade whenever it believes that changes
are appropriate.
See Appendix A for a discussion of restricted securities, repurchase
agreements, foreign securities and emerging market securities, and the risks
involved in these investments. Securities lending transactions and the
attendant risks are discussed in Appendix B.
(4) EMERGING GROWTH SERIES
The Emerging Growth Series seeks to provide long-term growth of capital.
Dividend and interest income from portfolio securities, if any, is incidental
to the series' investment objective of long-term growth of capital.
The series' policy is to invest primarily (i.e., at least 80% of its assets
under normal circumstances) in common stocks of companies that MFS believes
are early in their life cycle but which have the potential to become major
enterprises ("emerging growth companies"). These companies generally would be
expected to show earnings growth over time that is well above the growth rate
of the overall economy and the rate of inflation, and would have the products,
technologies, management and market and other opportunities which are usually
necessary to become more widely recognized as growth companies. Emerging
growth companies can be of any size, and may include larger and more
established companies whose rates of earnings growth are expected to
accelerate because of special factors, such as rejuvenated management, new
products, changes in consumer demand, or basic changes in the economic
environment. Investments in emerging growth companies may include, to a
limited extent, restricted securities of companies which are believed to have
significant growth potential. These securities may be considered speculative
and may not be readily marketable.
While the Emerging Growth Series will invest primarily in common stocks, the
series may, to a limited extent, seek appreciation in other types of
securities such as fixed income securities, convertible securities and
warrants when relative values make such purchases appear attractive either as
individual issues or as types of securities in certain economic environments.
The series may invest in fixed income securities rate BBB by S&P or Fitch or
Baa by Moody's and may invest up to 25% of its net assets in lower rated fixed
income securities or comparable unrated securities (commonly known as "junk
bonds"). (See Appendix C; see also "Additional Risk Factors Regarding Lower
Rated Securities" under "High Yield Series" below.)
The series may invest up to 25% and generally expects to invest between 0% and
10% of its total assets in foreign securities, and may invest in ADRs. The
series may also invest in corporate asset-backed securities, loan
participations, repurchase agreements and restricted securities.
The Emerging Growth Series may hold part or all of its assets in cash or
short-term obligations for temporary defensive purposes, as a reserve for
future purchases, or to meet liquidity needs. 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 series 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. For these
purposes, 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.
In order to achieve its investment objective, the Emerging Growth Series may
employ the investment techniques described below: (1) lending portfolio
securities; (2) purchasing securities on a "when-issued" or on a "forward
delivery" basis; (3) writing (selling) covered put and call options on
securities for the purpose of increasing its return and/or to protect the
value of its portfolio, and purchasing put and call options on securities in
anticipation of declines in the value of portfolio securities or increases in
the value of securities to be acquired (the series may also write combinations
of put and call options on the security, know as "straddles," which
transactions can generate additional income, but also present increased
risks); (4) writing covered call and put options and purchasing call and put
options on domestic and foreign stock indexes for the purpose of increasing
its current income and/or for hedging purposes and to attempt to reduce the
risk of missing a market or industry segment advance; (5) entering into
contracts for the purchase or sale for future delivery of fixed income
securities or foreign currencies or contracts based on indexes of securities
or currencies (including any index of U.S. or foreign securities) as such
instruments become available for trading ("futures contracts"), for hedging
purposes (to protect the series' current or intended investments from the
effects of changes in interest or exchange rates or declines in a securities
market) as well as for nonhedging purposes, to the extent permitted by law
(which involves greater risks and could result in losses which are not offset
by gains and other portfolio assets); (6) entering into forward foreign
currency exchange contracts ("forward contracts") for hedging purposes as well
as nonhedging purposes; and (7) purchasing and selling options on foreign
currencies for the purpose of protecting against declines in the dollar value
of foreign portfolio securities and against increases in the dollar cost of
securities to be acquired.
The portfolio of the series 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.
While it is not generally the series' policy to invest or trade for short-term
profits, the series may dispose of a portfolio security whenever the Adviser
is of the opinion that such security no longer has an appropriate appreciation
potential or when another security appears to offer relatively greater
appreciation potential.
See Appendix A for a discussion of foreign securities, U.S. Government
securities, corporate asset-backed securities, loan participations, repurchase
agreements and restricted securities and the risks involved in these
investments. The investment techniques set forth above and their attendant
risks are discussed in Appendix B. Please refer to the SAI Appendix for
further discussion of some of these instruments and techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE EMERGING GROWTH SERIES.
ADDITIONAL RISK FACTORS RELATING TO EMERGING GROWTH COMPANIES
The nature of investing in emerging growth companies involves greater risk
than is customarily associated with investments in more established companies.
Emerging growth companies often have limited product lines, markets or
financial resources, and they may be dependent on one-person management. In
addition, there may be less research available on many promising small and
medium sized emerging growth companies, making it more difficult to find and
analyze these companies. The securities of emerging growth companies may have
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger, more established growth companies or the
market averages in general. Similarly, many of the securities offering the
capital appreciation sought in making these investments will involve a higher
degree of risk than would established growth stocks. Shares of the series,
therefore, are subject to greater fluctuation in value than shares of a
conservative equity fund or of a growth fund which invests entirely in proven
growth stocks.
(5) EQUITY INCOME SERIES
Equity Income Series will primarily seek reasonable income by investing mainly
in income-producing securities; its secondary objective is to seek capital
appreciation.
Under normal market conditions, the Equity Income Series invests at least 65%
of its total assets in income producing equity securities. The Equity Income
Series seeks to achieve a gross yield that exceeds that of the S&P 500. The
Equity Income Series may also invest up to 35% of its total assets in fixed
income securities, including up to 20% of its net assets in fixed income
securities rated BB or lower by S&P, Fitch, or Duff & Phelps or Ba or lower by
Moody's, or if unrated, determined to be of equivalent quality by the Advisor
(commonly referred to as "junk bonds"). For a description of these ratings,
see Appendix C to this Prospectus. For a discussion of the risks of investing
in these securities, see "Additional Risk Factors -- Lower Rated Bonds" under
"High Yield Series" below.
Consistent with its investment objectives and policies described above, the
Equity Income Series may also invest up to 35% (and generally expects to
invest between 5% and 25%) of its net assets in foreign equity and fixed
income securities, not traded on a U.S. exchange, which may include emerging
market securities and Brady Bonds (not including American Depositary
Receipts).
In order to achieve its investment objectives, the Equity Income Series may
invest in the following securities and employ the following investment
techniques: (1) lending portfolio securities; (2) entering into repurchase
agreements; (3) purchasing "when issued" or "forward delivery" securities; (4)
investing in U.S. government securities, cash (including foreign currency) and
cash equivalents for temporary defensive purposes; (5) investing in securities
of emerging growth companies as well as foreign growth securities; (6)
entering into mortgage "dollar roll" transactions; (7) entering into swaps and
related transactions; (8) investing in indexed securities; (9) collateralized
mortgage obligations ("CMOs") and multiclass pass-through securities, mortgage
pass-through securities as well as stripped mortgage-backed securities and
corporate asset-backed securities; (10) investing in zero coupon bonds,
deferred interest bonds and PIK bonds as well as investing a portion of its
assets in loans and other direct indebtedness; (11) writing (selling) covered
put and call options and purchasing put and call options on securities,
securities indices and foreign currencies as well as "Yield Curve" options;
(12) purchasing and selling futures contracts ("Futures Contracts") on stock
indices, foreign currencies or indices of foreign currencies and may purchase
and write options on such Futures Contracts; and (13) entering into forward
foreign currency exchange contracts for the purchase or sale of a fixed
quantity of a foreign currency at a future date at a price set at the time of
the contract ("Forward Contracts").
See Appendix A for a discussion of foreign securities, emerging market
securities and other instruments set forth above and the risks involved in
these investments. Options, futures contracts, options on futures contracts,
forward contracts and other investment techniques and their attendant risks
are discussed in Appendix B. Please refer to the SAI Appendix for further
discussion of these techniques.
(6) GOVERNMENT SECURITIES SERIES
The Government Securities Series will seek current income and preservation of
capital by investing in debt obligations that are issued or guaranteed as to
principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities ("U.S. Government Securities") and obligations that are
fully collateralized or otherwise fully backed by U.S. Government securities
("U.S. Government-related Securities"), including collateralized mortgage
obligations ("CMOs") and government backed trust certificates ("GBTs"). The
series may invest a significant portion of its assets in Government National
Mortgage Association ("GNMA") certificates and other mortgage pass-through
securities. The series may also engage in transactions involving options,
futures contracts and options on futures contracts as a hedge against
anticipated future changes in interest rates that otherwise might adversely
affect the value of its portfolio of securities and may enter into mortgage
"dollar roll" transactions. The Government Securities Series may also hold
part or all of its assets in cash or in short-term U.S. Government debt
securities and related repurchase agreements for temporary defensive purposes
or as a buying reserve.
GBTs and certain CMOs and other U.S. Government-related Securities are issued
by private entities, are not U.S. Government Securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral held by the private issuer. Certain of these securities may have
variable or floating interest rates and others may be stripped (securities
which provide only the principal or interest feature of the underlying
security). The series intends to invest in privately issued CMOs only if they
are rated at the time of purchase in the two highest ratings by nationally
recognized rating agencies (see Appendix C).
Some U.S. Government Securities and U.S. Government-related Securities do not
generally involve the credit risks associated with other types of interest
bearing securities, although, as a result, yields available from these
securities are generally lower than the yields available from corporate
interest bearing securities. Like other interest bearing securities, however,
the values of U.S. Government Securities and U.S. Government-related
Securities change as interest rates fluctuate. Therefore, when interest rates
decline the market value of a portfolio invested at higher yields can be
expected to rise. Conversely, when interest rates rise the market value of a
portfolio invested at lower yields can be expected to decline. Therefore, the
Government Securities Series will engage in portfolio trading to take
advantage of market developments and yield disparities, e.g., shortening the
average maturity of the portfolio in anticipation of a rise in interest rates
so as to minimize depreciation of principal or lengthening the average
maturity of the portfolio in anticipation of a decline in interest rates so as
to maximize the appreciation of principal.
See Appendix A for a discussion of U.S. Government Securities, CMOs, GBTs,
mortgage pass-through securities, repurchase agreements, and other instruments
set forth above, and the risks involved in these investments. Options, futures
contracts, options on futures contracts, and mortgage "dollar roll"
transactions and their attendant risks are discussed in Appendix B. Please
refer to the SAI Appendix for further discussion of these techniques.
(7) HIGH YIELD SERIES
The High Yield Series will seek high current income and capital appreciation
by investing primarily in certain low-rated or unrated fixed-income securities
(possibly with equity features) of U.S. and foreign issuers. These securities
may be denominated in U.S. dollars or foreign currencies. Securities offering
the high current income sought by the High Yield Series are ordinarily in the
lower rated categories of recognized rating agencies (that is, rated BBB or
lower by S&P or Fitch or Baa or lower by Moody's) or are unrated and may
involve greater volatility of price and risk of principal and income than
securities in the higher rated categories (see Appendix C). In particular,
securities rated BBB by S&P or Fitch or Baa by Moody's (and comparable unrated
securities) are considered to have speculative characteristics while
securities rated lower than BBB by S&P or Fitch or Baa by Moody's (and
comparable unrated securities) (commonly known as "junk bonds") are considered
speculative. (See "Additional Risk Factors Regarding Lower Rated Securities"
below and Appendix C for a further description of the risks associated with
investing in these securities; see Appendix E for a chart indicating the
composition of the High Yield Series' portfolio for the fiscal year ended
December 31, 1996, with the debt securities separated into rating categories
and comparable unrated securities.)
Fixed-income securities include preferred and preference stocks and all types
of debt obligations of both domestic and foreign corporate and government
issuers, such as bonds, debentures, notes, repurchase agreements, equipment
lease contracts, loan participations, corporate asset-backed securities,
commercial paper, and obligations issued or guaranteed by the U.S. Government,
any foreign government or any of their respective political subdivisions,
agencies or instrumentalities (including obligations secured by such
instruments). The High Yield Series may also enter into mortgage "dollar roll"
transactions.
Corporate debt securities may bear fixed, fixed and contingent, or variable
rates of interest and may involve equity features, such as: conversion or
exchange rights or warrants for the acquisition of stock of the same or a
different issuer; participations based on revenues, sales or profits; or the
purchase of common stock in a unit transaction (where corporate debt
securities and common stock are offered as a unit). Under normal market
conditions, no more than 25% of the value of the High Yield Series' total
assets will be invested in equity securities, including common stock, warrants
and stock subscription rights, but excluding convertible debt securities.
The fixed-income securities in which the High Yield Series may invest also
include zero coupon bonds, deferred interest bonds, bonds on which the
interest is payable in kind ("PIK Bonds") and, to the extent permitted by its
investment restrictions (see "Investment Restrictions" in the SAI)
collateralized mortgage obligations, multi-class pass-through securities,
stripped mortgage-backed securities, and interests in trusts or other entities
representing interests in fixed-income securities or holding fixed income
securities in amounts sufficient to cover all payments due from such entities.
The High Yield Series may purchase securities on a "when-issued" basis. The
series may also invest up to 50% (and generally expects to invest between 0%
and 25%) of its total assets in foreign securities, which may include emerging
market securities and Brady Bonds, and may invest in ADRs. The series may
invest in restricted securities, subject to the limitation on investing more
than 10% of its net assets in securities that are not readily marketable.
In seeking to achieve its objectives and lessen risks, the High Yield Series
will engage in portfolio trading to take advantage of market developments and
yield disparities and will utilize credit analysis of the issues in which it
invests and evaluation of changes and trends in the world economies and
international financial markets. The High Yield Series is aggressively managed
and, thus, is subject to greater fluctuations in the value of its shares and
involves the assumption of a higher degree of risk as compared to a
conservative income fund.
See Appendix A for a discussion of foreign securities, emerging market
securities, Brady Bonds, loan participations, restricted securities and other
instruments set forth above, and the risks involved in these investments.
"When-issued" securities transactions and mortgage "dollar roll" transactions
and their attendant risks are discussed in Appendix B. Please refer to the SAI
Appendix for a further discussion of some of these instruments and techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE HIGH YIELD SERIES.
ADDITIONAL RISK FACTORS REGARDING LOWER RATED SECURITIES -- Investments in
lower rated fixed income 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 may involve
greater volatility of price (especially during periods of economic uncertainty
or change) than investments in higher rated securities. In addition, since
yields may vary over time, no specific level of income or yield differential
can ever be assured.
Securities rated lower than Baa by Moody's or BBB by S&P or Fitch (or
comparable unrated securities) (commonly known as "junk bonds") are considered
speculative. These high yielding fixed income securities generally tend to
reflect economic changes and short-term corporate and industry developments to
a greater extent than higher rated securities which react primarily to
fluctuations in the general level of interest rates (although these lower
rated securities are also affected by changes in interest rates, as described
below). These fixed income securities will also be affected by the market's
perception of their credit quality (especially during times of adverse
publicity) and the outlook for economic growth. In the past, economic
downturns or a rise 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 Series' 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 Series 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 Series' yield
despite the actual loss of principal. The prices for these securities may be
affected by legislative and regulatory developments. Change in the value of
securities subsequent to their acquisition will not affect cash income or
yield to maturity to a series but will be reflected in the net asset value of
shares of the series. 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, credit
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 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.
Securities rated Baa by Moody's or BBB by S&P or Fitch (and comparable unrated
securities), while normally exhibiting adequate protection parameters, 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.
While the Adviser may refer to ratings issued by established credit rating
agencies, it is not the policy of the series to rely exclusively on ratings
issued by these credit rating agencies, but rather to supplement such ratings
with the Adviser's own independent and ongoing review of credit quality. The
High Yield Series' achievement of its investment objectives may be more
dependent on the Adviser's own credit analysis than it would be in the case of
a fund or series investing primarily in higher quality bonds.
The net asset value of shares of the series changes as the general levels of
interest rates fluctuate; when interest rates decline, the value of a
portfolio invested at higher yields can be expected to rise, and conversely
when interest rates rise, the value of a portfolio invested at lower yields
can be expected to decline.
(8) MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
The Massachusetts Investors Growth Stock Series will seek to provide long-term
growth of capital and future income rather than current income. The
Massachusetts Investors Growth Stock Series' name does not imply any assurance
that an investor's capital will increase.
The Massachusetts Investors Growth Stock Series' policy is to invest
substantially all of its assets in equity securities of companies believed to
possess better than average prospects for long-term growth. Emphasis is placed
on the selection of progressive, well-managed companies. The Series may also,
for temporary defensive purposes, invest up to 10% of its assets in U.S.
Government securities.
Since shares of the Massachusetts Investors Growth Stock Series represent an
investment in securities with fluctuating market prices, shareholders should
understand that the value of shares of the Massachusetts Investors Growth
Stock Series will vary as the aggregate value of the Series' portfolio
securities increases or decreases. Moreover, any dividends paid by the Fund
will increase or decrease in relation to the income received by the Series
from its investments.
Consistent with its investment objectives and policies as described above, the
Massachusetts Investors Growth Stock Series may enter into repurchase
agreements in order to earn income on available cash or as a temporary
defensive measure and may seek to increase its income by lending portfolio
securities. In addition, in order to help ensure the availability of suitable
securities for its portfolio, the Series may purchase securities on a "when
issued" or "forward delivery" basis. The Massachusetts Investers Growth Stock
Series may invest in restricted securities, subject to the series' 15%
limitation of illiquid investments.
The Series may also write (sell) covered put and call options on securities
and stock indices and purchase put and call options on securities and stock
indices. For hedging and non-hedging purposes (in an effort to increase
current income), the Series may also enter into "yield curve" options and
purchase options on foreign currencies. In addition, the Series may enter into
futures contracts and options on futures contracts. The Series may also enter
into forward foreign currency exchange contracts ("Forward Contracts") for
hedging purposes as well as non-hedging purposes.
Consistent with its investment objectives and policies as described above, the
Series may invest up to 50% (and generally expects to invest between 0% and
30%) of its total assets in foreign securities, not traded on a U.S. exchange,
including emerging market securities, but not including American Depository
Receipts ("ADRs").
See Appendix A for a discussion of foreign securities, emerging market
securities and other instruments set forth above and the risks involved in
these investments. Options, futures contracts, options on futures contracts,
forward contracts and other investment techniques and their attendant risks
are discussed in Appendix B. Please refer to the SAI Appendix for further
discussion of these techniques.
(9) THE MANAGED SECTORS SERIES
The Managed Sectors Series will seek capital appreciation by varying the
weighting of its portfolio among thirteen industry sectors. Dividend income,
if any, is incidental to the Managed Sectors Series' objective of capital
appreciation.
The thirteen sectors from among which the Managed Sectors Series chooses its
investments are: autos and housing; basic materials and consumer staples;
defense and aerospace; energy; financial services; health care; industrial
goods and services; leisure; retailing; technology; transportation; utilities;
and foreign. (See Appendix D for a description of the scope of and potential
risks associated with each of these industry sectors.) 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.
In response to changes or anticipated changes in the general economy or within
one or more particular industry sectors, the Managed Sectors Series may
increase, decrease or eliminate entirely a particular sector's representation
in its portfolio; similarly, it 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 portfolio based upon such factors as such
sector's or company's economic cycle and sensitivity to interest rates. For
example, as interest rates rise and the performance of interest-sensitive
stocks declines, the Managed Sectors Series expects to remove such stocks from
its portfolio. Any one sector may comprise up to 50% of the portfolio, as may
cash held as a temporary defensive measure or to meet anticipated redemption
requests. The Managed Sectors Series is "non-diversified" so that more than 5%
of the series' assets may be invested in the securities of each of one or more
issuers. As a result of such non-diversified status, the Managed Sectors
Series may be more susceptible to adverse changes in the value of securities
of a particular company than would be a diversified series. Similarly, due to
the series' ability to concentrate in as few as two industry sectors, the
Managed Sectors Series' assets may be more susceptible to any single economic,
political or regulatory occurrence than would be those of an investment
company without a policy of concentration in particular industry sectors.
While the Managed Sectors Series' 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 in
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. The non-convertible bonds invested in by the
Managed Sectors Series will include (i) obligations issued or guaranteed by
the U.S. Treasury or U.S. Government agencies 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. The Managed Sectors
Series may invest up to 20% of its total assets in foreign securities, which
may include emerging market securities, may invest in ADRs and may enter into
forward foreign currency exchange contracts ("forward contracts") for the
purchase or sale of foreign currency for hedging purposes. The Managed Sectors
Series may write covered put and call options and purchase put and call
options on securities and stock indexes in an effort to increase current
income and for hedging purposes. The Managed Sectors Series may also purchase
and sell stock index futures contracts and may write and purchase options
thereon for hedging purposes. The Managed Sectors Series may invest in
restricted securities, subject to the limitation on investing more than 10% of
its net assets in securities that are not readily marketable.
The Managed Sectors Series' portfolio is aggressively managed and the series
assumes above average risk of loss. 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. Therefore, the rate of portfolio turnover is not a
limiting factor when changes are believed by its investment adviser to be
appropriate.
See Appendix A for a discussion of foreign securities, emerging market
securities and other instruments set forth above and the risks involved in
these investments. Options, futures contracts, options on futures contracts
and forward contracts and their attendant risks are discussed in Appendix B.
Please refer to the SAI Appendix for further discussion of these techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE MANAGED SECTORS SERIES.
(10), (11) AND (12) MFS/FOREIGN & COLONIAL SERIES
The following three series, collectively referred to as the "MFS/Foreign &
Colonial Series," have separate investment objectives, but employ many of the
same investment policies, instruments and techniques. Those investment
policies, instruments and techniques that are common to all three of the MFS/
Foreign & Colonial Series are set forth below, following the separate
statements of investment objectives and policies for each series.
(10) MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH SERIES ("INTERNATIONAL GROWTH
SERIES")
The International Growth Series' investment objective is to seek capital
appreciation. The series seeks to achieve its objective by investing, under
normal market conditions, at least 65% of its total assets in equity
securities of companies whose principal activities are outside the U.S.
growing at rates expected to be well above the growth rate of the overall U.S.
economy. The foreign growth securities in which the series may invest include
securities of more established companies which represent opportunities for
long-term growth. See "Investment Instruments and Techniques--Foreign Growth
Securities" below. The selection of securities is made solely on the basis of
potential for capital appreciation. Dividend and interest income from
portfolio securities, if any, is incidental to the series' investment
objective of capital appreciation.
The series may invest up to 25% of its net assets in securities of issuers
whose principal activities are located in emerging market countries. See
"Investment Instruments and Techniques--Emerging Market Securities" below.
While the series intends to invest primarily in equity securities, the series
may also invest up to 35% of its net assets (and generally expects to invest
not more than 20% of its net assets) in fixed income securities of government,
government-related, supranational and corporate issuers whose principal
activities are outside the U.S., including up to 10% of its net assets in
fixed income securities rated Ba or lower by Moody's or BB or lower by S&P or
Fitch and comparable unrated securities. See "Additional Risk Factors--Lower
Rated Fixed Income Securities" below. The Adviser and Sub-Advisers consider a
variety of factors in selecting fixed income securities to achieve capital
appreciation, including the creditworthiness of issuers, interest rates and
currency exchange rates.
(11) MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME SERIES
("INTERNATIONAL GROWTH AND INCOME SERIES")
The International Growth and Income Series' investment objective is to seek
capital appreciation and current income. The series seeks to achieve its
objective by investing primarily in equity and fixed income securities of
issuers whose principal activities are outside the U.S.
The series will invest, under normal market conditions, at least 65% of its
total assets (and generally expects to invest a substantial portion of its
total assets) in a combination of the following:
(a) equity securities of foreign "blue chip" companies and foreign growth
companies. See "Investment Instruments and Techniques--Foreign Growth
Securities" below. The series considers a security to be "blue chip"
if the total equity market capitalization of the issuer is at least
U.S. $1 billion; and
(b) fixed income securities of government, government-related,
supranational and corporate issuers whose principal activities are
outside the U.S. The series may invest up to 50% (and generally
expects to invest from 20% to 30%) of its net assets in fixed income
securities, including up to 25% of its net assets in fixed income
securities rated Ba or lower by Moody's or BB or lower by S&P or Fitch
and comparable unrated securities. See "Additional Risk Factors--Lower
Rated Fixed Income Securities" below.
The series may invest up to 10% of its net assets in securities of issuers
whose principal activities are located in emerging market countries. See
"Investment Instruments and Techniques--Emerging Market Securities" below.
(12) MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES ("EMERGING MARKETS
EQUITY SERIES")
The Emerging Markets Equity Series' investment objective is to seek capital
appreciation. The series seeks to achieve its objective by investing, under
normal market conditions, at least 65% of its total assets in equity
securities of issuers whose principal activities are located in emerging
market countries. The Adviser and the Sub-Advisers expect to take a global
approach to portfolio management by weighting the series' investments towards
countries in Latin America, Asia, Africa, the Middle East and the developing
countries of Europe, primarily in Eastern Europe. See "Investment Instruments
and Techniques--Emerging Market Securities" below. The selection of securities
is made solely on the basis of potential for capital appreciation. Dividend
and interest income from portfolio securities, if any, is incidental to the
series' investment objective of capital appreciation.
While the series intends to invest primarily in equity securities, the series
may also invest not more than 35% of its net assets in fixed income securities
of government, government-related, supranational and corporate issuers whose
principal activities are outside the U.S., rated Ba or lower by Moody's or BB
or lower by S&P or Fitch and comparable unrated securities. See "Additional
Risk Factors--Lower Rated Fixed Income Securities" below. The Adviser and the
Sub-Advisers consider a variety of factors in selecting fixed income
securities to achieve capital appreciation, including the creditworthiness of
issuers, interest rates and currency exchange rates.
POLICIES APPLICABLE TO THE MFS/FOREIGN & COLONIAL SERIES
The MFS/Foreign & Colonial Series do not intend to emphasize any particular
country or region in making their investments, but under normal market
conditions, each series will be invested in at least three countries (outside
the U.S.) and will not invest more than 50% of its net assets in issuers whose
principal activities are located in a single country. See "Additional Risk
Factors--Investments in One or a Limited Number of Countries" below. Currently
none of the series expect to invest more than 25% of its net assets in issuers
whose principal activities are located in a single country, except that the
International Growth Series and the International Growth and Income Series
generally expect to invest between 15% to 45% of their assets in issuers whose
principal activities are in Japan. Each series will seek to reduce risk by
investing its assets in a number of markets and issuers, performing credit
analyses of potential investments and monitoring current developments and
trends in both the international economy and financial markets.
Each series may invest in all types of equity securities, including the
following: common stocks, preferred stocks and preference stocks; securities
such as bonds, warrants or rights that are convertible into stocks; and
depositary receipts for those securities. These securities may be listed on
securities exchanges, traded in various over-the-counter markets or have no
organized market.
For temporary defensive reasons, such as during times of international
political or economic uncertainty or turmoil, most or all of each series'
investments may be in cash (U.S. dollars, foreign currencies or multinational
currency units) and/or securities that are denominated in U.S. dollars or
whose issuers are domiciled in the U.S. Each series is not restricted as to
the portions of its assets which may be invested in securities denominated in
a particular currency and up to 100% of each series' net assets may be
invested in securities denominated in foreign currencies and multinational
currency units.
The Adviser and the Sub-Advisers determine where an issuer's principal
activities are located by considering such factors as its country of
organization, the principal trading market for its securities and the source
of its revenues and assets. The issuer's principal activities are generally
deemed to be located in a particular country if: (a) the security is issued or
guaranteed by the government of that country or any of its agencies,
authorities or instrumentalities; (b) the issuer is organized under the laws
of, and maintains a principal office in, that country; (c) the issuer has its
principal securities trading market in that country; (d) the issuer derives
50% or more of its total revenues from goods sold or services performed in
that country; or (e) the issuer has 50% or more of its assets in that country.
INVESTMENT INSTRUMENTS AND TECHNIQUES
In order to achieve its investment objective, each of the MFS/Foreign &
Colonial Series may employ the investment instruments and techniques described
below.
FOREIGN GROWTH SECURITIES: Each series may invest in securities of foreign
growth companies, including established foreign companies, whose rates of
earnings growth are expected to accelerate because of special factors, such as
rejuvenated management, new products, changes in consumer demand, or basic
changes in the economic environment or which otherwise represent opportunities
for long-term growth. See "Additional Risk Factors" below. It is anticipated
that these companies will primarily be in nations with more developed
securities markets, such as Japan, Australia, Canada, New Zealand and most
Western European countries, including Great Britain.
EMERGING MARKET SECURITIES: Each series may invest in securities of issuers
whose principal activities are located in emerging market countries. Emerging
market countries include any country determined by the Adviser or Sub-Advisers
to have an emerging market economy, taking into account a number of factors,
including whether the country has a low- to middle-income economy according to
the International Bank for Reconstruction and Development, the country's
foreign currency debt rating, its political and economic stability and the
development of its financial and capital markets. See Appendix A -- "Emerging
Market Securities" for a description of emerging market securities, and the
risks involved in these investments. See also "Additional Risk Factors--
Emerging Markets" below.
FIXED INCOME SECURITIES: Fixed income securities in which each series may
invest include all types of long- or short-term debt obligations, such as
bonds, notes, bills, debentures, loans, loan assignments and commercial paper.
Each series may invest in emerging market fixed income securities, which, in
addition to the securities identified above, may take the form of interests
issued by entities organized and operated for the purpose of restructuring the
investment characteristics of instruments issued by emerging market country
issuers. Fixed income securities in which each series may invest include
securities in the lower rating categories of recognized rating agencies and
comparable unrated securities. See "Additional Risk Factors--Lower Rated Fixed
Income Securities" below. The International Growth Series will not invest more
than 10% of its net assets, the International Growth and Income Series will
not invest more than 25% of its net assets and the Emerging Markets Equity
Series will not invest 35% or more of its net assets in fixed income
securities rated Ba or lower by Moody's or BB or lower by S&P or Fitch and
comparable unrated securities. However, because most foreign fixed income
securities are not rated, a series will invest in foreign fixed income
securities primarily based on the Adviser's or the Sub-Advisers' credit
analysis without relying on published ratings.
INVESTMENT IN OTHER INVESTMENT COMPANIES: Each series may invest in other
investment companies to the extent permitted by the Investment Company Act of
1940 (the "1940 Act") and any applicable state securities laws (i) as a means
by which the series may invest in securities of certain countries which do not
otherwise permit investment, (ii) as a means to purchase thinly traded
securities of emerging market companies, or (iii) when the Adviser or the Sub-
Advisers believe such investments may be more advantageous to the series than
a direct market purchase of securities. If a series invests in such investment
companies, the series' shareholders will bear not only their proportionate
share of the expenses of the series (including operating expenses and the fees
of the Adviser) but also will indirectly bear similar expenses of the
underlying investment companies.
PRIVATIZATIONS: The governments in some countries, including emerging market
countries, have been engaged in programs of selling part or all of their
stakes in government owned or controlled enterprises ("privatizations"). Each
series may invest in privatizations. In certain countries, the ability of
foreign entities to participate in privatizations may be limited by local law
and the terms on which the foreign entities may be permitted to participate
may be less advantageous than those afforded local investors.
DEPOSITORY RECEIPTS: Each series may invest in ADRs, Global Depository
Receipts ("GDRs") and other types of depository receipts. ADRs 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 collateral. See Appendix A--"American Depositary Receipts."
GDRs and other types of depository receipts are typically issued by foreign
banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, ADRs are in
registered form and are designed for use in U.S. securities markets and GDRs
are in bearer form and are designed for use in foreign securities markets. For
the purposes of these series' policy of investing a certain percentage of
their assets in foreign securities, the investments of a series in ADRs, GDRs
and other types of depository receipts are deemed to be investments in the
underlying securities.
BRADY BONDS: Each series may invest in Brady Bonds. Brady Bonds and their
attendant risks are described in "Appendix A--Brady Bonds."
STRUCTURED SECURITIES: Each series may invest a portion of its assets in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with, or purchase by, an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans
or Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Structured Securities") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Securities to create securities
with different investment characteristics, such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Securities is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Securities of the type
in which each series anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments. Each series is permitted to invest in a class of
Structured Securities that is either subordinated or unsubordinated to the
right of payment of another class. Subordinated Structured Securities
typically have higher yields and present greater risks than unsubordinated
Structured Securities. Structured Securities are typically sold in private
placement transactions, and there currently is no active trading market for
Structured Securities.
REPURCHASE AGREEMENTS: Each series may enter into repurchase agreements with
both domestic and foreign securities dealers or institutions in order to earn
additional income on available cash or as a temporary defensive measure.
Repurchase agreements and their attendant risks are described in "Appendix A--
Repurchase Agreements." In addition, foreign repurchase agreements may be less
well secured than U.S. repurchase agreements, and may be denominated in
foreign currencies. They may also involve greater risk of loss if the
counterparty defaults. Some counterparties in these transactions may be less
creditworthy than those in U.S. markets.
OTHER INSTRUMENTS: Each series may also invest in zero coupon bonds, deferred
interest bonds and PIK bonds, indexed securities, restricted securities
(subject to the limitation on investing more than 15% of a series' net assets
in securities that are not readily marketable) and loans and other direct
indebtedness (including loans to corporate, government or other borrowers).
See Appendix A for a discussion of these instruments and their attendant
risks.
INVESTMENT TECHNIQUES: In order to achieve their investment objectives, each
of the MFS/Foreign & Colonial Series may employ the following investment
techniques: (1) lending portfolio securities to entities deemed creditworthy
by the Adviser or the Sub-Advisers, usually to member banks of the Federal
Reserve System and member firms (and subsidiaries thereof) of the New York
Stock Exchange; (2) purchasing securities on a "when issued" or a "forward
delivery" basis; (3) writing (selling) covered put and call options on
securities for the purpose of increasing its return and/or to protect the
value of its portfolio, and purchasing put or call options on securities in
anticipation of declines in the value of portfolio securities or increases in
the value of securities to be acquired (the series may also write combinations
of put and call options on the same security, known as "straddles," which
transactions can generate additional income, but also present increased
risks); (4) entering into "yield curve" options for hedging and non-hedging
purposes; (5) writing covered call and put options and purchasing call and put
options on domestic and foreign stock indexes for the purpose of increasing
its current income and/or for hedging purposes and to attempt to reduce the
risk of missing a market or industry segment advance; (6) entering into
contracts for the purchase or sale for future delivery of contracts based on
indexes of securities as such instruments become available for trading or
fixed income securities or foreign currencies ("futures contracts") for
hedging purposes (to protect the series' current or intended investments from
the effects of changes in interest or exchange rates or declines in a
securities market, or for non-hedging proposes, to the extent permitted by law
(which involves greater risks and could result in losses which are not offset
by gains on other portfolio assets); (7) purchasing and writing options on
futures contracts for the purpose of protecting against declines in the value
of portfolio securities or against increases in the cost of securities to be
acquired and also for non-hedging purposes, to the extent permitted by law;
(8) purchasing and writing options on foreign currencies for the purpose of
protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to
be acquired; (9) entering into forward foreign currency exchange contracts
("forward contracts") for hedging purposes as well as for the non-hedging
purpose of increasing the series' current income; and (10) entering into
interest rate swaps, currency swaps, and other types of available swap
agreements which will tend to shift the series' investment exposure from one
type of investment to another. See Appendix B and the SAI Appendix for a
discussion of these investment techniques and their attendant risks.
PORTFOLIO TRADING
While it is not generally each series' policy to invest or trade for short-
term profits, each series may dispose of a portfolio security whenever the
Adviser or the Sub-Adviser is of the opinion that such security no longer has
an appropriate appreciation potential or when another security appears to
offer relatively greater appreciation potential. 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. Therefore, the rate of portfolio
turnover is not a limiting factor when a change in the portfolio is otherwise
appropriate.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE MFS/FOREIGN & COLONIAL SERIES.
ADDITIONAL RISK FACTORS
FOREIGN SECURITIES: Each series may invest up to 100% of its assets in foreign
securities, including foreign securities that are not traded on a U.S.
exchange. Transactions involving foreign equity or debt securities or foreign
currencies, and transactions entered into in foreign countries, involve
considerations and risks not typically associated with investing in U.S.
markets. See "Appendix A--Foreign Securities".
EMERGING MARKETS: The risks of investing in foreign securities may be
intensified in the case of investments in emerging markets. Investment in
emerging market countries could decrease the series' liquidity, as a result of
settlement problems and other factors. Certain markets may require payment for
securities before delivery, and in such markets the series bear the risk that
the securities will not be delivered and that the series' payments will not be
returned. See "Appendix A--Emerging Market Securities."
ALLOCATION AMONG EMERGING MARKETS: Each series may allocate all or a portion
of its investment in emerging market securities among the emerging markets of
Latin America, Asia, Africa, the Middle East and the developing countries of
Europe, primarily in Eastern Europe. Each series will allocate its investments
among these emerging markets in accordance with the Adviser's and the Sub-
Advisers' determination as to the allocation most appropriate with respect to
the series' investment objective and policies. Each series may invest its
assets allocated for investment in emerging markets without limitation in any
particular region, and, in accordance with the Adviser's and the Sub-Advisers'
investment discretion, at times may invest all of its assets allocated for
investment in emerging markets in securities of emerging market issuers
located in a single region (e.g., Latin America). To the extent that a series'
investments are concentrated in one or a few emerging market regions, the
series' investment performance correspondingly will be more dependent upon the
economic, political and social conditions and changes in those regions. The
ability of a series to allocate its investments among emerging market regions
without restriction may have the effect of increasing the volatility of the
series, as compared to a series which limits such allocations.
INVESTMENTS IN ONE OR A LIMITED NUMBER OF COUNTRIES: Each series will seek to
reduce risk by investing its assets in a number of markets and issuers.
However, each series may invest up to 50% of its net assets in issuers located
in a single country. To the extent that a series invests a significant portion
of its assets in a single or limited number of countries, the series'
investment performance correspondingly will be more dependent upon the
economic, political and social conditions and changes in that country or
countries, and the risks associated with investments in such country or
countries will be particularly significant. The ability of a series to focus
its investments in one or a limited number of countries may have the effect of
increasing the volatility of that series.
EMERGING GROWTH COMPANIES: Each series may invest in securities of emerging
growth companies, including established companies. Investing in emerging
growth companies involves greater risk than is customarily associated with
investing in more established companies. Emerging growth companies often have
limited product lines, markets or financial resources, and they may be
dependent on one-person management. The securities of emerging growth
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of larger, more established companies
or the market averages in general. Similarly, many of the securities offering
the capital appreciation sought by the series will involve a higher degree of
risk than would established growth stocks.
FOREIGN CURRENCIES: Because each series may invest up to 100% of its assets
in securities denominated in currencies other than the U.S. dollar, and
because each series may hold foreign currencies, the value of a series'
investments, and the value of dividends and interest earned by a series, may
be significantly affected by changes in currency exchange rates. Some foreign
currency values may be volatile, and there is the possibility of governmental
controls on currency exchange or governmental intervention in currency
markets, which could adversely affect the series. Although the Adviser and
Sub-Advisers may attempt to manage currency exchange rate risks, there is no
assurance that the Adviser and Sub-Advisers will do so at an appropriate time
or that the Adviser and Sub-Advisers will be able to predict exchange rates
accurately. For example, if the Adviser and Sub-Advisers hedge a series'
exposure to a foreign currency, and that currency's value rises, the series
will lose the opportunity to participate in the currency's appreciation. Each
series may hold foreign currency received in connection with investments in
foreign securities, and enter into forward contracts, futures contracts and
options on foreign currencies when, in the judgment of the Adviser or Sub-
Advisers, it would be beneficial to convert such currency into U.S. dollars at
a later date, based on anticipated changes in the relevant exchange rates.
While the holding of foreign currencies will permit a series to take advantage
of favorable movements in the applicable exchange rate, it also exposes the
series to risk of loss if such rates move in a direction adverse to the
series' position. Such losses could also adversely affect the series' hedging
strategies. See the SAI for further discussion of the holding of foreign
currencies as well as the associated risks.
FIXED INCOME SECURITIES: To the extent a series invests in fixed income
securities, the net asset value of the series may change as the general levels
of interest rates fluctuate. When interest rates decline, the value of fixed
income securities can be expected to rise. Conversely, when interest rates
rise, the value of fixed income securities can be expected to decline. Each
series is subject to no restrictions on the maturities of the fixed income
securities it holds. A series' investments in fixed income securities with
longer terms to maturity are subject to greater volatility than the series'
shorter-term obligations.
LOWER RATED FIXED INCOME SECURITIES: Each series may invest in fixed income
securities rated Baa by Moody's or BBB by S&P or Fitch (and comparable unrated
securities). For a description of these and other rating categories, see
Appendix C. These securities, while normally exhibiting adequate protection
parameters, have speculative characteristics and changes in economic
conditions or 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. Each series may also invest in fixed income
securities rated Ba or lower by Moody's or BB or lower by S&P or Fitch (and
comparable unrated securities). No minimum rating standard is required by any
series. These securities are considered speculative and, while generally
providing greater yield than investments in higher rated securities, will
involve greater risk of principal and income. See "Additional Risk Factors
Regarding Lower Rated Securities" under "High Yield Series" above.
TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS: See
Appendix B-- "Risks of Transactions In Options, Futures Contracts and Forward
Contracts" and the SAI Appendix.
(13) MONEY MARKET SERIES
The Money Market Series will seek maximum current income to the extent
consistent with stability of principal by investing exclusively in the
following types of U.S. dollar-denominated money market instruments which
mature in less than 13 months:
(a) Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities;
(b) Certificates of deposit issued by domestic or foreign branches of any
U.S. or Canadian-chartered bank which has total assets in excess of $1
billion ("Eurodollar CD's") and bankers' acceptances issued by
domestic branches of any such bank (see Appendix A);
(c) Commercial paper which at the date of investment is rated A-1 by S&P
or P-1 by Moody's (see Appendix C);
(d) Repurchase agreements for the purchase of obligations which are
suitable for investment under paragraph (a) above (see Appendix A).
Under regulations currently in effect, the average maturity of the investments
in the Money Market Series may not exceed 90 days.
(14) NEW DISCOVERY SERIES
The New Discovery Series will seek capital appreciation. The New Discovery
Series seeks to achieve its objective by investing, under normal market
conditions, at least 65% of its total assets in companies that the Adviser
believes offer superior prospects for growth. Such securities may either be
listed on securities exchanges or traded in the over-the-counter markets and
may be U.S. or foreign companies. While companies in which the New Discovery
Series invests may be of any size, such as companies in a relatively early
stage of development that offer the potential for accelerated earnings or
revenue growth (emerging growth companies), or larger or more established
companies whose rates of earnings growth are expected to accelerate because of
special factors, such as rejuvenated management, new products, or structural
changes in the economy, the New Discovery Series will generally invest in
companies with small market capitalizations relative to companies included in
the Standard & Poor's 500 Stock Index. Such companies generally would be
expected to show earnings growth over time that is well above the growth rate
of the overall economy and the rate of inflation, and would have the products,
management and market opportunities which are usually necessary to become more
widely recognized as growth companies. The New Discovery Series seeks to
maintain a portfolio weighted median capitalization of $2 billion or less.
In order to achieve its investment objective, the New Discovery Series may
invest in the following securities and employ the following investment
techniques: (1) lending portfolio securities; (2) entering into repurchase
agreements; (3) purchasing "when issued" or "forward delivery" securities; (4)
investing in U.S. Government securities, cash (including foreign currency) and
cash equivalents for temporary defensive purposes; (5) investing in securities
of emerging growth companies as well as foreign growth securities; (6)
entering into swaps and related transactions; (7) investing in indexed
securities; (8) writing (selling) covered put and call options and purchasing
put and call options on securities, securities indices and foreign currencies;
(9) entering into "yield curve" options; (10) purchasing and selling futures
contracts ("Futures Contracts") on stock indices, foreign currencies or
indices of foreign currencies and may purchase and write options on such
Futures Contracts; (11) entering into forward foreign currency exchange
contracts ("Forward Contracts") for the purchase or sale of a fixed quantity
of a foreign currency at a future date at a price set at the time of the
contract ("Forward Contracts"); Purchasing restricted securities, subject to
the series 15% limitation on investments in illiquid securities.
The New Discovery Series may also invest in fixed income securities offering
an opportunity for capital appreciation, including up to 10% of its net assets
in fixed income securities rated BB or lower by S&P, Fitch or Duff & Phelps or
Ba or lower by Moody's, or if unrated, determined to be of equivalent quality
by the Adviser (commonly referred to as "junk bonds"). For a description of
these ratings, see Appendix C to this Prospectus. For a discussion of the
risks of investing in these securities, see "Additional Risk Factors -- Lower
Rated Bonds" under "High Yield Series" above.
The Fund may engage in short sales of securities if the Adviser anticipates
that the price of a security will decline. (See Appendix B -- Short Sales).
Consistent with its investment objective and policies described above, the New
Discovery Series may also invest up to, but not including, 20% of its net
assets in foreign securities which are not traded on a U.S. exchange and which
may include emerging markets securities (not including American Depository
Receipts).
See Appendix A for a discussion of foreign securities, emerging market
securities and other instruments set forth above and the risks involved in
these investments. Options, futures contracts, options on futures contracts,
forward contracts and other investment techniques and their attendant risks
are discussed in Appendix B. Please refer to the SAI Appendix for further
discussion of these techniques.
(15) RESEARCH GROWTH AND INCOME SERIES
The Research Growth and Income Series' investment objective is to provide
long-term growth of capital, current income and growth of income.
The portfolio securities of the series are selected by a committee of
investment research analysts. This committee includes investment analysts
employed not only by the Adviser but also by MFS International (U.K.) Limited,
a wholly owned subsidiary of MFS. The series' assets are allocated among
industries by the analysts acting together as a group. Individual analysts are
then responsible for selecting what they view as the securities best suited to
meet the series' investment objective within their assigned industry
responsibility.
Under normal market conditions, the series invests at least 65% of its total
assets in equity securities of companies with a market capitalization of at
least $2 billion which, in the Adviser's judgment, offer earnings growth
potential while paying current dividends. Equity securities include common
stocks, preferred stocks and preference stocks, securities such as bonds,
warrants or rights that are convertible into stocks; and depository receipts
for these securities. Over time, continued growth of earnings tends to lead to
higher dividends and enhancement of capital value. The series may also invest
up to 35% of its total assets in other equity securities which offer prospects
for growth of capital and future income.
The Research Growth and Income Series may enter into repurchase agreements for
U.S. Government Securities, lend portfolio securities, invest in restricted
securities, purchase securities on a "when-issued" basis, purchase indexed
securities and swaps, and purchase and sell options and futures contracts. The
series may invest up to 20% (and generally expects to invest between 5% and
15%) of its net assets in foreign equity securities, which are not traded on a
U.S. exchange, which may include emerging market securities, may invest in
ADRs, and may enter into forward foreign currency exchange contracts ("forward
contracts"). The Research Growth and Income Series may invest in restricted
securities, subject to the limitation on investing more than 15% of its net
assets in securities that are not readily marketable.
The Research Growth and Income Series does not intend to trade in securities
for short-term profits. However, the Series will trade whenever it believes
that changes are appropriate.
See Appendix A for a discussion of foreign securities, ADRs, emerging market
securities, indexed securities, restricted securities and other instruments
set forth above and the risks involved in these investments. Securities
lending, options, futures and forward contracts, swaps and "when issued"
securities and the attendant risks are discussed in Appendix B. Please refer
to the SAI Appendix for further discussion of forward contracts.
(16) RESEARCH INTERNATIONAL SERIES
The Research International Series will seek capital appreciation.
The Research International Series seeks to achieve its objective by investing,
under normal market conditions, at least 65% of its total assets in equity
securities of companies whose principal activities are located outside the
U.S. The equity securities in which the Research International Series may
invest include securities of more established companies which represent
opportunities for long-term growth (see "Appendix A -- Foreign Growth
Securities"). The Research International Series may also invest up to 25% of
its assets in securities of companies located, or primarily conducting their
business, in emerging market countries ("emerging market securities"). The
selection of securities is made solely on the basis of potential for capital
appreciation. The Research International Series does not intend to emphasize
any particular country and, under normal market conditions, will be invested
in at least five countries. In addition, the Research International Series may
hold foreign currency received in connection with investments in foreign
securities or in anticipation of purchasing foreign securities.
In determining where a company's principal activities are located, the Adviser
considers such factors as its country of organization, the principal trading
market for its securities, the source of its revenues and the location of its
assets. The company's principal activities are deemed to be located in a
particular country if: (a) the company is organized under the laws of, and
maintains a principal office in, that country; (b) the company has its
principal securities trading market in that country; (c) the company derives
50% or more of its total revenues from goods sold or services performed in
that country; or (d) the company has 50% or more of its assets in that
country.
The portfolio securities of the Research International Series are selected by
a committee of investment research analysts. This committee includes
investment analysts employed not only by the Adviser but also by MFS
International (U.K.) Limited, a wholly owned subsidiary of MFS. The Research
International Series' assets are allocated among countries and industries by
the analysts acting together as a group. Individual analysts are then
responsible for selecting what they view as the securities best suited to meet
the Fund's investment objective within their assigned geographic and industry
responsibility.
Consistent with its investment objective as described above, the Research
International Series may invest in the following securities and employ the
following investment techniques: (1) lending portfolio securities; (2)
entering into repurchase agreements; (3) purchasing "when issued" or "forward
delivery" securities; (4) investing in U.S. Government Securities, cash
(including foreign currency) and cash equivalents for temporary defensive
purposes; (5) investing in securities of emerging growth companies as well as
foreign growth securities; (6) entering into swaps and related transactions;
(7) investing in indexed securities; (8) writing (selling) covered put and
call options and purchasing put and call options on securities and securities
indices; (9) entering into "yield curve" options; (10) purchasing and selling
futures contracts ("Futures Contracts") on stock indices, foreign currencies
or indices of foreign currencies and may purchase and write options on such
Futures Contracts; and (11) entering into forward foreign currency exchange
contracts ("Forward Contracts").
See Appendix A for a discussion of foreign securities, emerging market
securities and other instruments set forth above and the risks involved in
these investments. Options, futures contracts, options on futures contracts,
forward contracts and other investment techniques and their attendant risks
are discussed in Appendix B. Please refer to the SAI Appendix for further
discussion of these techniques.
(17) RESEARCH SERIES
The Research Series will seek to provide long-term growth of capital and
future income.
The portfolio securities of the series are selected by a committee of
investment research analysts. This committee includes investment analysts
employed not only by the Adviser but also by MFS International (U.K.) Limited,
a wholly owned subsidiary of MFS. The series' assets are allocated among
industries by the analysts acting together as a group. Individual analysts are
then responsible for selecting what they view as the securities best suited to
meet the series' investment objective within their assigned industry
responsibility.
The series' policy is to invest a substantial proportion of its assets in the
common stocks or securities convertible into common stocks of companies
believed to possess better than average prospects for long-term growth. A
smaller proportion of the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic
is income production rather than growth. Such securities may also offer
opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies. From time to time, the Research Series'
management will exercise its judgment with respect to the proportions invested
in growth stocks, income-producing securities or cash (including foreign
currency) and cash equivalents depending on its view of their relative
attractiveness. The Research Series may hold part or all of its assets in cash
or short-term obligations for temporary defensive purposes or as a reserve for
future purchases.
The Research Series' debt investments, if any, may consist of "investment
grade" securities (rated BBB or better by S&P or Fitch or Baa or better by
Moody's), and, with respect to no more than 10% of its net assets, securities
rated BB or lower by S&P or Fitch or Ba or lower by Moody's or securities
which the Adviser believes to be of similar quality (commonly known as "junk
bonds"). (See Appendix C; see also "Additional Risk Factors Regarding Lower
Rated Securities" under "High Yield Series" above.) It is not the Research
Series' policy to rely exclusively on ratings issued by established credit
rating agencies but rather to supplement such ratings with the Adviser's own
independent and ongoing review of credit quality. The Research Series'
achievement of its investment objective may be more dependent on the Adviser's
own credit analysis than in the case of a series or fund investing in
primarily higher quality bonds.
The Research Series may enter into repurchase agreements for U.S. Government
Securities, lend portfolio securities, and invest in restricted securities.
The series may invest up to 20% of its total assets in foreign securities,
which may include emerging market securities and Brady Bonds, may invest in
ADRs, and may enter into forward foreign currency exchange contracts ("forward
contracts") for hedging purposes. The Research Series may invest in restricted
securities, subject to the limitation on investing more than 15% of its net
assets in securities that are not readily marketable.
The Research Series does not intend to trade in securities for short-term
profits. However, the Research Series will trade whenever it believes that
changes are appropriate.
See Appendix A for a discussion of foreign securities, emerging market
securities, Brady Bonds, restricted securities and other instruments set forth
above and the risks involved in these investments. Securities lending and
forward contracts and the attendant risks are discussed in Appendix B. Please
refer to the SAI Appendix for further discussion of forward contracts.
(18) STRATEGIC INCOME SERIES
The Strategic Income Series will seek to provide high current income by
investing in fixed income securities. In addition, as part of its investment
objective, the Strategic Income Series will seek to take advantage of
opportunities to realize significant capital appreciation while maintaining a
high level of current income. The Strategic Income Series will attempt to
achieve this objective by allocating portfolio assets among various categories
of fixed income securities as described below. For this purpose, the Fund will
consider preferred stocks and convertible securities to be fixed income
securities. With respect to its fixed income investments, the Stategic Income
Series will seek to earn high current income in comparison to the income
available on U.S. Government Securities. The Strategic Income Series may also
invest up to 25% of its assets in common stocks and depository receipts for
common stocks. The Adviser will monitor the Fund's portfolio performance on an
ongoing basis and reallocate assets in response to actual and anticipated
market and economic changes. Any investment involves risk and there can be no
assurance that the Strategic Income Series will achieve its investment
objective.
The Adviser will determine, based upon current yields and the appreciation
potential of various categories of fixed income and equity securities, the
relative portions of the Fund's assets which should be invested in particular
securities; however, under normal market conditions, at least 65% of the
Fund's assets will be invested in fixed income securities. Fixed income
securities can appreciate in value as a result of declines in interest rates,
improvements in credit ratings and other factors. In pursuing its objective,
the Strategic Income Series will consider the preservation of capital by
balancing the yields and appreciation potential of securities which it may
purchase against their attendant risks. For the risk considerations involved,
see "Additional Risk Factors" below.
In order to achieve its investment objective, the Strategic Income Series may
invest in the following securities and employ the following investment
techniques: (i) securities that are issued or guaranteed as to interest and
principal by the U.S. Government, its agencies, authorities or
instrumentalities ("U.S. Government Securities"); (ii) fixed income securities
issued by foreign governments and their political subdivisions and fixed
income and equity securities of non-U.S. issuers; (iii) corporate fixed income
securities, some of which may involve equity features; (iv) equity securities
of established companies; (v) equity securities of emerging growth companies;
(vi) obligations and equity securities of banks or savings and loan
associations (including certificates of deposit and bankers' acceptances);
(vii) long- or short-term municipal securities; (viii) restricted securities;
(ix) corporate asset-backed securities; (x) collateralized mortgage
obligations and multiclass pass-through securities; (xi) swaps and related
transactions (xii) stripped mortgage-backed securities; (xiii) lending of
portfolio securities; (xiv) mortgage dollar-roll transactions; (xv) when-
issued or forward delivery securities; and (xvi) to the extent available and
permissible, options, futures contracts and options on futures contracts on
securities, currencies and indices.
The Strategic Income Series may invest in obligations of domestic and foreign
banks which, at the date of investment, have capital, surplus and undivided
profits (as of the date of their most recently published financial statements)
in excess of $100 million. The Strategic Income Series may invest in debt
obligations of other banks or savings and loan associations if such
obligations are insured by the Federal Deposit Insurance Corporation. In
addition, the Strategic Income Series may invest in the equity securities of
banks or savings and loan associations in accordance with its investment
objective and policies with respect to equity investments.
The Strategic Income Series may also invest in municipal obligations issued by
or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies or
instrumentalities when the Adviser determines that they offer the highest
income available, except where differences in yield are not sufficient to
justify investments in higher risk securities. Such municipal obligations may
be unrated or in the medium and lower rating categories of recognized rating
agencies, which securities are speculative, involve high risk and are
questionable as to principal and interest payments.
Each of these securities and techniques are more fully described in Appendix A
and B, respectively. Please refer to the SAI for a further description of
these securities and techniques.
ADDITIONAL RISK FACTORS
EFFECT OF INTEREST RATE CHANGES: The value of shares of the Series will vary
as the aggregate value of the Series' portfolio securities increases or
decreases. The net asset value of the Series may change as the general levels
of interest rates fluctuate. When interest rates decline, the value of a
portfolio of fixed income securities can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio of fixed income securities can
be expected to decline. Moreover, the value of the lower-rated fixed income
securities that the Series purchases will fluctuate more than the value of
higher-rated fixed income securities. These lower-rated fixed income
securities generally tend to reflect short-term corporate and market
developments to a greater extent than higher-rated securities, which react
primarily to fluctuations in the general level of interest rates. See "Risks
of Investment in Lower Rated Bonds" below and under "High Yield Series" above
for additional discussion of the risks of investing in such securities.
Although changes in the value of the Series' portfolio securities subsequent
to their acquisition are reflected in the net asset value of shares of the
Series, such changes will not affect the income received by the Series from
such securities. The dividends paid by the Series will increase or decrease in
relation to the income received by the Series from its investments, which will
in any case be reduced by the Series' expenses before being distributed to the
Series' shareholders.
If the Adviser's expectations of changes in interest rates or its evaluation
of the normal yield relationship between two securities proves to be
incorrect, the Series' income, net asset value and potential capital gain may
be decreased or its potential capital loss may be increased. The Adviser's
reallocation of Series assets in response to actual and anticipated market and
economic changes may result in the Series not achieving anticipated benefits,
or experiencing losses, should the Adviser's reallocation decision be
incorrect.
RISKS OF INVESTMENT IN LOWER RATED BONDS: No minimum rating standard is
required for a purchase of corporate debt securities by the Series and up to
100% of the Series' net assets may be invested in convertible and non-
convertible fixed-income securities. These securities are considered
speculative and, while generally providing greater income than investments in
higher rated securities, will involve greater risk of principal and income
(including the possibility of default or bankruptcy of the issuers of such
securities) and may involve greater volatility of price (especially during
periods of economic uncertainty or change) than securities in the higher
rating categories and, because yields vary over time, no specific level of
income can ever be assured. See "Additional Risk Factors Regarding Lower Rated
Securities" under "High Yield Series" above.
(19) TOTAL RETURN SERIES
The Total Return Series will primarily seek to obtain above-average income
(compared to a portfolio entirely invested in equity securities) consistent
with the prudent employment of capital. While current income is the primary
objective, this series also will seek a reasonable opportunity for growth of
capital and income, since many securities offering a better than average yield
may also possess growth potential. Assets will be allocated and reallocated
from time to time between money market, fixed income and equity securities.
Under normal market conditions, at least 25% of the series' assets will be
invested in fixed income securities and at least 40% and no more than 75% of
the series' assets will be invested in equity securities, including preferred
stocks.
The Total Return Series' policy is to invest in a broad portfolio of
securities, including short-term obligations. The portfolio may be diversified
not only by companies and industries, but also by type of securities, for
example, equity securities, fixed income securities, and securities
representing cash equivalents. Thus fixed income securities, such as bonds,
may be held as well as common stocks. In addition, some fixed income
securities held by this series may include a right to purchase common stock by
means of a conversion privilege or attached warrants. This series may vary the
percentage of assets invested in any one type of security in accordance with
its interpretation of economic and money market conditions, fiscal and
monetary policy, and underlying security values. Most of the series' long-term
debt investments will consist of "investment grade" securities (rated Baa or
better by Moody's or BBB or better by S&P or Fitch), although the series may
invest up to 20% of its net assets in lower rated securities. (See Appendix C
and "Additional Risk Factors Regarding Lower Rated Securities" under "High
Yield Series" above.) The series may enter into repurchase agreements for U.S.
Government Securities and may seek to increase its income by lending its
portfolio securities to the extent consistent with present regulatory
policies. The series may enter into mortgage "dollar roll" transactions and
invest in corporate asset-backed securities. The series may invest up to 20%
of its total assets in foreign securities, including emerging market
securities and Brady Bonds, and may invest in ADRs. The series may invest in
restricted securities, subject to the limitation on investing more than 10% of
its net assets in securities that are not readily marketable.
Securities offering above-average yield may at times involve greater than
average risk. For this reason, and because the value of securities and the
income earned on them may fluctuate according to the earnings of the issuers
and changes in economic and money market conditions, there can be no assurance
that the series' investment objectives will be achieved.
The Total Return Series' portfolio will be managed actively with respect to
fixed income securities, and the asset allocations will be modified as the
Adviser deems necessary. Although the Total Return Series does not intend to
seek short-term profits, fixed income securities in its portfolio will be sold
whenever the Adviser believes it is appropriate to do so, without regard to
the length of time the particular asset may have been held. With respect to
its equity securities, the Total Return Series does not intend to trade in
securities for short-term profits and anticipates that equity securities in
its portfolio will ordinarily be held for one year or longer. However, the
series will trade whenever it believes that changes in the portfolio are
appropriate.
See Appendix A for discussion of foreign securities, emerging market
securities, Brady Bonds, corporate asset-backed securities, restricted
securities and repurchase agreements and the risks involved in these
investments. Mortgage "dollar roll" transactions and lending portfolio
securities and their attendant risks are discussed in Appendix B.
(20) UTILITIES SERIES
The Utilities Series will seek capital growth and current income (income above
that available from a portfolio invested entirely in equity securities) by
investing, under normal market conditions, at least 65% (but up to 100% at the
discretion of the Adviser) of its assets in equity and debt securities of both
domestic and foreign companies in the utilities industry. Equity securities in
which the Utilities Series may invest include common stocks, preferred stocks,
securities convertible into common stocks or preferred stocks, and warrants to
purchase common or preferred stocks. At least 80% of the debt securities held
by the Utilities Series will be rated at the time of investment at least Baa
by Moody's or BBB by S&P or Fitch (see Appendix C) or will be of comparable
quality as determined by the Adviser (see "Additional Risk Factors Regarding
Lower Rated Securities" under "High Yield Series" above). The Utilities Series
may also invest in debt and equity securities of issuers in other industries,
as discussed below, although under normal circumstances not more than 35% of
the series' assets will be so invested. In addition, the Utilities Series may
hold a portion of its assets in cash and money market instruments.
Companies in the utilities industry include (i) companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electric, gas or other types of energy, water or other sanitary services and
(ii) companies engaged in telecommunications, including telephone, cellular
telephones, telegraph, satellite, microwave, cable television and other
communications media (but not companies engaged in public broadcasting). The
Adviser deems a particular company to be in the utilities industry if, at the
time of investment, the Adviser determines that at least 50% of the company's
assets or revenues are derived from one or more of those industries. For a
description of the principal sectors of the utilities industry, see Appendix
D.
The portion of the Utilities Series' assets invested in a particular type of
utility and in equity or debt securities will vary in light of changes in
interest rates, market conditions and economic conditions and other factors.
The Utilities Series may invest in foreign securities, including non-dollar
denominated securities and emerging market securities, and in ADRs, although
under normal circumstances it is not expected that more than 35% of the
Utilities Series' assets will be invested in foreign securities.
The Utilities Series is permitted to invest in securities of issuers that are
outside the utilities industry, although under normal circumstances not more
than 35% of the Utilities Series' assets will be so invested. Such investments
may include common stocks, debt securities (including municipal debt
securities) and preferred stocks and will be selected to meet the Utilities
Series' investment objective of both capital appreciation and current income.
These securities may be issued by either U.S. or non-U.S. companies. Some of
these issuers may be in industries related to the utilities industry and,
therefore, may be subject to similar risks. Investments outside the utilities
industry may also include U.S. Government Securities, including U.S.
Government Securities that are mortgage pass-through securities.
Some U.S. Government Securities do not generally involve the credit risks
associated with other types of interest bearing securities, although, as a
result, the yields available from these securities are generally lower than
the yields available from corporate interest bearing securities. Like other
interest bearing securities, however, the values of U.S. Government Securities
change as interest rates fluctuate.
When unfavorable economic or market conditions exist, the Utilities Series
may, until favorable conditions return, invest up to 75% of its assets in cash
(or foreign currency), cash equivalents (such as certificates of deposit,
bankers' acceptances and time deposits), commercial paper, short-term
obligations, repurchase agreements and obligations issued or guaranteed by the
U.S. or any foreign government or any of their agencies, authorities or
instrumentalities.
See "Additional Risk Factors" below for further information on investing in
the securities described above as well as the risks associated therewith.
In order to achieve its investment objective the Utilities Series may employ
the investment techniques noted below and purchase the securities described
below in accordance with the above-mentioned investment policies: (1) entering
into repurchase agreements for U.S. Government Securities; (2) lending
portfolio securities to the extent consistent with present regulatory policies
for the purpose of increasing the Utilities Series' income; (3) entering into
covered mortgage "dollar roll" transactions; (4) investing in corporate asset-
backed securities; (5) purchasing securities on a "when-issued" or on a
"forward delivery" basis; (6) investing in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indexes or other
financial indicators; (7) purchasing restricted securities, subject to the
limitation on investing more than 15% of its net assets in securities that are
not readily marketable; (8) writing covered put and call options and
purchasing put and call options on domestic and foreign stock indexes for the
purpose of increasing the Utilities Series' gross income or for hedging
purposes, and to attempt to reduce the risk of missing a market or industry
segment advance; (9) investing in CMOs, multiclass pass-through securities,
parallel pay CMO's and Planned Amortization Class CMO's ("PAC Bonds"); (10)
investing in zero coupon bonds; (11) entering into futures contracts, options
on futures contracts and options on foreign currencies for hedging purposes in
order to protect the Utilities Series' current or intended investments from
the effects of changes in interest or exchange rates or declines in the stock
market and entering into futures contracts and options on futures contracts
for non-hedging purposes to the extent permitted by applicable law; and (12)
entering into forward foreign currency exchange contracts ("forward
contracts") for hedging purposes as well as for non-hedging (i.e.,
speculative) purposes.
The Utilities Series' portfolio will be managed actively and the selection of
securities modified as the Adviser deems necessary. Although the Utilities
Series does not intend to seek short-term profits, securities in its portfolio
will be sold whenever the Adviser believes it is appropriate to do so without
regard to the length of time the particular asset may have been held.
See Appendix A for a discussion of foreign securities, emerging market
securities, U.S. Government Securities, repurchase agreements and other
instruments set forth above and the risks involved in these investments. The
investment techniques set forth above and their attendant risks are discussed
in Appendix B. Please refer to the SAI Appendix for further discussion of
these techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE UTILITIES SERIES.
ADDITIONAL RISK FACTORS
UTILITY COMPANIES: Since the Utilities Series' investments are concentrated
in utility securities, the value of the shares of the series will be
especially affected by factors peculiar to the utilities industry and may
fluctuate more widely than the value of shares of a series that invests in a
broader range of industries. The rates many utility companies may charge their
customers are controlled by governmental regulatory commissions which may
result in a delay in the utility company passing along increases in costs to
its customers. Furthermore, there is no assurance that regulatory authorities
will, in the future, grant rate increases or that such increases will be
adequate to permit the payment of dividends on common stocks. Many utility
companies, especially electric and gas and other energy related utility
companies, are subject to various uncertainties, including: risks of increases
in fuel and other operating costs; the high cost of borrowing to finance
capital construction during inflationary periods; difficulty obtaining
adequate returns on invested capital, even if frequent rate increases are
approved by public service commissions; restrictions on operations and
increased costs and delays as a result of environmental and nuclear safety
regulations; securing financing for large construction projects during an
inflationary period; difficulties of the capital markets in absorbing utility
debt and equity securities; difficulty in raising capital in adequate amounts
on reasonable terms in periods of high inflation and unsettled capital
markets; technological innovations which may render existing plants, equipment
or products obsolete; the potential impact of natural or man-made disasters;
difficulties in obtaining natural gas for resale or fuel for electric
generation at reasonable prices; coping with the general effects of energy
conservation, particularly in light of changing policies regarding energy; and
special risks associated with the construction and operation of nuclear power
generating facilities, including technical factors and costs, and the
possibility that federal, state and municipal government authorities may from
time to time review existing requirements and impose additional requirements.
Certain utility companies, especially gas and telephone utility companies,
have in recent years been affected by increased competition, which could
adversely affect the profitability of such utility companies. Furthermore,
there are uncertainties resulting from certain telecommunications companies'
diversification into new domestic and international businesses as well as
agreements by many such companies linking future rate increases to inflation
or other factors not directly related to the active operating profits of the
enterprise.
FOREIGN UTILITY COMPANIES: Foreign utility companies are also subject to
regulation, although such regulations may or may not be comparable to those in
the U.S. Foreign utility companies may be more heavily regulated by their
respective governments than utilities in the U.S. and, as in the U.S.,
generally are required to seek government approval for rate increases. In
addition, since many foreign utilities use fuel that causes more pollution
than those used in the U.S., such utilities may be required to invest in
pollution control equipment to meet any proposed pollution restrictions.
Foreign regulatory systems vary from country to country and may evolve in ways
different from regulation in the U.S.
(21) VALUE SERIES
The Value Series will seek capital appreciation. Dividend income, if any, is a
consideration incidental to the series' objective of capital appreciation.
While the Value Series' policy is to invest primarily in common stocks, it may
seek appreciation in other types of securities such as fixed income securities
(which may be unrated), convertible bonds, convertible preferred stocks and
warrants when relative values make such purchases appear attractive either as
individual issues or as types of securities in certain economic environments.
The series may invest in income securities rated lower than "investment grade"
(investment grade securities are rated at least Baa by Moody's or BBB by S&P
or Fitch), or in comparable unrated securities, when, in the opinion of the
Adviser, such an investment presents a greater opportunity for appreciation
with comparable risk to an investment in "investment grade" securities. Under
normal market conditions, the series will invest not more than 25% of its net
assets in these securities. Such lower rated or unrated fixed income
securities may have speculative risk characteristics (see "Additional Risk
Factors Regarding Lower Rated Securities" under "High Yield Series" above).
Fixed income securities that the Value Series may invest in also include zero
coupon bonds, deferred interest bonds and PIK bonds. There is no formula as to
the percentage of assets that may be invested in any one type of security.
Cash, commercial paper, short-term obligations, repurchase agreements or debt
securities are held to provide a reserve for future purchases of common stock
or other securities and may also be held as a temporary defensive measure when
the Adviser determines security markets to be overvalued.
The Value Series may invest up to 50% of its total assets in foreign
securities, which may include emerging market securities and Brady Bonds. The
series may also invest a portion of its assets in loans, loan participations
or other direct indebtedness.
In order to achieve its investment objective, the Value Series may also
purchase the securities and employ the investment techniques described below:
(1) entering into repurchase agreements; (2) lending portfolio securities; (3)
purchasing securities on a "when issued" or "forward delivery" basis; (4)
purchasing restricted securities, subject to the limitation on investing more
than 15% of its net assets in securities that are not readily marketable; (5)
purchasing ADRs; (6) writing (selling) covered put and call options on
securities for the purpose of increasing its return and/or to protect the
value of its portfolio, and purchasing put and call options on securities in
anticipation of declines in the value of portfolio securities or increases in
the value of securities to be acquired (the series may also write combinations
of put and call options on the same security, known as "straddles," which
transactions can generate additional income, but also present increased
risks); (7) entering into "yield curve" options for hedging and nonhedging
purposes; (8) entering into stock index and foreign currency futures contracts
for hedging purposes (to protect the series' current or intended investments
from the effects of changes in interest or exchange rates, or declines in the
value of portfolio securities or increases in the cost of such securities to
be acquired) as well as for nonhedging purposes, to the extent permitted by
applicable law (which involves greater risks and could result in losses which
are not offset by gains and other portfolio assets); (9) purchasing and
writing options on futures contracts for the purpose of protecting against
declines in the value of portfolio securities or against increases in the cost
of securities to be acquired and also for nonhedging purposes, to the extent
permitted by applicable law; (10) entering into forward foreign currency
exchange contracts ("forward contracts") for hedging purposes as well as for
the nonhedging purpose of increasing current income; (11) purchasing and
selling 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; (12) writing covered call and
put options and purchasing call and put options on stock indexes for the
purpose of increasing its current income and/or for hedging purposes and to
attempt to reduce the risk of missing a market or industry segment advance;
and (13) investing in indexed securities whose value is linked to foreign
currencies, precious metals, interest rates, commodities, indexes or other
financial indicators.
The Value Series is designed for purchasers who understand and are willing to
accept the risks inherent in seeking capital appreciation.
The Value Series' portfolio is aggressively managed. Portfolio changes are
made without regard to the length of time a security has been held, or whether
a sale would result in profit or loss. Therefore, the rate of portfolio
turnover is not a limiting factor when appropriate.
See Appendix A for discussion of foreign securities, emerging market
securities, Brady Bonds, ADRs, zero coupon bonds, deferred interest bonds and
PIK bonds, restricted securities, loans and loan participations, and other
instruments set forth above, and the risks involved in these securities. The
investment techniques set forth above and their attendant risks are discussed
in Appendix B. Please refer to the SAI Appendix for further discussion of
these instruments and techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE VALUE SERIES.
(22) WORLD ASSET ALLOCATION SERIES
The World Asset Allocation Series will seek total return over the long term
through investments in equity and fixed income securities; the series will
also seek to have low volatility of share price (i.e., net asset value per
share) and reduced risk (compared to an aggressive equity/fixed income
portfolio).
The World Asset Allocation Series will seek to achieve its objective by
allocating portfolio assets among various asset classes of equity and fixed
income securities where the opportunities for total return are expected to be
most attractive. On average, over time, the World Asset Allocation Series
intends to invest approximately 65% of its total assets in equity securities;
however, at any particular point in time, equity securities may constitute
more or less than 65% of the series' total assets. Under normal circumstances,
the series intends to invest at least 30% of its total assets in equity
securities and allocate its assets among at least three asset classes, except
when the Adviser believes that investing for temporary defensive purposes is
appropriate as noted below.
Equity securities include: common and preferred stock; securities such as
bonds, warrants or rights that are convertible into stock; and depository
receipts for those securities. Fixed income securities include: bonds,
debentures and other debt instruments issued by a variety of issuers,
including corporations and other business entities, the U.S. and foreign
governments and their agencies, authorities, instrumentalities and political
subdivisions and supranational entities; mortgage-backed and other asset
backed securities; receipts evidencing separately traded interest and
principal component parts of obligations; and repurchase agreements involving
any of the foregoing types of securities.
The Adviser will allocate assets among some or all of the following five asset
classes of securities.
(i) U.S. Equity Securities--equity securities of U.S. issuers including
securities of emerging growth companies;
(ii) Foreign Equity Securities--equity securities of foreign issuers
including securities of issuers in emerging markets (as described
below);
(iii) U.S. Investment Grade Fixed Income Securities--fixed income
securities of U.S. issuers (including U.S. Government Securities,
short-term instruments and municipal obligations) rated Baa or
better by Moody's or BBB or better by S&P or Fitch or comparable
unrated securities;
(iv) U.S. High Yield Fixed Income Securities--high yield fixed income
securities of U.S. issuers, including municipal obligations, rated Ba
or below by Moody's or BB or below by S&P or Fitch or comparable
unrated securities (commonly known as "junk bonds"); and
(v) Foreign Fixed Income Securities--fixed income securities of foreign
issuers including securities of issuers in emerging markets (as
described below). Foreign fixed income securities may include
securities in any of the rating categories (and comparable unrated
securities) including securities in lower rating categories.
As of the date of this Prospectus, the target allocations of assets among the
asset classes are in the following approximate proportions of the World Asset
Allocation Series' portfolio: U.S. Equity Securities--15%; Foreign Equity
Securities--45%; U.S. Investment Grade Fixed Income Securities--10%; U.S. High
Yield Fixed Income Securities--10%; and Foreign Fixed Income Securities--20%.
Such allocation will change from time to time, as described below. (See
Appendix E for a chart indicating the composition of the World Asset
Allocation Series' portfolio for the fiscal year ended December 31, 1996, with
the debt securities separated into rating categories and comparable unrated
securities.)
The Adviser will allocate the assets of the World Asset Allocation Series
among some or all of the various asset classes described above where the
opportunities for total return are expected to be the most attractive,
consistent with the objective of seeking low share price volatility and
reduced risk. The judgment of the Adviser concerning the allocation of the
World Asset Allocation Series' assets will be based on the Adviser's
experience in qualitative and fundamental analysis and disciplined
quantitative techniques. The Adviser will make changes in the allocation of
assets of the World Asset Allocation Series when its research and analysis
indicate the likely occurrence of changes in financial markets or economic
conditions affecting the various asset classes that may change the expected
total return from the various asset classes. To the extent World Asset
Allocation Series assets are allocated among most or all of the asset classes,
this will reduce the impact of the poorer performing classes at any point in
time. By following this asset allocation strategy, the World Asset Allocation
Series' performance in part will be dependent on the Adviser's skill in
allocating assets.
Although the percentage of the World Asset Allocation Series' assets invested
in foreign securities will vary, the Series will be invested in at least three
different countries, one of which may be the United States, except when the
Adviser believes that investing for defensive purposes is appropriate as noted
below.
The risks of each asset class vary. For example, the values of equity
securities change in response to general market and economic conditions and
the activities and changing circumstances of individual issuers, and the
values of fixed income securities change in response to changes in economic
conditions, interest rates and the creditworthiness of individual issuers. A
significant portion of the World Asset Allocation Series' assets may be
allocated to equity and fixed income investments in foreign securities which
involve the risks set forth under "Additional Risk Factors" below. The World
Asset Allocation Series may also invest in high yield fixed income securities
(see "Additional Risk Factors regarding Lower Rated Securities" under "High
Yield Series" above).
Emerging Growth Companies: The World Asset Allocation Series may invest
in securities of U.S. and foreign emerging growth companies. For a discussion
of emerging growth companies see the description of these companies and
"Additional Risk Factors Relating to Emerging Growth Companies" under
"Emerging Growth Series."
Emerging Market Securities: The World Asset Allocation Series may invest
in securities of issuers whose principal activities are in emerging market
countries, including investments in Brady Bonds. See "Appendix A--Emerging
Market Securities" and "Brady Bonds" for a discussion of emerging market
securities and Brady Bonds and the risks involved in these investments. The
World Asset Allocation Series may also invest in securities of emerging market
governments or any of their political subdivisions, agencies, authorities or
instrumentalities. See "Additional Risk Factors--Foreign Securities" below.
Investments in Other Investment Companies: The World Asset Allocation
Series may invest in other investment companies to the extent permitted by the
1940 Act (i) as a means by which the series may invest in securities of
certain countries which do not otherwise permit investment, (ii) as a means to
acquire securities of emerging market companies where the supply of such
securities available for purchase is limited, or (iii) when the Adviser
believes such investments may be more advantageous to the series than a direct
market purchase of securities. Such investment may also involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities, and the total return on such investment will be reduced by the
operating expenses and fees of such other investment companies, including
advisory fees.
Investments for Defensive Purposes: When the Adviser believes that
investing for defensive purposes is appropriate, such as during periods of
unusual or unfavorable market or economic conditions, or in order to meet
anticipated redemption requests, up to 100% of the World Asset Allocation
Series' assets may be temporarily invested in cash (including foreign
currency) 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. or any foreign government
or any of their agencies, authorities or instrumentalities and repurchase
agreements.
Other Investments and Techniques: In order to achieve its investment
objective, the World Asset Allocation Series also may purchase the securities
and employ the investment techniques described below: (1) purchasing zero
coupon bonds, deferred interest bonds, PIK bonds, loan participations and
other direct indebtedness, indexed securities, municipal obligations, mortgage
securities, collateralized mortgage obligations and multiclass pass-through
securities, stripped mortgage-backed securities, and restricted securities,
subject to the limitation on investing more than 15% of its net assets in
securities that are not readily marketable; (2) lending portfolio securities;
(3) entering into mortgage "dollar roll" transactions; (4) writing (selling)
covered put and call options on securities for the purpose of increasing its
return and/or to protect the value of its portfolio, and purchasing put and
call options on securities in anticipation of declines in the value of
portfolio securities or increases in the value of securities to be acquired
(the Series may also write combinations of put and call options on the same
security, known as "straddles," which transactions can generate additional
income, but also present increased risks); (5) entering into "yield curve"
options for hedging and nonhedging purposes; (6) writing covered call and put
options and purchasing call and put options on domestic and foreign stock
indexes for the purpose of increasing its current income and/or for hedging
purposes and to attempt to reduce the risk of missing a market or industry
segment advance; (7) entering into contracts for the purchase or sale for
future delivery of fixed income securities or foreign currencies or contracts
based on indexes of securities or currencies (including any index of U.S. or
foreign securities) as such instruments become available for trading ("futures
contracts") for hedging purposes (to protect the Series' current or intended
investments from the effects of changes in interest or exchange rates or
declines in a securities market) as well as for nonhedging purposes, to the
extent permitted by law (which involves greater risks and could result in
losses which are not offset by gains and other portfolio assets); (8)
purchasing and writing options on futures contracts for the purpose of
protecting against declines in the value of portfolio securities or against
increases in the cost of securities to be acquired and also for non hedging
purposes, to the extent permitted by applicable law; (9) entering into forward
foreign currency exchange contracts ("forward contracts") for hedging purposes
as well as nonhedging purposes; (10) purchasing and selling options on foreign
currencies for the purpose of protecting against declines in the dollar value
of foreign portfolio securities and against increases in the dollar cost of
securities to be acquired; and (11) entering into interest rate swaps,
currency swaps, and other types of available swap agreements for the purpose
of shifting the series' investment exposure from one type of investment to
another.
Portfolio Trading: Although the World Asset Allocation Series does not
intend to seek short-term profits, securities in its portfolio will be sold
whenever the Adviser believes it is appropriate to do so without regard to the
length of time the particular asset may have been held or whether the sale
would result in a gain or loss. Therefore, the rate of portfolio turnover is
not a limiting factor when a change in the portfolio is otherwise appropriate.
See Appendix A for a discussion of foreign securities, emerging market
securities, Brady Bonds, zero coupon bonds, PIK bonds, loan participations,
mortgage pass through securities, collateralized mortgage obligations and
multiclass pass through securities and other instruments set forth above, and
the risks involved in these investments. The investment techniques set forth
above and their attendant risks are discussed in Appendix B. Please refer to
the SAI Appendix for further discussion for these instruments and techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE WORLD ASSET ALLOCATION SERIES.
ADDITIONAL RISK FACTORS
EMERGING GROWTH COMPANIES: Investing in emerging growth companies involves
greater risk than is customarily associated with investing in more established
companies. See "Additional Risk Factors Relating to Emerging Growth Companies"
under "Emerging Growth Series" above.)
FOREIGN SECURITIES: Transactions involving foreign equity or debt securities
or foreign currencies, and transactions entered into in foreign countries,
involve considerations and risks not typically associated with investing in
U.S. markets (see "Appendix A--Foreign Securities"). In addition, investments
in emerging markets involve special risks (see "Appendix A--Emerging Market
Securities").
FOREIGN CURRENCIES: To the extent the series invests in securities not
denominated in U.S. dollars, the value of the series' foreign investments, and
the value of dividends and interest earned by the series on such investments,
may be significantly affected by changes in currency exchange rates. Some
foreign currency values may be volatile, and there is the possibility of
governmental controls on currency exchange or governmental intervention in
currency markets which could adversely affect the series. Although the Adviser
(or a Sub-Adviser, if applicable) may attempt to manage currency exchange rate
risks, there is no assurance that they will do so at an appropriate time or
that they will be able to predict exchange rates accurately. For example, if
the Adviser hedges the series' exposure to a foreign currency, and that
currency's value rises, the series will lose the opportunity to participate in
the currency's appreciation. The series may hold foreign currency received in
connection with investments in foreign securities, forward contracts and
options on foreign currencies when, in the judgment of the Adviser, it would
be beneficial to convert such currency into U.S. dollars at a later date,
based on anticipated changes in the relevant exchange rates. While the holding
of foreign currencies will permit the series to take advantage of favorable
movements in the applicable exchange rate, it also exposes the series to risk
of loss if such rates move in a direction adverse to the series' position.
Such losses could also adversely affect the series' hedging strategies.
(23) WORLD GOVERNMENTS SERIES
The World Governments Series will seek moderate current income and
preservation and growth of capital by investing in debt obligations that are
issued or guaranteed as to principal and interest by (1) the U.S. government,
its agencies, authorities or instrumentalities ("U.S. Government Securities")
or (2) the governments of foreign countries ("Foreign Government Securities")
(to the extent the Adviser believes that the higher yields available from such
Foreign Government Securities are sufficient to justify the risks of investing
in such securities). The World Governments Series may also hold its assets in
cash or short-term obligations. In pursuing its objectives, the World
Governments Series will consider the preservation and growth of capital by
balancing the yields of various fixed income securities against their
attendant risks.
The World Governments Series will seek to provide purchasers with an
opportunity to enhance the value and increase the protection of their
investment against inflation and otherwise by taking advantage of investment
opportunities in the United States as well as in other countries where
opportunities may be more rewarding. It is believed that diversification of
assets on an international basis decreases the degree to which events in any
one country, including the United States, can affect the entire portfolio.
Although the percentage of the series' assets invested in securities issued
abroad and denominated in foreign currencies ("non-dollar securities") will
vary depending on the state of the economies of the principal countries of the
world, their financial markets and the relationships of their currencies to
the U.S. dollar, under normal conditions the series' portfolio will be
internationally diversified. However, for defensive reasons or during times of
international, political, or economic uncertainty or turmoil, most or all of
the series' investments may be in the United States.
The World Governments Series will purchase non-dollar securities denominated
in the currency of countries where the interest rate environment as well as
the general economic climate provide an opportunity for declining interest
rates and currency appreciation. If interest rates decline, such non-dollar
securities will appreciate in value. If the currency also appreciates against
the dollar, the total investment in such non-dollar securities would be
enhanced further. Conversely, a rise in interest rates or decline in currency
exchange rates would adversely affect the series' return. Investments in non-
dollar securities are evaluated primarily on the strength of a particular
currency against the dollar and on the interest rate climate of that country.
Currency is judged on the basis of fundamental economic criteria (e.g.,
relative inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and political
data. In addition to the foregoing, interest rates are evaluated on the basis
of differentials or anomalies that may exist between different countries.
The phrase "preservation of capital" is generally understood to imply that the
portfolio is invested in very low risk securities and that the major risk is
loss of purchasing power through the effects of inflation or major changes in
interest rates. However, while the World Governments Series will invest in
securities which are believed by the Adviser to have minimal credit risk, an
error of judgment in selecting a currency or an interest rate environment
could result in loss of capital.
The World Governments Series may invest in Foreign Government Securities of
issuers considered stable by the Adviser. The Adviser does not believe that
the credit risk inherent in the obligations of such stable foreign governments
is significantly greater than that of U.S. Government Securities. The
percentage of the World Governments Series' assets invested in Foreign
Government Securities will vary depending on the relative yields of such
securities, the economies of the countries in which the investments are made
and such countries' financial markets, the interest rate climate of such
countries and the relationship of such countries' currencies to the U.S.
dollar. To the extent that the World Governments Series invests in Foreign
Government Securities, its portfolio, under normal conditions, will include
securities of a number of foreign countries. As a "non-diversified" series,
the World Governments Series will be able to invest more than 5% of its assets
in obligations of one or more foreign governments, to the extent consistent
with federal income tax diversification requirements; the World Governments
Series may also hold foreign currency for hedging purposes.
When the Adviser believes that investing for temporary defensive purposes is
appropriate, such as during periods of unusual market conditions, or when
relative yields are deemed attractive, part or all of the World Governments
Series' assets may be invested in cash (including foreign currency) or cash
equivalent short-term obligations including, but not limited to, certificates
of deposit, commercial paper, notes, U.S. Government Securities, Foreign
Government Securities and repurchase agreements.
Some U.S. Government Securities do not generally involve the credit risks
associated with other types of interest bearing securities, although, as a
result, the yields available from such securities are generally lower than the
yields available from other interest bearing securities. Like other interest
bearing securities, however, the values of U.S. Government Securities change
as interest rates fluctuate. When interest rates decline, the value of a
portfolio invested at higher yields can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio invested at lower yields can be
expected to decline. If the series' expectations of changes in interest rates
or its evaluation of the normal yield relationship between two securities
proves to be incorrect, the series' income and the value of its shares
decreases.
In order to achieve its investment objectives, the World Governments Series
may employ the following investment techniques: (1) writing covered put and
call options and purchasing put and call options on U.S. and Foreign
Government Securities that are traded on United States and foreign securities
exchanges and over the counter in an effort to increase current income and to
reduce fluctuations in the value of its shares; (2) entering into contracts
for the purchase or sale for future delivery of fixed income securities or
foreign currencies, or contracts based on financial indexes, including any
index of U.S. or Foreign Government Securities ("futures contracts") and
purchasing and writing options to buy or sell futures contracts ("options on
futures contracts") but only as a hedge against anticipated further changes in
interest or exchange rates; (3) purchasing and writing put and call options on
foreign currencies traded on U.S. and foreign exchanges or over the counter
for the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increase in the dollar cost of foreign
securities to be acquired; (4) entering into forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the risk to the series
from adverse changes in the relationship between the U.S. dollar and foreign
currencies; (5) lending portfolio securities to the extent consistent with
present regulatory policies for the purpose of increasing the World
Governments Series' income; (6) purchasing securities on a "when-issued" or on
a "forward delivery" basis; (7) entering into repurchase agreements for U.S.
Government Securities; (8) entering into mortgage "dollar roll" transactions;
(9) purchasing restricted securities, subject to the limitation on investing
more than 15% of its net assets in securities that are not readily marketable;
and, subject to approval by the Board of Trustees, (10) entering into interest
rate swaps, currency swaps and other types of swap agreements; and (11)
purchasing indexed securities.
The World Governments Series will engage in portfolio trading if it believes
that a transaction, net of costs, will help in achieving its investment
objective. The World Governments Series cannot accurately predict its
portfolio turnover rate, but it is anticipated that the annual turnover rate
generally will not exceed 400% (excluding turnover of securities having a
maturity of one year or less). A high turnover rate (in excess of 100%)
involves greater expenses, including higher brokerage and transaction costs,
to the World Governments Series.
See Appendix A for a discussion of foreign securities, indexed securities,
U.S. Government Securities, and other instruments set forth above, and the
risks involved in such investments. The investment techniques set forth above
and their attendant risks are discussed in Appendix B. Please refer to the SAI
Appendix for further discussion of these instruments and techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE WORLD GOVERNMENTS SERIES.
(24) WORLD GROWTH SERIES
The World Growth Series will seek capital appreciation by investing in
securities of companies worldwide growing at rates expected to be well above
the growth rate of the overall U.S. economy. The World Growth Series will seek
to achieve this objective by investing primarily in securities in three market
sectors: U.S. emerging growth companies; foreign growth companies; and
emerging market companies. (The U.S. emerging growth and foreign growth
sectors may include securities of more established companies which represent
opportunities for long-term growth.) Although the percentage of the World
Growth Series' assets invested in securities issued abroad and denominated or
quoted in foreign currencies ("non-dollar securities") will vary depending on
the state of the economies of the various countries of the world, their
financial markets and the relationship of their currencies to the U.S. dollar,
under normal conditions, the series will be invested in at least three
different countries, one of which will be the United States. For defensive
reasons or during times of international political or economic uncertainty or
turmoil, most or all of the series' investments may be in the United States.
While the World Growth Series intends to invest primarily in equity
securities, the series may also invest in fixed income securities as described
below. Equity securities include: common and preferred stocks; securities such
as bonds, warrants or rights that are convertible into stock; and depository
receipts for those securities. The selection of securities, except for
defensive purposes, is made solely on the basis of potential for capital
appreciation. Dividend and interest income from portfolio securities, if any,
is incidental to the series' investment objective of capital appreciation.
U.S. Emerging Growth Companies: The World Growth Series may invest in
securities of U.S. emerging growth companies. For a discussion of emerging
growth companies see the description of these companies and "Additional Risk
Factors Relating to Emerging Growth Companies" under Emerging Growth Series
above.
Foreign Growth Companies: The World Growth Series may invest in
securities and in ADRs of foreign growth companies and more established
foreign companies whose rates of earnings growth are expected to accelerate
because of special factors, such as rejuvenated management, new products,
changes in consumer demand, or basic changes in the economic environment or
which otherwise represent opportunities for long-term growth. It is
anticipated that these companies will primarily be in nations with more
developed securities markets such as Australia, Canada, Japan, New Zealand and
Western European countries. (See "Additional Risk Factors--Foreign Securities"
below.)
Emerging Market Companies: The World Growth Series may invest in
securities of issuers whose principal activities are in emerging market
countries. See "Appendix A--Emerging Market Securities" for a description of
emerging market securities, and the risks involved in these investments.
Fixed Income and Debt Securities: Debt securities of both domestic and
foreign issuers in which the World Growth Series may invest include all types
of long- or short-term debt obligations, such as bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sales
contracts and commercial paper. The World Growth Series may also invest in
zero coupon bonds, deferred interest bonds, PIK bonds, and corporate asset-
backed securities. Fixed income securities in which the World Growth Series
may invest include securities in the lower rating categories of recognized
rating agencies (and comparable unrated securities). The series will not
invest more than 35% of its net assets in fixed income securities rated Ba or
lower by Moody's or BB or lower by S&P or Fitch (or comparable unrated
securities). (See Appendix C for a description of these ratings. See also
"Additional Risk Factors Regarding Lower-Rated Securities" under "High Yield
Series" above.) To the extent the World Growth Series invests in fixed income
securities, the net asset value of the series may change as the general levels
of interest rates fluctuate. When interest rates decline, the value of fixed
income securities can be expected to rise. Conversely, when interest rates
rise, the value of fixed income securities can be expected to decline.
Investments in Other Investment Companies: The World Growth Series may
invest in other investment companies to the extent permitted by the 1940 Act
(i) as a means by which the series may invest in securities of certain
countries which do not otherwise permit investment, (ii) as a means to acquire
securities of emerging market companies where the supply of such securities
available for purchase is limited, or (iii) when the Adviser or a Sub-Adviser
believes such investments may be more advantageous to the series than a direct
market purchase of securities. Such investment may also involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities, and the total return on such investment will be reduced by the
operating expenses and fees of such other investment companies, including
advisory fees.
Investments for Defensive Purposes: When the Adviser or a Sub-Adviser
believes that investing for defensive purposes is appropriate, such as during
periods of unusual market conditions, or when relative yields are deemed
attractive, part or all of the World Growth Series' assets may be temporarily
invested in cash (including foreign currency) or cash equivalent short-term
obligations including, but not limited to, certificates of deposit, commercial
paper, short-term notes, U.S. Government Securities and repurchase agreements.
Other Investments and Techniques: In order to achieve its investment
objective, the World Growth Series also may purchase the securities and employ
the investment techniques described below: (1) entering into repurchase
agreements; (2) purchasing restricted securities, subject to the limitation on
investing more than 15% of its net assets in securities that are not readily
marketable; (3) writing (selling) covered put and call options on securities
that are traded on U.S. and foreign securities exchanges and over the counter
for the purpose of increasing its current income and/or to protect the value
of the series' portfolio and purchasing put and call options on securities in
anticipation of declines in the value of portfolio securities or increases in
the value of securities to be acquired (the series may also write combinations
of put and call options on the same security, known as "straddles," which
transactions can generate additional income, but also present increased risk);
(4) writing covered call and put options and purchasing call and put options
on domestic and foreign stock indexes for the purpose of increasing current
income and/or for hedging purposes and to attempt to reduce the risk of
missing a market or industry segment advance; (5) entering into futures
contracts and options on futures contracts to protect the series' current or
intended stock investments from broad fluctuations in stock prices and, to the
extent permitted by applicable law, for non-hedging purposes, which involves
greater risks and could result in losses which are not offset by gains on
other portfolio assets; (6) entering into forward foreign currency exchange
contracts ("forward contracts") for hedging purposes as well as for the non-
hedging purpose of increasing the World Growth Series' current income; (7)
entering into options on foreign currencies for the purpose of protecting
against declines in the dollar value of foreign portfolio securities and
against increases in the cost of securities to be acquired; (8) lending
portfolio securities; and (9) purchasing securities on a "when-issued" or a
"forward delivery" basis.
Portfolio Trading: The World Growth Series' portfolio will be managed
actively and the asset allocation modified as the Adviser or a Sub-Adviser
deems necessary. While it is not generally the series' policy to invest or
trade for short-term profits, the series may dispose of a portfolio security
whenever the Adviser or a Sub-Adviser is of the opinion that such security no
longer has an appropriate appreciation potential or when another security
appears to offer relatively greater appreciation potential. 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. Therefore, the rate of
portfolio turnover is not a limiting factor when a change in the portfolio is
otherwise appropriate.
See Appendix A for a discussion of foreign securities, emerging market
securities, PIK bonds, corporate asset-backed securities, restricted
securities, repurchase agreements, and other instruments set forth above, and
the risks involved in these investments. The investment techniques set forth
above and their attendant risks are discussed in Appendix B. Please refer to
the SAI Appendix for further discussion of these instruments and techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE WORLD GROWTH SERIES.
ADDITIONAL RISK FACTORS
See the discussion of risks involved in emerging growth companies, foreign
securities, emerging market securities, and foreign currencies in "Additional
Risk Factors" under World Asset Allocation Series above.
(25) WORLD TOTAL RETURN SERIES
The World Total Return Series' investment objective is to seek total return by
investing in securities which will provide above-average current income
(compared to a portfolio invested entirely in equity securities) and
opportunities for long-term growth of capital and income. The Series will
invest primarily in global equity and fixed income securities (i.e., those of
U.S. and non-U.S. issuers).
The World Total Return Series will seek to achieve its investment objective
through a professionally managed, internationally diversified portfolio
consisting of equity and fixed income securities. The World Total Return
Series will attempt to provide investors with an opportunity to enhance the
value and increase the protection of their investment against inflation and
otherwise by taking advantage of investment opportunities in the United States
as well as in other countries where opportunities may be more rewarding. It is
believed that diversification of assets on an international basis decreases
the degree to which events in any one country, including the United States,
can affect the entire portfolio. Although the percentage of the World Total
Return Series' assets invested in securities issued abroad and denominated or
quoted in foreign currencies ("non-dollar securities") will vary depending on
the state of the economies of the various countries of the world, their
financial markets and the relationship of their currencies to the U.S. dollar,
under normal conditions the series will be invested in at least three
different countries, one of which will be the United States. For defensive
reasons or during times of international or political or economic uncertainty
or turmoil, most or all of the series' investments may be in the United
States.
Under normal economic and market conditions, the World Total Return Series
will invest not less than 40% and not more than 75% of its assets in equity
securities. Such securities will include common stocks and equivalents (such
as convertible securities and warrants) and preferred stocks of (i) U.S.
issuers which derive, or have the potential to derive, a meaningful portion
(approximately 25% or more) of their revenues and earnings in foreign markets;
(ii) non-U.S. issuers; and (iii) to a lesser extent, other U.S. issuers. The
Series may invest up to 90% of its total assets in foreign securities (not
including ADRs), which may be traded on foreign exchanges.
In managing the World Total Return Series conservatively, the Adviser attempts
to exercise prudence, discretion and intelligence in the selection of
securities of high or improving investment quality, with due regard for
probable income and probable safety of capital. The words "high investment
quality" reflect the intention of the World Total Return Series to invest in
securities of well-known, established issuers and to avoid the acquisition of
speculative securities or those of doubtful character even if the immediate
prospect is tempting. The Adviser may determine that a security possesses high
or improving investment quality if, for instance, there has been an increase
in the issuer's sales and earnings or if current trends indicate that an
increase in the issuer's sales and earnings is likely, or if the issuer's
balance sheet is strong or has improved. The opportunity for currency
appreciation generally is not a significant factor in the series' selection of
equity securities.
Under normal economic and market conditions, at least 25% of the World Total
Return Series' assets will be invested in fixed income securities, such as
bonds, debentures, mortgage securities, notes, commercial paper, obligations
issued or guaranteed by a government or any of its political subdivisions,
agencies or instrumentalities, certificates of deposit, as well as debt
obligations which may have a call on common stock by means of attached
warrants. Debt securities in which the series may invest may also include zero
coupon bonds.
The World Total Return Series will purchase non-dollar fixed income securities
denominated in the currency of countries where the interest rate environment
as well as the general economic climate provide an opportunity for declining
interest rates and currency appreciation. If interest rates decline, such non-
dollar fixed income securities will generally appreciate in value. If the
currency also appreciates against the dollar, the total investment in such
non-dollar fixed income securities would be enhanced further.
Conversely, a rise in interest rates or decline in currency exchange rates
would adversely affect the World Total Return Series' return. Investments in
non-dollar fixed income securities are evaluated by the Adviser primarily on
the strength of a particular currency against the dollar and on the interest
rate climate of that country. Currency is judged on the basis of fundamental
economic criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. In addition to the foregoing, interest rates are
evaluated on the basis of differentials or anomalies that may exist between
different countries. The World Total Return Series may hold foreign currency
received in connection with investments in non-dollar fixed income securities
when, in the judgment of the Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in
the relevant exchange rate.
The World Total Return Series will invest in investment grade U.S. and non-
U.S. fixed income securities. Such securities will be rated BBB or better by
S&P or Fitch or Baa or better by Moody's or, if unrated, will be determined by
the Adviser to be of comparable quality. Securities rated BBB or Baa, while
normally exhibiting adequate protection parameters, have speculative
characteristics and changes in economic conditions or 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. If a
security purchased by the World Total Return Series is subsequently downgraded
to below BBB by S&P or Fitch or Baa by Moody's (or comparable standards for
unrated securities), the security will be sold only if the Adviser believes it
is advantageous to do so (see Appendix C and "Additional Risk Factors
Regarding Lower Rated Securities" under "High Yield Series" above).
Assets invested in fixed income securities of non-U.S. issuers will be
diversified among countries where opportunities for total return are expected
to be most attractive. It is currently expected that fixed income investments
within foreign countries will be primarily in securities issued or guaranteed
by governments, including their political subdivisions, authorities, agencies
and instrumentalities, or supranational authorities (such as the World Bank)
to minimize credit risk. While the World Total Return Series will invest in
fixed income securities which are believed to have minimal credit risk, an
error of judgment in selecting a currency or an interest rate environment
could result in a loss of capital.
Although it may invest anywhere in the world, the World Total Return Series
expects to invest most of its assets in the equity securities of issuers
located in Europe, Japan or the United States and in the debt securities of
issuers located in any of such regions or countries or Australia, New Zealand
or Canada. The series may also invest in emerging market securities and Brady
Bonds. The series may invest more than 25% of its assets in securities of
issuers located in the United States. The Adviser will determine the amount of
the series' assets to be invested in the United States and the amount to be
invested abroad.
When unfavorable economic or market conditions exist, the series may, until
favorable conditions return, invest all or a portion of its assets in cash (or
foreign currency) or cash equivalents (such as certificates of deposit,
bankers acceptances and time deposits), commercial paper, short-term
obligations, repurchase agreements and obligations issued or guaranteed by the
U.S. or any foreign government or any of their agencies, authorities or
instrumentalities.
In order to achieve its investment objective, the World Total Return Series
may also purchase the securities and employ the investment techniques
described below: (1) entering into repurchase agreements; (2) lending
portfolio securities; (3) purchasing securities on a "when issued" or "forward
delivery" basis; (4) purchasing restricted securities, subject to the
limitation on investing more than 15% of its net assets in securities that are
not readily marketable, and ADRs; (5) entering into mortgage "dollar roll"
transactions; (6) writing (selling) covered put and call options on fixed
income securities for the purpose of increasing its return and/or to protect
the value of its portfolio, and purchasing put and call options on securities
in anticipation of declines in the value of portfolio securities or increases
in the value of securities to be acquired (the Series may also write
combinations of put and call options on the same security, known as
"straddles," which transactions can generate additional income, but also
present increased risks); (7) entering into "yield curve" options for hedging
and nonhedging purposes; (8) entering into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indexes of fixed income securities as such instruments
become available for trading ("futures contracts") for hedging purposes (to
protect the series' current or intended investments from the effects of
changes in interest or exchange rates, or declines in the value of fixed
income portfolio securities or increases in the cost of such securities to be
acquired) as well as for nonhedging purposes, to the extent permitted by
applicable law (which involves greater risks and could result in losses which
are not offset by gains and other portfolio assets); (9) purchasing and
writing options on futures contracts for the purpose of protecting against
declines in the value of portfolio securities or against increases in the cost
of securities to be acquired and also for non hedging purposes, to the extent
permitted by applicable law; (10) entering into forward foreign currency
exchange contracts ("forward contracts") for hedging purposes as well as for
the nonhedging purpose of increasing current income; (11) purchasing and
selling options on foreign currencies for the purpose of protecting against
declines in the dollar value of fixed income portfolio securities and against
increases in the dollar cost of fixed income securities to be acquired; and
(12) entering into interest rate swaps, currency swaps and other types of swap
agreements.
The World Total Return Series portfolio will be managed actively and the asset
allocations modified as the Adviser deems necessary. Although the series does
not intend to seek short-term profits, securities in its portfolio will be
sold whenever the Adviser believes it is appropriate to do so without regard
to the length of time the particular asset may have been held.
See Appendix A for discussion of foreign securities, emerging market
securities, Brady Bonds, ADRs, corporate asset-backed securities, zero coupon
bonds, restricted securities and other instruments set forth above, and the
risks involved in these securities. The investment techniques set forth above
and their attendant risks are discussed in Appendix B. Please refer to the SAI
Appendix for further discussion of these techniques.
PROSPECTIVE PURCHASERS SHOULD REVIEW THIS SECTION CAREFULLY AND CONSIDER THE
INVESTMENT RISKS INVOLVED BEFORE ALLOCATING PURCHASE PAYMENTS UNDER THE
CONTRACTS TO THE WORLD TOTAL RETURN SERIES.
(26) ZERO COUPON SERIES, PORTFOLIO 2000
The Zero Coupon Series, Portfolio 2000 will seek the highest predictable
compounded investment return for a specific period of time, consistent with
the safety of invested capital, by investing primarily in debt obligations of
the United States 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 (collectively, "Zero Coupon
Obligations"). This portfolio is a sub-series of the Zero Coupon Series and
has a liquidation date of November 15, 2000. This series is currently
available only in connection with the purchase of variable life insurance
contracts issued by Sun Life of Canada (U.S.).
The Zero Coupon Series invests only in readily marketable debt securities. It
is the policy of the Zero Coupon Series to invest at least 90% of its assets
in Zero Coupon Obligations. Up to 10% of the assets may be invested and held
in stripped securities issued by corporations with a quality rating of Baa or
better. (See Appendix C.) MFS will evaluate the creditworthiness of potential
investments in corporate securities in order to determine whether such
securities are suitable for purchase by the Zero Coupon Series.
Because it does not make periodic interest payments, a Zero Coupon Obligation
normally trades at a price significantly less than face value, often referred
to as a "deep discount." The size of this discount depends upon the final
maturity of the Zero Coupon Obligation and current market interest rates.
Investment return consists of the difference between the face value of the
Zero Coupon Obligation (which is paid at the time of maturity, or the payment
date in the case of coupons) and the price at which the Zero Coupon Obligation
was acquired. Investment return is normally expressed in terms of a compounded
rate of return, which is calculated as though there were an automatic
reinvestment of current earnings at a rate of return that is "locked in" at
the time of initial investment.
As with any fixed income investment, when interest rates decline, the market
value of an investment made at higher yields can be expected to rise.
Conversely, when interest rates rise, the market value of an investment made
at lower yields can be expected to decline. Because they "automatically
reinvest" current earnings, investments in Zero Coupon Obligations eliminate
the risk of being unable to reinvest current earnings at a rate as high as the
implicit yield on the Zero Coupon Obligations; conversely, they forego the
ability to reinvest at higher rates should market interest rates rise in the
future.
The value of the Zero Coupon Obligations acquired by the Portfolio, and
therefore the value of shares in the Portfolio, may be subject to greater
fluctuations in response to changing market interest rates than the value of
debt obligations that pay interest currently. The degree of fluctuation with
interest rate changes is typically greater when the period to maturity is
longer.
It is the policy of the Zero Coupon Series to invest as great a portion of its
assets as is practicable in Zero Coupon Obligations. Any Zero Coupon
Obligations purchased will mature within one year of the Portfolio liquidation
date. A portion of the Zero Coupon Series may be invested in interest-bearing
debt obligations in order to make effective use of cash reserves pending
investments in the securities described above, pending liquidation and to
permit the payment of current operating expenses of the Zero Coupon Series.
On the liquidation date of the Portfolio, all of the securities held by the
Portfolio will be sold and all outstanding shares of the Portfolio will be
redeemed. As explained in the prospectus for the Contracts, the redemption
proceeds will, except as otherwise directed by Contract owners, be used to
purchase shares of the Money Market Series.
ADDITIONAL RISK FACTORS
The Zero Coupon Series seeks to realize a higher yield than would be obtained
simply by maintaining the Zero Coupon Series' initial investments. The Zero
Coupon Series is actively managed by MFS to take advantage of trading
opportunities that may exist from time to time due to price and yield
distortions resulting from changes in the supply and demand characteristics or
perceived differences in quality or liquidity characteristics of the
securities available for purchase by the Zero Coupon Series. There is a
corresponding risk that, to the extent that this strategy is unsuccessful, the
initial yield objective will not be met.
As described above, Zero Coupon Obligations, if held to maturity, provide a
predictable yield. However, in light of the fluctuation in the market value of
the Zero Coupon Obligations that occurs with changes in market interest rates,
Contract owners who desire to attain the growth rate anticipated at the time
of investment must plan to leave their Account Values invested in Portfolio
shares until the Portfolio matures. Any Contract owner who transfers his or
her Account Values in the Portfolio prior to the Portfolio liquidation date is
likely to achieve quite a different investment return than the return that was
anticipated on the date the investment was made, and may even suffer a loss.
YIELD
The calculation of a Portfolio's anticipated yield assumes that (a) all
dividends and disbursements will be reinvested and (b) the expense ratio and
portfolio composition of a Portfolio remains unchanged for the life of that
Portfolio. Factors such as MFS' investment skills and changes in the economy's
interest rate structure will determine how closely the return actually
realized by a Contract owner matches the anticipated yield if such owner's
Account Value remains invested in a Portfolio's shares and all dividends and
distributions are reinvested until the Portfolio matures.
PORTFOLIO TRANSACTIONS
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 Conduct
Rules of the National Association of Securities Dealers, Inc. and such other
policies as the Trustees may determine, MFS may consider the sale of
Contracts, and thus the sale of Series Fund shares through the allocation of
purchase payments under the Contracts, together with the sale of shares of
funds in the MFS Family of Funds, as a factor in the selection of broker-
dealers to execute the Series Fund's portfolio transactions. The Adviser and
the Sub-Advisers also have the ability to direct portfolio security
transactions to broker-dealers in consideration of the payment of certain
Series Fund expenses. As discussed under "Condensed Financial Information"
above, certain series have had portfolio turnover rates that exceed 100%. A
relatively high level of portfolio activity (i.e., in excess of 100%) involves
greater expenses, including higher transaction and brokerage costs, to the
Series. For a further discussion of portfolio trading, see the SAI.
INVESTMENT RESTRICTIONS
The SAI includes a listing of specific investment restrictions and a
discussion of investment policies applicable to each series. The specific
investment restrictions listed in the SAI may not be changed without
shareholder approval, unless otherwise indicated. If a percentage restriction
or a rating restriction on investments or utilization of assets is adhered to
at the time an investment is made or assets are so utilized, a later change in
percentage resulting from changes in the value of the Series Fund's portfolio
securities or a change in the rating of a portfolio security will not be
considered a violation of policy.
NON-DIVERSIFIED STATUS
The High Yield Series, Managed Sectors Series, Strategic Income Series,
Utilities Series, World Asset Allocation Series, World Governments Series,
World Growth Series and World Total Return Series are "non-diversified" as
that term is defined in the 1940 Act, so that the proportion of their assets
that may be invested in the securities of any one issuer is limited only by
the series' own investment restrictions and the diversification requirements
of the Internal Revenue Code of 1986, as amended. Since these series may
invest a relatively high percentage of their assets in a limited number of
issuers, they will be more susceptible to any single economic, political or
regulatory occurrence and to the financial conditions of the issuers in which
they invest.
4. MANAGEMENT OF THE SERIES FUND
The Series Fund's Board of Trustees provides broad supervision over the
affairs of the Series Fund. MFS is responsible for the management of each
series' assets (including supervision of the Sub-Advisers), and the officers
of the Series Fund are responsible for the Series Fund's operations.
INVESTMENT ADVISER --MFS, a Delaware corporation, 500 Boylston Street, Boston,
Massachusetts 02116, manages the assets of the Money Market Series, the
Government Securities Series, the High Yield Series and the Capital
Appreciation Series pursuant to an Investment Advisory Agreement dated May 24,
1985 and manages the assets of the Conservative Growth Series and the Zero
Coupon Series pursuant to an Investment Advisory Agreement dated July 23,
1986. MFS manages the assets of the World Governments Series, Total Return
Series and Managed Sectors Series pursuant to an Investment Advisory Agreement
dated January 26, 1988; manages the assets of the World Growth Series and
Utilities Series pursuant to Investment Advisory Agreements dated November 1,
1993; manages the assets of the Research Series, World Asset Allocation Series
and World Total Return Series pursuant to Investment Advisory Agreements dated
September 16, 1994; manages the assets of the Emerging Growth Series pursuant
to an Investment Advisory Agreement dated May 1, 1995; manages the assets of
each of the MFS/Foreign & Colonial Series pursuant to separate Investment
Advisory Agreements each dated September 1, 1995; manages the assets of the
Value Series pursuant to an Investment Advisory Agreement dated May 1, 1996;
MFS manages the assets of the Research Growth and Income Series pursuant to an
Investment Advisory Agreement dated May 12, 1997; and manages the assets of
the Bond Series, the Equity Income Series, the Massachusetts Investors Growth
Stock Series, the New Discovery Series, the Research International Series and
the Strategic Income Series pursuant to an Investment Advisory Agreement dated
[May 1], 1998.
Under the Advisory Agreements, the Adviser provides each series of the Series
Fund with overall investment advisory services. The portfolio manager(s) of
each series and his/her position with MFS are shown below.
<TABLE>
<CAPTION>
SERIES PORTFOLIO MANAGERS
------ ------------------
<S> <C>
Money Market and Zero Coupon Geoffrey L. Kurinsky, a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1987.
Government Securities Steven E. Nothern, a Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1986.
High Yield Bernard Scozzafava, a Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1989.
Capital Appreciation Paul M. McMahon, a Senior Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1981.
Conservative Growth John D. Laupheimer, Jr., a Senior Vice President of MFS since 1981. Kevin R. Parke, a Senior Vice
President of MFS, has been employed by the Adviser as a portfolio manager since 1985. Mitchell D.
Dynan, a Vice President of MFS, has been employed by the Adviser as a portfolios manager since
1986.
World Governments Stephen C. Bryant, a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1987.
Total Return David M. Calabro, a Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1992. Prior to 1992, Mr. Calabro was an analyst and sector portfolio manager with
Fidelity Investments.
Geoffrey L. Kurinsky, a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1987.
Managed Sectors Kenneth J. Enright, a Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1986.
Emerging Growth John W. Ballen, a Senior Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1984. Toni Y. Shimura, a Vice President of MFS, has been employed by the Adviser as
a portfolio manager since 1987.
Utilities Maura A. Shaughnessy, a Vice President of MFS has been employed by the Adviser as a portfolio
manager since 1991.
World Asset Allocation James T. Swanson, a Senior Vice President of MFS, has been employed by the Adviser as a portfolio
manager since 1985. David R. Mannheim, a Senior Vice President of MFS, has been employed by the
Adviser as a portfolio manager since 1988. Joan S. Batchelder, a Senior Vice President of MFS,
has been employed by the Adviser as a portfolio manager since 1978. Geoffrey L. Kurinsky, a
Senior Vice President of MFS, has been employed by the Adviser as a portfolio manager since 1987.
John F. Brennan, Jr., a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1985. Leslie J. Nanberg, a Senior Vice President of MFS, has been
employed by the Adviser as a portfolio manager since 1980.
World Total Return Frederick J. Simmons, a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1971.
Value John F. Brennan, Jr., a Senior Vice President of MFS, has been employed by the Adviser as a
portfolio manager since 1985.
Research and Research Growth These Series are managed by a committee comprised of various equity research analysts.
and Income and Research
International
MFS/Foreign & Colonial See "Sub-Advisers to the MFS/Foreign & Colonial Series" below.
International Growth
MFS/Foreign & Colonial See "Sub-Advisers to the MFS/Foreign & Colonial Series" below.
International Growth and Income
MFS/Foreign & Colonial See "Sub-Advisers to the MFS/Foreign & Colonial Series" below.
Emerging Markets Equity
World Growth See description immediately below.
Bond Series Geoffrey L. Kurinsky, a Senior Vice-President of MFS, has been employed by the Adviser as a
portfolio manager since 1987.
Equity Income Series Lisa B. Nurme, a Vice-President of MFS, has been employed by the Adviser as a portfolio manager
since 1987.
Massachusetts Investors Growth Christian Felipe, a Senior Vice-President of MFS, has been employeed by the Adviser as a
Stock Series portfolio manager since 1986.
New Discovery Series Brian E. Stack, a Vice-President of MFS, has been employed by the Adviser as a portfolio manager
since 1993. Prior to 1993, Mr. Stack was employed by Robertson, Stephens & Co. As a securities
analyst.
Strategic Income Series James T. Swanson, a Senior Vice-President of MFS, has been employeed by the Adviser since 1985.
</TABLE>
The World Growth Series' assets are allocated by the Adviser among: domestic
(i.e., U.S.) growth companies; foreign developed markets (e.g., Western
European countries) growth companies; and foreign emerging markets (e.g.,
South American and Pacific Rim countries) growth companies.
The World Growth Series' assets allocated to domestic growth companies are
managed by John W. Ballen, Senior Vice President, Toni Y. Shimura, Vice
President, and David R. Mannheim, Senior Vice President of the Adviser, each
of whom has been employed by the Adviser as a portfolio manager since 1984,
1987 and 1988, respectively.
The World Growth Series' assets allocated to foreign developed markets growth
companies are managed by a committee of investment research analysts. This
committee includes investment analysts employed not only by the Adviser but
also by MFS International (U.K.) Limited, a wholly owned subsidiary of MFS,
and investment analysts employed by FCM and FCEM, with which MFS has entered
into a strategic alliance, as described below. This portion of the World
Growth Series' assets are further allocated among countries and industries by
the analysts acting together as a group. Individual analysts are then
responsible for selecting what they view as the securities best suited to meet
the World Growth Series' investment objective within their assigned geographic
and industry responsibility.
The World Growth Series' assets allocated to foreign emerging markets growth
securities are managed by Dr. Arnab Kumar Banerji, Chief Investment Officer of
FCEM. Dr. Banerji has been employed by FCEM as a portfolio manager since 1993.
Prior to 1993, Dr. Barerji served as Joint Head of Emerging Markets for
Citibank Global Asset Management since 1989.
Subject to such policies as the Trustees may determine, the Adviser makes
investment decisions for each series of the Series Fund. For these services,
the Adviser receives a fee computed and paid monthly at an annual rate equal
to:
<TABLE>
<CAPTION>
MANAGEMENT FEE AS A % OF
SERIES AVERAGE DAILY NET ASSETS ("ADNA")
- ------ ---------------------------------
<S> <C>
Money Market ...................................................... 0.50%
Government Securities ............................................. 0.55%
High Yield ........................................................ 0.75%
Capital Appreciation .............................................. 0.75% of the first $1 billion of ADNA
0.675% of ADNA in excess of $1 billion
Conservative Growth ............................................... 0.55%
World Governments ................................................. 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
Total Return ...................................................... 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million but less than $1
billion
0.60% of ADNA in excess of $1 billion
Managed Sectors ................................................... 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
Zero Coupon ....................................................... 0.25%
World Growth ...................................................... 0.90%
Research .......................................................... 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
Utilities ......................................................... 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
World Asset Allocation ............................................ 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
World Total Return ................................................ 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
Emerging Growth ................................................... 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
MFS/Foreign & Colonial International Growth ....................... 0.975% of the first $500 million of ADNA
0.925% of ADNA in excess of $500 million
MFS/Foreign & Colonial International Growth and Income ............ 0.975% of the first $500 million of ADNA
0.925% of ADNA in excess of $500 million
MFS/Foreign & Colonial Emerging Markets Equity* ................... 1.25%
Value ............................................................. 0.75% of the first $300 million of ADNA
0.675% of ADNA in excess of $300 million
Research Growth and Income ........................................ 0.75%
Bond .............................................................. 0.60%
Equity Income ..................................................... 0.75%
Massachusetts Investors Growth Stock .............................. 0.75%
New Discovery ..................................................... 0.90%
Research International ............................................ 1.00%
Strategic Income .................................................. 0.75%
</TABLE>
- ------------
*MFS has voluntarily agreed to reduce the series' management fee to 0% of
average daily net assets. This voluntary fee reduction may be rescinded or
changed at any time without notice to shareholders as to fees accruing after
the date of such rescission.
For the Series Fund's fiscal year ended December 31, 1996 the Series Fund's
Adviser received fees under the investment advisory agreements as follows:
<TABLE>
<CAPTION>
MANAGEMENT
MANAGEMENT FEES WAIVED
FEES PAID FOR BY ADVISER FOR
FISCAL YEAR FISCAL YEAR
SERIES ENDED 1996 % ADNA ENDED 1996 % ADNA
- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C>
Money Market .................................................................. $1,658,426 0.50% N/A N/A
Government Securities ......................................................... 2,121,808 0.55% N/A N/A
High Yield .................................................................... 1,252,812 0.75% N/A N/A
Capital Appreciation .......................................................... 7,006,502 0.75% N/A N/A
Conservative Growth ........................................................... 2,320,310 0.55% N/A N/A
World Governments ............................................................. 1,091,953 0.75% N/A N/A
Total Return .................................................................. 8,228,127 0.68% N/A N/A
Managed Sectors ............................................................... 1,729,822 0.75% N/A N/A
Zero Coupon ................................................................... 11,094 0.25% N/A N/A
World Growth .................................................................. 1,633,811 0.90% N/A N/A
Research ...................................................................... 1,401,185 0.75% N/A N/A
Utilities ..................................................................... 418,966 0.75% N/A N/A
World Asset Allocation ........................................................ 390,024 0.75% N/A N/A
World Total Return ............................................................ 194,413 0.75% N/A N/A
Emerging Growth ............................................................... 956,932 0.61% $225,349 0.14%
MFS/Foreign & Colonial International Growth and Income ........................ 185,572 0.78% 44,482 0.19%
MFS/Foreign & Colonial International Growth(1) ................................ N/A N/A 14,479 0.975%
MFS/Foreign & Colonial Emerging Markets Equity(2) ............................. N/A N/A 11,151 1.25%
Value(1) ...................................................................... N/A N/A 27,382 0.75%
- ----------
(1) From the commencement of investment operations on June 3, 1996.
(2) From the commencement of investment operations on June 5, 1996.
</TABLE>
MFS also serves as investment adviser to each of the funds in the MFS Family
of Funds and to certain other registered investment companies established by
MFS and/or Sun Life of Canada (U.S.). MFS Institutional Advisors, Inc., a
wholly owned subsidiary of MFS, provides investment advice to substantial
private clients. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. Net assets under the management of the MFS organization were
approximately $51.5 billion on behalf of 2.4 million investor accounts as of
March 31, 1997, consisting of approximately $18.9 billion of assets invested
in fixed income funds or portfolios, approximately $3.9 billion in foreign
securities and approximately $27.9 billion in equity securities. MFS is a
subsidiary of Sun Life of Canada (U.S.), which, in turn, is a wholly owned
subsidiary of Sun Life Assurance Company of Canada ("Sun Life"). The Directors
of MFS are A. Keith Brodkin, Arnold D. Scott, Donald A. Stewart, John D.
McNeil and Jeffrey L. Shames. Messrs. Brodkin, Shames and Scott are the
Chairman, the President and the Secretary and a Senior Executive Vice
President, respectively, of MFS, and Messrs. McNeil and Stewart 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 in the world and has been operating in the United States since 1895.
The executive officers of MFS report directly to the Chairman of Sun Life.
John D. McNeil is the Chairman and a Trustee of the Series Fund and David D.
Horn is a Trustee of the Series Fund. Both are directors and/or officers of
Sun Life, Sun Life of Canada (U.S.) and Sun Life (N.Y.). Stephen E. Cavan,
James R. Bordewick, Jr., W. Thomas London and James O. Yost are officers of
the Series Fund and of MFS.
STRATEGIC ALLIANCE -- MFS has established a strategic alliance with FCM. The
ownership of FCM is discussed below under "Sub-Advisers to the MFS/Foreign
Colonial Series." As part of this alliance, the portfolio managers and
investment analysts of MFS and FCM share their views on a variety of
investment related issues, such as the economy, securities markets, portfolio
securities and their issuers, investment recommendations, strategies and
techniques, risk analysis, trading strategies and other portfolio management
matters. MFS has access to the extensive international equity investment
expertise of FCM, and FCM has access to the extensive U.S. equity investment
expertise of MFS. MFS and FCM each have investment personnel working in each
other's offices in Boston and London respectively.
In certain instances there may be securities which are suitable for the Series
Fund's portfolio as well as for portfolios of other clients of MFS or clients
of FCM. Some simultaneous transactions are inevitable when several clients
receive investment advice from MFS and FCM, particularly when the same
security is suitable for more than one client. While in some cases this
arrangement could have a detrimental effect on the price or availability of
the security as far as a Series is concerned, in other cases, however, it may
produce increased investment opportunities for a Series.
SUB-INVESTMENT ADVISERS -- The Advisory Agreements with respect to the MFS/
Foreign & Colonial Series and the World Growth Series permit the Adviser from
time to time to engage one or more sub-advisers to assist in the performance
of its services. MFS has engaged the following sub-advisers with respect to
these series:
SUB-ADVISERS TO THE MFS/FOREIGN & COLONIAL SERIES
The Adviser has engaged FCM, a company incorporated under the laws of England
and Wales (see "Strategic Alliance" above), located at Exchange House,
Primrose Street, London EC2A 2NY, United Kingdom, as sub-adviser to render
advisory services to the MFS/Foreign & Colonial Series. FCM is a wholly owned
subsidiary of Hypo Foreign & Colonial Management (Holdings) Ltd. ("Hypo F&C").
Sixty-five percent of the outstanding voting securities of Hypo F&C is owned
by Hypo (U.K.) Holdings Ltd., which is a wholly owned subsidiary of HYPO-BANK
(Bayerische Hypotheken-und Wechsel-Bank AG), the oldest publicly listed, and
fifth largest, commercial bank in Germany, founded in 1835. The remaining
thirty-five percent is owned by four closed-end, publicly listed investment
trusts managed by FCM, including Foreign & Colonial Investment Trust PLC
(which has a 30.5 percent interest). FCM has a history of money management
dating from 1868 and the establishment of the world's oldest closed-end fund,
Foreign & Colonial Investment Trust PLC. As of December 31, 1996, FCM managed
approximately U.S. $42 billion of assets.
Under separate Sub-Advisory Agreements between the Adviser and FCM, each dated
September 1, 1995 (the "Sub-Advisory Agreements"), the Adviser may delegate to
FCM the authority to make investment decisions for each of the MFS/Foreign &
Colonial Series. It is presently intended that FCM will provide portfolio
management services for all of the assets of the International Growth Series
and the Emerging Markets Equity Series and for the equity portion of the
assets of the International Growth and Income Series. For its services, the
Adviser pays FCM a management fee, computed and paid monthly, in an amount
equal to 0.80% and 1.00% of the average daily net assets of the International
Growth Series and the Emerging Markets Equity Series, respectively, on an
annualized basis and 0.75% of the average daily net assets managed by FCM of
the International Growth and Income Series on an annualized basis. As
described under "Strategic Alliance" above, the Adviser and FCM have agreed to
cooperate in distributing, advising and managing investment products
throughout the world. In this arrangement they anticipate that certain
expenses and revenues relating to their cooperative activities, including
investment advisory fees received from the series and certain expenses
incurred by MFS, FCM and their affiliates attributable to their services to
the series, will be shared. FCM has voluntarily agreed to waive the management
fee with respect to the Emerging Markets Equity Series. This waiver may be
rescinded at any time without notice to shareholders as to fees accruing after
the date of such rescission, although FCM has agreed not to rescind the waiver
as long as MFS continues to waive its fees.
Each Sub-Advisory Agreement permits FCM from time to time to engage one or
more sub-advisers to assist in the performance of its services. Pursuant to
each Sub-Advisory Agreement, FCM has engaged FCEM, a company incorporated
under the laws of England and Wales, located at Exchange House, Primrose
Street, London EC2A, 2NY, United Kingdom, as sub-adviser to render advisory
services to the MFS/Foreign & Colonial Series. FCEM is a subsidiary of FCM.
FCEM serves as the investment adviser to public closed-end and open-end funds
and segregated accounts specializing in emerging markets. As of December 31,
1996, FCEM managed approximately U.S.$4.7 billion of assets invested in
emerging markets.
Under separate Sub-Advisory Agreements between FCM and FCEM, each dated
September 1, 1995, FCM may delegate to FCEM the authority to make investment
decisions for each of the MFS/Foreign & Colonial Series. It is presently
intended that FCEM will provide portfolio management services for the portion
of the assets of the series invested in emerging markets securities. For its
services, FCM pays FCEM a management fee, computed and paid monthly, in an
amount equal to 1.00% of the average daily net assets managed by FCEM of each
series on an annualized basis. FCEM has voluntarily agreed to waive the
management fee with respect to the Emerging Markets Equity Series. This waiver
may be rescinded at any time without notice to shareholders as to fees
accruing after the date of such recision, although FCEM has agreed not to
rescind the waiver as long as MFS continues to waive its fees.
The identity and background of the portfolio managers for each of the MFS/
Foreign & Colonial Series is set forth below.
International Growth Series -- Ian K. Wright, Director of the Board of
FCM, Atul Patel, Assistant Director and Global Funds Manager of FCM and June
Scott, Global Funds Manager of FCM, are the series' portfolio managers. Mr.
Wright has been employed as a portfolio manager by FCM since 1981. Mr. Patel
has been employed by FCM as a portfolio manager since 1994 before which he was
employed by Bankers Trust Investment Management as Investment Manager since
1992 and by Gartmore Investment Management as Global Fund Manager since 1990.
Ms. Scott has been employed by FCM as a portfolio manager since 1995, before
which she completed her MBA at the London Business School. Prior to completing
her MBA, Ms. Scott worked as a Quantitative Portfolio Analyst in the Equity
Research Group at J.P. Morgan Investment Management in London.
International Growth and Income Series -- Chilton Thomson, Chief
Investment Officer of FCM, Atul Patel, Assistant Director and Global Funds
Manager of FCM, and Richard O. Hawkins, a Senior Vice President of the
Adviser, are the series' portfolio managers. Mr. Thomson has been employed by
FCM as a portfolio manager since 1994 before which he was employed by Bankers
Trust Investment Management as Chief International Investment Officer since
1992 and by Gartmore Investment Management as International Director since
1989. Mr. Patel has been employed by FCM as a portfolio manager since 1994
before which he was employed by Bankers Trust Investment Management as
Investment Manager since 1992 and by Gartmore Investment Management as Global
Fund Manager since 1990. Mr. Hawkins has been employed by the Adviser as a
portfolio manager since 1988.
Emerging Markets Equity Series -- Dr. Arnab Kumar Banerji, Chief
Investment Officer of FCEM, and Jefferey Chowdry, a Director of FCEM, are the
series' portfolio managers. Dr. Banerji has been employed by FCEM as a
portfolio manager since 1993 before which he served as Joint Head of Emerging
Markets for Citibank Global Asset Management since 1989. Mr. Chowdry has been
employed by FCEM as a portfolio manager since 1994, before which he was a
portfolio manager at BZW Investment Management.
SUB-ADVISERS TO THE WORLD GROWTH SERIES
The Adviser has engaged FCM and FCEM as sub-advisers to the World Growth
Series. FCM and FCEM are described above under "Strategic Alliance" and "Sub-
Advisers to the MFS/Foreign & Colonial Series."
Under the sub-investment advisory agreement between FCM and the Adviser dated
May 1, 1996, the Adviser may delegate to FCM the authority to make investment
decisions for the World Growth Series. It is intended that FCM, through FCEM,
will provide portfolio management services for assets of the World Growth
Series to be invested in emerging markets. For its services, the Adviser pays
FCM an annual management fee computed and paid monthly, in an amount equal to
1.00% on an annualized basis of the average daily net asset value of the World
Growth Series' assets managed by FCM.
The terms of the sub-advisory agreement with FCM (the "FCM Agreement") permit
FCM from time to time to engage one or more sub-advisers to assist in the
performance of its services. FCM has entered into a sub-advisory agreement
with FCEM, dated May 1, 1996, under which FCM may delegate to FCEM FCM's
obligations under the FCM Agreement, reflecting the fact that FCEM is the FCM
affiliate that has the investment expertise in emerging markets. For these
services, FCM pays FCEM a sub-advisory fee equal to 1.00% on an annualized
basis of the average daily net asset value of the assets of the World Growth
Series managed by FCEM. The Agreement with FCEM is substantially identical to
the FCM Agreement.
ADMINISTRATOR -- MFS provides each series with certain administrative services
pursuant to a Master Administrative Services Agreement dated March 1, 1997.
Under this Agreement, MFS provides each series with certain financial, legal,
compliance, shareholder communications and other administrative services. As a
partial reimbursement for the cost of providing these services, each Series
pays MFS an administrative fee up to 0.015% per annum of the series' average
daily net assets, provided that the administrative fee is not assessed on
series' assets that exceed $3 billion.
EXPENSES
The Series Fund pays the compensation of the four Trustees who are not
affiliated with MFS or Sun Life of Canada (U.S.) as well as certain of its
other expenses and fees, including governmental fees, taxes, brokerage
expenses, fees and expenses of legal counsel, independent auditors, any
shareholder servicing agent, dividend disbursing agent and the custodian and
expenses of preparing, printing and mailing materials to shareholders and
government authorities, in certain cases subject to limited reimbursement by
MFS (see "Management of the Series Fund" in the SAI). Expenses which are not
attributable to a specific series are allocated among the series in a manner
believed to be fair and equitable to each.
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the expenses of the MFS/Foreign & Colonial Emerging Markets
Equity Series and the Research Growth and Income Series such that each such
series' "Total Operating Expenses," which are defined to include all series'
expenses except for interest, taxes, brokerage commissions and extraordinary
expenses, do not exceed 1.50% 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 series' fiscal year in which such series' "Total
Operating Expenses" are less than or equal to the Maximum Percentage.
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the expenses of the Bond Series, Equity Income Series,
Massachusetts Investors Growth Stock Series, New Discovery Series, Research
International Series and Strategic Income Series, such that the Series' "Other
Expenses," which are defined to include all Series expenses except for
management fees, taxes, extraordinary expenses, brokerage and transaction
costs, do not exceed 0.40%, 0.25%, 0.25%, 0.35%, 0.50%, and 0.50% per annum,
respectively, 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.
POTENTIAL CONFLICTS
Shares of the Series Fund may be offered to Variable Accounts established by
Sun Life of Canada (U.S.), Sun Life (N.Y.) and their affiliated companies to
fund benefits under both variable annuity and variable life insurance
products. The Series Fund does not anticipate any disadvantage to contract
owners arising out of its simultaneous funding of both variable annuity and
variable life insurance contracts. Such conflict could occur due to a change
in laws affecting the operation of variable life and/or variable annuity
separate accounts or for some other reason. The management of the Series Fund
intends to monitor events in order to identify any material conflicts among
the interests of variable annuity contract owners and the interests of
variable life insurance contract owners and to determine what action, if any,
should be taken in response. In addition, if Sun Life of Canada (U.S.) and/or
Sun Life (N.Y.) believe the Series Fund's response to any such events or
conflicts is insufficient to protect contract owners, they will take
additional appropriate action. Such action might include withdrawal by one or
more separate accounts of their investment in the Series Fund, which could
force the Series Fund to liquidate portfolio securities at disadvantageous
prices.
5. ADDITIONAL INFORMATION WITH RESPECT TO SHARES OF EACH SERIES
PURCHASES
Sun Life of Canada (U.S.) and Sun Life (N.Y.) buy shares of each series at
their net asset value without a sales charge for their Variable Accounts
through the allocation of purchase payments made under Contracts issued by Sun
Life of Canada (U.S.) and Sun Life (N.Y.) in accordance with the allocation
instructions received from owners of the Contracts.
NET ASSET VALUE, DIVIDENDS AND DISTRIBUTIONS
The Net Asset Value of each series is determined as of the close of regular
trading on the New York Stock Exchange on each day the Exchange is open for
trading.
MONEY MARKET SERIES -- All the Net Income, as defined in the SAI, of the Money
Market Series is declared as a dividend to its shareholders at the time of
such determination. Shares purchased become entitled to dividends declared as
of the first day following the date of investment. Dividends are distributed
on the last business day of each month. If paid in the form of additional
shares, dividends are paid at the rate of one share (and fraction thereof) for
each one dollar (and fraction thereof) of dividend income attributable to the
Money Market Series.
Securities held by the Money Market Series are valued at amortized cost, which
the Trustees have determined in good faith constitutes fair value for the
purposes of complying with the 1940 Act. This valuation method will continue
to be used until such time as the Trustees determine that it does not
constitute fair value for such purposes. Since the Net Income of the Money
Market Series is declared as a dividend each time the Net Income of that
series is determined, the net asset value per share of that series (i.e., the
value of the net assets of that series divided by the number of its shares
outstanding) remains at $1.00 per share immediately after each such
determination and dividend declaration.
It is expected that the Money Market Series will have a positive Net Income at
the time of each determination thereof. If for any reason the Net Income
determined at any time is a negative amount the Series Fund will first offset
the negative amount against the dividends declared during the month and will
then, to the extent necessary, reduce the number of its outstanding shares by
treating each shareholder of that series as having contributed to the capital
of that series that number of full and fractional shares in the account of
such shareholder which represents his proportion of the negative amount. Each
shareholder of the Money Market Series will be deemed to have agreed to such
contribution in these circumstances by his investment in that series. This
procedure will permit the net asset value per share of the Money Market Series
to be maintained at a constant $1.00 per share. There can be no assurance that
the Money Market Series will be able to maintain a stable net asset value of
$1.00 per share, other than by such offset of dividends or reduction in the
number of shares in a shareholder account.
ZERO COUPON SERIES -- The Net Asset Value of the shares of the Zero Coupon
Series will be determined in accordance with the procedures set forth at page
55 of this Prospectus. This determination will be made at the close of regular
trading on the New York Stock Exchange on each day the Exchange is open for
trading. MFS also will calculate the compounded annual yield that would result
if all securities in the Portfolio were held until the liquidation date or
until their maturity dates, if earlier (with the proceeds reinvested until the
liquidation date). This is the anticipated yield for the Portfolio on a given
date. It can also be expressed as the amount to which an investment of $10,000
is predicted to grow by the Portfolio liquidation date. To the extent
permitted by regulations of the Securities and Exchange Commission, MFS will
furnish both of these numbers on request.
ALL SERIES OTHER THAN THE MONEY MARKET SERIES AND ZERO COUPON SERIES -- With
respect to these series, determination of the net asset value per share is
made by deducting the liabilities of that series from the value of its assets
and dividing the difference by the number of its shares outstanding. Equity
securities in the portfolio of a series are normally valued at the last sale
price during regular hours on the exchange on which they are primarily traded
or on the NASDAQ system for unlisted national market issues, or at the last
quoted bid price for unlisted securities or listed securities in which there
were no sales during that day. Debt securities of U.S. issuers (other than
short-term obligations) in any of these portfolios are normally valued on the
basis of valuations provided by a pricing service since such valuations are
believed to reflect the fair value of such securities. Valuations provided by
the pricing service may be determined without exclusive reliance on quoted
prices and may take into account appropriate factors such as institutional-
size trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data.
Forward Contracts will be valued using a pricing model taking into
consideration market data from an external pricing service. Use of the pricing
services has been approved by the Board of Trustees. Short-term obligations in
any of these portfolios (i.e., obligations maturing in not more than sixty
days) are valued at amortized cost, which constitutes fair value as determined
by the Board of Trustees. Short-term obligations with a remaining maturity in
excess of 60 days will be valued upon dealer supplied valuations. All other
securities, futures contracts and options in the series' portfolio (other than
short-term obligations) for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign) will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available,
be valued at current bid prices, unless such securities are reported on the
NASDAQ system, in which case they are valued at the last sale price or, if no
sales occurred during that day, at the last quoted bid price. Portfolio
securities and other assets for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.
All investments and assets are expressed in U.S. dollars based upon current
currency exchange rates.
The Bond Series, Conservative Growth Series, Equity Income Series, High Yield
Series, Government Securities Series, Research Growth and Income Series,
Strategic Income Series, World Governments Series, Total Return Series, Zero
Coupon Series and Utilities Series receive dividends, interest or other
earnings from substantially all of their investments. Substantially all of the
net income of all series (other than the Money Market Series, which is
discussed above) is paid to their shareholders as a dividend at least
annually. Each series will also distribute its net profits from the sale of
securities, if any, on at least an annual basis.
DISTRIBUTIONS -- The Variable Accounts can choose to receive distributions
from the Series Fund in either cash or additional shares. It is expected that
the Variable Accounts will choose to receive distributions in additional
shares. If the Variable Accounts choose to receive distributions in cash, they
will reinvest the cash in the Series Fund to purchase additional shares at
their net asset value.
TAX STATUS
Each series and each portfolio of the Zero Coupon Series is treated as a
separate entity for federal income tax purposes. In order to minimize the
taxes each series or portfolio would otherwise be required to pay, each
individual series or portfolio of the Series Fund intends to qualify each year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended, (the "Code"). Because each series and portfolio
intends to distribute all of its net investment income and net realized
capital gains to its shareholders in accordance with the timing requirements
imposed by the Code, it is not expected that any series or portfolio will be
required to pay any federal income or excise taxes, although a series'
foreign-source income may be subject to foreign withholding taxes.
REDEMPTIONS
Sun Life of Canada (U.S.) and Sun Life (N.Y.) will redeem shares of each
series held in their Variable Accounts as they deem necessary to make benefit
or surrender payments under the terms of their Contracts. Redemptions are
processed on any day on which the net asset value of the Series Fund is
calculated and are effected at the net asset value next determined after the
redemption order is received.
The Series Fund may suspend the right of redemption with respect to the shares
of any series only under the following unusual circumstances: when the New
York Stock Exchange is closed or trading is restricted; when an emergency
exists, making disposal of portfolio securities or the valuation of net assets
not reasonably practicable; or during any period when the Securities and
Exchange Commission has by order permitted a suspension of redemptions for the
protection of shareholders.
EXCHANGE PRIVILEGE
Shares of any series of the Series Fund may be exchanged for shares of any
other series of the Series Fund (if shares of that series are available for
purchase) at net asset value so as to facilitate exchanges among Sub-Accounts
of the Variable Accounts as described in the prospectuses for the Variable
Accounts. Such exchanges are treated as a redemption of shares in one series
and a purchase of shares in one or more of the other series. If a substantial
portion of any series' shares should be redeemed within a short period, the
series might have to liquidate portfolio securities it might otherwise hold
and also incur the additional costs related to such transactions.
Neither the Series Fund nor the Variable Accounts are designed for
professional market timing organizations or other entities using programmed
and frequent transfers. The Variable Accounts, in coordination with the Series
Fund, reserve the right to temporarily or permanently refuse exchange requests
if, in the Adviser's judgment, a series would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. In particular, a pattern of exchanges that
coincide with a "market timing" strategy may be disruptive to a series and
therefore may be refused. Investors should consult the appropriate Variable
Account prospectus that accompanies this prospectus for information on other
specific limitations on the transfer privilege.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional Shares of Beneficial Interest (without par value) and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in the Series Fund.
The Series Fund presently has twenty series of shares and has reserved the
right to create additional series of shares. Each share of a series represents
an equal proportionate interest in that series with each other share of that
series. Shares of each series participate equally in the earnings, dividends
and assets of that series or portfolio. Shares when issued are fully paid and
non-assessable. Shareholders are entitled to one vote for each share held.
Shares of each series are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shares of all
series would vote together in the election of Trustees and selection of
accountants. Upon liquidation of the Series Fund, shareholders of each series
would be entitled to share pro rata in the net assets of their respective
series available for distribution to shareholders.
The Series Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of any series of such a
trust may, under certain circumstances, be held personally liable as partners
for its obligations. However, the Series Fund's Declaration of Trust contains
an express disclaimer of shareholder liability for acts or obligations of the
Series Fund and provides for indemnification and reimbursement of expenses out
of the Series Fund property for any shareholder held personally liable for the
obligations of the Series Fund. The Series Fund's Declaration of Trust also
provides that it shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Series
Fund, its shareholders, Trustees, officers, employees and agents covering
possible tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability would be limited to
circumstances in which both inadequate insurance existed and the Series Fund
itself was unable to meet its obligations.
CONTENTS OF SAI
The Series Fund's SAI contains more detailed information about the Series
Fund, including information related to (i) the Series Fund's investment
policies and restrictions, (ii) its Trustees, officers, investment adviser and
sub-investment advisers, (iii) portfolio transactions and brokerage
commissions, (iv) the Series Fund's shares, including rights and liabilities
of shareholders, and (v) various services and privileges provided by the
Series Fund for the benefit of its shareholders. The following audited
financial statements of the Series Fund are incorporated in the SAI by
reference from the Series Fund's Annual Report to shareholders for the year
ended December 31, 1996: Portfolios of Investments at December 31, 1996;
Statements of Assets and Liabilities at December 31, 1996; Statements of
Operations for the year ended December 31, 1996; and Statements of Changes in
Net Assets for the years ended December 31, 1996 and December 31, 1995.
<PAGE>
APPENDIX A
DESCRIPTION OF INSTRUMENTS
AMERICAN DEPOSITARY RECEIPTS -- American Depositary Receipts ("ADRs") 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 collateral. ADRs may be sponsored or unsponsored. A
sponsored ADR is issued by a depository which has an exclusive relationship
with the issuer of the underlying security. An unsponsored ADR may be issued
by any number of U.S. depositories. Under the terms of most sponsored
arrangements, depositories agree to distribute notices of shareholder meetings
and voting instructions, and to provide shareholder communications and other
information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under
no obligation to distribute shareholder communications received from the
issuer of the deposited securities or to pass through voting rights to ADR
holders in respect of the deposited securities. Each series that invests in
foreign securities may invest in either type of ADR. Although the U.S.
investor holds a substitute receipt of ownership rather than direct stock
certificates, the use of the depository receipts in the United States can
reduce costs and delays as well as potential currency exchange and other
difficulties. These series may purchase securities in local markets and direct
delivery of these ordinary shares to the local depository of an ADR agent bank
in the foreign country. Simultaneously, the ADR agents create a certificate
which settles at the series' custodian in five days. Each such series may also
execute trades on the U.S. markets using existing ADRs. Because ADRs trade on
United States securities exchanges, the Adviser does not treat them as foreign
securities. However, they are subject to many of the risks of foreign
securities. A foreign issuer of the security underlying an ADR is generally
not subject to the same reporting requirements in the United States as a
domestic issuer. Accordingly the information available to a U.S. investor will
be limited to the information the foreign issuer is required to disclose in
its own country and the market value of an ADR may not reflect undisclosed
material information concerning the issuer of the underlying security. ADRs
may also be subject to exchange rate risks if the underlying foreign
securities are traded in foreign currency.
BANKERS' ACCEPTANCES -- Bankers' acceptances are 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.
BRADY BONDS -- Brady Bonds are securities created through the exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings under a
debt restructuring plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been
implemented to date in Mexico, Uruguay, Venezuela, Costa Rica, Dominican
Republic, Ecuador, Jordan, Argentina, Nigeria, Panama, Brazil, Bulgaria,
Poland and the Philippines. Brady Bonds have been issued only recently, and
for that reason do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (but
primarily the U.S. dollar) and are actively traded in over-the-counter
secondary markets. U.S. dollar-denominated, collateralized Brady Bonds, which
may be fixed-rate bonds or floating-rate bonds, are generally collateralized
in full as to principal by U.S. Treasury zero coupon bonds having the same
maturity as the bonds. Brady Bonds are often viewed as having three or four
valuation components: the collateralized repayment of principal at final
maturity; the collateralized interest payments; the uncollateralized interest
payments; and any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constituting the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries issuing
Brady Bonds with respect to commercial bank loans by public and private
entities, investments in Brady Bonds may be viewed as speculative.
CERTIFICATES OF DEPOSIT -- Certificates of deposit are certificates issued
against funds deposited in a bank, are for a definite period of time, earn a
specified rate of return, and are normally negotiable. An investment in
certificates of deposit issued by foreign branches of U.S. or Canadian-
chartered banks ("Eurodollar CD's") may be subject to risks in addition to
those incurred by an investment in debt obligations issued in the United
States. Such risks may include future political and economic developments, the
possible imposition of foreign withholding taxes on interest income payable on
the Eurodollar CD's, the possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the
payment of the principal of and interest on the Eurodollar CD's. Also,
Eurodollar CD's are not insured by the Federal Deposit Insurance Corporation.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH SECURITIES --
Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by certificates issued by the Government
National Mortgage Association, the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation but also may be collateralized by
whole loans or private mortgage pass-through securities (such collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-
through securities are equity interests in a trust composed of Mortgage
Assets. Unless the context indicates otherwise, all references herein to CMOs
include multi-class pass-through securities. Payments of principal of and
interest on the Mortgage Assets and any reinvestment income thereon provide
the funds to pay debt service on the CMOs or make scheduled distributions on
the multi-class pass-through securities. CMOs may be issued by agencies or
instrumentalities of the United States government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.
In a CMO, a series of bonds or certificates is usually issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayment on a Mortgage Asset may cause the CMOs
to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any
has been paid. Certain classes of CMOs have priority over others with respect
to the receipt of prepayments on the mortgages. Therefore, depending on the
type of CMOs in which the series invests, the investment may be subject to a
greater or lesser risk of prepayment than other types of mortgage-related
securities. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semi-annual basis. The principal of and interest on the
Mortgage Assets may be allocated under several classes of a series of a CMO in
innumerable ways. In a common structure, payments of principal, including any
principal prepayment, on the Mortgage Assets are applied to the classes of the
series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class
of CMOs until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution
date of each class, which, as with other CMO structures, must be retired by
its stated maturity date or final distribution date but may be retired
earlier. Planned amortization class CMOs ("PAC Bonds") generally require
payments of the specified amount of principal on each payment date. PAC Bonds
are always parallel pay CMOs with the required principal payment of such
securities having the highest priority after interest has been paid to all
classes.
COMMERCIAL PAPER -- Commercial paper refers to promissory notes issued by
corporations in order to finance their short-term credit needs.
CONVERTIBLE BONDS -- Convertible bonds are bonds which, at the option of the
holder, are convertible into other securities of the issuer, usually into
equity securities.
CORPORATE ASSET-BACKED SECURITIES -- Corporate asset-backed securities are
issued by trusts and special purpose corporations and are backed by a pool of
assets, such as credit card and 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. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing
the balance due. Most issuers of automobile receivables permit the servicers
to retain possession of the underlying obligations. If the servicer were to
sell these obligations to another party, there is a risk that the purchaser
would acquire an interest superior to that of the holders of the related
automobile receivables. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws,
the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
The underlying assets (e.g., loans) are also subject to prepayments which
shorten the securities' weighted average life and may lower their return.
As noted above, corporate asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make
payments, the securities may contain elements of credit support which fall
into two categories: (i) liquidity protection; and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection against
losses resulting from ultimate default ensures payment through insurance
policies or letters of credit obtained by the issuer or sponsor from third
parties. The series will not pay any additional or separate fees for credit
support. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that anticipated
or failure of the credit support could adversely affect the return on an
investment in such a security.
CORPORATE OBLIGATIONS -- Corporate obligations include bonds and notes issued
by corporations in order to finance long-term credit needs. The Money Market
Series will invest only in corporate obligations which have a maturity when
purchased of less than 13 months.
EMERGING GROWTH COMPANIES -- Emerging growth securities are securities of U.S.
and foreign companies of any size that are early in their life cycle but which
have the potential to become major enterprises (emerging growth companies).
Such companies would be expected to show earnings growth over time that is
well above the growth rate of the overall economy and the rate of inflation,
and would have the products, management, and market opportunities which are
usually necessary to become more widely recognized as growth companies.
EMERGING MARKET SECURITIES -- Emerging market securities are securities of
issuers whose principal activities are located in emerging market countries.
Emerging market countries include any country determined by the Adviser or a
Sub-Adviser to have an emerging market economy, taking into account a number
of factors, including whether the country has a low- to middle-income economy
according to the International Bank for Reconstruction and Development, the
country's foreign currency debt rating, its political and economic stability
and the development of its financial and capital markets. The Adviser or a
Sub-Adviser determines whether an issuer's principal activities are located in
an emerging market country by considering such factors as its country of
organization, the principal trading market for its securities and the source
of its revenues and assets. The issuer's principal activities generally are
deemed to be located in a particular country if: (a) the security is issued or
guaranteed by the government of that country or any of its agencies,
authorities or instrumentalities; (b) the issuer is organized under the laws
of, and maintains a principal office in, that country; (c) the issuer has its
principal securities trading market in that country; (d) the issuer derives
50% or more of its total revenues from goods sold or services performed in
that country; or (e) the issuer has 50% or more of its assets in that country.
The risks of investing in foreign securities may be intensified in the case of
investments in emerging markets. Securities prices in emerging markets can be
significantly more volatile and less liquid than in the more developed nations
of the world, reflecting the greater uncertainties of investing in less
established markets and economies. In particular, countries with emerging
markets may have relatively unstable governments, present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of
property rights than more developed countries. The economies of countries with
emerging markets may be predominantly based on only a few industries, may be
highly vulnerable to changes in local or global trade conditions, and may
suffer from extreme and volatile debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to
respond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times.
Securities of issuers located in countries with emerging markets may have
limited marketability and may be subject to more abrupt or erratic price
movements.
These securities may be considered speculative and, while generally offering
higher income and the potential for capital appreciation, may present
significantly greater risk. Emerging markets may have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets of a
series is uninvested and no return is earned thereon. The inability of a
series to make intended security purchases due to settlement problems could
cause the series to miss attractive investment opportunities. Inability to
dispose of portfolio securities due to settlement problems could result in
losses to the series due to subsequent declines in values of the portfolio
securities, a decrease in the level of liquidity in the series' portfolio, or,
if the series has entered into a contract to sell the security, possible
liability to the purchaser. Certain markets may require payment for securities
before delivery, and in such markets the series bears the risk that the
securities will not be delivered and that the series' payments will not be
returned.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. A series could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the
application to a series of any restrictions on investments.
Investment in certain foreign emerging market debt obligations may be
restricted or controlled to varying degrees. These restrictions or controls
may at times preclude investment in certain foreign emerging market debt
obligations and increase the expenses of a Series.
FOREIGN SECURITIES -- Investing in foreign securities involves considerations
and risks not typically associated with investing in U.S. markets. Such
investments may be favorably or unfavorably affected by changes in interest
rates, currency exchange rates and exchange control regulations, application
of foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances between nations. There may be less publicly-available
information about a foreign company than about a domestic company, and foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of U.S. companies. Foreign
securities markets, while growing in volume, have substantially less volume
than U.S. markets, and securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable domestic
companies. Fixed brokerage commissions and other transaction costs are
generally higher than in the United States. There is generally less government
supervision and regulation of exchanges, brokers and issuers in foreign
countries than there is in the United States. In addition, investments in
foreign countries could be affected by other factors generally not thought to
be present in the United States, including the possibility of heavy taxation,
political or social instability, limitations on the removal of funds or other
assets of the series, expropriation of assets, diplomatic developments adverse
to U.S. investors and difficulties in enforcing contractual obligations, and
could be subjected to extended settlement periods.
As a result of its investments in foreign securities, a series 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 series may promptly convert such currencies
into dollars at the 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
series may hold such currencies for an indefinite period of time. The series
may also hold foreign currency in anticipation of purchasing foreign
securities.
While the holding of currencies will permit a series to take advantage of
favorable movements in the applicable exchange rate, it also exposes the
series to risk of loss if such rates move in a direction adverse to the
series' position. Such losses could reduce any profits or increase any losses
sustained by the series from the sale or redemption of securities, and could
reduce the dollar value of interest or dividend payments received. Costs may
also be incurred in connection with conversions between various currencies.
GOVERNMENT BACKED TRUST CERTIFICATES -- Government backed trust certificates
("GBTs") are obligations of certain private trusts formed for the purpose of
refinancing certain foreign government loans. The assets of the trust
typically include (a) a foreign government loan (the "Note"), 90% of principal
and interest payments on which are backed by a full faith and credit guaranty
of the United States government and (b) a beneficial interest in a trust
holding direct obligations of the United States government, calculated to
provide amounts equal to at least 10% of all principal and interest payments
on the Note. Funds scheduled to be received from these assets are calculated
to cover all scheduled distributions on the GBTs.
INDEXED SECURITIES -- The value of indexed securities is linked to foreign
currencies, interest rates, commodities, indices, or other financial
indicators. Most indexed securities are short to intermediate term fixed-
income securities whose values at maturity (i.e., principal value) or interest
rates rise or fall according to the change in one or more specified underlying
instruments. Indexed securities may be positively or negatively indexed (i.e.,
their principal value or interest rates may increase or decrease if the
underlying instrument appreciates), and may have return characteristics
similar to direct investments in the underlying instrument or to one or more
options on the underlying instrument. Indexed securities may be more volatile
than the underlying instrument itself.
The performance of indexed securities depends to a great extent on the
performance of the securities, currencies, or other instruments to which they
are indexed, and may also be influenced by interest rate changes in the U.S.
and abroad. At the same time, indexed securities are subject to the credit
risks associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent issuers of
indexed securities have included banks, corporations, and certain U.S.
government agencies.
LOANS, LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS -- By purchasing a
loan or loan participation, the series acquires some or all of the interest of
a bank or other lending institution in a loan to a corporate, government, or
other borrower. Many such loans are secured, and most impose restrictive
covenants which must be met by the borrower. These loans are made generally to
finance internal growth, mergers, acquisitions, stock repurchases, leveraged
buy-outs and other corporate activities. Such loans may be in default at the
time of purchase. The series may also purchase trade or other claims against
companies, which generally represent money owed by the company to a supplier
of goods or services. These claims may also be purchased at a time when the
company is in default. Certain of the loan participations acquired by a series
may involve revolving credit facilities or other standby financing commitments
which obligate the series to pay additional cash on a certain date or on
demand.
The highly leveraged nature of many such loans may make such loans especially
vulnerable to adverse changes in economic or market conditions. Loan
participations and other direct indebtedness may not be in the form of
securities or may be subject to restrictions on transfer, and only limited
opportunities may exist to resell such instruments. As a result, the series
may be unable to sell such investments at an opportune time or may have to
resell them at less than fair market value. For a further discussion of loan
participations and the risks related to transactions therein, see the SAI
Appendix.
MORTGAGE PASS-THROUGH SECURITIES -- Mortgage pass-through securities are
securities representing interests in "pools" of mortgage loans. Monthly
payments of interest and principal by the individual borrowers on mortgages
are passed through to the holders of the securities (net of fees paid to the
issuer or guarantor of the securities) as the mortgages in the underlying
mortgage pools are paid off. The average life of mortgage pass-throughs are
variable when issued because their average lives depend on prepayment rates.
The average life of these securities is likely to be substantially shorter
than their stated final maturity as a result of unscheduled principal
prepayment. Prepayments on underlying mortgages result in a loss of
anticipated interest, and all or part of a premium if any has been paid, and
the actual yield (or total return) to the series may be different than the
quoted yield on the securities. Mortgage prepayments generally increase with
falling interest rates and decrease with rising interest rates. Like other
fixed income securities, when interest rates rise the value of a mortgage
pass-through security generally will decline; however, when interest rates are
declining, the value of mortgage pass-through securities with prepayment
features may not increase as much as that of other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) will be guaranteed by
either the full faith and credit of the U.S. Government (in the case of
securities guaranteed by GNMA); or guaranteed by agencies or instrumentalities
of the U.S. Government but not guaranteed by the U.S. Government (such as the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"). Mortgage pass-through securities may also be
issued by nongovernmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers). Some of these mortgage pass-through securities may
be supported by various forms of insurance or guarantees.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a
person purchases a security and simultaneously commits to resell that security
to the seller (such as a member bank of the Federal Reserve System or
recognized securities dealer) at an agreed upon price on an agreed upon date.
The repurchase price may be higher than the purchase price, the difference
being income to the series, or the purchase and repurchase price may be the
same, with interest at a standard rate due to the Series together with the
repurchase price on repurchase. In either case, the income to the Series is
unrelated to the coupon rate or maturity of the purchased security. Such
transactions afford an opportunity for a series to earn a return on available
cash. However the series may be subject to various delays and risks of loss
(including risk of decline in market value of the underlying securities) if
the seller is unable to meet its obligation to repurchase. In evaluating
whether to enter into a repurchase agreement the Adviser will carefully
consider the creditworthiness of the seller and will follow guidelines
regarding the determination of creditworthiness established by the Board of
Trustees of the Series Fund. A series may enter into repurchase agreements
only with member banks of the Federal Reserve System, member firms (or
subsidiaries thereof) of the New York Stock Exchange, recognized primary U.S.
Government Securities dealers or other institutions that the Adviser has
determined to be of comparable credit-worthiness, unless otherwise indicated.
The repurchase agreement provides that in the event the seller fails to pay
the price agreed upon on the agreed upon delivery date or upon demand, as the
case may be, the series will have the right to liquidate the securities. If at
the time the series is contractually entitled to exercise its right to
liquidate the securities, the seller is subject to a proceeding under the
bankruptcy laws or its assets are otherwise subject to a stay order, the
series' exercise of its right to liquidate the securities may be delayed and
result in certain losses and costs to the Series. The Series Fund has adopted
and follows procedures which are intended to minimize the risks of repurchase
agreements. For example, a series only enters into repurchase agreements after
the Adviser has determined that the seller is creditworthy, and the Adviser
monitors that seller's creditworthiness on an ongoing basis. Moreover, under
such agreements, the value of the securities (which are marked to market every
business day) is required to be greater than the repurchase price, and the
series has the right to make margin calls at any time if the value of the
securities falls below the agreed upon margin.
RESTRICTED SECURITIES -- Restricted securities are securities that are subject
to legal or contractual restrictions on resale, including securities which
cannot be sold to the public without registration under the Securities Act of
1933 (the "Securities Act"). Unless registered for sale, such securities can
only be sold in privately negotiated transactions or pursuant to an exemption
from registration, such as pursuant to Rule 144A under the Securities Act for
offers and sales to "qualified institutional buyers". Consequently, there may
be a more limited trading market for these securities and market quotations
may be less readily available. However, as to certain restricted securities, a
substantial market of qualified institutional buyers may develop pursuant to
Rule 144A ("Rule 144A Securities"). A determination is made based upon a
continuing review of the trading markets for the specific Rule 144A Security
that such securities are readily marketable. The Board of Trustees has adopted
guidelines and delegated to the Adviser the daily function of determining and
monitoring liquidity of Rule 144A Securities. The Board, however, retains
oversight, focusing on factors such as valuation, liquidity and availability
of information. Investing in Rule 144A Securities could have the effect of
decreasing the level of liquidity in a series to the extent that qualified
institutional buyers become for a time uninterested in purchasing Rule 144A
Securities held in the series' portfolio. As a result, the series 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. A series
may invest in restricted securities as to which the Board has made such a
determination of ready marketability, to the extent consistent with its
investment objectives. Where the Board has not made such a determination,
investments in restricted securities are subject to the series' investment
restrictions on investments in securities that are not readily marketable.
STRIPPED MORTGAGE-BACKED SECURITIES -- Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities issued by agencies or
instrumentalities of the United States Government or by private originators
of, or investors in, mortgage loans including savings and loan associations,
mortgage banks, commercial banks and investment banks. SMBS are usually
structured with two classes that receive different proportions of the interest
and principal distributions from a pool of Mortgage Assets. A common type of
SMBS will have one class receiving some of the interest and most of the
principal from the Mortgage Assets while the other class will receive most of
the interest and the remainder of the principal. In the most extreme case, one
class will receive all of the interest (the interest only or "IO" class) while
the other class will receive all of the principal (the principal only or "PO"
class). The yield to maturity on an IO is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying Mortgage
Assets, and a rapid rate of principal payments may have a material adverse
effect on such securities' yield to maturity. If the underlying Mortgage
Assets experience more than anticipated prepayments of principal, a series may
fail to fully recoup its initial investment in these securities. The market
value of the class consisting primarily or entirely of principal payments
generally is unusually volatile in response to changes in interest rates.
U.S. GOVERNMENT SECURITIES -- U.S. Government Securities include: (1) U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: U.S. Treasury bills (maturity of one year or less),
U.S. Treasury notes (maturities of one to 10 years), and U.S. Treasury bonds
(generally maturities of greater than 10 years), all of which are backed by
the full faith and credit of the United States; and (2) obligations issued or
guaranteed by U.S. Government agencies or instrumentalities, some of which are
backed by the full faith and credit of the U.S. Treasury, e.g., direct pass-
through certificates of the Government National Mortgage Association ("GNMA");
some of which are supported by the right of the issuer to borrow from the U.S.
government, e.g., obligations of Federal Home Loan Banks; some of which are
backed only by the credit of the issuer itself, e.g., obligations of the
Student Loan Marketing Association; and some of which are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations, e.g., obligations of the Federal National Mortgage Association
("FNMA"). 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, in addition to those mentioned above, the Tennessee Valley
Authority, the Bank for Cooperatives, the Farmers Home Administration, Federal
Intermediate Credit Banks, Federal Land Banks, the Federal Home Loan Mortgage
Corporation, the Small Business Administration, the Resolution Funding
Corporation, the Financing Corporation, and the Federal Agricultural Mortgage
Corporation.
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.
WARRANTS -- Warrants are certificates giving the holder the right, either for
a specified period of time or indefinitely, to purchase a security at a
stipulated price.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS -- Zero coupon and
deferred interest bonds are debt obligations which are issued or purchased at
a significant discount from face value. The discount approximates the total
amount of interest the bonds will accrue and compound over the period until
maturity or the first interest payment date at a rate of interest reflecting
the market rate of the security at the time of issuance. Zero coupon bonds do
not require the periodic payment of interest and deferred interest bonds
provide for a period of delay before the regular payment of interest begins.
PIK bonds are debt obligations which provide that the issuer thereof may, at
its option, pay interest on such bonds in cash or in the form of additional
debt obligations. Such investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of such cash. Such
investments may experience greater volatility in market value due to changes
in interest rates and/or credit quality than debt obligations which make
regular payments of interest. A series will accrue income on such investments
for tax and accounting purposes, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the series' distribution
obligations.
<PAGE>
APPENDIX B
INVESTMENT TECHNIQUES
INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES:
Each series may, during periods of unusual market conditions when the Adviser
believes that investing for temporary defensive purposes is appropriate, or in
order to meet anticipated redemption requests, invest a large portion or all
of the assets of a series in cash (including foreign currency) or cash
equivalents including, but not limited to, obligations of banks (including
certificates of deposit, bankers' acceptances, time deposits and repurchase
agreements), commercial paper, short-term notes, U.S. Government securities
and related repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
The Bond Series, Conservative Growth Series, Emerging Growth Series, Equity
Income Series, Massachusetts Investors Growth Stock Series, New Discovery
Series, Research Growth and Income Series, Research Series, Research
International Series, Strategic Income Series, Total Return Series, Utilities
Series, Value Series, World Asset Allocation Series, World Governments Series,
World Total Return Series and World Growth Series and the MFS/Foreign &
Colonial Series may seek to increase their income by lending portfolio
securities to the extent consistent with present regulatory policies,
including those of the Board of Governors of the Federal Reserve System and
the Securities and Exchange Commission. Such loans may be made to member banks
of the Federal Reserve System and to member firms (and subsidiaries thereof)
of the New York Stock Exchange (unless otherwise indicated) and would be
required to be secured continuously by collateral, including cash, U.S.
Government Securities, or an irrevocable letter of credit maintained on a
current basis at an amount at least equal to the market value of the
securities loaned. A series would have the right to call a loan and obtain the
securities loaned at any time on customary industry settlement notice (which
will usually not exceed five days). For the duration of a loan, the series
would continue to receive the equivalent of the interest or dividends paid by
the issuer on the securities loaned and would also receive compensation from
the investment of the collateral. A series would not, however, have the right
to vote any securities having voting rights during the existence of the loan,
but would call the loan in anticipation of an important vote to be taken among
holders of the securities or of the giving or withholding of their consent on
a material matter affecting the investment. As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
the loans would be made only to firms deemed by the investment adviser to be
of good standing, and when, in the judgment of the investment adviser, the
consideration which could be earned currently from securities loans of this
type justified the attendant risk. If the investment adviser determines to
make securities loans, it is intended that the value of the securities loaned
would not exceed 30% of the value of a series' total assets.
MORTGAGE "DOLLAR ROLL" TRANSACTIONS
The Bond Series, Government Securities Series, Equity Income Series, High
Yield Series, Strategic Income Series, Total Return Series, Utilities Series,
World Asset Allocation Series, World Governments Series and World Total Return
Series may enter into mortgage "dollar roll" transactions with selected banks
and broker-dealers pursuant to which the series sells mortgage-backed
securities for delivery in the future (generally within 30 days) and
simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. The series will
only enter into covered rolls. A "covered roll" is a specific type of dollar
roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of
the dollar roll transaction. During the roll period, the series foregoes
principal and interest paid on the mortgage-backed securities. The series is
compensated for the lost interest by the difference between the current sales
price and the lower price for the futures purchase (often referred to as the
"drop") as well as by the interest earned on the cash proceeds of the initial
sale. The series may also be compensated by receipt of a commitment fee.
In the event that the party with whom a series contracts to repurchase
substantially similar securities on a future date fails to deliver such
securities, the series may not be able to obtain such securities at the price
specified in such contract and thus may not benefit from the price
differential between the current sales price and the repurchase price. The
market value of securities purchased by the series may decline below the price
of securities that the series has sold but is obligated to repurchase under
the agreement. Under the terms of these transactions, the securities purchased
may have different prepayment characteristics and both the series and the
dealer may be permitted to over or underdeliver the aggregate principal amount
of the securities by 2%.
OPTIONS, FUTURES AND FORWARD CONTRACTS
Certain series, as discussed below, 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 series' gross income. The types of
instruments that may be purchased and sold by each series and the permissible
purposes of these transactions are described in the series' statement of
investment objectives and policies. Among other risks, the trading of options,
futures contracts and forward contracts entails the risk that, if the
Adviser's judgment as to the general direction of interest or exchange rates
is incorrect, the series' overall performance may be poorer than if it had not
entered into any such contract. For example, if the series has hedged against
the possibility of an increase in interest rates, and rates instead decline,
the series will lose part or all of the benefit of the increased value of the
securities being hedged, and may be required to meet ongoing daily variation
margin payments. The SAI Appendix, which should be read in conjunction with
the following section, contains a further discussion of the nature of the
transactions which may be entered into and the risks associated therewith.
OPTIONS ON SECURITIES AND SECURITIES INDICES
The Bond Series, Capital Appreciation Series, Emerging Growth Series, Equity
Income Series, Government Securities Series, Managed Sectors Series,
Massachusetts Investors Growth Stock Series, New Discovery Series, Research
Growth and Income Series, Research International Series, Strategic Income
Series, Utilities Series, Value Series, World Asset Allocation Series, World
Governments Series, World Growth Series and World Total Return Series and the
MFS/Foreign & Colonial Series may write (sell) "covered" call and put options
and purchase call and put options on securities or securities indices. These
transactions may be designed for the purpose of increasing a series' return on
such securities and/or to protect the value of its portfolio. In particular,
where the series writes an option which expires unexercised or is closed out
by the series at a profit, it will retain the premium paid for the option
(less related transaction costs) 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 or index moves
adversely to the series' position, the option may be exercised and the series
will be required to purchase or sell the underlying security or index at a
disadvantageous price, which may only be partially offset by the amount of the
premium. The series 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 series 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
series retains the risk of depreciation in value of securities on which it has
written call options.
A series 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 series wants to purchase at a later date, or, in
the case of an option on a stock index, to attempt to reduce the risk of
missing a market or industry segment advance. In the event that the expected
market fluctuations occur, the series 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 series 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 series.
"Yield curve" options are options on the yield "spread," or yield differential
between two securities. In contrast to other types of options a yield curve
option is based on the difference between the yields of designated securities
rather than the actual prices of the individual securities, and is settled
through cash payments. Accordingly, a yield curve option is profitable to the
holder if this differential widens (in the case of a call) or narrows (in the
case of a put), regardless of whether the yields of the underlying securities
increase or decrease. Yield curve options will be "covered" but could involve
additional risks, as discussed in the SAI Appendix.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Bond Series, Capital Appreciation Series, Emerging Growth Series, Equity
Income Series, Government Securities Series, Managed Sectors Series,
Massachusetts Investors Growth Stock Series, New Discovery Series, Research
Growth and Income Series, Research International Series, Strategic Income
Series, Utilities Series, Value Series, World Asset Allocation Series, World
Governments Series, World Growth Series, World Total Return Series and the
MFS/Foreign & Colonial Series may enter into contracts for the purchase or
sale for future delivery of securities, securities indexes or currency
("futures contracts"). These instruments may be used for hedging purposes, in
order to protect the series' current or intended investments from a decline in
value due to changes in exchange rates or interest rates or declines in the
stock market, and for non-hedging purposes subject to applicable law. With
respect to hedging purposes, if an anticipated decrease in the value of
portfolio securities or currency occurs as a result of market movements, the
adverse effects of such changes may be offset, in whole or in part, by gains
on the sale of futures contracts. Conversely, the increased cost of portfolio
securities to be acquired may be offset, in whole or in part, by gains on
futures contracts purchased. The series will incur brokerage fees when it
purchases and sells futures contracts, and will be required to maintain margin
deposits. In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the series, if its investment
judgment about the general direction of exchange rates, interest rates or the
stock market is incorrect, the series' overall performance may be poorer than
if it had not entered into any such contract and the series may realize a
loss. The series will not enter into any futures contract if immediately
thereafter the value of securities and other obligations underlying all such
futures contracts would exceed 50% of the value of its total assets.
These series may also purchase and write options on such futures contracts.
Purchases of options on futures contracts may present less risk in hedging the
series' portfolio 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, although it may be necessary to exercise the
option to realize any profit, which results in the establishment of a futures
position. The writing of options on futures contracts, 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 series may suffer a loss on the transaction.
These transactions may also be used for non-hedging purposes, to the extent
permitted by applicable law.
In order to assure that the series will not be deemed to be a "commodity pool"
for purposes of the Commodity Exchange Act, regulations of the Commodity
Futures Trading Commission (the "CFTC") require that the series enter into
transactions in futures contracts and options on futures contracts only (i)
for bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums
on such non-hedging positions does not exceed 5% of the liquidation value of
the series' assets. In addition, the series must comply with the requirements
of various state securities laws in connection with such transactions.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS ("FORWARD CONTRACTS")
The Bond Series, Capital Appreciation Series, Emerging Growth Series, Equity
Income Series, Managed Sectors Series, Massachusetts Investors Growth Stock
Series, New Discovery Series, Research Growth and Income Series, Research
International Series, Research Series, Strategic Income Series, Utilities
Series, Value Series, World Asset Allocation Series, World Governments Series,
World Growth Series, World Total Return Series and the MFS/Foreign & Colonial
Series 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"). Forward contracts may be entered into for hedging and
non-hedging purposes. Hedging purposes include seeking to minimize the risk to
the series from adverse changes in the relationship between the U.S. dollar
and foreign currencies. 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 series 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 series may be required to forgo the benefits of
advantageous changes in exchange rates. Certain series 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, a
series may purchase or sell such currency, respectively, through a forward
contract. If the expected changes in the value of the currency occur, the
series will realize profits which will increase its gross income. Where
exchange rates do not move in the direction or to the extent anticipated, such
series may sustain losses which will reduce its gross income. Such
transactions may be considered speculative and could involve significant risk
of loss, as set forth below. 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
future contracts or options traded on exchanges. The series have 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 Bond Series, Emerging Growth Series, Equity Income Series, Massachusetts
Investors Growth Stock Series, New Discovery Series, Research Growth and
Income Series, Research International Series, Strategic Income Series,
Utilities Series, Value Series, World Asset Allocation Series, World
Governments Series, World Growth Series, World Total Return Series and the
MFS/Foreign & Colonial Series may purchase and write options on foreign
currencies for the purpose of protecting against declines in the dollar value
of foreign portfolio securities and against increases in the dollar cost of
foreign 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 series may 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 series' position, it
may forfeit the entire amount of the premium paid for the option plus related
transaction costs. The series may also choose to, or be required to, receive
delivery of the foreign currencies underlying options on foreign currencies it
has entered into. Under certain circumstances, such as where the Adviser or a
Sub-Adviser believes that the applicable exchange rate is unfavorable at the
time the currencies are received, or the Adviser or Sub-Adviser anticipates
for any other reason that the exchange rate will improve, the series may hold
such currencies for an indefinite period of time. (See "Appendix A--Foreign
Securities" for information on the risks associated with holding foreign
currency.)
RISKS OF TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS:
Even where a series enters into 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 or
forward contract and the assets being hedged, or unexpected adverse price
movements, could render the series' 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 series may be required
to maintain a position until exercise or expiration, which could result in the
series' being unable to control losses. As noted, certain series 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, a series may experience losses which are
not offset by gains on other portfolio positions, thereby lowering the series'
return and the loss from investing in certain futures transactions is
potentially unlimited. In addition, the markets for such instruments may be
extremely volatile from time to time, as discussed in the SAI Appendix, which
could increase the risks incurred by the series in entering into such
transactions. Gains and losses on investments in such instruments depend on
the ability of the Adviser or Sub-Adviser to predict correctly the direction
of stock prices, interest rates or other economic factors affecting market
conditions and incorrect decisions by the Adviser or Sub-Adviser may cause a
series to experience losses or otherwise reduce its return.
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 a series 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.
SHORT SALES
If the New Discovery Series anticipates that the price of a security will
decline, it may sell the security short and borrow the same type of security
from a broker or other institution to complete the sale. A Series may make a
profit or loss depending upon whether the market price of the security
decreases or increases between the date of the short sale and the date on
which the Series must replace the borrowed security. Possible losses from
short sales differ from losses that could be incurred from a purchase of a
security, because losses from short sales may be unlimited, whereas losses
from purchaes can equal only the total amount invested. The New Discovery
Series will segregate liquid assets to cover its short sale obligations. The
New Discovery Series will not sell short securities whose underlying value
exceeds 40% of its net assets.
SWAPS AND RELATED TRANSACTIONS
The Bond Series, Equity Income Series, Massachusetts Investors Growth Stock
Series, New Discovery Series, Research Growth and Income Series, Research
International Series, Strategic Income Series, World Asset Allocation Series,
World Governments Series, World Total Return Series and the MFS/Foreign &
Colonial Series may enter into interest rate swaps, currency swaps and other
types of available swap agreements (such as caps, collars and floors), as one
way of managing their exposure to different types of investments. These
transactions involve the exchange by a series with another party of cash
payments based upon different interest rate indexes, currencies, and other
prices or rates, such as the value of mortgage prepayment rates. For example,
in the typical interest rate swap, the series might exchange a sequence of
cash payments based on a floating rate index for cash payments based on a
fixed rate. Payments made by both parties to a swap transaction are based on a
principal amount determined by the parties.
These series may also purchase and sell caps, floors and collars. In a typical
cap or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. For
example, the purchase of an interest rate cap entitles the buyer, to the
extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a contractually-based principal amount from
the counterparty selling such interest rate cap. The sale of an interest rate
floor obligates the seller to make payments to the extent that a specified
interest rate falls below an agreed-upon level. A collar arrangement combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift a Series' investment exposure from one type
of investment to another. For example, if a series agreed to exchange payments
in dollars for payments in foreign currency, in each case based on a fixed
rate, the swap agreement would tend to decrease a Series' exposure to U.S.
interest rates and increase its exposure to foreign currency and interest
rates. Caps and floors have an effect similar to buying or writing options.
Depending on how they are used, swap agreements may increase or decrease the
overall volatility of a Series' investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
series' performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A series may also suffer losses
if it is unable to terminate outstanding swap agreements or reduce its
exposure through offsetting transactions.
Swaps, caps, floors and collars are highly specialized activities which
involve certain risks different from those associated with ordinary portfolio
transactions. See the SAI Appendix for further information on, and the risks
involved in, these activities.
"WHEN-ISSUED" SECURITIES
The Bond Series, Emerging Growth Series, Equity Income Series, Government
Securities Series, High Yield Series, Massachusetts Investors Growth Stock
Series, New Discovery Series, Research Growth and Income Series, Research
International Series, Strategic Income Series, Utilities Series, Value Series,
World Asset Allocation Series, World Governments Series, World Growth Series,
World Total Return Series and the MFS/Foreign & Colonial Series may purchase
securities on a "when-issued" or on a "forward delivery" basis, which means
that the obligations will be delivered at a future date usually beyond
customary settlement time. The commitment to purchase a security for which
payment will be made on a future date may be deemed a separate security.
Although a series is not limited to the amount of securities for which it may
have commitments to purchase on such basis, it is expected that under normal
circumstances, a series will not commit more than 30% of its assets to such
purchase. A series does not pay for the securities until received or start
earning interest on them until the settlement date. In order to invest its
assets immediately, while awaiting delivery of securities purchased on such
basis, a series will normally invest in short-term securities that offer same-
day settlement and earnings, but that may bear interest at a lower rate than
longer term securities.
When a series commits to purchase a security on a "when issued" or "forward
delivery" basis it will set up a segregated account consistent with the
statements of the SEC referred to above under "Forward Foreign Currency
Exchange Contracts." While the series do not intend to make such purchases for
speculative purposes and intend to adhere to the provisions of the SEC policy,
purchases of securities on such bases may involve more risk than other types
of purchases. For example, if a series determines it is necessary to sell the
"when issued" or "forward delivery" securities before delivery, it may incur a
gain or a loss because of market fluctuations since the time the commitment to
purchase such securities was made.
<PAGE>
APPENDIX C
DESCRIPTION OF STANDARD & POOR'S RATINGS SERVICES ("S&P"), FITCH, INVESTORS
SERVICE, INC. ("FITCH"), DUFF & PHELPS CREDIT RATING CO. ("DUFF & PHELPS") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") HIGHEST COMMERCIAL PAPER RATINGS
AND BOND RATINGS:
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.
BOND/DEBT RATINGS
The ratings of S&P, Fitch and Moody's 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.
S&P DEBT RATINGS
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor'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, B, CCC, CC and C: Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
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.
FITCH'S BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
NR indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely
direction of such change. These are designated as "Positive", indicating a
potential upgrade, "Negative", for potential downgrade, or "Evolving", where
ratings may be raised or lowered. FitchAlert is relatively short-term, and
should be resolved within 12 months.
DUFF & PHELPS' BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA. Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"D-1+".
A. Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB. Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB. Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business, and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B. Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC. Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
Plus (+) or Minus (-). Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within a rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR. Indicates that Duff & Phelps does not rate the specific issue.
DUFF & PHELPS' SHORT-TERM RATINGS
D-1+.Highest certainty of timely payment. Short-term liquidity, including
internal operation factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D-1. Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D-1-. High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2. Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D-3. Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
D-4. Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.
D-5. Issuer failed to meet scheduled principal and/or interest payments.
MOODY'S BOND RATINGS
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-edge". 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 risks appear somewhat larger than in 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 sometime 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 or
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.
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.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
<PAGE>
APPENDIX D
INDUSTRY SECTORS
The Managed Sectors Series seeks to achieve its investment objective by
varying the weighting of its portfolio among the following thirteen 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) BASIC MATERIALS AND CONSUMER STAPLES 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, geothermal, 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.
(7) INDUSTRIAL GOODS AND SERVICES 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) 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.
(10) 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.
(11) 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.
(12) 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, 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.
(13) 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. Foreign investments
will be subject to certain risks not generally associated with domestic
investments. Such investments may be favorably or unfavorably affected by
changes in interest rates, currency exchange rates and exchange control
regulations, and costs may be incurred in connection with conversions
between currencies. In addition, investments in foreign countries could be
affected by less favorable tax provisions, less publicly available
information, less securities regulation, political or social instability,
limitations on the removal of funds or other assets of the Managed Sectors
Series, expropriation of assets, diplomatic developments adverse to U.S.
investments and difficulties in enforcing contractual obligations.
Diversified companies will generally be included in the sector of their
predominant industry activity, as determined by the Adviser.
PRINCIPAL SECTORS OF THE UTILITIES INDUSTRY
The principal sectors of the utilities industry in which the Utilities Series
may invest are discussed below.
ELECTRIC -- The electric utility industry consists of companies that are
engaged principally in the generation, transmission and sale of electric
energy, although many also provide other energy-related services. Domestic
electric utility companies, in general, recently have been favorably affected
by lower fuel and financing costs and the full or near completion of major
construction programs. In addition, many of these companies recently have
generated cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Some electric utilities have also taken advantage of the right to
sell power outside of their traditional geographic areas. Electric utility
companies historically have been subject to the risks associated with
increases in fuel and other operating costs, high interest costs on borrowings
needed for capital construction programs, costs associated with compliance
with environmental and safety regulations and changes in the regulatory
climate.
In the U.S., the construction and operation of nuclear power facilities is
subject to increased scrutiny by, and evolving regulations of, the Nuclear
Regulatory Commission and state agencies having comparable jurisdiction.
Increased scrutiny might result in higher operating costs and higher capital
expenditures, with the risk that the regulators may disallow inclusion of
these costs in rate authorizations or the risk that a company may not be
permitted to operate or complete construction of a facility. In addition,
operators of nuclear power plants may be subject to significant costs for
disposal of nuclear fuel and for the de-commissioning of such plants.
TELECOMMUNICATIONS -- The telephone industry is large and highly concentrated.
Companies that distribute telephone services and provide access to the
telephone networks comprise the greatest portion of this segment. Telephone
companies in the U.S. are still experiencing the effects of the breakup of
American Telephone & Telegraph Company, which occurred in 1984. Since 1984,
companies engaged in telephone communication services have expanded their non-
regulated activities into other businesses, including cellular telephone
services, data processing, equipment retailing, computer software and hardware
services, and financial services. This expansion has provided significant
opportunities for certain telephone companies to increase their earnings and
dividends at faster rates than had been allowed in traditionally regulated
businesses. Increasing competition, technological innovations and other
structural changes, however, could adversely affect the profitability of such
utilities.
GAS -- Gas transmission companies and gas distribution companies are also
undergoing significant changes. In the U.S., interstate transmission companies
are regulated by the Federal Energy Regulatory Commission, which is reducing
its regulation of the industry. Many companies have diversified into oil and
gas exploration and development, making returns more sensitive to energy
prices. In the recent decade, gas utility companies have been adversely
affected by disruptions in the oil industry and have also been affected by
increased concentration and competition. In the opinion of the Adviser,
however, environmental considerations could improve the gas industry outlook
in the future. For example, natural gas is the cleanest of the hydrocarbon
fuels, and this may result in incremental shifts in fuel consumption toward
natural gas and away from oil and coal.
WATER -- Water supply utilities are companies that collect, purify, distribute
and sell water. In the U.S. and around the world, the industry is highly
fragmented because most of the supplies are owned by local authorities.
Companies in this industry are generally mature and are experiencing little or
no per capita volume growth.
<PAGE>
APPENDIX E
PORTFOLIO COMPOSITION CHARTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
The charts below show the percentages of the Series' assets at December 31,
1996 invested in bonds assigned to the various rating categories by S&P,
Moody's (provided only for securities not rated by S&P) and Fitch (provided
only for securities not rated by S&P or Moody's) and in unrated bonds
determined by the Adviser to be of comparable quality. For a split rated bond,
the S&P rating is used, and when an S&P rating is unavailable, secondary
sources are selected in the following order: Moody's and Fitch.
HIGH YIELD SERIES
UNRATED
BONDS OF
COMPARABLE
RATING COMPILED RATINGS QUALITY TOTAL
- ------ ---------------- ---------- -----
AAA/Aaa ........................ -- -- --
AA/Aa .......................... -- -- --
A/A ............................ -- -- --
BBB/Baa ........................ -- -- --
BB/Ba .......................... 12.76% -- 12.76%
B/B ............................ 71.66% 2.70% 74.36%
CCC/Caa ........................ 4.33% 0.04% 4.37%
CC/Ca .......................... -- -- --
C/C ............................ -- -- --
Default ........................ 0.60% -- 0.60%
----- --- -----
Total .......................... 89.35% 2.74% 92.09%
WORLD ASSET ALLOCATION SERIES
UNRATED
BONDS OF
COMPARABLE
RATING COMPILED RATINGS QUALITY TOTAL
- ------ ---------------- ---------- -----
AAA/Aaa ........................ 3.37% -- 3.37%
AA/Aa .......................... 4.11% -- 4.11%
A/A ............................ -- -- --
BBB/Baa ........................ 0.33% -- 0.33%
BB/Ba .......................... 1.68% -- 1.68%
B/B ............................ 7.36% -- 7.36%
CCC/Caa ........................ 0.31% -- 0.31%
CC/Ca .......................... -- -- --
C/C ............................ -- -- --
Default ........................ -- -- --
----- --- -----
Total .......................... 17.16% -- 17.16%
The charts do not necessarily indicate what the composition of the Series'
portfolios will be in subsequent years. Rather, the Series' investment
objectives, policies and restrictions indicate the extent to which the Series
may purchase securities in the various categories.
<PAGE>
MFS/SUN LIFE SERIES TRUST
An Open-End Management
Investment Company
INVESTMENT ADVISER
Massachusetts Financial
Services Company
500 Boylston Street, Boston,
MA 02116
(617) 954-5000
CUSTODIAN
State Street Bank and Trust
Company
225 Franklin Street, Boston,
MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
MAILING ADDRESS:
P.O. Box 1024, Boston, MA
02103
BUSINESS ADDRESS:
500 Boylston Street, Boston,
MA 02116
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston,
MA 02110
SUN-1-5/97/185M
<PAGE>
MFS/SUN LIFE SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
1. Definitions .......................................................... 2
2. Investment Objectives, Policies and Restrictions ..................... 2
3. Management of the Series Fund ........................................ 9
Trustees .......................................................... 9
Officers .......................................................... 10
Investment Adviser ................................................ 10
Administrator ..................................................... 13
Custodian ......................................................... 14
Shareholder Servicing Agent ....................................... 14
4. Independent Accountants and Financial Statements ..................... 14
5. Additional Information with Respect to Shares of Each Series ......... 14
Purchases ......................................................... 14
Exchange Privilege ................................................ 14
Net Asset Value, Dividends and Distributions ...................... 14
Tax Status ........................................................ 16
Description of Shares, Voting Rights and Liabilities .............. 16
6. Portfolio Transactions and Brokerage Commissions ..................... 16
Appendix ............................................................. 19
This Statement of Additional Information, as amended or supplemented from time
to time (the "SAI"), sets forth information which may be of interest to
investors but which is not necessarily included in the Series Fund's
Prospectus dated May 1, 1997. This SAI should be read in conjunction with the
Prospectus, a copy of which may be obtained without charge by contacting the
Sun Life Annuity Service Center, P.O. Box 1024, Boston, Massachusetts 02103,
telephone (800) 752-7215.
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. DEFINITIONS
"Series Fund" -- MFS/Sun Life Series Trust, a Massachusetts
business trust. The Series Fund changed its
name from "Compass Series Trust" in January,
1985. The shares of each series will be used
to fund benefits under variable annuity
contracts and variable life insurance
contracts.
"Sun Life of Canada (U.S.)" -- Sun Life Assurance Company of Canada (U.S.),
a Delaware corporation.
"Sun Life (N.Y.)" -- Sun Life Insurance and Annuity Company of New
York, a New York corporation.
"Contracts" -- Variable annuity and variable life insurance
contracts issued by Sun Life of Canada
(U.S.), Sun Life (N.Y.) or any of their
affiliated companies.
"Variable Accounts" -- Variable accounts established by Sun Life of
Canada (U.S.), Sun Life (N.Y.) and their
affiliated companies to fund Contracts.
"MFS" or the "Adviser" -- Massachusetts Financial Services Company, a
Delaware corporation.
"Prospectus" -- The Prospectus of the Series Fund, dated May
1, 1997, as amended or supplemented from time
to time.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of the twenty-six series of the Series
Fund are described in the Prospectus. More information about some of the
series' investment instruments and techniques can be found in the Appendix to
this SAI. There can be no assurance that the investment objectives of any
series will be achieved. Shareholder approval is not required to change the
investment objectives of any series or the manner in which each series seeks
to achieve its objectives.
INVESTMENT RESTRICTIONS
The Series Fund has adopted the following policies which apply to the various
series and, except where specifically indicated, cannot be changed with
respect to any series without the approval of the holders of a majority of the
shares of that series (which, as used in this SAI, means the lesser of (i) 67%
or more of the outstanding shares present at a meeting at which holders of
more than 50% of the outstanding shares are represented in person or by proxy,
or (ii) more than 50% of the outstanding shares):
(1) INVESTMENT RESTRICTIONS THAT APPLY TO THE CAPITAL APPRECIATION SERIES,
CONSERVATIVE GROWTH SERIES, GOVERNMENT SECURITIES SERIES, HIGH YIELD
SERIES, MANAGED SECTORS SERIES, MONEY MARKET SERIES, TOTAL RETURN SERIES,
WORLD GOVERNMENTS SERIES AND ZERO COUPON SERIES.
None of these series may, except as indicated:
(1) Enter into repurchase agreements if, as a result of such agreement,
more than 10% of the series' total assets valued at the time of the
transaction would be subject to repurchase agreements maturing in more
than seven days.
(2) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term
obligations in accordance with its investment objectives and policies are
not prohibited; and provided that the Conservative Growth Series, Total
Return Series, World Governments Series and Managed Sectors Series may
purchase a portion of an issue of debt securities of types commonly
distributed privately to financial institutions, and provided that this
shall not prohibit the World Governments Series, Total Return Series or
Conservative Growth Series from lending securities in accordance with
their investment objectives or the Managed Sectors Series from purchasing
convertible debt instruments consistent with its investment objectives.
For the purposes of this restriction, the purchase of short-term
commercial paper or a portion of an issue of debt securities which are
part of an issue to the public shall not be considered the making of a
loan.
(3) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to 1/3 of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities (any such borrowings under this section
will not be collateralized). If, for any reason, the current value of the
total assets of any series falls below an amount equal to three times the
amount of its indebtedness for money borrowed, that series will, within
three business days, reduce its indebtedness to the extent necessary. No
series will borrow for leverage purposes. No series will purchase any
investments while borrowings are outstanding. For this purpose a borrowing
shall not be deemed the issuance of a senior security.
(4) Write, purchase or sell puts, calls or combinations thereof, provided
however that warrants and convertible securities may be purchased and sold
by a series, and provided further that this shall not prevent the Capital
Appreciation Series, the Government Securities Series, the World
Governments Series or the Managed Sectors Series from writing, purchasing
and selling puts, calls or combinations thereof or from purchasing,
owning, holding or selling contracts for the future delivery of securities
or currencies in accordance with their objectives and policies.
(5) Purchase or retain the securities of any issuer if any of the members
of the Board of Trustees or the Directors and Officers of Sun Life of
Canada (U.S.), Sun Life (N.Y.) or MFS own beneficially more than 1/2 of
1% of the securities of such issuer and together own more than 5% of the
securities of such issuer.
(6) Invest for the purpose of exercising control or management of another
issuer.
(7) Invest in oil, gas or other mineral exploration or development
programs.
(8) Purchase securities of other investment companies, except that the
Government Securities Series may purchase U.S. Government-related
Securities in accordance with its investment objectives and policies; and
except, as regards the Total Return Series, the World Governments Series
and the Managed Sectors Series, by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase
other than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan of merger
or consolidation; and provided, however that the Managed Sectors Series
shall not purchase the securities of any investment company if such
purchase at the time thereof would cause more than 10% of the series'
total assets (taken at market value) to be invested in the securities of
such issuers; and provided, further, that these series shall not purchase
securities issued by any registered open-end investment company.
(9) Underwrite securities issued by others except to the extent the series
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
(10) Make short sales of securities or purchase any securities on margin
except to obtain such short term credits as may be necessary for the
clearance of transactions; provided that this shall not prevent the
Capital Appreciation Series, Government Securities Series, World
Governments Series or Managed Sectors Series from making margin deposits
in connection with options, Futures Contracts, Options on Futures
Contracts, Forward Contracts or options on foreign currencies; and
provided that this shall not prevent the Total Return Series, Managed
Sectors Series or Conservative Growth Series from making any short sales
of securities or selling a security which it does not own if, by virtue of
its ownership of other securities, the series has, at the time of sale, a
right to obtain securities without payment of further consideration
equivalent in kind and amount to the securities sold and provided that if
such right is conditional, the sale is made upon the same conditions.
(11) Invest in commodities or commodity futures contracts or in real
estate; except that this restriction shall not prevent the Capital
Appreciation Series, Government Securities Series, World Governments
Series or Managed Sectors Series from writing, selling or purchasing
Futures Contracts, Options on Futures Contracts, Forward Contracts or
options on foreign currencies or from holding or selling real estate or
mineral leases, commodities or commodity contracts acquired as a result of
the ownership of securities in accordance with their investment objectives
and policies and provided that this restriction shall not apply to the
Conservative Growth Series;
(2) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE CAPITAL APPRECIATION SERIES
The Capital Appreciation Series will operate under the general investment
restrictions described above. In addition, the Capital Appreciation Series
will not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
as a result of such purchase, more than 5% of the value of its assets
would be invested in the securities of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks shall each be considered one
class.
(3) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric, and gas utilities shall each be
considered a separate industry.
(4) Invest more than 10% of its total assets in securities of issuers
which are not readily marketable (including repurchase agreements maturing
in more than seven days).
(3) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE CONSERVATIVE GROWTH SERIES
The Conservative Growth Series will operate under the general investment
restrictions described above. In addition, the Conservative Growth Series will
not:
(1) Pledge, mortgage or hypothecate an amount of assets which (taken at
market value) exceeds 15% of its gross assets (taken at the lower of cost
or market value).
(2) Concentrate more than 25% of the value of its assets in any one
industry.
(3) Purchase securities of any issuer (other than obligations of or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
as a result of such purchase, more than 5% of the value of its assets
would be invested in the securities of that issuer.
(4) Purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held by the Conservative Growth Series; or purchase
securities of any issuer if such purchase at the time thereof would cause
the Conservative Growth Series to hold more than 10% of any class of
securities of such issuer. For this purpose all indebtedness of an issuer
shall be deemed a single class and all preferred stock of an issuer shall
be deemed a single class.
(5) Invest more than 10% of its total assets, taken at market value, in
securities of issuers which are not readily marketable (including
repurchase agreements maturing in more than seven days).
(6) Purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment
trusts, which deal in real estate or interests therein) or mineral leases,
commodities or commodity contracts in the ordinary course of its business.
The Conservative Growth Series reserves the freedom of action to hold and
to sell real estate or mineral leases, commodities or commodity contracts
acquired as a result of the ownership of securities, but will not purchase
securities for the purpose of acquiring real estate or mineral leases,
commodities or commodity contracts.
(4) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE GOVERNMENT SECURITIES
SERIES
The Government Securities Series will operate under the general investment
restrictions described above. In addition, the Government Securities Series
will not:
(1) Purchase securities of any issuer (other than obligations of or
guaranteed by the U.S. Government, its agencies or instrumentalities that
are backed by the full faith and credit of the United States Government)
if, as a result of such purchase, more than 10% of the value of its assets
would be invested in securities of that issuer (for this purpose,
investments in certificates representing individual interests in pools of
U.S. Treasury securities will be treated as direct investments in U.S.
Treasury obligations).
(2) Purchase more than 10% of any class of securities of any issuer (for
this purpose all indebtedness of an issuer shall be deemed a single
class).
(3) Purchase equity securities or voting securities.
(4) Purchase interests in pools of mortgages evidenced by direct pass
through mortgage certificates if, as a result of such purchase, more than
90% of the value of its assets would be evidenced by direct pass through
mortgage certificates.
(5) Invest in securities of issuers which are not readily marketable
(except for repurchase agreements maturing in more than seven days).
(5) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE HIGH YIELD SERIES
The High Yield Series will operate under the general investment restrictions
described above. In addition, the High Yield Series will not:
(1) Purchase securities of any issuer (other than obligations of or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
as a result of such purchase, more than 10% of the value of its assets
would be invested in the securities of that issuer.
(2) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric, and gas utilities shall each be
considered a separate industry.
(3) Invest more than 10% of its total assets, taken at market value, in
securities of issuers which are not readily marketable (including
repurchase agreements maturing in more than seven days).
(6) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE MANAGED SECTORS SERIES:
The Managed Sectors Series will operate under the general investment
restrictions described above. In addition, the Managed Sectors Series will
not:
(1) Purchase the securities of any issuer (other than obligations of, or
guaranteed by the United States government, its agencies or
instrumentalities) if, as to 50% of the series' total assets, such
purchase, at the time thereof, would cause more than 5% of its total
assets, taken at market value, to be invested in the securities of such
issuer.
(2) Purchase voting securities of any issuer if, as to 50% of the value of
the series' assets, such purchase, at the time thereof, would cause more
than 10% of the outstanding voting securities of such issuer to be held by
the series.
(3) Invest more than 10% of its total assets, taken at market value, in
securities of issuers which are not readily marketable (including
repurchase agreements maturing in more than seven days).
The Managed Sectors Series has also adopted the following nonfundamental
investment policy, which may be changed by the series without approval of its
shareholders. The series' purchase of warrants will not exceed 5% of its
assets. Included within that amount, but not exceeding 2% of assets, may be
warrants for which there is no public market. Any such warrants will be valued
at their market value, except that warrants which are attached to securities
at the time such securities are acquired by the Managed Sectors Series will be
deemed to be without value for the purpose of this restriction.
(7) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE MONEY MARKET SERIES
The Money Market Series will operate under the general investment restrictions
described above. In addition, the Money Market Series will not:
(1) Purchase securities of any issuer (other than obligations of or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
as a result of such purchase, more than 5% of the value of its assets
would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer (for
this purpose all indebtedness of an issuer shall be deemed a single
class).
(3) Concentrate more than 25% of the value of its assets in any one
industry, provided that this restriction shall not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or certificates of deposit or securities issued or
guaranteed by domestic banks.
(4) Purchase equity securities, voting securities or local or state
government securities.
(5) Invest in securities of issuers which are not readily marketable
(except for repurchase agreements maturing in more than seven days).
(8) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE TOTAL RETURN SERIES:
The Total Return Series will operate under the general investment restrictions
described above. In addition, the Total Return Series will not:
(1) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the attainment of its investment objectives, up to
25% of its assets, taken at market value at the time of each investment,
may be invested in any one industry.
(2) Purchase the securities of any issuer (other than obligations of, or
guaranteed by the United States government, its agencies or
instrumentalities) if such purchase, at the time thereof, would cause more
than 5% of its total assets, taken at market value, to be invested in the
securities of such issuer.
(3) Purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held by the series, or purchase securities of any issuer
if such purchase at the time thereof, would cause the series to hold more
than 10% of any class of securities of such issuer. For this purpose, all
indebtedness of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class.
(4) Invest more than 10% of its total assets, taken at market value, in
securities of issuers which are not readily marketable (including
repurchase agreements maturing in more than seven days).
(9) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE WORLD GOVERNMENTS SERIES:
The World Governments Series will operate under the general investment
restrictions described above. In addition the World Governments Series will
not:
(1) Purchase the securities of any issuer (other than obligations of, or
guaranteed by the United States government, its agencies or
instrumentalities) if such purchase at the time thereof would cause more
than 10% of the voting securities of such issuer to be held by the series.
(2) Invest more than 10% of its total assets, taken at market value, in
securities of issuers which are not readily marketable (including
repurchase agreements maturing in more than seven days).
(10) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE ZERO COUPON SERIES
The Zero Coupon Series will operate under the general investment restrictions
described above. In addition, the Zero Coupon Series will not:
(1) Purchase securities of any issuer (other than the U.S. Treasury) if,
as a result of such purchase, more than 10% of the value of its assets
would be invested in securities of that issuer (for this purpose,
investments in certificates representing individual interests in pools of
U.S. Treasury securities will be treated as direct investments in U.S.
Treasury obligations).
(2) Purchase more than 10% of any class of securities of any issuer (for
this purpose all indebtedness of an issuer shall be deemed a single
class).
(3) Purchase equity securities, voting securities, securities of agencies
or instrumentalities of the United States Government which are not backed
by the full faith and credit of the United States Treasury.
(4) Invest in securities of issuers which are not readily marketable
(except for repurchase agreements maturing in more than seven days).
PERCENTAGE RESTRICTIONS: With respect to the above restrictions (1) through
(10) applicable to all series except the Emerging Growth Series, Research
Series, World Asset Allocation Series, World Growth Series, World Total Return
Series and the Utilities Series, if a percentage restriction is adhered to at
the time of investment, a later increase or decrease in percentage beyond the
specified limit resulting from a change in values or assets will not be
considered a violation of policy.
(11) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE UTILITIES SERIES
The Utilities Series will not:
(1) Borrow amounts in excess of 33 1/3% of its gross assets, and then only
as a temporary measure for extraordinary or emergency purposes, or pledge,
mortgage or hypothecate its assets (taken at market value) to an extent
greater than 33 1/3% of its gross assets, in each case taken at the lower
of cost or market value and subject to a 300% asset coverage requirement
(for the purpose of this restriction, collateral arrangements with respect
to options, Futures Contracts, Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies and payments of initial and
variation margin in connection therewith are not considered a pledge of
assets); while such borrowings exceed 5% of the series' gross assets, no
securities may be purchased; however, the series' may complete the
purchase of securities already contracted for;
(2) Underwrite securities issued by other persons except insofar as the
series may technically be deemed an underwriter under the Securities Act
of 1933 in selling a portfolio security;
(3) Invest 25% or more of the market value of its total assets in
securities of issuers in any one industry (excluding obligations of the
U.S. Government and repurchase agreements collateralized by obligations of
the U.S. Government), except that the series will invest at least 25% of
its total assets in the utilities industry; (4) Purchase or sell real
estate (including limited partnership interests but excluding securities
secured by real estate or interests therein), interests in oil, gas or
mineral leases, commodities or commodity contracts (except foreign
currencies, Forward Contracts, Futures Contracts, options, Options on
Futures Contracts and Options on Foreign Currencies) in the ordinary
course of its business. The series reserves the freedom of action to hold
and to sell real estate and commodities acquired as a result of the
ownership of securities;
(5) Make loans to other persons except through the lending of its
portfolio securities and except through repurchase agreements. For these
purposes the purchase of commercial paper or all or a portion of an issue
of debt securities shall not be considered the making of a loan;
(6) Invest for the purpose of exercising control or management;
(7) Purchase any securities or evidences of interest therein on margin,
except that the series may obtain such short-term credit as may be
necessary for the clearance of any transactions and except that the series
may make margin deposits in connection with Futures Contracts, Options on
Futures Contracts, Forward Contracts, options and Options on Foreign
Currencies;
(8) Sell any security which the series does not own unless by virtue of
its ownership of other securities the series has at the time of sale a
right to obtain securities without payment of further consideration
equivalent in kind and amount to the securities sold and provided that if
such right is conditional the sale is made upon the same conditions;
(9) Invest in illiquid investments, including securities which are subject
to legal or contractual restrictions on resale, or for which there is no
readily available market (e.g., trading in the security is suspended or,
in the case of unlisted securities, market makers do not exist or will not
entertain bids or offers), unless the Board of Trustees of the Series Fund
has determined that such securities are liquid based upon trading markets
for the specific security, if more than 15% of the series' assets (taken
at market value) would be invested in such securities.
Except with respect to Investment Restriction (1), these investment
restrictions applicable to the Utilities Series 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.
OTHER INVESTMENT POLICIES THAT APPLY ONLY TO THE UTILITIES SERIES
The Utilities Series has also adopted the following additional nonfundamental
investment policies that may be required by various laws and administrative
positions. These investment policies are not fundamental and may be changed by
the series without approval of its shareholders.
(a) Repurchase agreements maturing in more than seven days will be deemed to
be illiquid for purposes of the series' limitation on investment in illiquid
securities; (b) during the coming year, (i) less than 5% of the series' assets
will be used to engage in short sales permitted by Investment Restriction (8)
above and (ii) purchases of warrants will not exceed 5% of the series' net
assets (included within that amount, but not exceeding 2% of the series' net
assets, may be warrants not listed on the New York or American Stock
Exchange); (c) the series will not invest more than 5% of its total assets in
companies which, including their respective predecessors, have a record of
less than three years' continuous operation; (d) the series will not purchase
or retain in its portfolio any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Series Fund, or is a partner, officer or a director of the Adviser, if
after the purchase of the securities of such issuer by the series one or more
of such persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, of such issuer, and such persons owning more than 1/2 of
1% of such shares or securities together own beneficially more than 5% of such
shares or securities, or both; (e) the series will not write, purchase or sell
any put or call option or any combination thereof, provided that this shall
not prevent the series from writing, purchasing and selling puts, calls or
combinations thereof with respect to securities (including yields on
securities), indexes of securities, foreign currencies and futures contracts;
(f) the series may not purchase voting securities of any issuer if such
purchase, at the time thereof, would cause more than 10% of the outstanding
voting securities of such issuer to be held by the series (for this purpose,
all indebtedness of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class); (g) the series will not
purchase securities issued by any closed-end investment company except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market,
is part of a plan of merger or consolidation; provided, however, that the
series shall not purchase such securities if such purchase at the time thereof
would cause more than 10% of its total assets (taken at market value) to be
invested in the securities of such issuers, or more than 3% of the total
outstanding voting securities of any closed-end investment company to be held
by the series. The series shall not purchase securities issued by any open-end
investment company; (h) the series will only borrow amounts from banks and
then only as permitted by Investment Restriction (1); and (i) the Board of
Trustees of the Series Fund will determine a security is liquid based upon
trading markets for the specific security as stated in Investment Restriction
(9) only if the security is a Rule 144A restricted security.
(12) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE EMERGING GROWTH SERIES,
EQUITY INCOME SERIES, MASSACHUSETTS INVESTORS GROWTH STOCK SERIES, NEW
DISCOVERY SERIES, RESEARCH GROWTH AND INCOME SERIES, RESEARCH
INTERNATIONAL SERIES, RESEARCH SERIES, STRATEGIC INCOME SERIES, VALUE
SERIES, WORLD ASSET ALLOCATION SERIES, WORLD GROWTH SERIES AND WORLD
TOTAL RETURN SERIES (SEE (13) BELOW FOR TWO ADDITIONAL RESTRICTIONS
APPLICABLE ONLY TO THE EMERGING GROWTH SERIES AND RESEARCH SERIES)
None of these series may, except as indicated:
(1) borrow amounts in excess of 33 1/3% of its assets including amounts
borrowed, and then only as a temporary measure for extraordinary or
emergency purposes;
(2) underwrite securities issued by other persons except insofar as a
series may technically be deemed an underwriter under the Securities Act
of 1933 in selling a portfolio security;
(3) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein and
securities of companies, such as real estate investment trusts, which deal
in real estate or interests therein), interests in oil, gas or mineral
leases, commodities or commodity contracts (excluding currencies, any type
of option, any type of futures contract, and Forward Contracts) in the
ordinary course of its business. The series reserve the freedom of action
to hold and to sell real estate, mineral leases, commodities or commodity
contracts (including currencies, any type of option, any type of futures
contract, and Forward Contracts) acquired as a result of the ownership of
securities;
(4) issue any senior securities except as permitted by the 1940 Act. (For
purposes of this restriction, collateral arrangements with respect to any
type of option, any type of swap agreement, Forward Contracts and any type
of futures contract and collateral arrangements with respect to initial
and variation margin are not deemed to be the issuance of a senior
security);
(5) make loans to other persons. For these purposes the purchase of short-
term commercial paper, the purchase of a portion or all of an issue of
debt securities, the purchase of loan participations and other direct
indebtedness in accordance with its investment objectives, the lending of
portfolio securities, and the investment of a series' assets in repurchase
agreements shall not be considered the making of a loan; or
(6) purchase any securities of an issuer of a particular industry, if as a
result 25% or more of its gross assets would be invested in securities of
issuers whose principal business activities are in the same industry
(except for obligations issued or guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities and repurchase agreements
collateralized by such obligations).
Except with respect to Investment Restriction (1), these investment
restrictions and the investment restrictions below 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;
OTHER INVESTMENT POLICIES THAT APPLY TO THE BOND SERIES, EMERGING GROWTH
SERIES, EQUITY INCOME SERIES, MASSACHUSETTS INVESTORS GROWTH STOCK SERIES, NEW
DISCOVERY SERIES, RESEARCH GROWTH AND INCOME SERIES, RESEARCH INTERNATIONAL
SERIES, RESEARCH SERIES, STRATEGIC INCOME SERIES, VALUE SERIES, WORLD ASSET
ALLOCATION SERIES, WORLD GROWTH SERIES AND WORLD TOTAL RETURN SERIES
The Bond Series Emerging Growth Series, Equity Income Series, Massachusetts
Investors Growth Stock Series, New Discovery Series, Research Growth and
Income Series, Research International Series, Research Series, Strategy Income
Series, Value Series, World Asset Allocation Series, World Growth Series and
World Total Return Series have the following additional nonfundamental
policies which may be changed without shareholder approval. Each of these
Series will not:
(1) invest in illiquid investments, including securities subject to legal
or contractual restrictions on resale or for which there is no readily
available market (e.g., trading in the security is suspended, or, in the
case of unlisted securities, where no market exists) if more than 15% of
the series' net assets (taken at market value) would be invested in such
securities. Repurchase agreements maturing in more than seven days will be
deemed to be illiquid for purposes of this limitation. Securities that are
not registered under the 1933 Act and sold in reliance on Rule 144A
thereunder, but are determined to be liquid by the Series Fund's Board of
Trustees (or its delegee), will not be subject to this 15% limitation;
(2) invest for the purpose of exercising control or management.
(3) pledge, mortgage or hypothecate in excess of 33 1/3% of its gross
assets. For purposes of this restriction, collateral arrangements with
respect to any type of option, any type of futures contracts, any type of
swap agreement, Forward Contracts, short sales and payments of initial and
variation margin in connection therewith, in each case in accordance with
the Series' investment objectives and policies, are not considered a
pledge of assets;
OTHER INVESTMENT POLICIES THAT APPLY TO THE EMERGING GROWTH SERIES, RESEARCH
GROWTH AND INCOME SERIES, RESEARCH SERIES, VALUE SERIES, WORLD ASSET
ALLOCATION SERIES, WORLD GROWTH SERIES, AND WORLD TOTAL RETURN SERIES
The Emerging Growth Series, Research Growth and Income Series, Research
Series, Value Series, World Asset Allocation Series, World Growth Series, and
World Total Return Series have the following additional nonfundamental
policies which may be changed without shareholder approval. Each of these
Series will not:
(1) invest more than 5% of the value of the series' net assets, valued at
the lower of cost or market, in warrants. Included within such amount, but
not to exceed 2% of the value of the series' net assets, may be warrants
which are not listed on the New York or American Stock Exchange. Warrants
acquired by a series in units or attached to securities may be deemed to
be without value;
(2) purchase securities issued by any other investment company in excess
of the amount permitted by the 1940 Act, except when such purchase is part
of a plan of merger or consolidation;
(3) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or trustee of the
Series Fund, or is an officer or a director of the Adviser, or any Sub-
Adviser to the series, if one or more of such persons also owns
beneficially more than 1/2 of 1% of the securities of such issuer, and
such persons owning more than 1/2 of 1% of such securities together own
beneficially more than 5% of such securities;
(4) purchase any securities or evidences of interest therein on margin,
except that a Series may obtain such short-term credit as may be necessary
for the clearance of any transaction and except that a series may make
margin deposits in connection with any type of option, any type of futures
contract, any type of swap agreement and Forward Contracts entered into in
accordance with its investment objectives and policies;
(5) sell any security which the series does not own unless by virtue of
its ownership of other securities the series has at the time of sale a
right to obtain securities without payment of further consideration
equivalent in kind and amount to the securities sold and provided that if
such right is conditional, the sale is made upon the same conditions;
(6) invest more than 5% of its gross assets in companies which, including
predecessors, controlling persons, sponsoring entities, general partners
and guarantors, have a record of less than three years' continuous
operation or relevant business experience;
(7) purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent (a) the purchase, ownership, holding
or sale of (i) warrants where the grantor of the warrants is the issuer of
the underlying securities or (ii) put or call options or combinations
thereof with respect to securities, indexes of securities, foreign
currency, any type of swap agreement or any type of futures contracts or
(b) the purchase, ownership, holding or sale of contracts for the future
delivery of securities or currencies, in each case in accordance with the
series' investment objectives and policies;
(8) purchase securities while borrowings pursuant to fundamental
investment restriction (1) exceed 5% of the series' total assets; however,
a series may complete the purchase of securities already contracted for;
or
(13) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE EMERGING GROWTH SERIES AND
THE RESEARCH SERIES.
Neither the Emerging Growth Series nor the Research Series may:
(1) purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of its total assets (taken at market
value) to be invested in the securities of such issuer, other than U.S.
Government securities;
(2) purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held by the series; or purchase securities of any issuer
if such purchase at the time thereof would cause the series to hold more
than 10% of any class of securities of such issuer. For this purpose all
indebtedness of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class.
(14) INVESTMENT RESTRICTIONS THAT APPLY ONLY TO THE MFS/FOREIGN & COLONIAL
SERIES
None of these series may, except as indicated:
(1) borrow amounts in excess of 33 1/3% of its assets including amounts
borrowed;
(2) underwrite securities issued by other persons except insofar as a
series may technically be deemed an underwriter under the Securities Act
of 1933 in selling a portfolio security;
(3) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein and
securities of companies, such as real estate investment trusts, which deal
in real estate or interests therein), interests in oil, gas or mineral
leases, commodities or commodity contracts (excluding currencies, any type
of option, any type of futures contract, and Forward Contracts) in the
ordinary course of its business. The series reserve the freedom of action
to hold and to sell real estate, mineral leases, commodities or commodity
contracts (including currencies, any type of option, any type of futures
contract, and Forward Contracts) acquired as a result of the ownership of
securities;
(4) issue any senior securities except as permitted by the 1940 Act. (For
purposes of this restriction, collateral arrangements with respect to any
type of option, any type of swap agreement, Forward Contracts and any type
of futures contract and collateral arrangements with respect to initial
and variation margin are not deemed to be the issuance of a senior
security);
(5) make loans to other persons. For these purposes the purchase of short-
term commercial paper, the purchase of a portion or all of an issue of
debt securities, the purchase of loan participations and other direct
indebtedness in accordance with its investment objectives, the lending of
portfolio securities, and the investment of a series' assets in repurchase
agreements shall not be considered the making of a loan; or
(6) purchase any securities of an issuer of a particular industry, if as a
result 25% or more of its gross assets would be invested in securities of
issuers whose principal business activities are in the same industry
(except for obligations issued or guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities and repurchase agreements
collateralized by such obligations).
Except with respect to Investment Restriction (1), these investment
restrictions and the investment restrictions below 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;
OTHER INVESTMENT POLICIES THAT APPLY TO THE MFS/FOREIGN & COLONIAL SERIES
The MFS/Foreign & Colonial Series have the following additional nonfundamental
policies which may be changed without shareholder approval. Each of these
series will not:
(1) invest in illiquid investments, including securities subject to legal
or contractual restrictions on resale or for which there is no readily
available market (e.g., trading in the security is suspended, or, in the
case of unlisted securities, where no market exists) if more than 15% of
the series' net assets (taken at market value) would be invested in such
securities. Repurchase agreements maturing in more than seven days will be
deemed to be illiquid for purposes of this limitation. Securities that are
not registered under the 1933 Act and sold in reliance on Rule 144A
thereunder, but are determined to be liquid by the Series Fund's Board of
Trustees (or its delegee), will not be subject to this 15% limitation;
(2) invest more than 10% of the value of the series' net assets, valued at
the lower of cost or market, in warrants. Included within such amount may
be warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by a series in units or attached to securities
may be deemed to be without value;
(3) purchase securities issued by any other investment company in excess
of the amount permitted by the 1940 Act, except when such purchase is part
of a plan of merger or consolidation;
(4) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or trustee of the
Series Fund, or is an officer or a director of the Adviser, or any Sub-
Adviser to the series, if one or more of such persons also owns
beneficially more than 1/2 of 1% of the securities of such issuer, and
such persons owning more than 1/2 of 1% of such securities together own
beneficially more than 5% of such securities;
(5) purchase any securities or evidences of interest therein on margin,
except that a series may obtain such short-term credit as may be necessary
for the clearance of any transaction and except that a series may make
margin deposits in connection with any type of option, any type of futures
contract, any type of swap agreement and Forward Contracts;
(6) sell any security which the series does not own unless by virtue of
its ownership of other securities the series has at the time of sale a
right to obtain securities without payment of further consideration
equivalent in kind and amount to the securities sold and provided that if
such right is conditional, the sale is made upon the same conditions;
(7) invest more than 5% of its gross assets in companies which, including
predecessors, controlling persons, sponsoring entities, general partners
and guarantors, have a record of less than three years' continuous
operation or relevant business experience;
(8) pledge, mortgage or hypothecate in excess of 33 1/3% of its gross
assets. For purposes of this restriction, collateral arrangements with
respect to any type of option, any type of futures contracts, any type of
swap agreement, Forward Contracts and payments of initial and variation
margin in connection therewith are not considered a pledge of assets;
(9) borrow, except as a temporary measure for extraordinary or emergency
purposes;
(10) purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent (a) the purchase, ownership, holding
or sale of (i) warrants where the grantor of the warrants is the issuer of
the underlying securities or (ii) put or call options or combinations
thereof with respect to securities, indexes of securities, or foreign
currency, or (iii) any type of swap agreement or any type of futures
contracts or (b) the purchase, ownership, holding or sale of contracts for
the future delivery of securities or currencies; or
(11) invest for the purpose of exercising control or management.
------------------------
INSURANCE LAW RESTRICTIONS: In connection with the Series Fund's agreement to
sell shares to the Variable Accounts, MFS and Sun Life of Canada (U.S.), Sun
Life (N.Y.) or any of their affiliated companies may enter into agreements,
required by certain state insurance departments, under which MFS may agree to
use its best efforts to ensure that the Series Fund complies with the
investment restrictions and limitations prescribed by state insurance laws,
and the regulations promulgated thereunder, insofar as such investment
restrictions and limitations are applicable to the investment of assets of the
Variable Accounts in shares of the Series Fund, and to permit Sun Life of
Canada (U.S.), Sun Life (N.Y.) or any of their affiliated companies to monitor
investments made by the Series Fund to ensure compliance with those
restrictions and limitations. If the Series Fund fails to comply with such
restrictions or limitations, the Variable Accounts will take appropriate
action which might include ceasing to make investments in the Series Fund or
ceasing to issue Contracts in the state imposing the limitation. It is not
expected that such restrictions and limitations will have a significant impact
on the operations of the Series Fund.
3. MANAGEMENT OF THE SERIES FUND
The Series Fund's Board of Trustees provides broad supervision over the
affairs of the Series Fund. MFS is responsible for the investment management
of each series, and the officers of the Series Fund are responsible for the
Series Fund's operations. The Trustees and officers are listed below, together
with their principal occupations during the past five years. (Their titles may
have varied during that period.)
TRUSTEES
SAMUEL ADAMS (born 10/19/25)
Partner, Warner & Stackpole (Attorneys)
Address: 75 State Street, Boston, Massachusetts
GARTH MARSTON (born 4/28/26)
Chairman-Retired, Provident Institution for Savings
Address: 90 Beacon Street, Boston, Massachusetts
JOHN D. McNEIL*, Chairman (born 2/17/34)
Chairman and Director, Sun Life Assurance Company of Canada
Address: 150 King Street West, Toronto, Ontario, Canada
GEOFFREY CROFTS (born 5/12/24)
Professor Emeritus, University of Hartford
Address: 74 Scott Drive, Bloomfield, Connecticut
DAVID D. HORN* (born 6/7/41)
Senior Vice President and General Manager, Sun Life Assurance Company of
Canada
Address: One Sun Life Executive Park, Wellesley Hills, Massachusetts
DERWYN F. PHILLIPS (born 8/31/30)
Vice Chairman-Retired, The Gillette Company
Address: One Cliff Street, Marblehead, Massachusetts
OFFICERS
W. THOMAS LONDON*, Treasurer (born 3/1/44)
Senior Vice President and Assistant Treasurer, Massachusetts Financial
Services Company
Address: 500 Boylston Street, Boston, Massachusetts
JAMES O. YOST*, Assistant Treasurer (born (6/12/60)
Vice President, Massachusetts Financial Services Company
Address: 500 Boylston Street, Boston, Massachusetts
MARK E. BRADLEY*, Assistant Treasurer (born 11/23/59)
Massachusetts Financial Services Company, Vice President (since March 1997);
Putnam Investments, Vice President (from September 1994 until March 1997);
Ernst & Young, Senior Tax Manager (prior to September 1994).
ELLEN MOYNIHAN,* Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President (since September
1996); Deloitte & Touche, LLP, Senior Manager (prior to September 1996).
STEPHEN E. CAVAN,* Secretary and Clerk (born 11/6/53)
Senior Vice President, General Counsel and Assistant Secretary, Massachusetts
Financial Services Company
Address: 500 Boylston Street, Boston, Massachuetts
JAMES R. BORDEWICK, JR.,* Assistant Secretary (born 3/6/59)
Senior Vice President and Associate General Counsel, Massachusetts Financial
Services Company
Address: 500 Boylston Street, Boston, Massachusetts
- ------------
*"Interested persons" (as defined in the 1940 Act) of MFS whose address is 500
Boylston Street, Boston, Massachusetts.
All of the Trustees are also Members of the Boards of Managers of Money Market
Variable Account, High Yield Variable Account, Capital Appreciation Variable
Account, Government Securities Variable Account, World Governments Variable
Account, Total Return Variable Account and Managed Sectors Variable Account,
which were established by Sun Life of Canada (U.S.) in connection with the
sale of Compass combination fixed/variable annuity contracts. The officers of
the Series Fund hold similar offices for these variable accounts. Mr. McNeil
is a Director of MFS, the Series Fund's investment adviser and Chairman of the
Boards of Managers of the aforementioned variable accounts.
No Trustee or Officer owned shares of the Series Fund on the date of this SAI.
The Series Fund's Declaration of Trust provides that the Series Fund will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Series Fund, unless it is finally adjudicated or, in case of
a settlement, it has been determined by fair and reasonable means, that they
have not acted in good faith in the reasonable belief that their actions were
in the best interests of the Series Fund. However, no indemnification will be
paid to any Trustee or Officer for any liability to the Series Fund or its
shareholders which arose by reason of his wilful misfeasance, bad faith, gross
negligence or reckless disregard of his duties.
INVESTMENT ADVISER
MFS is the investment adviser of the Series Fund and in such capacity manages
the portfolio of each series. MFS also serves as investment adviser to the
funds in the MFS Family of Funds, and to certain other registered investment
companies established by MFS and/or Sun Life of Canada (U.S.). MFS
Institutional Advisors, Inc., a wholly owned subsidiary of MFS, provides
investment advice to substantial private clients. For information concerning
the allocation by MFS of simultaneous securities transactions for different
clients, see "Portfolio Transactions and Brokerage Commissions."
MFS and its predecessor organizations have a history of money management
dating from 1924. MFS is a subsidiary of Sun Life of Canada (U.S.) which in
turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life"). The Prospectus contains information with respect to the
management of the Adviser and other investment companies for which MFS serves
as investment adviser.
INVESTMENT ADVISORY AGREEMENTS -- MFS manages the series pursuant to
investment advisory agreements as noted below:
DATE OF INVESTMENT
SERIES ADVISORY AGREEMENT
- -------------------------------------------------------------------------------
Money Market, High Yield and Capital Appreciation .......... May 24, 1985
Government Securities, Conservative Growth and Zero Coupon . July 23, 1986
World Governments, Total Return and Managed Sectors ........ January 26,1988
World Growth and Utilities ................................. November 1,1993
Research, World Asset Allocation and World Total Return .... September 16, 1994
Emerging Growth ............................................ May 1, 1995
Each of the MFS/Foreign & Colonial Series .................. September 1, 1995
Value ...................................................... May 1, 1996
Research Growth and Income ................................. May 12, 1997
Bond Series, Equity Income Series, Massachusetts Investors
Growth Stock Series, New Discovery Series, Research
International Series and Strategic Income Series ......... [May 1, 1998]
MFS provides each series of the Series Fund with overall investment advisory
services. Subject to such policies as the Trustees may determine, MFS makes
investment decisions for each series of the Series Fund. For these services,
MFS receives an annual management fee, computed and paid monthly, as disclosed
in the Prospectus under the heading "Management of the Series Fund."
For the fiscal years ended December 31, 1996, 1995 and 1994, the Series paid
the following management fees ("average daily net assets" below has been
abbreviated as "ADNA"):
<TABLE>
<CAPTION>
MANAGEMENT FEES
MANAGEMENT FEES PAID WAIVED BY ADVISER
FOR FISCAL YEAR ENDED FOR FISCAL YEAR
SERIES 1996 % ADNA ENDED 1996 % ADNA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market .............. $1,658,426 0.50% N/A N/A
Government Securities ..... 2,121,808 0.55% N/A N/A
High Yield ................ 1,252,812 0.75% N/A N/A
Capital Appreciation ...... 7,006,502 0.75% N/A N/A
Conservative Growth ....... 2,320,310 0.55% N/A N/A
World Governments ......... 1,091,953 0.75% N/A N/A
Total Return .............. 8,228,127 0.68% N/A N/A
Managed Sectors ........... 1,729,822 0.75% N/A N/A
Zero Coupon ............... 11,094 0.25% N/A N/A
World Growth .............. 1,633,811 0.90% N/A N/A
Research .................. 1,401,185 0.75% N/A N/A
Utilities ................. 418,966 0.75% N/A N/A
World Asset Allocation .... 390,024 0.75% N/A N/A
World Total Return ........ 194,413 0.75% N/A N/A
Emerging Growth ........... 956,932 0.61% $225,349 0.14%
MFS/Foreign & Colonial
International Growth and
Income .................... 185,572 0.78% 44,482 0.19%
MFS/Foreign & Colonial
International Growth(1) ... N/A N/A 14,479 0.975%
MFS/Foreign & Colonial
Emerging Markets Equity(2) N/A N/A 11,151 1.25%
Value(1) .................. N/A N/A 27,382 0.75%
- ----------
(1) From the commencement of investment operations on June 3, 1996.
(2) From the commencement of investment operations on June 5, 1996.
<CAPTION>
MANAGEMENT FEES
MANAGEMENT FEES PAID WAIVED BY ADVISER
FOR FISCAL YEAR ENDED FOR FISCAL YEAR
SERIES 1995 % ADNA ENDED 1995 % ADNA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market .............. $1,204,609 0.50% N/A N/A
Government Securities ..... 1,877,922 0.55% N/A N/A
High Yield ................ 990,965 0.75% N/A N/A
Capital Appreciation ...... 4,876,631 0.75% N/A N/A
Conservative Growth ....... 1,160,504 0.55% N/A N/A
World Governments ......... 1,136,612 0.75% N/A N/A
Total Return .............. 6,671,672 0.70% N/A N/A
Managed Sectors ........... 1,202,378 0.75% N/A N/A
Zero Coupon ............... 8,185 0.25% N/A N/A
World Growth .............. 1,090,977 0.90% N/A N/A
Research .................. 106,482 0.38% $105,489 0.37%
Utilities ................. 70,277 0.24% 148,727 0.51%
World Asset Allocation .... 41,031 0.31% 57,610 0.44%
World Total Return ........ 21,382 0.33% 27,327 0.42%
Emerging Growth(1) ........ N/A N/A 149,156 0.75%
MFS/Foreign & Colonial
International Growth and
Income(2) ................. N/A N/A 7,653 0.98%
- ----------
(1) From the commencement of investment operations on May 1, 1995.
(2) From the commencement of investment operations on October 2, 1995.
<CAPTION>
MANAGEMENT FEES
MANAGEMENT FEES PAID WAIVED BY ADVISER
FOR FISCAL YEAR ENDED FOR FISCAL YEAR
SERIES 1994 % ADNA ENDED 1994 % ADNA
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market .............. $1,090,506 0.50% N/A N/A
Government Securities ..... 1,872,095 0.55% N/A N/A
High Yield ................ 745,658 0.75% N/A N/A
Capital Appreciation ...... 3,421,246 0.75% N/A N/A
Conservative Growth ....... 699,509 0.55% N/A N/A
World Governments ......... 1,086,621 0.75% N/A N/A
Total Return .............. 5,700,358 0.68% N/A N/A
Managed Sectors ........... 843,914 0.75% N/A N/A
Zero Coupon ............... 21,500 0.25% N/A N/A
Research .................. N/A N/A $ 2,145 0.75%
Utilities ................. N/A N/A 109,624 0.75%
World Asset Allocation(1) . N/A N/A 1,577 0.75%
World Total Return(1) ..... N/A N/A 773 0.75%
World Growth .............. 111,479 0.17% 472,698 0.73%
- ----------
(1) From the commencement of investment operations on November 7, 1994.
</TABLE>
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the expenses of the MFS/Foreign & Colonial Emerging Markets
Equity Series and the Research Growth and Income Series such that each such
series' "Total Operating Expenses," which are defined to include all series'
expenses except for interest, taxes, brokerage commissions and extraordinary
expenses, do not exceed 1.50% 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 Series' fiscal year in which such series' "Total
Operating Expenses" are less than or equal to the Maximum Percentage.
MFS has agreed to bear the expenses of the Capital Appreciation Series,
Conservative Growth Series, Government Securities Series, High Yield Series,
Managed Sectors Series, Money Market Series, Total Return Series, World
Governments Series and Zero Coupon Series such that each such series' "Total
Operating Expenses," which are defined to include all series' expenses except
for interest, taxes, brokerage commissions and extraordinary expenses, do not
exceed 1.25% per annum of its average daily net assets. The obligation of MFS
to bear these expenses continues indefinitely.
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the expenses of the Bond Series, Equity Income Series,
Massachusetts Investors Growth Stock Series, New Discovery Series, Research
International Series and Strategic Income Series, such that the Series' "Other
Expenses," which are defined to include all Series expenses except for
management fees, taxes, extraordinary expenses, brokerage and transaction
costs, do not exceed 0.40%, 0.25%, 0.25%, 0.35%, 0.50%, and 0.50% per annum,
respectively, 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 Series Fund pays the compensation of the four Trustees who are not
affiliated with MFS or Sun Life of Canada (U.S.) (who will each receive from
the Series Fund $1,500 to $3,300 annually, depending on attendance at
meetings) and all expenses (other than those assumed by MFS), including
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Series Fund, fees and expenses of
independent auditors, of legal counsel and of any transfer agent or registrar
of the Series Fund, expenses of repurchasing and redeeming shares, expenses of
preparing, printing and mailing shareholder reports, notices, proxy statements
and reports to governmental officers and commissions, brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions including currency conversion costs, insurance premiums,
fees and expenses of State Street Bank and Trust Company, the Series Fund's
Custodian, for all services to the Series Fund, including safekeeping of funds
and securities and maintaining required books and accounts, expenses of
calculating the net asset value of the shares of each series, and expenses of
shareholder meetings. Payment by the Series Fund of brokerage commissions for
brokerage and research services of value to MFS in serving its clients is
discussed under the caption "Portfolio Transactions and Brokerage
Commissions." Expenses of the Series Fund which are not attributable to a
specific series are allocated among the series in a manner believed to be fair
and equitable to each.
The Investment Advisory Agreements will remain in effect until November 1,
1997 (except for the Investment Advisory Agreement for the Research Growth and
Income Series, which will remain in effect until May 12, 1999) and will
continue in effect thereafter only if such continuance is specifically
approved at least annually by the Series Fund's Board of Trustees or by the
vote of a majority of the outstanding voting securities of each series and, in
either case, by a majority of the Trustees who are not parties to the Advisory
Agreements or interested persons of any such party. The Advisory Agreements
terminate automatically if assigned and, since they are severable with respect
to each series, may be terminated with respect to any series without penalty
by vote of a majority of the outstanding voting securities of that series or
by either party on not more than 60 days' nor less than 30 days' written
notice. The Advisory Agreements provide that MFS may render services to others
and that neither MFS nor its personnel shall be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or
for any act or omission in the execution and management of the Series Fund,
except for wilful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under the Advisory Agreements.
SUB-ADVISER TO THE MFS/FOREIGN & COLONIAL SERIES
As discussed in the Prospectus, FCM serves as sub-adviser to the MFS/Foreign &
Colonial Series pursuant to separate Sub-Advisory Agreements, each dated
September 1, 1995, between the Adviser and FCM (the "FCM Sub-Advisory
Agreements"). FCEM serves as sub-adviser to the MFS/Foreign & Colonial Series
pursuant to separate Sub-Advisory Agreements, each dated September 1, 1995,
between FCM and FCEM (the "FCEM Sub-Advisory Agreements").
Each Sub-Advisory Agreement will remain in effect until November 1, 1997, and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by the Series Fund's Board of Trustees or by the
vote of a majority of the relevant series' outstanding voting securities, and,
in either case, by a majority of the Trustees who are not parties to the Sub-
Advisory Agreement or interested persons of any such party. Each FCM Sub-
Advisory Agreement terminates automatically if it is assigned or if the
Advisory Agreement has terminated for any reason, and may be terminated
without penalty by the Trustees, by vote of a majority of the relevant series'
outstanding voting securities, by the Adviser on not less than 30 days' nor
more than 60 days' written notice or by FCM on not less than 60 days' nor more
than 90 days' written notice. Each FCEM Sub-Advisory Agreement terminates
automatically if it is assigned or in the event that the FCM Sub-Advisory
Agreement or the Advisory Agreement shall have terminated for any reason, and
may be terminated without penalty by the Trustees, by vote of a majority of
the relevant series' outstanding voting securities, by the Adviser or by FCM
on not less than 30 days' nor more than 60 days' written notice or by FCEM on
not less than 60 days' nor more than 90 days' written notice.
Each FCM Sub-Advisory Agreement provides that if FCM ceases to serve as the
sub-adviser to the series, the series will change its name so as to delete the
words "Foreign & Colonial" and that FCM may render services to others and may
permit other fund clients to use the words "Foreign & Colonial" in their
names. Each Sub-Advisory Agreement specifically provides that neither FCM or
FCEM, as the case may be, nor its personnel shall be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or
for any act or omission in the execution and management of the relevant
series, except for wilful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Sub-Advisory Agreement.
For the periods ended December 31, 1996 and 1995, FCM received and/or waived
the following fees:
<TABLE>
<CAPTION>
RECEIVED WAIVED RECEIVED WAIVED
SERIES 1996 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS/F&C International Growth ............................................... N/A $11,880 N/A N/A
MFS/F&C International Growth and Income .................................... $113,776 25,053 N/A $721
MFS/F&C Emerging Markets Equity ............................................ N/A 8,964 N/A N/A
</TABLE>
SUB-ADVISERS TO THE WORLD GROWTH SERIES
As discussed in the Prospectus, FCM and FCEM also serve as sub-advisers to the
World Growth Series. FCM serves as sub-adviser to the series pursuant to a
Sub-Advisory Agreement dated May 1, 1996, between MFS and FCM. FCEM serves as
sub-adviser to the series pursuant to a Sub-Investment Advisory Agreement
dated May 1, 1996, between FCM and FCEM. The terms of these agreements are
substantially similar to the FCM and FCEM Sub-Advisory Agreements discussed
above.
Prior to May 1, 1996 and November 1, 1996, MFS had retained Batterymarch
Financial Management, Inc. ("Batterymarch") and Oechsle International
Advisers, Inc. ("Oechsle"), respectively, as sub-advisers to the World Growth
Series. Under this arrangement, the World Growth Series paid an investment
advisory fee to MFS and MFS paid sub-advisory fees to Batterymarch and
Oechsle.
On April 29, 1996, shareholders of the World Growth Series approved the
replacement of Batterymarch as a sub-adviser to the World Growth Series with
FCM and its subsidiary, FCEM. Effective November 1, 1996, MFS terminated
Oechsle as a sub-adviser to the World Growth Series. On November 1, 1996, MFS
began managing the assets of the World Growth Series previously managed by
Oechsle. These assets are managed by MFS using a committee of investment
research analysts as described in the Prospectus under the caption "Management
of the Series Fund-Investment Adviser." A further description of FCM and FCEM
is contained in the Prospectus under the caption "Management of the Series
Fund-Sub-Investment Advisers."
For the periods ended December 31, 1996 and 1995, Batterymarch, Oechsle and
FCM received the following fees:
SUB-ADVISER 1996 1995
- ------------------------------------------------------------------------------
Batterymarch ....................................... $110,377 $206,294
Oechsle ............................................ 223,505 180,863
FCM ................................................ 268,449 N/A
ADMINISTRATOR
MFS provides each series with certain administrative services pursuant to a
Master Administrative Services Agreement dated March 1, 1997. Under this
Agreement, MFS provides each series with certain financial, legal, compliance,
shareholder communications and other administrative services. As a partial
reimbursement for the cost of providing these services. Each series' pays MFS
an administrative fee up to 0.015% per annum of each series' average daily net
assets, provided that the administrative fee is not assessed on series' assets
that exceed $3 billion.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Series Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Series Fund's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest and
dividends on the Series Fund's investments, maintaining books of original
entry for portfolio and fund accounting and other required books and accounts,
and calculating the daily net asset value, public offering price and
redemption price of shares of the Series Fund. The Custodian has contracted
with the Adviser for the Adviser to perform certain accounting functions
related to options transactions for which the Adviser receives remuneration on
a cost basis. The Custodian does not determine the investment policies of the
Series Fund or decide which securities the Series Fund will buy or sell. The
Series Fund may, however, invest in securities of the Custodian and may deal
with the Custodian as principal in securities transactions. Portfolio
securities may be deposited into the Federal Reserve-Treasury Department Book
Entry System, the Depository Trust Company, or the Mortgage Backed Securities
Clearing Corporation.
TRUSTEE COMPENSATION TABLE
TOTAL TRUSTEE FEES
TRUSTEE FEES FROM SERIES FUND
TRUSTEE FROM EACH SERIES AND FUND COMPLEX(2)
- ---------------------------------------------------------------------------
Samuel Adams ................ $158 $23,500
Geoffrey Crofts ............. 174 26,200
David D. Horn ............... 0 0**
John D. McNeil .............. 0 0**
Garth Marston ............... 158 23,500
Derwyn F. Phillips .......... 158 23,500
- ----------
(1) For the year ended December 31, 1996.
(2) Information provided for calendar year 1996. All Trustees receiving
compensation from the Series Fund served as Trustees of 27 funds within
the MFS Fund complex having aggregate net assets at December 31, 1996 of
$6.9 billion.
** Messrs. Horn and McNeil are affiliated with MFS and receive no
compensation from the Series Fund.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Series Fund's shareholder servicing agent, pursuant
to a Shareholder Servicing Agreement effective August 1, 1985 (the "Agency
Agreement"). The Shareholder Servicing Agent's responsibilities under the
Agency Agreement include administering and performing transfer agent functions
and the keeping of records in connection with the issuance, transfer and
redemption of the shares of the Series Fund. In addition, State Street Bank
and Trust Company, the dividend and distribution disbursing agent for the
Series Fund, has contracted with the Shareholder Servicing Agent to administer
and perform certain dividend and distribution disbursing functions for the
Series Fund. For these services, the Shareholder Servicing Agent will receive
a fee based on the number of accounts in the Series Fund, computed and paid
monthly. In addition, the Shareholder Servicing Agent will be reimbursed by
the Series Fund for certain expenses incurred by the Shareholder Servicing
Agent on behalf of the Series Fund.
4. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
The financial statements incorporated in this SAI by reference from the Series
Fund's Annual Report to shareholders for the year ended December 31, 1996 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing. A copy of the Annual Report
accompanies this SAI.
5. ADDITIONAL INFORMATION WITH RESPECT TO SHARES OF EACH SERIES
PURCHASES
Sun Life of Canada (U.S.) and Sun Life (N.Y.) buy shares of each series for
their Variable Accounts without a sales charge at their net asset value
through the allocation of purchase payments made under Contracts issued by Sun
Life of Canada (U.S.) and Sun Life (N.Y.) in accordance with the allocation
instructions received from owners of the Contracts.
EXCHANGE PRIVILEGE
Shares of any series of the Series Fund may be exchanged for shares of any
other series of the Series Fund (if shares of that series are available for
purchase) at net asset value so as to facilitate exchanges among Sub-Accounts
of the Variable Accounts, as described in the prospectuses for the Variable
Accounts. See the Prospectus for a further discussion of the exchange
privilege.
NET ASSET VALUE, DIVIDENDS AND DISTRIBUTIONS
The Net Asset Value of each series is determined once daily as of the close of
regular trading on the New York Stock Exchange on each day the Exchange is
open for trading. As of the date of this SAI, the Exchange is open for trading
every weekday except for the following holidays (or the days on which they are
observed): New Year's Day, Martin Luther King Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
MONEY MARKET SERIES -- All the Net Income, as defined below, of the Money
Market Series determined at the times stated above is declared as a dividend
to its shareholders at the time of such determination. (Shares purchased
become entitled to dividends declared as of the first day following the date
of investment.) Dividends are distributed on the last business day of each
month. If paid in the form of additonal shares, dividends are paid at the rate
of one share (and fraction thereof) for each one dollar (and fraction thereof)
of dividend income attributable to the Money Market Series.
For this purpose the Net Income of the Money Market Series (from the time of
the immediately preceding determination thereof) shall consist of (i) all
interest income accrued on the portfolio assets of the series, (ii) less all
actual and accrued expenses of the series determined in accordance with
generally accepted accounting principles, and (iii) plus or minus net realized
or net unrealized gains and losses on the assets of the series. Interest
income shall include discount earned (including both original issue and market
discount) on discount paper accrued ratably to the date of maturity.
Securities are valued at amortized cost, which the Trustees have determined in
good faith constitutes fair value for the purposes of complying with the 1940
Act. This valuation method will continue to be used until such time as the
Trustees determine that it does not constitute fair value for such purposes.
Since the Net Income of the Money Market Series is declared as a dividend each
time the Net Income of that series is determined, the net asset value per
share of that series (i.e., the value of the net assets of that series divided
by the number of its shares outstanding) remains at $1.00 per share
immediately after each such determination and dividend declaration.
It is expected that the Money Market Series will have a positive Net Income at
the time of each determination thereof. If for any reason the Net Income
determined at any time is a negative amount, which could occur, for instance,
upon default by an issuer of a portfolio security, the Series Fund will first
offset the negative amount with respect to each shareholder account against
the dividends declared during the month with respect to each such account. If
and to the extent that such negative amount exceeds such declared dividends at
the end of the month, the Series Fund will reduce the number of outstanding
shares of the Money Market Series by treating each shareholder of that series
as having contributed to the capital of that series that number of full and
fractional shares in the account of such shareholder which represents his
proportion of the negative amount. Each shareholder of the Money Market Series
will be deemed to have agreed to such contribution in these circumstances by
his investment in that series. This procedure will permit the net asset value
per share of the Money Market Series to be maintained at a constant $1.00 per
share. There can be no assurance that the Money Market Series will be able to
maintain a stable net asset value of $1.00 per share other than by such offset
of dividends or reduction in the number of shares in a shareholder account.
ALL SERIES OTHER THAN THE MONEY MARKET SERIES -- With respect to these series,
the determination of net asset value per share is made by deducting the
liabilities of each series from the value of its assets and dividing the
difference by the number of its shares outstanding. Equity securities in the
portfolio of a series are normally valued at the last sale price during
regular hours on the exchange on which they are primarily traded or on the
NASDAQ system for unlisted national market issues, or at the last quoted bid
price for unlisted securities or listed securities in which there were no
sales during that day. Debt securities of U.S. issuers (other than short-term
obligations) in the portfolio of any of these series are normally valued on
the basis of valuations provided by a pricing service since such prices are
believed to reflect the fair value of such securities. Prices provided by the
pricing service may be determined without exclusive reliance on quoted prices
and may take into account appropriate factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data.
Forward Contracts will be valued using a pricing model taking into
consideration market data from an external pricing source. Use of the pricing
services has been approved by the Board of Trustees. Short-term obligations in
the portfolios of any of these series (i.e., obligations maturing in not more
than sixty days) are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer supplied valuations.
All other securities, futures contracts and options in the series' portfolio
(other than short-term obligations) for which the principal market is one or
more securities or commodities exchanges (whether domestic or foreign) will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available,
be valued at current bid prices, unless such securities are reported on the
NASDAQ system, in which case they are valued at the last sale price or, if no
sales occurred during the day, at the last quoted bid price. Portfolio
securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Board of
Trustees.
All investments and assets are expressed in U.S. dollars based upon current
currency exchange rates.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of regular trading on the exchange.
Occasionally, events affecting the values of such securities may occur between
the times at which they are determined and the close of regular trading on the
exchange which will not be reflected in the computation of the series' net
asset value unless the Trustees deem that such event would materially affect
the net asset value in which case an adjustment would be made.
The Bond Series, Conservative Growth Series, Equity Income Series, High Yield
Series, Government Securities Series, Research Growth and Income Series,
Strategic Income Series, World Governments Series, Total Return Series, Zero
Coupon Series and Utilities Series receive dividends, interest or other
earnings from substantially all of their investments. Substantially all of the
net income of all series (other than the Money Market Series, which is
discussed above) is paid to their shareholders as a dividend at least
annually. Each series will also distribute its net profits from the sale of
securities, if any, on at least an annual basis.
DISTRIBUTIONS -- The Variable Accounts can choose to receive distributions
from the Series Fund in either cash or additional shares. It is expected that
the Variable Accounts will choose to receive distributions in additional
shares. If the Variable Accounts choose to receive distributions in cash, they
will reinvest the cash in the Series Fund to purchase additional shares at
their net asset value.
TAX STATUS
Each series and each portfolio of the zero coupon Series is treated as a
separate entity for federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"). Each individual series or portfolio of
the Series Fund has elected to be treated and intends to qualify each year as
a "regulated investment company" under Subchapter M of the Code by meeting all
applicable requirements of subchapter M, including requirements as to the
nature of a series' or portoflio's gross income, the amount of its
distributions, and the composition of its portfolio assets. Because each
series or portfolio intends to distribute all of its net investment income and
realized capital gains to its shareholders, and should, therefore, pay no
federal income tax. Distributions by the Series Fund, to the extent applied to
increase reserves under the Contracts, are not taxable to Sun Life of Canada
(U.S.) or Sun Life (N.Y.). If any series or portfolio should fail to qualify
as a "regulated investment company" in any year, that series or portfolio
would incur a regular corporate federal income tax upon its taxable income,
and its distributions would generally be taxable as ordinary income to its
shareholders. In accordance with the timing requirements imposed by the Code,
it is not expected that any series or portfolio will be required to pay any
federal income or excise taxes, although a series' foreign source income may
be subject to foreign withholding taxes.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional Shares of Beneficial Interest (without par value) and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in the Series Fund.
The Series Fund presently has twenty-six series of shares and has reserved the
right to create additional series of shares. Each share of a series represents
an equal proportionate interest in that series with each other share of that
series. Shares of each series participate equally in the earnings, dividends
and assets of that series. Shares when issued are fully paid and non-
assessable. Shares of each series are 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 or selection of
Trustees and accountants. Upon liquidation of the Series Fund, shareholders of
each series would be entitled to share pro rata in the net assets of their
respective series available for distribution to shareholders.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have under certain circumstances the right to remove one or more
Trustees. No material amendment may be made to the Declaration of Trust
without the affirmative vote of a majority of the outstanding shares of the
Series Fund. For a discussion of the manner in which the Variable Account will
vote its shares, see the prospectuses for the Contracts. No shares of any
series have pre-emptive or conversion rights. The Series Fund may be
terminated (i) upon the sale of its assets to another open-end management
investment company, if approved by the vote of the holders of a majority (as
defined in the 1940 Act) of the outstanding shares of the Series Fund, or (ii)
upon liquidation and distribution of the assets of the Series Fund, if
approved by the vote of the holders of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of the Series Fund,
or (iii) by the Trustees by written notice to the shareholders of the Series
Fund. If not so terminated, the Series Fund will continue indefinitely.
The Series Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of any series of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the Series Fund. However, the Declaration of Trust
contains an express disclaimer of shareholder liability for acts or
obligations of the Series Fund and provides for indemnification and
reimbursement of expenses out of the Series Fund property for any shareholder
held personally liable for the obligations of the Series Fund. The Declaration
of Trust also provides that the Series Fund shall maintain appropriate
insurance (for example, fidelity bonding or errors and omissions insurance)
for the protection of the Series Fund, shareholders of each of its series,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Series Fund itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the Series Fund
are not binding upon the Trustees individually but only upon the property of
the Series Fund and that the Trustees will not be liable for errors of
judgment or mistakes of fact or law, but nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for each series or sub-
series of the Series Fund are made by a portfolio manager for that series or
sub-series each of whom is an employee of MFS appointed and supervised by its
senior officers or by persons affiliated with a Sub-Adviser. Any such person
may serve other clients of the Adviser or a Sub-Adviser or any subsidiary of
the Adviser or a Sub-Adviser in a similar capacity. Changes in the investments
of each series are reviewed by the Board of Trustees.
The primary consideration in placing portfolio security transactions for each
series is "best execution," i.e., execution at the most favorable prices and
in the most effective manner possible. In certain instances there may be
securities which are suitable for the portfolio of one or more series of the
Series Fund as well as for that of one or more of the Adviser's or a Sub-
Adviser's other clients. Investment decisions for each series of the Series
Fund and for such other clients are made with a view to achieving their
respective investment objectives. It may develop that a particular security is
bought or sold for only one client even though it might be held by, or bought
or sold for, other clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to
be equitable to each. It is recognized that in some cases this system could
have a detrimental effect on the price or volume of the security as far as any
series of the Series Fund is concerned. In other cases, however, the Series
Fund believes that the ability of the series to participate in volume
transactions will produce better executions for the series.
Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Adviser or a Sub-Adviser may
consider the sale of Contracts, and thus the sale of Series Fund shares
through the allocation of purchase payments from the Contracts, as a factor in
the selection of broker-dealers to execute the Series Fund's portfolio
transactions.
MONEY MARKET SERIES -- MFS has complete freedom as to the markets in and the
broker-dealers through which it seeks to achieve "best execution." It is
expected that most transactions will be with the issuer or with major dealers
acting for their own account and not as brokers. Subject to the requirement of
seeking "best execution," securities may be bought from or sold to broker-
dealers who have furnished research and investment services to MFS. Such
research and investment services are those which brokerage houses customarily
provide to institutional investors and include statistical and economic data
and research reports on particular companies and industries. In placing orders
with such broker-dealers MFS will, where possible, take into account the
comparative usefulness of such research and investment services. Such research
and investment services are useful to MFS even though their dollar value may
be indeterminable and their receipt or availability generally does not reduce
the normal research activities or expenses of MFS.
ALL SERIES OTHER THAN THE MONEY MARKET SERIES -- MFS has complete freedom as
to the markets in and the broker-dealers through which it seeks to achieve
"best execution." The Equity Trading Department of MFS or a Sub-Adviser, which
also serves other clients of MFS or a Sub-Adviser, attempts to achieve "best
execution" by selecting broker-dealers to execute portfolio transactions on
behalf of the Series Fund and other clients of MFS or a Sub-Adviser on the
basis of their professional capability, the value and quality of their
brokerage services and the level of their brokerage commissions. In the United
States and some other countries debt securities are traded principally in the
over-the-counter market on a net basis through dealers acting for their own
account and not as brokers. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. The cost of
securities purchased from underwriters includes an underwriter's commission or
concession, and the prices at which securities are purchased and sold from and
to dealers include a dealer's mark-up or mark-down. MFS normally seeks to deal
directly with the primary market makers or on major exchanges unless, in its
opinion, better prices are available elsewhere. Subject to the requirement of
seeking execution at the best available price, securities may, as authorized
by the respective Advisory Agreements, be bought from or sold to dealers who
have furnished statistical, research and other information or services to MFS.
From time to time soliciting dealer fees are available to MFS or a Sub-Adviser
on the tender of securities from the portfolio of these series in so-called
tender or exchange offers. Such soliciting dealer fees are in effect
recaptured for these series by the Adviser or a Sub-Adviser. At present no
other recapture arrangements are in effect.
Under the Investment Advisory Agreements and Sub-Advisory Agreements and as
permitted by Section 28(e) of the Securities Exchange Act of 1934, MFS or a
Sub-Adviser may cause these series to pay a broker-dealer which provides
brokerage and research services to such series and MFS or a Sub-Adviser an
amount of commission for effecting a securities transaction for such series in
excess of the amount other broker-dealers would have charged for the
transaction if MFS or a Sub-Adviser determines in good faith that the greater
commission is reasonable in relation to the value of the brokerage and
research services provided by the executing broker-dealer viewed in terms of
either a particular transaction or their overall responsibilities to such
series and to accounts as to which they exercise investment discretion.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement).
Although commissions paid on every transaction will, in the judgment of MFS or
a Sub-Adviser, be reasonable in relation to the value of the brokerage
services provided, commissions exceeding those which another broker might
charge may be paid to broker-dealers who were selected to execute transactions
on behalf of the series and other clients of MFS or a Sub-Adviser in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other
factual information or services ("Research") to MFS or a Sub-Adviser for no
consideration other than brokerage or underwriting commissions. Securities may
be bought or sold from time to time through such broker-dealers on behalf of
the Series Fund.
The investment management personnel of MFS attempt to evaluate the quality of
Research provided by brokers. Results of this effort are sometimes used by the
Adviser as a consideration in the selection of brokers to execute portfolio
transactions. However, MFS is unable to quantify the amount of commissions
which are paid as a result of such Research because a substantial number of
transactions are effected through brokers which provide Research but which are
selected principally because of their execution capabilities.
The management fee paid by the Series Fund to MFS or by MFS to a Sub-Adviser
will not be reduced as a consequence of the receipt of brokerage and research
services. To the extent portfolio transactions of a series are used to obtain
such services, the brokerage commissions paid by such series will exceed those
that might otherwise be paid, for such portfolio transactions, or for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services would be useful and of value to MFS or a Sub-Adviser
in serving the series and other clients and conversely, such services obtained
by the placement of brokerage business of other clients would be useful to MFS
or a Sub-Adviser in carrying out its obligations to the series. While such
services are not expected to reduce the expenses of MFS or a Sub-Adviser, MFS
or a Sub-Adviser would, through use of the services, avoid the additional
expenses which would be incurred if they should attempt to develop comparable
information through their own staff.
The portfolio turnover rates of any series cannot be accurately predicted.
However, it is anticipated that the annual turnover rate for certain series
will exceed 100% (excluding short-term obligations). For example, a 100%
annual portfolio turnover rate would occur if all the securities in a series'
portfolio were replaced once in a period of one year.
For the years ended December 31, 1994, 1995 and 1996, brokerage commissions
paid by the Series were as follows:
TOTAL COMMISSIONS PAID DURING
----------------------------------
SERIES 1994 1995 1996
- ------------------------------------------------------------------------------
Capital Appreciation ..................... $1,215,985 $1,644,280 $1,286,630
Conservative Growth ...................... 602,120 453,519 599,469
Government Securities .................... 0 0 0
World Governments ........................ 0 0 0
High Yield ............................... 340 0 0
Managed Sectors .......................... 430,233 691,688 683,756
Total Return ............................. 331,065 745,342 1,053,060
Utilities ................................ 54,179 154,286 198,070
World Growth ............................. 0 0 840,289
Zero Coupon .............................. 0 0 0
Research(5) .............................. 2,631 223,769 577,244
World Asset Allocation(5) ................ 4,277 114,957 175,327
World Total Return(5) .................... 1,119 76,890 53,646
Emerging Growth(3) ....................... 119,816 306,542
MFS/Foreign & Colonial International
Growth(1) .............................. N/A N/A 14,450
MFS/Foreign & Colonial International
Growth and Income(4) ................... N/A 1,404 29,935
MFS/Foreign & Colonial Emerging Markets
Equity(2) .............................. N/A N/A 7,951
Value(1) ................................. 19,750
Money Market ............................. 0 0 0
- ----------
(1) From the commencement of investment operations on June 3, 1996.
(2) From the commencement of investment operations on June 5, 1996.
(3) From the commencement of investment operations on May 1, 1995.
(4) From the commencement of investment operations on October 2, 1995.
(5) From the commencement of investment operations on November 7, 1994.
During the year ended December 31, 1996 each of the following Series purchased
and retained securities issued by regular broker-dealers and affiliates
thereof, as follows:
VALUE OF SECURITY AT
SERIES BROKER-DEALER DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Capital Appreciation Ford Motor Credit $13,707,000
Capital Appreciation General Electric Co. 10,965,000
Conservative Growth General Electric Co. 11,994,000
Conservative Growth Merrill Lynch, Pierce,
Fenner & Smith, Inc. 1,426,000
Government Securities Goldman Sachs 6,399
High Yield Merrill Lynch, Pierce,
Fenner & Smith, Inc. 420,000
Managed Sectors Ford Motor Credit 5,684,000
Money Market Bank America Corp. 6,912,000
Money Market Ford Motor Credit 11,610,000
Total Return General Electric Co. 15,622,000
Total Return Nationsbank 1,854,000
Total Return Merrill Lynch, Pierce,
Fenner & Smith, Inc. 798,000
Total Return Ford Motor Credit 6,320,000
Utilities Ford Motor Credit 230,000
World Growth Ford Motor Credit 9,323,000
World Total Return General Electric Co. 430,000
World Asset Allocation Ford Motor Credit 147,000
Emerging Growth Ford Motor Credit 6,094,000
Value Ford Motor Credit 140,000
<PAGE>
APPENDIX A
ADDITIONAL INFORMATION CONCERNING INVESTMENT INSTRUMENTS AND TECHNIQUES
OPTIONS AND FUTURES
A discussion of options, Futures Contracts, Options on Futures Contracts,
Forward Foreign Currency Contracts and options on foreign currencies follows.
OPTIONS ON SECURITIES -- A call option written by a series will be covered (i)
through ownership of the security underlying the option or through ownership
of an absolute and immediate right to acquire such security upon conversion or
exchange of other securities held in its portfolio; or (ii) in such other
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. A put option will be
covered through (i) segregation in a segregated account held by the custodian
of liquid assets in an amount equal to the exercise price of the option; or
(ii) in such other manner as may be in accordance with the requirements of the
exchange on which the option is traded and applicable laws and regulations.
Effecting a closing transaction in the case of a written call option will
permit a series to write another call option on the underlying security with
either a different exercise price or expiration date or both, or in the case
of a written put option will permit a series to write another put option to
the extent that the exercise price thereof is secured by liquid assets. Such
transactions permit a series to generate additional premium income, which will
partially offset declines in the value of portfolio securities or increases in
the cost of securities to be acquired. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any securities
subject to the option to be used for other investments, provided that another
option on such security is not written. If a series desires to sell a
particular security from its portfolio on which it has written a call option,
it will effect a closing transaction in connection with the option prior to or
concurrent with the sale of the security.
A series will realize a profit from a closing transaction if the premium paid
in connection with the closing of an option written by it is less than the
premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by it is more than the
premium paid for the original purchase. Conversely, a series will suffer a
loss if the premium paid or received in connection with a closing transaction
is more or less, respectively, than the premium received or paid in
establishing the option position. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option
previously written by a series is likely to be offset in whole or in part by
appreciation of the underlying security owned by a series.
A series may write options in connection with buy-and-write transactions; that
is, a series may purchase a security and then write a call option against that
security. The exercise price of the call option will depend upon the expected
price movement of the underlying security. The exercise price of a call option
may be below ("in-the-money"), equal to ("at-the-money") or above ("out-of-
the-money") the current value of the underlying security at the time the
option is written. If the call options are exercised in such transactions, the
series' maximum gain will be the premium received by it for writing the
option, adjusted upwards or downwards by the difference between the series'
purchase price of the security and the exercise price. If the options are not
exercised and the price of the underlying security declines, the amount of
such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options could be used by a
series in the same market environments that call options would be used in
equivalent buy-and-write transactions.
A series may write combinations of put and call options on the same security,
a practice known as a "straddle." By writing a straddle, a series undertakes a
simultaneous obligation to sell and purchase the same security in the event
that one of the options is exercised. If the price of the security
subsequently rises sufficiently above the exercise price to cover the amount
of the premium and transaction costs, the call will likely be exercised and
the series will be required to sell the underlying security at a below market
price. This loss may be offset, however, in whole or in part, by the premiums
received on the writing of the two options. Conversely, if the price of the
security declines by a sufficient amount, the put will likely be exercised.
The writing of straddles will likely be effective, therefore, only where the
price of a security remains stable and neither the call nor the put is
exercised. In an instance where one of the options is exercised, the loss on
the purchase or sale of the underlying security may exceed the amount of the
premiums received.
By writing a call option, a series limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, a series assumes the risk that
it may be required to purchase the underlying security for an exercise price
above its then current market value, resulting in a loss unless the security
subsequently appreciated in value. The writing of options on securities by the
Capital Appreciation Series, Government Markets Series, Managed Sectors
Series, Research Growth and Income Series, Utilities Series, Value Series,
World Asset Allocation Series, World Growth Series and World Total Return
Series and the MFS/Foreign & Colonial Series will not be undertaken solely for
hedging purposes, and could involve certain risks which are not present in the
case of hedging transactions. Moreover, even where options are written for
hedging purposes, such transactions will constitute only a partial hedge
against declines in the value of portfolio securities or against increases in
the value of securities to be acquired, up to the amount of the premium.
A series also may purchase put and call options on securities. Put options
would be purchased to hedge against a decline in the value of the securities
held in its portfolio. If such a decline occurs, the put options will permit a
series to sell the securities at the exercise price, or to close out the
options at a profit. By using put options in this way, the series will reduce
any profit it might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and related transaction costs. A
series may purchase call options to hedge against an increase in the price of
securities that the series anticipates purchasing in the future. If such an
increase occurs, the call option will permit the series to purchase the
securities at the exercise price or to close out the option at a profit. The
premium paid for a call or put option plus any transaction costs will reduce
the benefit, if any, realized by the series upon exercise of the option, and,
unless the price of the underlying security rose or declined sufficiently, the
option may expire worthless to the series.
Yield curve options may be used for the same purposes as other options on
securities. Specifically, a series may purchase or write such options for
hedging purposes. For example, a series may purchase a call option on the
yield spread between two securities, if it owns one of the securities and
anticipates purchasing the other security and wants to hedge against an
adverse change in the yield spread between the two securities. The series may
also purchase or write yield curve options for other than hedging purposes
(i.e., in an effort to increase its current income) if, in the judgment of the
Adviser or Sub Adviser, the series will be able to profit from movements in
the spread between the yields of the underlying securities. The trading of
yield curve options is subject to all of the risks associated with the trading
of other types of options. In addition, however, such options present risk of
loss even if the yield of one of the underlying securities remains constant,
if the spread moves in a direction or to an extent which was not anticipated.
Yield curve options written by the series will be "covered." A call (or put)
option is covered if the series holds another call (or put) option on the
spread between the same two securities and maintains in a segregated account
with its custodian liquid assets sufficient to cover the series' net liability
under the two options. Therefore, the series' liability for such a covered
option is generally limited to the difference between the amount of the
series' liability under the option written by the series less the value of the
option held by the series. Yield curve options may also be covered in such
other manner as may be in accordance with the requirements of the counter
party with which the option is traded and applicable laws and regulations.
Yield curve options are traded over-the-counter and because they have been
only recently introduced, established trading markets for these securities
have not yet developed.
OPTIONS ON INDICES -- A series will cover call options on indices by owning
securities whose price changes, in the opinion of MFS, are expected to be
similar to those of the index, or in such other manner as may be in accordance
with the rules of the exchange on which the option is traded and applicable
laws and regulations. Nevertheless, where a series covers a call option on an
index through ownership of securities, such securities may not match the
composition of the index. In that event, the series will not be fully covered
and could be subject to risk of loss in the event of adverse changes in the
value of the index. A series will cover put options on indices by segregating
assets equal to the option's exercise price, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations.
A series will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of an index on which a series has written
a call option falls or remains the same, the series will realize a profit in
the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the series will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation
in the series' investments. By writing a put option, a series assumes the risk
of a decline in the index. To the extent that the price changes of securities
owned by the series correlate with changes in the value of the index, writing
covered put options on indices will increase the series' loss in the event of
a market decline, although such losses will be offset in part by the premium
received for writing the option.
The purchase of call options on indices may be used by a series to attempt to
reduce the risk of missing a broad market advance, or an advance in an
industry or market segment, at a time when a series holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options
for this purpose, the series will also bear the risk of losing all or a
portion of the premium paid, and related transaction costs, if the value of
the index does not rise. The purchase of call options on indices when the
series is substantially fully invested is a form of leverage, up to the amount
of the premium and related transaction costs, and involves risks of loss and
of increased volatility similar to those involved in purchasing calls on
securities the series owns.
A series also may purchase put options on indices to hedge its investments
against a decline in value. By purchasing a put option on an index, a series
will seek to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of the series' investments does
not decline as anticipated, or if the value of the option does not increase,
the series' loss will be limited to the premium paid for the option, plus
related transaction costs. The success of this strategy will largely depend on
the accuracy of the correlation between the changes in value of the index and
the changes in value of the series' security holdings.
FUTURES CONTRACTS -- The Capital Appreciation Series, Emerging Growth Series,
Government Securities Series, World Governments Series, Managed Sectors
Series, Research Growth and Income Series, Utilities Series, Value Series,
World Asset Allocation Series, World Growth Series and World Total Return
Series and the MFS/Foreign & Colonial Series may enter into interest rate or
stock index futures contracts ("Futures Contracts") in order to protect the
series' current or intended investments from broad fluctuations in interest
rates or stock prices. The Emerging Growth Series, Utilities Series, Research
Growth and Income Series, Value Series, World Asset Allocation Series, World
Growth Series and World Total Return Series and the MFS/Foreign & Colonial
Series may also enter into Futures Contracts for non-hedging purposes, which
involves greater risk and could result in losses which are not offset by gains
on other portfolio assets. The Emerging Growth Series, Utilities Series,
Research Growth and Income Series, Value Series, World Asset Allocation
Series, World Governments Series, World Growth Series and World Total Return
Series and the MFS/Foreign & Colonial Series may also enter into foreign
currency futures contracts.
For example, a series may sell Futures Contracts in anticipation of or during
a market decline to attempt to offset the decrease in market value of the
series' securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
in part, by gains on the futures position. When a series is not fully invested
in the securities market and anticipates a significant market advance, it may
purchase Futures Contracts in order to gain rapid market exposure that may, in
part or in whole, offset increase in the cost of securities that the series
intends to purchase. As such acquisitions are made, the corresponding
positions in Futures Contracts will be closed out. In a substantial majority
of these transactions, a series will purchase such securities upon the
termination of the futures position, but under unusual market conditions, a
long futures position may be terminated without a related purchase of
securities.
OPTIONS ON FUTURES CONTRACTS -- The writing of a call Option on a Futures
Contract constitutes a partial hedge against declining prices of the
securities underlying the Futures Contract or of the securities comprising the
index underlying the Futures Contact. If the futures price at expiration of
the option is below the exercise price, the series will retain the full amount
of the option premium which provides a partial hedge against any decline that
may have occurred in the series' portfolio holdings. The writing of a put
Option on a Futures Contract constitutes a partial hedge against increasing
prices of the securities underlying the Futures Contract or of the securities
comprising the index underlying the Futures Contract. If the futures price at
expiration of the option is higher than the exercise price, a series will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which a series intends to
purchase. If a put or call option a series has written is exercised, it will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, the
series' losses from existing Options of Futures Contracts may to some extent
be reduced or increased by changes in the value of portfolio securities.
A series will cover the writing of call Options on Futures Contracts through
purchases of the underlying Futures Contract, and will cover the writing of
put Options on Futures Contracts through sales of the underlying Futures
Contract. Upon the exercise of a call Option on a Futures Contract written by
a series, the series will be required to sell the underlying Futures Contract
which, if the series has covered its obligation through the purchase of such
Contract, will serve to liquidate its futures position. Similarly, where a put
Option on a Futures Contract written by a series is exercised, the series will
be required to purchase the underlying Futures Contract which, if the series
has covered its obligation through the sale of such Contract, will close out
its futures position. Put and call Options on Futures Contracts may also be
covered in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.
A series may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of a projected market-wide decline, a series could, in lieu of
selling Futures Contracts, purchase put options thereon. In the event that
such decrease occurs, it may be offset, in whole or part, by a profit on the
option. Conversely, where it is projected that the value of securities to be
acquired by a series will increase prior to acquisition, due to a market
advance, the series could purchase call Options on Futures Contracts, rather
than purchasing the underlying Futures Contracts.
FORWARD CONTRACTS -- The Capital Appreciation Series, Managed Sectors Series,
Research Series and World Governments Series may enter into contracts for the
purchase or sale of a specific currency at a future date at a price set at the
time the contract is entered into (a "Forward Contract") for hedging purposes
only. The Emerging Growth Series, Utilities Series, Research Growth and Income
Series, Value Series, World Asset Allocation Series, World Growth Series and
World Total Return Series and the MFS/Foreign & Colonial Series may enter into
Forward Contracts for hedging purposes and non-hedging purposes. A series will
enter into Forward Contracts for the purpose of protecting its current or
intended investments from fluctuations in currency exchange rates. A Forward
Contract to sell a currency may be entered into, for example, in lieu of the
sale of a foreign currency futures contract where a series seeks to protect
against an anticipated increase in the exchange rate for a specific currency
which could reduce the dollar value of portfolio securities denominated in
such currency. Conversely, a series may enter into a Forward Contract to
purchase a given currency to protect against a projected increase in the
dollar value of securities denominated in such currency which a series intends
to acquire.
If a hedging transaction in Forward Contracts is successful, the decline in
the value of portfolio securities or the increase in the cost of securities to
be acquired may be offset, at least in part, by profits on the Forward
Contract. Nevertheless, by entering into such Forward Contracts, a series may
be required to forego all or a portion of the benefits which otherwise could
have been obtained from favorable movements in exchange rates. The series do
not presently intend to hold Forward Contracts entered into until maturity, at
which time they would be required to deliver or accept delivery of the
underlying currency, but will seek in most instances to close out positions in
such Contracts by entering into offsetting transactions, which will serve to
fix the series' profit or loss based upon the value of the Contracts at the
time the offsetting transaction is executed.
Each of the series has established procedures consistent with Securities and
Exchange Commission policies concerning the use of "cover" or the
establishment of segregated accounts in connection with purchases of foreign
currency through Forward Contracts. Since those policies currently require the
use of "cover" or that liquid assets of the series equal to the amount of the
purchase be held aside or segregated in an account maintained by the custodian
to be used to pay for the commitment, each series will always use "cover" or
have liquid assets available sufficient to cover any commitments under these
contracts or to limit any potential risk.
OPTIONS ON FOREIGN CURRENCIES -- The Emerging Growth Series, Utilities Series,
Research Growth and Income Series, Value Series, World Asset Allocation
Series, World Governments Series, World Growth Series and World Total Return
Series and the MFS/Foreign & Colonial Series may purchase and write options on
foreign currencies for hedging purposes in a manner similar to that in which
Futures Contracts on foreign currencies, or Forward Contracts, will be
utilized. All call options written on foreign currencies will be covered. A
call option written on a foreign currency is "covered" if the series owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated
account by the series' custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call option is also covered if the series
has a call on the same foreign currency and in the same principal amount as
the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the
series in liquid assets in a segregated account with its custodian. Options on
foreign currencies may also be covered in such other manner as may be in
accordance with the requirements of the exchange on which they are traded and
applicable laws and regulations.
RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH A SERIES'
PORTFOLIO -- A series' ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts, options on
foreign currencies, Options on Futures Contracts, and Forward Contracts will
depend on the degree to which price movements in the underlying index or
instrument correlate with price movements in the relevant portion of the
portfolio. Because the securities in the portfolio will most likely not be the
same as those securities underlying an index, the correlation between
movements in the portfolio and in the securities underlying the index will not
be perfect. The trading of Futures Contracts and options entails the
additional risk of imperfect correlation between movements in the futures or
option price and the price of the underlying index or obligation. The
anticipated spread between the prices may be distorted due to the differences
in the nature of the markets, such as differences in margin requirements, the
liquidity of such markets and the participation of speculators in the futures
and options market. In this regard, trading by speculators in such instruments
has in the past occasionally resulted in market distortions, which may be
difficult or impossible to predict particularly near the expiration of such
contracts. It should be noted that Futures Contracts or options based upon a
narrower index of securities, such as those of a particular industry group,
may present greater risk than options or Futures Contracts based on a broad
market index, because a narrower index is more susceptible to rapid and
extreme fluctuations as a result of changes in the value of a small number of
securities. The trading of Options on Futures Contracts also entails the risk
that changes in the value of the underlying Futures Contracts will not be
fully reflected in the value of the option. Further, with respect to options
on securities, options on indices and Options on Futures Contracts, a series
is subject to the risk of market movements between the time that the option is
exercised and the time of performance thereunder. In writing a covered call
option on a security, index or Futures Contract, a series also incurs the risk
that changes in the value of the instruments used to cover the position will
not correlate closely with changes in the value of the option or underlying
index or instrument. Transactions in Forward Contracts or options on foreign
currencies designed to hedge against exposure arising from currency
fluctuations will subject a series to the risk of imperfect correlation
between changes in the value of the currencies underlying the forwards or
options and changes in the value of the currencies being hedged.
A series will invest in a hedging instrument only if, in the judgment of MFS,
there would be expected to be a sufficient degree of correlation between
movements in the value of the instrument and movements in the value of the
relevant portion of the series' portfolio for such hedge to be effective.
There can be no assurance that MFS' judgment will be accurate.
It should also be noted that the Capital Appreciation Series, Managed Sectors
Series, Research Growth and Income Series, Utilities Series, World Governments
Series, World Asset Allocation Series, World Growth Series and World Total
Return Series and the MFS/Foreign & Colonial Series would be able to purchase
and write options on securities and indices not only for hedging purposes, but
also for the purpose of increasing their return on portfolio securities. The
Utilities Series, World Asset Allocation Series, World Growth Series and the
World Total Return Series and the MFS/Foreign & Colonial Series may also
purchase and write Futures Contracts, Options on Futures Contracts and Forward
Contracts for non-hedging purposes. As a result, in the event of adverse
market movements, such series might be required to forfeit the entire amount
of the premium paid for an option purchased, which might not be offset by
increases in the value of portfolio securities or declines in the cost of
securities to be acquired. In addition, the method of covering an option
employed by a series may not fully protect it against risk of loss and, in any
event, a series could suffer losses on the option position which might not be
offset by corresponding portfolio gains.
With respect to the writing of straddles on securities, a series would incur
the risk that the price of the underlying security will not remain stable,
that one of the options written will be exercised and that the resulting loss
will not be offset by the amount of the premiums received.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET -- Prior to exercise or
expiration, a futures or option position can only be terminated by entering
into a closing purchase or sale transaction. This requires a secondary market
for such instruments on the exchange on which the initial transaction was
entered into. While a series will enter into options or futures positions only
if there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular contracts at any
specific time. In that event, it may not be possible to close out a position
held by a series and the series could be required to purchase or sell the
instrument underlying an option, make or receive a cash settlement or meet
ongoing variation margin requirements. Under such circumstances, if the series
had insufficient cash available to meet margin requirements, it might be
necessary to liquidate portfolio securities at a time when it would be
disadvantageous to do so. The inability to close out options and futures
positions, therefore, could have an adverse impact on a series' ability
effectively to hedge its portfolio, and could result in trading losses. The
liquidity of a secondary market in a Futures Contract or options thereon may
also be adversely affected by "daily price fluctuation limits", established by
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day. The trading of Futures Contracts and options is
also subject to the risk of trading halts, suspensions, exchange or clearing
house equipment failures government intervention, insolvency of a brokerage
firm of clearing house or other disruptions of normal trading activity, which
could at times make if difficult or impossible to liquidate existing positions
or to recover excess variation margin payments.
MARGIN -- Because of low initial margin deposits made upon the opening of a
futures position and the writing of an option, such transactions involve
substantial leverage. As a result, relatively small movements in the price of
the contract can result in substantial unrealized gains or losses. To the
extent a series engages in the purchase or sale of Futures Contracts and the
writing of Options on Futures Contracts solely for hedging purposes, however,
and to the extent that the series purchases and writes options on securities
and indices for hedging purposes, any losses incurred in connection therewith
should, if the hedging strategy is successful, be offset, in whole or in part,
by increases in the value of securities held by the series or decreases in the
prices of securities the series intends to acquire. If a series writes options
on securities or options on indices for other than hedging purposes, the
margin requirements associated with such transactions could expose the series
to greater risk.
TRADING AND POSITION LIMITS -- The exchanges on which Futures Contracts and
options are traded may impose limitations governing the maximum number of
positions on the same side of the market and involving the same underlying
instrument which may be held by a single investor, whether acting alone or in
concert with others (regardless of whether such contracts are held on the same
or different exchanges or held or written in one or more accounts or through
one or more brokers). In addition, the Commodity Futures Trading Commission
("CFTC") and the various contract markets have established limits referred to
as "speculative position limits" on the maximum net long or net short position
which any person may hold or control in a particular futures or option
contract. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
MFS does not believe that these trading and position limits will have any
adverse impact on the strategies for hedging the portfolio of a series.
RISK OF OPTIONS ON FUTURES CONTRACTS -- The amount of risk a series assumes
when it purchases an Option on a Futures Contract is the premium paid for the
option, plus related transaction costs. In order to profit from an option
purchased, however, it may be necessary to exercise the option and to
liquidate the underlying Futures Contract, subject to the risks of the
availability of a liquid offset market described herein. The writer of an
Option on a Futures Contract is subject to the risks of commodity futures
trading, including the requirement of initial and variation margin payments,
as well as the additional risk that movements in the price of the option may
not correlate with movements in the price of the underlying index or Futures
Contract.
ADDITIONAL RISKS OF TRANSACTIONS RELATED TO FOREIGN CURRENCIES AND
TRANSACTIONS NOT CONDUCTED ON U.S. EXCHANGES -- Transactions in Forward
Contracts are subject to all of the correlation, liquidity and other risks
outlined above. In addition, however, such transactions are subject to the
risk of governmental actions affecting trading in or the prices of currencies
underlying such contracts, which could restrict or eliminate trading and could
have a substantial adverse effect on the value of positions held by a series.
In addition, the value of such positions could be adversely affected by a
number of other complex political and economic factors applicable to the
countries issuing the underlying currencies. Further, unlike trading in most
other types of instruments, there is no systematic reporting of last sale
information with respect to the foreign currencies underlying contracts
thereon. As a result, the available information on which trading systems will
be based may not be as complete as the comparable data on which a series makes
investment and trading decisions in connection with other transactions.
Moreover, because the foreign currency market is a global, twenty-four hour
market, events could occur on that market which would not be reflected in the
forward markets until the following day, thereby preventing a series from
responding to such events in a timely manner. Settlements of exercises of
Forward Contracts generally must occur within the country issuing the
underlying currency, which in turn requires traders to accept or make delivery
of such currencies in conformity with any United States or foreign
restrictions and regulations regarding the maintenance of foreign banking
relationships, fees, taxes or other charges.
Forward Contracts, over-the-counter options on securities, and options on
foreign exchanges are not traded on contract markets regulated by the CFTC or
the Securities and Exchange Commission, but through financial institutions
acting as market-makers. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be available. In
addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
series' position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the series.
Where no such counterparty is available, it will not be possible to enter into
a desired transaction. There also may be no liquid secondary market in the
trading of over-the-counter contracts, and a series could be required to
retain options purchased or written, or Forward Contracts entered into, until
exercise, expiration or maturity. This in turn could limit a series' ability
to profit from open positions or to reduce losses experienced, and could
result in greater losses. Further, over-the-counter transactions are not
subject to the performance guarantee of an exchange clearing house, and a
series will therefore be subject to the risk of default by, or the bankruptcy
of, the financial institution serving as its counterparty.
While Forward Contracts are not presently subject to regulation by the CFTC,
the CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, a series' ability to utilize Forward Contracts in
the manner set forth above could be restricted.
Options on securities, options on indices, Futures Contracts, Options on
Futures Contracts and options on foreign currencies may be traded on exchanges
located in foreign countries. Such transactions may not be conducted in the
same manner as those entered into on United States exchanges, and may be
subject to different margin, exercise, settlement or expiration procedures. As
a result, many of the risks of over-the-counter trading may be present in
connection with such transactions.
RESTRICTIONS ON THE USE OF OPTIONS AND FUTURES -- In order to assure that a
series will not be deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the CFTC require that the series enter
into transactions in Futures Contracts and Options on Futures Contracts only
(i) for bona fide hedging purposes (as defined in CFTC regulations), or (ii)
for non-hedging purposes, provided that the aggregate initial margin and
premiums on such non-hedging positions does not exceed 5% of the liquidation
value of the series' assets.
The Board of Trustees of the Series Fund has adopted the additional
restriction that a series will not enter into a Futures Contract if,
immediately thereafter, the value of securities and other obligations
underlying all such Futures Contracts would exceed 50% of the value of the
series' assets, taken at market value. Moreover, a series will not purchase
put and call options if, as a result, more than 5% of its total assets would
be invested in such options.
When a series purchases a Futures Contract an amount of cash and cash
equivalents will be deposited in a segregated account with the series'
custodian so that the amount so segregated will at all times equal the value
of the Futures Contract, thereby insuring that the leveraging of such Futures
Contract is minimized.
The staff of the Securities and Exchange Commission ("SEC") has taken the
position that purchased over-the-counter options and assets used to cover
written over-the-counter options are illiquid and, therefore, together with
other illiquid securities held by a series, cannot exceed 15% of such series'
assets, or such lower ceiling on illiquid securities imposed by a series'
investment restrictions (the "SEC Illiquidity Ceiling"). Although the
investment adviser disagrees with this position, the investment adviser
intends to limit a series' writing of over-the-counter options in accordance
with the following procedure. Except as provided below, each series which may
write options intends to write over-the-counter options only with primary U.S.
Government securities dealers recognized as such by the Federal Reserve Bank
of New York. Also, the contracts these series have in place with such primary
dealers provide that the series has the absolute right to repurchase an option
it writes at any time at a price which represents the fair market value, as
determined in good faith through negotiation between the parties, but which in
no event will exceed a price determined pursuant to a formula in the contract.
Although the specific formula may vary between contracts with different
primary dealers, the formula generally is based on a multiple of the premium
received by the series for writing the option, plus the amount, if any, of the
option's intrinsic value (i.e., the amount that the option is in-the-money).
The formula may also include a factor to account for the difference between
the price of the security and the strike price of the option if the option is
written out-of-the-money. A series will treat all or a portion of the formula
as illiquid for purposes of the SEC Illiquidity Ceiling. Each series which may
write options may also write over-the-counter options with non-primary
dealers, including foreign dealers (where applicable), and will treat the
assets used to cover these options as illiquid for purposes of such SEC
Illiquidity Ceiling.
LOANS, LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS
The Emerging Growth Series, High Yield Series Value Series and World Asset
Allocation Series and the MFS/Foreign & Colonial Series may purchase loans,
loan participations and other direct claims against a borrower. In purchasing
a loan or loan participation, the series acquires some or all of the interest
of a bank or other lending institution in a loan to a corporate borrower. Many
such loans are secured, although some may be unsecured. Such loans may be in
default at the time of purchase. Loans that are fully secured offer the series
more protection than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the corporate
borrower's obligation, or that the collateral can be liquidated.
These loans are made generally to finance internal growth, mergers,
acquisitions, stock repurchases, leveraged buy-outs and other corporate
activities. Such loans are typically made by a syndicate of lending
institutions, represented by an agent lending institution which has negotiated
and structured the loan and is responsible for collecting interest, principal
and other amounts due on its own behalf and on behalf of the others in the
syndicate, and for enforcing its and their other rights against the borrower.
Alternatively, such loans may be structured as a novation, pursuant to which
the series would assume all of the rights of the lending institution in a
loan, or as an assignment, pursuant to which the series would purchase an
assignment of a portion of a lender's interest in a loan either directly from
the lender or through an intermediary. The series may also purchase trade or
other claims against companies, which generally represent money owed by the
company to a supplier of goods or services. These claims may also be purchased
at a time when the company is in default.
Certain of the loan participations acquired by the series may involve
revolving credit facilities or other standby financing commitments which
obligate the series to pay additional cash on a certain date or on demand.
These commitments may have the effect of requiring the series to increase its
investment in a company at a time when the series might not otherwise decide
to do so (including at a time when the company's financial condition makes it
unlikely that such amounts will be repaid). To the extent that the series is
committed to advance additional funds, it will at all times hold and maintain
in a segregated account cash or other high grade debt obligations in an amount
sufficient to meet such commitments.
The series' ability to receive payments of principal, interest and other
amounts due in connection with these investments will depend primarily on the
financial condition of the borrower. In selecting the loan participations and
other direct investments which the series will purchase, the Adviser will rely
upon its (and not that of the original lending institution's) own credit
analysis of the borrower. As the series may be required to rely upon another
lending institution to collect and pass on to the series amounts payable with
respect to the loan and to enforce the series' rights under the loan, an
involvency, bankruptcy or reorganization of the lending institution may delay
or prevent the series from receiving such amounts. In such cases, the series
will evaluate as well the creditworthiness of the lending institution and will
treat both the borrower and the lending institution as an "issuer" of the loan
participation for purposes of certain investment restrictions pertaining to
the diversification of the series' portfolio investments. The highly leveraged
nature of many such loans may make such loans especially vulnerable to adverse
changes in economic or market conditions. Investments in such loans may
involve additional risks to the series. For example, if a loan is foreclosed,
the series could become part owner of any collateral, and would bear the costs
and liabilities associated with owning and disposing of the collateral. In
addition, it is conceivable that under emerging legal theories of lender
liability, the series could be held liable as a co-lender. It is unclear
whether loans and other forms of direct indebtedness offer securities law
protections against fraud and misrepresentation. In the absence of definitive
regulatory guidance, the series relies on the Adviser's or Sub-Adviser's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the series. In addition, loan participations and other
direct investments may not be in the form of securities or may be subject to
restrictions on transfer, and only limited opportunities may exist to resell
such instruments. As a result, the series may be unable to sell such
instruments at an opportune time or may have to resell them at less than fair
market value. To the extent that the Adviser or a Sub-Adviser determines that
any such investments are illiquid, the series will include them in the
investment limitations applicable to the series.
SWAPS AND RELATED TRANSACTIONS
The Research Growth and Income Series, World Asset Allocation Series, World
Government Series and World Total Return Series and the MFS/Foreign & Colonial
Series may enter into interest rate swaps, currency swaps and other types of
available swap agreements, such as caps, collars and floors. Swap agreements
may be individually negotiated and structured to include exposure to a variety
of different types of investments or market factors. Depending on their
structure, swap agreements may increase or decrease a series' exposure to long
or short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
securities prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. A series is not limited to any
particular form or variety of swap agreement if the Adviser determines it is
consistent with the series' investment objective and policies.
The series will maintain cash or appropriate liquid assets with its custodian
to cover its current obligations under swap transactions. If the series enters
into a swap agreement on a net basis (i.e., the two payment streams are netted
out, with the series receiving or paying, as the case may be, only the net
amount of the two payments), the series will maintain liquid assets with its
custodian with a daily value at least equal to the excess, if any, of the
series' accrued obligations under the swap agreement over the accrued amount
the series is entitled to receive under the agreement. If the series enters
into a swap agreement on other than a net basis, it will maintain cash or
liquid assets with a value equal to the full amount of the series' accrued
obligations under the agreement.
The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, currency or other factor
that determines the amount of payments to be made under the arrangement. If
the Adviser is incorrect in its forecasts of such factors, the investment
performance of the series would be less than what it would have been if these
investment techniques had not been used. If a swap agreement calls for
payments by the series, the series must be prepared to make such payments when
due. In addition, if the counterparty's creditworthiness declined, the value
of the swap arrangement would be likely to decline, potentially resulting in
losses. If the counterparty defaults, the series' risk of loss consists of the
net amount of payments that the series is contractually entitled to receive.
The series anticipates that it will be able to eliminate or reduce its
exposure under these arrangements by assignment or other disposition or by
entering into an offsetting agreement with the same or another counterparty.
INVESTMENT INSTRUMENTS AND TECHNIQUES OF THE MFS/FOREIGN & COLONIAL SERIES
EMERGING MARKETS: Each of the MFS/Foreign & Colonial Series may invest in
securities of government, government-related, supranational and corporate
issuers located in emerging markets. Such investments entail significant risks
as described in the Prospectus under the caption "Additional Risk Factors" and
as more fully described below.
COMPANY DEBT -- Governments of many emerging market countries have exercised
and continue to exercise substantial influence over many aspects of the
private sector through the ownership or control of many companies, including
some of the largest in any given country. As a result, government actions in
the future could have a significant effect on economic conditions in emerging
markets, which in turn, may adversely affect companies in the private sector,
general market conditions and prices and yields of certain of the securities
in a series' portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar developments have
occurred frequently over the history of certain emerging markets and could
adversely affect a series' assets should these conditions recur.
SOVEREIGN DEBT -- Investment in sovereign debt can involve a high degree of
risk. The governmental entity that controls the repayment of sovereign debt
may not be able or willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of the debt service burden to the economy as
a whole, the governmental entity's policy towards the International Monetary
Fund and the political constraints to which a governmental entity may be
subject. Governmental entities may also be dependent on expected disbursements
from foreign governments, multilateral agencies and others abroad to reduce
principal and interest on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancelation of such third
parties' commitments to lend funds to the governmental entity, which may
further impair such debtor's ability or willingness to service its debts in a
timely manner. Consequently, governmental entities may default on their
sovereign debt. Holders of sovereign debt (including a series) may be
requested to participate in the rescheduling of such debt and to extend
further loans to governmental entities. There is no bankruptcy proceeding by
which sovereign debt on which governmental entities have defaulted may be
collected in whole or in part.
Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations
and other financial institutions. Certain emerging market governmental issuers
have not been able to make payments of interest on or principal of debt
obligations as those payments have come due. Obligations arising from past
restructuring agreements may affect the economic performance and political and
social stability of those issuers.
The ability of emerging market governmental issuers to make timely payments on
their obligations is likely to be influenced strongly by the issuer's balance
of payments, including export performance, and its access to international
credits and investments. An emerging market whose exports are concentrated in
a few commodities could be vulnerable to a decline in the international prices
of one or more of those commodities. Increased protectionism on the part of an
emerging market's trading partners could also adversely affect the country's
exports and tarnish its trade account surplus, if any. To the extent that
emerging markets receive payment for their exports in currencies other than
dollars or non-emerging market currencies, its ability to make debt payments
denominated in dollars or non-emerging market currencies could be affected.
To the extent that an emerging market country cannot generate a trade surplus,
it must depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign
governments and on inflows of foreign investment. The access of emerging
markets to these forms of external funding may not be certain, and a
withdrawal of external funding could adversely affect the capacity of emerging
market country governmental issuers to make payments on their obligations. In
addition, the cost of servicing emerging market debt obligations can be
affected by a change in international interest rates since the majority of
these obligations carry interest rates that are adjusted periodically based
upon international rates.
Another factor bearing on the ability of emerging market countries to repay
debt obligations is the level of international reserves of the country.
Fluctuations in the level of these reserves affect the amount of foreign
exchange readily available for external debt payments and thus could have a
bearing on the capacity of emerging market countries to make payments on these
debt obligations.
LIQUIDITY; TRADING VOLUME; REGULATORY OVERSIGHT -- The securities markets of
emerging market countries are substantially smaller, less developed, less
liquid and more volatile than the major securities markets in the U.S.
Disclosure and regulatory standards are in many respects less stringent than
U.S. standards. Furthermore, there is a lower level of monitoring and
regulation of the markets and the activities of investors in such markets.
The limited size of many emerging market securities markets and limited
trading volume in the securities of emerging market issuers compared to volume
of trading in the securities of U.S. issuers could cause prices to be erratic
for reasons apart from factors that affect the soundness and competitiveness
of the securities issuers. For example, limited market size may cause prices
to be unduly influenced by traders who control large positions. Adverse
publicity and investors' perceptions, whether or not based on in-depth
fundamental analysis, may decrease the value and liquidity of portfolio
securities.
The risk also exists that an emergency situation may arise in one or more
emerging markets, as a result of which trading of securities may cease or may
be substantially curtailed and prices for a series' securities in such markets
may not be readily available. The Series Fund may suspend redemption of its
shares for any period during which an emergency exists, as determined by the
SEC. Accordingly, if a series believes that appropriate circumstances exist,
it will promptly apply to the SEC for a determination that an emergency is
present. During the period commencing from the series' identification of such
condition until the date of the SEC action, the series' securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.
DEFAULT; LEGAL RECOURSE -- A series may have limited legal recourse in the
event of a default with respect to certain debt obligations it may hold. If
the issuer of a fixed-income security owned by a series defaults, the series
may incur additional expenses to seek recovery. Debt obligations issued by
emerging market governments differ from debt obligations of private entities;
remedies from defaults on debt obligations issued by emerging market
governments, unlike those on private debt, must be pursued in the courts of
the defaulting party itself. A series' ability to enforce its rights against
private issuers may be limited. The ability to attach assets to enforce a
judgment may be limited. Legal recourse is therefore somewhat diminished.
Bankruptcy, moratorium and other similar laws applicable to private issuers of
debt obligations may be substantially different from those of other countries.
The political context, expressed as an emerging market governmental issuer's
willingness to meet the terms of the debt obligation, for example, is of
considerable importance. In addition, no assurance can be given that the
holders of commercial bank debt may not contest payments to the holders of
debt obligations in the event of default under commercial bank loan
agreements.
INFLATION -- Many emerging markets have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, wage and price controls have
been imposed in certain countries. Of these countries, some, in recent years,
have begun to control inflation through prudent economic policies.
WITHHOLDING -- Income from securities held by a series could be reduced by a
withholding tax on the source or other taxes imposed by the emerging market
countries in which the series makes its investments. A series' net asset value
may also be affected by changes in the rates or methods of taxation applicable
to the series or to entities in which the series has invested. The Adviser and
the Sub-Adviser will consider the cost of any taxes in determining whether to
acquire any particular investments, but can provide no assurance that the
taxes will not be subject to change.
FOREIGN CURRENCIES -- Each series may invest up to 100% of its assets in
securities denominated in foreign currencies. Accordingly, changes in the
value of these currencies against the U.S. dollar may result in corresponding
changes in the U.S. dollar value of a series' asset denominated in those
currencies. Each Series may attempt to minimize the impact of these changes to
the U.S. dollar value of the series' portfolio by engaging in certain hedging
practices, such as entering into Futures Contracts and Options on Foreign
Securities as described below.
Some emerging market countries also may have managed currencies, which are not
free floating against the U.S. dollar. In addition, there is risk that certain
emerging market countries may restrict the free conversion of their currencies
into other currencies. Further, certain emerging market currencies may not be
internationally traded. Certain of these currencies have experienced a steep
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which a Series' portfolio securities are denominated may have a detrimental
impact on the series' net asset value.
INVESTMENT IN OTHER INVESTMENT COMPANIES: A series' investment in other
investment companies, as described in the Prospectus is limited in amount by
the 1940 Act, and any applicable state securities laws. Such investment may
also involve the payment of substantial premiums above the value of such
investment companies' portfolio securities, and the total return on such
investment will be reduced by the operating expenses and fees of such other
investment companies, including advisory fees.
REPURCHASE AGREEMENTS: Each series may enter into repurchase agreements with
sellers who are member firms (or a subsidiary thereof) of the New York Stock
Exchange, members of the Federal Reserve System, recognized domestic or
foreign securities dealers or institutions which the Adviser or the Sub-
Adviser has determined to be of comparable creditworthiness. The securities
that a series purchases and holds have values which are equal to or greater
than the repurchase price agreed to be paid by the seller. The repurchase
price may be higher than the purchase price, the difference being income to
the series, or the purchase and repurchase prices may be the same, with
interest at a standard rate due to the series together with the repurchase
price on repurchase.
The repurchase agreement provides that in the event the seller fails to pay
the price agreed upon on the agreed upon delivery date or upon demand, as the
case may be, a series will have the right to liquidate the securities. If at
the time the series is contractually entitled to exercise its right to
liquidate the securities, the seller is subject to a proceeding under the
bankruptcy laws or its assets are otherwise subject to a stay order, the
series' exercise of its right to liquidate the securities may be delayed and
result in certain losses and costs to the series. Each series has adopted and
follows procedures which are intended to minimize the risk of repurchase
agreements. For example, a series only enters into repurchase agreements after
the Adviser or the Sub-Adviser has determined that the seller is creditworthy,
and the Adviser or the Sub-Adviser monitors that seller's creditworthiness on
an ongoing basis. Moreover, under such agreements, the value of the securities
(which are marked to market every business day) is required to be greater than
the repurchase price, and the series has the right to make margin calls at any
time if the value of the securities falls below the agreed upon margin.
LOANS AND OTHER DIRECT INDEBTEDNESS: Each series may purchase loans and other
direct claims against an issuer of emerging market debt instruments (a
"borrower"). In purchasing a loan, a series acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate,
governmental or other borrower. Many such loans are secured, although some may
be unsecured. Such loans may be in default at the time of purchase. Loans that
are fully secured offer a series more protection than an unsecured loan in the
event of non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan would satisfy
the corporate borrower's obligation, or that the collateral can be liquidated.
Certain of the loans acquired by a series may involve revolving credit
facilities or other standby financing commitments which obligate the series to
pay additional cash on a certain date or on demand. These commitments may have
the effect of requiring a series to increase its investment in a company at a
time when the series might not otherwise decide to do so (including at a time
when the company's financial condition makes it unlikely that such amounts
will be repaid). To the extent that a series is committed to advance
additional funds, it will at all times hold and maintain in a segregated
account liquid assets in an amount sufficient to meet such commitments.
A series' ability to receive payments of principal, interest and other amounts
due in connection with these investments will depend primarily on the
financial condition of the borrower. Direct indebtedness of developing
countries involves the risk that the governmental entities responsible for the
repayment of the note may be unable, or unwilling, to pay interest and repay
principal where due. In selecting the loans and other direct indebtedness
which a series will purchase, the Adviser or Sub-Advisor will rely upon their
(and not that of the original lending institution's) own credit analysis of
the borrower. As a series may be required to rely upon another lending
institution to collect and pass on to the series amounts payable with respect
to the loan and to enforce the series' rights under the loan, an insolvency,
bankruptcy or reorganization of the lending institution may delay or prevent
the Series from receiving such amounts. In such cases, the series will
evaluate as well the creditworthiness of the lending institution and will
treat both the borrower and the lending institution as an "Issuer" of the loan
for purposes of certain investment restrictions pertaining to the
diversification of the series' portfolio investments. The highly leveraged
nature of many such loans may make such loans especially vulnerable to adverse
changes in economic or market conditions. Investments in such loans may
involve additional risks to a series.
WARRANTS: Each series will not invest more than 10% of its net assets, taken
at market value, in warrants not acquired in a unit transaction. Warrants are
securities that give a series the right to purchase equity securities from the
issuer at a specific price (the "strike price") for a limited period of time.
The strike price of warrants typically is much lower than the current market
price of the underlying securities, yet they are subject to similar price
fluctuations. As a result, warrants may be more volatile investment than the
underlying securities and may offer greater potential for capital appreciation
as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect to
the underlying securities and do not represent any rights in the assets of the
issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date. These factors can make
warrants more speculative than other types of investments.
DEPOSITORY RECEIPTS: Each series may purchase depository receipts, including
unsponsored depository receipts. Under the terms of most sponsored
arrangements, depositories agree to distribute notices of shareholder meetings
and voting instructions, and to provide shareholder communications and other
information to the ADR holders at the request of the issuer of the deposited
securities. The depository of an unsponsored ADR, on the other hand, is under
no obligation to distribute shareholder communications received from the
issuer of the deposited securities or to pass through voting rights to ADR
holders in respect of the deposited securities. For further discussion of
depository receipts see the Prospectus and Appendix A to the Prospectus --
"American Depositary Receipts."
<PAGE>
MFS/SUN LIFE SERIES TRUST
An Open-end Management Investment Company
INVESTMENT ADVISER
Massachusetts Financial Services Company
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.
Mailing Address:
P.O. Box 2281, Boston, MA 02107
Business Address:
500 Boylston Street, Boston, MA 02116
Telephone:
Toll free: (800) 225-2606;
in Massachusetts and Alaska, collect: (617) 954-5000
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
For the years or periods, as applicable to each series, ended
December 31 1988 through December 31, 1997*:
Financial Highlights
FINANCIAL STATEMENTS INCLUDED IN PART B:
Portfolios of Investments, December 31, 1997*
Statement of Assets and Liabilities, December 31, 1997*
Statements of Operations, year ended December 31, 1997*
Statements of Changes in Net Assets, years ended December 31,
1996 and 1997.*
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* To be provided in Post-Effective Amendment #22 to the Registrant's
Registration Statement.
(B) EXHIBITS:
1 Amended and Restated Declaration of Trust of
Registrant dated December 29, 1997; filed
herewith.
2 By-Laws of Registrant dated February 6, 1998;
filed herewith.
3 Not Applicable.
4 Not Applicable.
5 (a) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company dated May 24, 1985; filed
herewith.
(b) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company dated July 23, 1986;
filed herewith.
(c) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company dated January 26, 1988;
filed herewith.
(d) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the World Growth
Series dated November 1, 1993; filed
herewith.
(e) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the Utilities
Series dated November 1, 1993; filed
herewith.
(f) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the Research
Series dated September 16, 1994; filed
herewith.
(g) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the World Asset
Allocation Series dated September 16, 1994;
filed herewith.
(h) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the World Total
Return Series dated September 16, 1994; filed
herewith.
(i) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the Emerging
Growth Series dated May 1, 1995; filed
herewith.
(j) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the MFS/Foreign
& Colonial International Growth Series dated
September 1, 1995; filed herewith.
(k) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the MFS/Foreign
& Colonial International Growth and Income
Series dated September 1, 1995; filed
herewith.
(l) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the MFS/Foreign
& Colonial Emerging Markets Equity Series
dated September 1, 1995; filed herewith.
(m) Sub-Advisory Agreement by and between
Massachusetts Financial Services Company
and Foreign & Colonial Management Ltd.
relating to the MFS/Foreign & Colonial
International Growth Series dated
September 1, 1995; filed herewith.
(n) Sub-Advisory Agreement by and
between Massachusetts Financial Services
Company and Foreign & Colonial Management
Ltd. relating to the MFS/Foreign &
Colonial Emerging Markets Equity Series
dated September 1, 1995; filed herewith.
(o) Sub-Advisory Agreement between Foreign &
Colonial Management Ltd. and Foreign &
Colonial Emerging Markets Limited relating to
the MFS/Foreign & Colonial International
Growth Series dated September 1, 1995; filed
herewith.
(p) Sub-Advisory Agreement between Foreign &
Colonial Management Ltd. and Foreign &
Colonial Emerging Markets Limited relating to
the MFS/Foreign & Colonial Emerging Markets
Equity Series dated September 1, 1995; filed
herewith.
(q) Sub-Advisory Agreement by and between
Massachusetts Financial Services Company and
Foreign & Colonial Management Limited
relating to the World Growth Series dated May
1, 1996; filed herewith.
(r) Sub-Advisory Agreement between Foreign &
Colonial Management Limited and Foreign &
Colonial Emerging Markets Limited relating to
the World Growth Series dated May 1, 1996;
filed herewith.
(s) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the Value Series
dated May 1, 1996; filed herewith.
(t) Investment Advisory Agreement between
Registrant, on behalf of the Research Growth
and Income Series, and Massachusetts
Financial Services Company dated May 12,
1997; filed herewith.
(u) Amendment to the Investment Advisory
Agreement by and between Massachusetts
Financial Services Company and the Registrant
relating to the Capital Appreciation Series
dated January 1, 1997. (1)
(v) Form of Investment Advisory Agreement between
Registrant, on behalf of the Bond Series, and
Massachusetts Financial Services Company
dated May 1, 1998; filed
herewith.
(w) Form of Investment Advisory Agreement between
Registrant, on behalf of the Equity Income
Series, and Massachusetts Financial Services
Company dated May 1, 1995; filed herewith.
(x) Form of Investment Advisory Agreement between
Registrant, on behalf of the Massachusetts
Investors Growth Stock Series, and
Massachusetts Financial Services Company
dated May 1, 1995; filed
herewith.
(y) Form of Investment Advisory Agreement between
Registrant, on behalf of the New Discovery
Series, and Massachusetts Financial Services
Company dated May 1, 1995; filed herewith.
(z) Form of Investment Advisory Agreement between
Registrant, on behalf of the Research
International Series, and Massachusetts
Financial Services Company dated May 1, 1995;
filed herewith.
(aa) Form of Investment Advisory Agreement between
Registrant, on behalf of the Strategic Income
Series, and Massachusetts Financial Services
Company dated May 1, 1995; filed herewith.
6 Not Applicable.
7 Not Applicable.
8 (a) Custodian Agreement between Registrant
and State Street Bank and Trust Company dated
May 24, 1985; filed herewith.
(b) Amendment dated July 23, 1986 to Custodian
Agreement; filed herewith.
9 (a) Shareholder Servicing Agent Agreement
between Registrant and Massachusetts
Financial Service Center, Inc., dated August
1, 1985; filed herewith.
(b) Master Administrative Services Agreement,
dated March 1, 1997. (2)
10 Consent and Opinion of Counsel for the fiscal
year ended December 31, 1996, previously
filed with the Registrant's Rule 24f-2 Notice
on February 27, 1997; (to be provided for
fiscal year ended December 31, 1997).
11 Consent of Deloitte & Touche LLP [to be
provided]
12 Not Applicable.
13 Investment representation letter from initial
shareholder; filed herewith.
14 Not Applicable.
15 Not Applicable.
16 Not Applicable.
17 Financial Data Schedules [to be provided]
Power of Attorney dated February 6, 1997. (2)
- -----------------------
(1) Incorporated by reference to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement filed on April 29, 1997.
(2) Incorporated by reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement filed on March 18, 1997.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 2
(without par value) (as of January 31, 1998)
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Article V of the Registrant's
Amended and Restated Declaration of Trust, filed as an Exhibit to the
Registrant's Post-Effective Amdendment No. 21 and (b) the undertaking of the
Registrant regarding indemnification set forth in Registrant's Post-Effective
Amdendment No. 21.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also insured
under the fidelity bond required by Rule 17g-1 under the Investment Company Act
of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds (except the Vertex Funds mentioned below):
Massachusetts Investors Trust, Massachusetts Investors Growth Stock Fund, MFS
Growth Opportunities Fund, MFS Government Securities Fund, MFS Government
Limited Maturity Fund, MFS Series Trust I (which has thirteen series: MFS
Managed Sectors Fund, MFS Cash Reserve Fund, MFS World Asset Allocation Fund,
MFS Strategic Growth Fund, MFS Research Growth and Income Fund, MFS Core Growth
Fund, MFS Equity Income Fund, MFS Special Opportunities Fund, MFS Convertible
Securities Fund, MFS Blue Chip Fund, MFS New Discovery Fund, MFS Science and
Technology Fund and MFS Research International Fund), MFS Series Trust II (which
has three series: MFS Emerging Growth Fund, MFS Large Cap Growth Fund and MFS
Intermediate Income Fund), MFS Series Trust III (which has two series: MFS High
Income Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has
four series: MFS Money Market Fund, MFS Government Money Market Fund, MFS
Municipal Bond Fund and MFS Mid Cap Growth Fund), MFS Series Trust V (which has
six series: MFS Total Return Fund, MFS Research Fund, MFS International
Opportunities Fund, MFS International Strategic Growth Fund, MFS International
Value Fund and MFS Asia Pacific Fund), MFS Series Trust VI (which has three
series: MFS World Total Return Fund, MFS Utilities Fund and MFS World Equity
Fund), MFS Series Trust VII (which has two series: MFS World Governments Fund
and MFS Value Fund), MFS Series Trust VIII (which has two series: MFS Strategic
Income Fund and MFS World Growth Fund), MFS Series Trust IX (which has three
series: MFS Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited
Maturity Fund), MFS Series Trust X (which has eight series: MFS Government
Mortgage Fund, MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS
International Growth Fund, MFS International Growth and Income Fund, MFS Real
Estate Investment Fund, MFS Strategic Value Fund, MFS Small Cap Value Fund and
MFS Emerging Markets Debt Fund), MFS Series Trust XI (which has six series: MFS
Union Standard Equity Fund, Vertex All Cap Fund, Vertex Research All Cap Fund,
Vertex Growth Fund, Vertex Discovery Fund and Vertex Contrarian Fund), and MFS
Municipal Series Trust (which has 16 series: MFS Alabama Municipal Bond Fund,
MFS Arkansas Municipal Bond Fund, MFS California Municipal Bond Fund, MFS
Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS Maryland
Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi
Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North Carolina
Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South Carolina
Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Virginia Municipal
Bond Fund, MFS West Virginia Municipal Bond Fund and MFS Municipal Income Fund)
(the "MFS Funds"). The principal business address of each of the MFS Funds is
500 Boylston Street, Boston, Massachusetts 02116.
MFS also serves as investment adviser of the following open-end
Funds: MFS Institutional Trust ("MFSIT") (which has seven series) and MFS
Variable Insurance Trust ("MVI") (which has twelve series). The principal
business address of each of the aforementioned funds is 500 Boylston Street,
Boston, Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the MFS Closed-End Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series
Trust ("MFS/SL") (which has 26 series), Money Market Variable Account, High
Yield Variable Account, Capital Appreciation Variable Account, Government
Securities Variable Account, World Governments Variable Account, Total Return
Variable Account and Managed Sectors Variable Account (collectively, the
"Accounts"). The principal business address of MFS/SL is 500 Boylston Street,
Boston, Massachusetts 02116. The principal business address of each of the
aforementioned Accounts is One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02181.
Vertex Investment Management, Inc., a Delaware corporation and a
wholly owned subsidiary of MFS, whose principal business address is 500 Boylston
Street, Boston, Massachusetts 02116 ("Vertex"), serves as investment adviser to
Vertex All Cap Fund, Vertex Research All Cap Fund, Vertex Growth Fund, Vertex
Discovery Fund and Vertex Contrarian Fund, each a series of MFS Series Trust XI.
The principal business address of the aforementioned Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
MFS International Ltd. ("MIL"), a limited liability company
organized under the laws of Bermuda and a subsidiary of MFS, whose principal
business address is Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda, serves
as investment adviser to and distributor for MFS American Funds (which has six
portfolios: MFS American Funds-U.S. Equity Fund, MFS American Funds-U.S.
Emerging Growth Fund, MFS American Funds-U.S. High Yield Bond Fund, MFS American
Funds - U.S. Dollar Reserve Fund, MFS American Funds-Charter Income Fund and MFS
American Funds-U.S. Research Fund) (the "MIL Funds"). The MIL Funds are
organized in Luxembourg and qualify as an undertaking for collective investments
in transferable securities (UCITS). The principal business address of the MIL
Funds is 47, Boulevard Royal, L-2449 Luxembourg.
MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Governments Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund, MFS Meridian U.S. Equity Fund, MFS Meridian Research Fund, MFS
Meridian U.S. High Yield Fund and MFS Meridian Emerging Markets Debt Fund
(collectively the "MFS Meridian Funds"). Each of the MFS Meridian Funds is
organized as an exempt company under the laws of the Cayman Islands. The
principal business address of each of the MFS Meridian Funds is P.O. Box 309,
Grand Cayman, Cayman Islands, British West Indies.
MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.
MFS Institutional Advisors (Australia) Ltd. ("MFSI-Australia"), a
private limited company organized under the Corporations Law of New South Wales,
Australia whose current address is Level 37, Governor Phillip Tower, One Farrer
Place, Sydney, N5W2000, Australia, is involved primarily in investment
management and distribution of Australian superannuation unit trusts and acts as
an investment adviser to institutional accounts.
MFS Holdings Australia Pty Ltd. ("MFS Holdings Australia"), a
private limited company organized pursuant to the Corporations Law of New South
Wales, Australia whose current address is Level 37, Governor Phillip Tower, One
Farrer Place, Sydney, NSW2000 Australia, and whose function is to serve
primarily as a holding company.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of
MFS, serves as distributor for the MFS Funds, MVI and MFSIT.
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFSIT and MVI.
MFS Institutional Advisors, Inc. ("MFSI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.
MFS
The Directors of MFS are Jeffrey L. Shames, Arnold D. Scott, John W.
Ballen, Donald A. Stewart and John D. McNeil. Mr. Shames is the Chairman, Chief
Executive Officer and President, Mr. Scott is a Senior Executive Vice President
and Secretary, William W. Scott, Jr., Patricia A. Zlotin, John W. Ballen, Thomas
J. Cashman, Jr., Joseph W. Dello Russo and Kevin R. Parke are Executive Vice
Presidents, Stephen E. Cavan is a Senior Vice President, General Counsel and an
Assistant Secretary, Robert T. Burns is a Senior Vice President, Associate
General Counsel and an Assistant Secretary of MFS, and Thomas B. Hastings is a
Vice President and Treasurer of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS SERIES TRUST VI
MFS SERIES TRUST X
MFS GOVERNMENT LIMITED MATURITY FUND
Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley, Vice Presidents
of MFS, are the Assistant Treasurers, James R. Bordewick, Jr., Senior Vice
President and Associate General Counsel of MFS, is the Assistant Secretary.
MFS SERIES TRUST II
Leslie J. Nanberg, Senior Vice President of MFS, is a Vice
President, Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the Assistant
Treasurers, and James R. Bordewick, Jr. is the Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
Leslie J. Nanberg, Senior Vice President of MFS, is a Vice
President, Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the Assistant
Treasurers, and James R. Bordewick, Jr. is the Assistant Secretary.
MFS SERIES TRUST III
James T. Swanson, Robert J. Manning and Joan S. Batchelder, Senior
Vice Presidents of MFS, and Bernard Scozzafava, Vice President of MFS, are Vice
Presidents, Sheila Burns-Magnan, Assistant Vice President of MFS, and Daniel E.
McManus, Vice President of MFS, are Assistant Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M.
Moynihan and Mark E. Bradley are the Assistant Treasurers, and James R.
Bordewick, Jr. is the Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
Robert A. Dennis and Geoffrey L. Kurinsky, Senior Vice Presidents of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.
MFS SERIES TRUST VII
Leslie J. Nanberg and Stephen C. Bryant, Senior Vice Presidents of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.
MFS SERIES TRUST VIII
Jeffrey L. Shames, Leslie J. Nanberg and James T. Swanson and John
D. Laupheimer, Jr., a Senior Vice President of MFS, are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost,
Ellen M. Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
Robert A. Dennis is Vice President, David B. Smith and Geoffrey L.
Schechter, Vice Presidents of MFS, are Vice Presidents, Daniel E. McManus, Vice
President of MFS, is an Assistant Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is
the Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS SERIES TRUST XI
MFS INSTITUTIONAL TRUST
Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
Robert J. Manning is Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is
the Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost,
Ellen M. Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.
MFS SPECIAL VALUE TRUST
Robert J. Manning is Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is
the Assistant Secretary.
MFS/SUN LIFE SERIES TRUST
John D. McNeil, Chairman and Director of Sun Life Assurance Company
of Canada, is the Chairman, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.
MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT
John D. McNeil is the Chairman, Stephen E. Cavan is the Secretary,
and James R. Bordewick, Jr. is the Assistant Secretary.
VERTEX
Jeffrey L. Shames and Arnold D. Scott are the Directors, Jeffrey L.
Shames is the President, Kevin R. Parke and John W. Ballen are Executive Vice
Presidents, John F. Brennan, Jr., and John D. Laupheimer are Senior Vice
Presidents, Brian E. Stack is a Vice President, Joseph W. Dello Russo is the
Treasurer, Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is
the Secretary and Robert T. Burns is the Assistant Secretary.
MIL
Arnold D. Scott, Jeffrey L. Shames and Thomas J. Cashman, Jr. are
Directors, Stephen E. Cavan is a Director, Senior Vice President and the Clerk,
Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo, Executive Vice
President and Chief Financial Officer of MFS, is the Treasurer and Thomas B.
Hastings is the Assistant Treasurer.
MIL-UK
Thomas J. Cashman, Jr. is President and a Director, Arnold D. Scott
and Jeffrey L. Shames are Directors, Stephen E. Cavan is a Director and the
Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer and Robert T. Burns is the Assistant Secretary.
MFSI - AUSTRALIA
Thomas J. Cashman, Jr. is President and a Director, Graham E.
Lenzer, John A. Gee and David Adiseshan are Directors, Stephen E. Cavan is the
Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, and Robert T. Burns is the Assistant Secretary.
MFS HOLDINGS - AUSTRALIA
Jeffrey L. Shames is the President and a Director, Arnold D. Scott,
Thomas J. Cashman, Jr., and Graham E. Lenzer are Directors, Stephen E. Cavan is
the Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL FUNDS
Richard B. Bailey, John A. Brindle, Richard W. S. Baker, Arnold D.
Scott, Jeffrey L. Shames and William F. Waters are Directors, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M.
Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.
MFS MERIDIAN FUNDS
Richard B. Bailey, John A. Brindle, Richard W. S. Baker, Arnold D.
Scott, Jeffrey L. Shames and William F. Waters are Directors, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James R. Bordewick, Jr. is
the Assistant Secretary and James O. Yost, Ellen M. Moynihan and Mark E. Bradley
are the Assistant Treasurers.
MFD
Arnold D. Scott and Jeffrey L. Shames are Directors, William W.
Scott, Jr., an Executive Vice President of MFS, is the President, Stephen E.
Cavan is the Secretary, Robert T. Burns is the Assistant Secretary, Joseph W.
Dello Russo is the Treasurer, and Thomas B. Hastings is the Assistant Treasurer.
MFSC
Arnold D. Scott and Jeffrey L. Shames are Directors, Joseph A.
Recomendes, a Senior Vice President and Chief Information Officer of MFS, is
Vice Chairman and a Director, Janet A. Clifford is the President, Joseph W.
Dello Russo is the Treasurer, Thomas B. Hastings is the Assistant Treasurer,
Stephen E. Cavan is the Secretary, and Robert T. Burns is the Assistant
Secretary.
MFSI
Jeffrey L. Shames, and Arnold D. Scott are Directors, Thomas J.
Cashman, Jr., is the President and a Director, Leslie J. Nanberg is a Senior
Vice President, a Managing Director and a Director, Kevin R. Parke is the
Executive Vice President and a Managing Director, George F. Bennett, Jr., John
A. Gee, Brianne Grady, Joseph A. Kosciuszek and Joseph J. Trainor are Senior
Vice Presidents and Managing Directors, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer and Robert T. Burns is the
Secretary.
RSI
Arnold D. Scott is the Chairman and a Director, Martin E. Beaulieu
is the President, William W. Scott, Jr. is a Director, Joseph W. Dello Russo is
the Treasurer, Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan
is the Secretary and Robert T. Burns is the Assistant Secretary.
In addition, the following persons, Directors or officers of MFS,
have the affiliations indicated:
Donald A. Stewart President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Stewart is also an
officer and/or Director of various
subsidiaries and affiliates of Sun Life)
John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada
(Mr. McNeil is also an officer and/or
Director of various subsidiaries and
affiliates of Sun Life)
Joseph W. Dello Russo Director of Mutual Fund Operations, The
Boston Company, Exchange Place, Boston,
Massachusetts (until August, 1994)
ITEM 29. DISTRIBUTORS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal
business address of each of these persons is 500 Boylston Street, Boston,
Massachusetts 02116.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in whole or
in part, at the office of the Registrant and the following locations:
NAME ADDRESS
---- -------
Massachusetts Financial Services 500 Boylston Street
Company (investment adviser) Boston, MA 02116
MFS Service Center, Inc. 500 Boylston Street
Boston, MA 02116
State Street Bank and Trust Company State Street South
5-North
North Quincy, MA 02171
Sun Life Annuity Service Center 50 Milk Street
Boston, MA 02109
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being Registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 12th day of February, 1998.
MFS/SUN LIFE SERIES TRUST
By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on February 12, 1998.
SIGNATURE TITLE
--------- -----
Chairman, Principal Executive Officer
JOHN D. MCNEIL* and Trustee
- ----------------------------
John D. McNeil
Treasurer (Principal Financial Officer
W. THOMAS LONDON* and Principal Accounting Officer)
- ----------------------------
W. Thomas London
SAMUEL ADAMS* Trustee
- ----------------------------
Samuel Adams
GEOFFREY CROFTS* Trustee
- ----------------------------
Geoffrey Crofts
GARTH MARSTON* Trustee
- ----------------------------
Garth Marston
DAVID D. HORN* Trustee
- ----------------------------
David D. Horn
DERWYN F. PHILLIPS* Trustee
- ----------------------------
Derwyn F. Phillips
*By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
as Attorney-in-fact
Executed by James R. Bordewick, Jr.
on behalf of those indicated pursuant
to a Power of Attorney filed herewith.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ----------- ---------------------- --------
1 Amended and Restated Declaration of
Trust of Registrant.
2 By-Laws of Registrant.
5 (a) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company dated May 24, 1985.
(b) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company dated July 23, 1986.
(c) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company dated January 26, 1988.
(d) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the World
Growth Series.
(e) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the
Utilities Series.
(f) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the
Research Series.
(g) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the World
Asset Allocation Series.
(h) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the World
Total Return Series.
(i) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the
Emerging Growth Series.
(j) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the
MFS/Foreign & Colonial International
Growth Series.
(k) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the
MFS/Foreign & Colonial International
Growth and Income Series.
(l) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the
MFS/Foreign & Colonial Emerging Markets
Equity Series.
(m) Sub-Advisory Agreement by and between
Massachusetts Financial Services
Company and Foreign & Colonial
Management Ltd. relating to the
MFS/Foreign & Colonial International
Growth Series.
(n) Sub-Advisory Agreement by and between
Massachusetts Financial Services Company
and Foreign & Colonial Management Ltd.
relating to the MFS/Foreign & Colonial
Emerging Markets Equity Series.
(o) Sub-Advisory Agreement between Foreign
& Colonial Management Ltd. and Foreign &
Colonial Emerging Markets Limited
relating to the MFS/Foreign & Colonial
International Growth Series.
(p) Sub-Advisory Agreement between Foreign
& Colonial Management Ltd. and Foreign &
Colonial Emerging Markets Limited
relating to the MFS/Foreign & Colonial
Emerging Markets Equity Series.
(q) Sub-Advisory Agreement by and between
Massachusetts Financial Services Company
and Foreign & Colonial Management
Limited relating to the World Growth
Series.
(r) Sub-Advisory Agreement between Foreign
& Colonial Management Limited and
Foreign & Colonial Emerging Markets
Limited relating to the World Growth
Series.
(s) Investment Advisory Agreement between
Registrant and Massachusetts Financial
Services Company relating to the Value
Series.
(t) Form of Investment Advisory Agreement
between Registrant , on behalf of the
Research Growth and Income Series, and
Massachusetts Financial Services
Company.
(v) Form of Investment Advisory Agreement
between Registrant, on behalf of the
Bond Series, and Massachusetts Financial
Services Company.
(w) Form of Investment Advisory Agreement
between Registrant, on behalf of the
Equity Income Series, and Massachusetts
Financial Services Company.
(x) Form of Investment Advisory Agreement
between Registrant, on behalf of the
Massachusetts Investors Growth Stock
Series, and Massachusetts Financial
Services Company.
(y) Form of Investment Advisory Agreement
between Registrant, on behalf of the New
Discovery Series, and Massachusetts
Financial Services Company.
(z) Form of Investment Advisory Agreement
between Registrant, on behalf of the
Research International Series, and
Massachusetts Financial Services
Company.
(aa) Form of Investment Advisory Agreement
between Registrant, on behalf of the
Strategic Income Series, and
Massachusetts Financial Services
Company.
8 (a) Custodian Agreement between Registrant
and State Street Bank and Trust
Company dated May 24, 1985.
(b) Amendment dated July 23, 1986 to
Custodian Agreement.
9 Shareholder Servicing Agent Agreement
between Registrant and Massachusetts
Financial Service Center, Inc.
13 Investment representation letter from
initial shareholder.
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT NO. 99.1
- --------------------------------------------------------------------------------
MFS/SUN LIFE SERIES TRUST
--------------------
AMENDED AND RESTATED
DECLARATION OF TRUST
DECEMBER 29, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - NAME AND DEFINITIONS
Section 1.1 Name 2
Section 1.2 Definitions 2
ARTICLE II - TRUSTEES
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 4
Section 2.4 Vacancies 5
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III - POWERS OF TRUSTEES
Section 3.1 General 5
Section 3.2 Investments 6
Section 3.3 Legal Title 7
Section 3.4 Issuance and Repurchase of Securities 7
Section 3.5 Borrowing Money; Lending Trust Property 7
Section 3.6 Delegation; Committees 7
Section 3.7 Collection and Payment 8
Section 3.8 Expenses 8
Section 3.9 Manner of Acting; By-Laws 8
Section 3.10 Miscellaneous Powers 8
Section 3.11 Principal Transactions 9
Section 3.12 Trustees and Officers as Shareholders 9
ARTICLE IV - INVESTMENT ADVISER AND TRANSFER AGENT
Section 4.1 Investment Adviser 10
Section 4.2 Transfer Agent 10
Section 4.3 Parties to Contract 11
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE V - LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES
AND OTHERS
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 11
Section 5.2 Non-Liability of Trustees, etc. 12
Section 5.3 Mandatory Indemnification 12
Section 5.4 No Bond Required of Trustees 14
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 14
Section 5.6 Reliance on Experts, etc. 15
ARTICLE VI - SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest 15
Section 6.2 Rights of Shareholders 15
Section 6.3 Trust Only 15
Section 6.4 Issuance of Shares 16
Section 6.5 Register of Shares 16
Section 6.6 Transfer of Shares 16
Section 6.7 Notices 17
Section 6.8 Voting Powers 17
Section 6.9 Series Designation 18
ARTICLE VII - REDEMPTIONS
Section 7.1 Redemption of Shares 21
Section 7.2 Price 21
Section 7.3 Payment 21
Section 7.4 Effect of Suspension of Determination of
Net Asset Value 21
Section 7.5 Redemption of Shares in Order to Qualify
as Regulated Investment Company; Disclosure
of Holding 22
Section 7.6 Suspension of Right to Redemption 22
ARTICLE VIII - DETERMINATION OF NET ASSET VALUE, NET INCOME
--------------------------------------------
AND DISTRIBUTIONS 23
-----------------
ARTICLE IX - DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
--------------------------------------------------------
Section 9.1 Duration 23
Section 9.2 Termination of Trust 23
Section 9.3 Amendment Procedure 24
Section 9.4 Merger, Consolidation and Sale of Assets 25
Section 9.5 Incorporation, Reorganization 26
Section 9.6 Incorporation or Reorganization of Series 26
ARTICLE X - REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 27
------------------------------------------------------
ARTICLE XI - MISCELLANEOUS
Section 11.1 Filing 28
Section 11.2 Governing Law 28
Section 11.3 Counterparts 28
Section 11.4 Reliance by Third Parties 28
Section 11.5 Provisions in Conflict with Law or Regulations 29
ANNEX A 30
SIGNATURE PAGE 32
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MFS/SUN LIFE SERIES TRUST
500 Boylston Street
Boston, Massachusetts 02116
AMENDED AND RESTATED DECLARATION OF TRUST, made as of this 29th day of
December 1997 by the Trustees hereunder.
WHEREAS, the Trust was established pursuant to a Declaration of Trust
dated May 9, 1983 for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets continue to be divided into transferable Shares of Beneficial Interest
(without par value) issued in one or more series, as hereinafter provided; and
WHEREAS, the Declaration of Trust has been, from time to time, amended and
restated in accordance with the provisions of the Declaration; and
WHEREAS, the Trustees now desire further to amend and to restate the
Declaration of Trust and hereby certify, as provided in Section 11.1 of the
Declaration, that this Amended and Restated Declaration of Trust has been
further amended and restated in accordance with the provisions of the
Declaration;
NOW THEREFORE, the Trustees hereby confirm that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the shares of Beneficial
Interest (without par value) issued hereunder and subject to the provisions
hereof.
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 - Name. The name of the trust created hereby is the MFS/Sun
Life Series Trust.
Section 1.2 - Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as from
time to time amended.
(b) "Commission" has the meaning given that term in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "Interested Person" has the meaning given that term in the 1940 Act.
(e) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(f) "Majority Shareholder Vote" has the same meaning as the phrase "vote
of a majority of the outstanding voting securities" as defined in the 1940 Act,
except that such term may be used herein with respect to the Shares of the Trust
as a whole or the Shares of any particular series, as the context may require.
(g) "1940 Act" means the Investment Company Act of 1940 and the Rules and
Regulations thereunder, as amended from time to time.
(h) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof,
whether domestic or foreign.
(i) "Shareholder" means a record owner of outstanding Shares.
(j) "Shares" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series of Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(k) "Transfer Agent" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(l) "Trust" means the trust created hereby.
(m) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(n) "Trustees" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1 - Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15).
Section 2.2 - Term of Office of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided;
except:
(a) that any Trustee may resign his trust (without need for prior or
subsequent accounting) by an instrument in writing signed by him and delivered
to the other Trustees, which shall take effect upon such delivery or upon such
later date as is specified therein;
(b) that any Trustee may be removed with cause, at any time by written
instrument, signed by at least two-thirds of the remaining Trustees, specifying
the date when such removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has
become incapacitated by illness or injury may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; and (d) a Trustee may be removed at any meeting of Shareholders by a
vote of two-thirds of the outstanding Shares of each series.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to
be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.
Section 2.3 - Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy by
appointing such other person as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16(a)
of the 1940 Act.
Section 2.4 - Vacancies. The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall not operate to
annul the Trust or to revoke any existing agency created pursuant to the terms
of this Declaration. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.3, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of the existence of such
vacancy.
Section 2.5 - Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees; provided that in no case shall
less than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1 - General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2 - Investments.
(a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an investment
company;
(ii) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of U.S. and foreign currencies, any form of gold
and other precious metals, commodity contracts, contracts for the future
acquisition or delivery of fixed income or other securities, and securities of
every nature and kind, including, without limitation, all types of bonds,
debentures, stocks, negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, bankers' acceptances, and other securities of any
kind, issued, created, guaranteed or sponsored by any and all Persons,
including, without limitation, states, territories and possessions of the United
States and the District of Columbia and any political subdivision, agency or
instrumentality of any such Person, or by the U. S. Government, any foreign
government, any political subdivision or any agency or instrumentality of the U.
S. Government, any foreign government or any political subdivision of the U. S.
Government or any foreign government, or any international instrumentality, or
by any bank or savings institution, or by any corporation or organization
organized under the laws of the United States or of any state, territory or
possession thereof, or by any corporation or organization organized under any
foreign law, or in "when issued" contracts for any such securities, to retain
Trust assets in cash and from time to time change the investments of the assets
of the Trust; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of every kind
and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and
(iii) to carry on any other business in connection with or incidental
to any of the foregoing powers, to do everything necessary, suitable or proper
for the accomplishment of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, and to do every other act or
thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
(b) The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Section 3.3 - Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person or nominee, on such terms as the Trustees may determine. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 3.4 - Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds of the Trust or other Trust Property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of The Commonwealth of Massachusetts governing business
corporations.
Section 3.5 - Borrowing Money; Lending Trust Property. The Trustees shall
have power to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the Trust Property, to
endorse, guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust Property.
Section 3.6 - Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
Section 3.7 - Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 3.8 - Expenses. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 3.9 - Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of all the Trustees.
The Trustees may adopt By-Laws not inconsistent with this Declaration to provide
for the conduct of the business of the Trust and may amend or repeal such
By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10 - Miscellaneous Powers. The Trustees shall have the power
to:
(a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust;
(b) enter into joint ventures, partnerships and any other combinations or
associations;
(c) remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as they
consider appropriate, and appoint from their own number, and terminate, any one
or more committees which may exercise some or all of the power and authority of
the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property, insurance policies
insuring the Shareholders, Trustees, officers, employees, agents, investment
advisers, distributors, selected dealers or independent contractors of the Trust
against all claims arising by reason of holding any such position or by reason
of any action taken or omitted by any such Person in such capacity, whether or
not constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability;
(e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust;
(f) to the extent permitted by law, indemnify any person with whom the
Trust has dealings, including the Investment Adviser, Transfer Agent, and any
dealer, to such extent as the Trustees shall determine;
(g) determine and change the fiscal year of the Trust and the method by
which its accounts shall be kept; and
(h) adopt a seal for the Trust, provided, that the absence of such seal
shall not impair the validity of any instrument executed on behalf of the Trust.
Section 3.11 - Principal Transactions. Except in transactions permitted by
the 1940 Act, or any order of exemption issued by the Commission, the Trustees
shall not, on behalf of the Trust, buy any securities (other than Shares) from
or sell any securities (other than Shares) to, or lend any assets of the Trust
to, any Trustee or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with the
Investment Adviser, or Transfer Agent or with any Interested Person of such
Person; but the Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
Section 3.12 - Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or member of the Advisory Board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser and no Investment Adviser of the Trust, shall take long or short
positions in the securities issued by the Trust. The foregoing provision shall
not prevent:
(a) The purchase from the Trust of Shares by any officer, Trustee or
member of the Advisory Board of the Trust or by any member, partner, officer,
director or trustee of the Investment Adviser at a price not lower than the net
asset value of the Shares at the moment of such purchase, provided that any such
sales are only to be made pursuant to a uniform offer described in the Trust's
current prospectus; or
(b) The Investment Adviser or any of its officers, partners, directors or
trustees from purchasing Shares prior to the effective date of the Registration
Statement relating to the Shares under the Securities Act of 1933, as amended.
ARTICLE IV
INVESTMENT ADVISER AND TRANSFER AGENT
Section 4.1 - Investment Adviser. Subject to a Majority Shareholder Vote
of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby a party to such contract shall undertake to furnish
the Trust such management, investment advisory, statistical and research
facilities and services, promotional activities and such other facilities and
services, if any, with respect to one or more series of Shares, as the Trustees
shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provision of the Declaration, the Trustees may delegate to the Investment
Adviser authority (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of assets of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases, sales, loans or exchanges shall be
deemed to have been authorized by all the Trustees.
Section 4.2 - Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract or
contracts whereby the other party or parties to such contract or contracts shall
undertake to furnish transfer agency and/or shareholder services. The contract
or contracts shall have such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the Declaration or the By-Laws. Such
services may be provided by one or more Persons.
Section 4.3 - Parties to Contract. Any contract of the character described
in Sections 4.1 or 4.2 of this Article IV or any Custodian contract, as
described in the By-Laws, may be entered into with any Person, although one or
more of the Trustees or officers of the Trust may be an officer, partner,
director, trustee, shareholder, or member of such other party to the contract,
and no such contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship; nor shall any Person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article IV or
the By-Laws. The same Person may be the other party to contracts entered into
pursuant to Sections 4.1 or 4.2 above or Custodian contracts, and any individual
may be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.3.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1 - No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series other than Trust Property
allocated or belonging to such series.
Section 5.2 - Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, wilful misfeasance, gross negligence or reckless disregard of
his duties.
Section 5.3 - Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is or has been a Trustee or officer of the Trust
shall be indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee or
officer or other disposition not involving a final adjudication as provided in
paragraph (b) (i) or (b) (ii) above resulting in a payment by a Trustee or
officer, unless there has been either a determination that such Trustee or
officer did not engage in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or by a
reasonable determination, based upon a review of readily available facts (as
opposed to a full trial-type inquiry) that he did not engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be entitled,
shall continue as to a Person who has ceased to be such Trustee or officer and
shall inure to the benefit of the heirs, executors and administrators of such
Person. Nothing contained herein shall affect any rights to indemnification to
which personnel other than Trustees and officers may be entitled by contract or
otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Section 5.4 - No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5 - No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, Transfer Agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is executed or made by them
not individually, but as Trustees under the Declaration, and that the
obligations of any such instrument are not binding upon any of the Trustees or
Shareholders individually, but bind only the trust estate, and may contain any
further recital which they or he may deem appropriate, but the omission of such
recital shall not operate to bind any of the Trustees or Shareholders
individually. The Trustees shall at all times maintain insurance for the
protection of the Trust Property, the Trust's Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 5.6 - Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, Transfer Agent,
selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 - Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of Beneficial Interest
(without par value), all of one class, which shall be divided into one or more
series as provided in Section 6.9 hereof. The number of Shares authorized
hereunder is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.
Section 6.2 - Rights of Shareholders. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any series
of Shares.
Section 6.3 - Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4 - Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times, and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or combine the
Shares of any series into a greater or lesser number without thereby changing
their proportionate beneficial interests in Trust Property allocated or
belonging to such series. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or l/l,000ths of a Share or
integral multiples thereof.
Section 6.5 - Register of Shares. A register shall be kept at the
principal office of the Trust or at an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-Laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of Share certificates and promulgate appropriate rules and regulations as to
their use.
Section 6.6 - Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with any certificate or
certificates (if issued) for such Shares and such evidence of the genuineness of
each such execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer, employee or agent
of the Trust shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent; but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 6.7 - Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 6.8 - Voting Powers. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote, except that Shares
held in the treasury of the Trust shall not be voted. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by Shareholders. The
By-Laws may include further provisions for Shareholder votes and meetings and
related matters.
Section 6.9 - Series Designation. Shares of the Trust may be divided into
series, the number and relative rights, privileges and preferences of which
shall be established and designated by the Trustees, in their discretion, in
accordance with the terms of this Section 6.9. The Trustees may from time to
time exercise their power to authorize the division of Shares into one or more
series by establishing and designating one or more series of Shares upon and
subject to the following provisions:
(a) All Shares shall be identical except that there may be such variations
as shall be fixed and determined by the Trustees between different series as to
purchase price, right of redemption and the price, terms and manner of
redemption, and special and relative rights as to dividends and on liquidation.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series, the Trustees shall allocate them among any
one or more of the series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all series for all purposes. No holder of Shares of any
particular series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be charged with
the liabilities of the Trust in respect of that series and all expenses, costs,
charges and reserves attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular series shall be allocated and
charged by the Trustees to and among any one or more of the series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to any particular series be charged with liabilities attributable
to any other series. All Persons who have extended credit which has been
allocated to a particular series, or who have a claim or contract which has been
allocated to any particular series, shall look only to the assets of that
particular series for payment of such credit, claim or contract.
(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest in the
net assets allocated or belonging to such series only, and such interest shall
not extend to the assets of the Trust generally. Dividends and distributions on
Shares of a particular series may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that series, only from such
of the income and capital gains, accrued or realized, from the assets belonging
to that series, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series. All dividends and distributions on
Shares of a particular series shall be distributed pro rata to the holders of
that series in proportion to the number of Shares of that series held by such
holders at the date and time of record established for the payment of such
dividends or distributions. Shares of any particular series of the Trust may be
redeemed solely out of Trust Property allocated or belonging to that series.
Upon liquidation or termination of a series of the Trust, Shareholders of such
series shall be entitled to receive a pro rata share of the net assets of such
series only. A Shareholder of a particular series of the Trust shall not be
entitled to participate in a derivative or class action on behalf of any other
series or the Shareholders of any other series of the Trust.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series, except that (i) when required by
the 1940 Act to be voted in the aggregate, Shares shall not be voted by
individual series, and (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
The series of Shares established and designated pursuant to this Section
6.9 and existing as of the date hereof are set forth in Annex A hereto.
ARTICLE VII
REDEMPTIONS
Section 7.1 - Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as hereinafter
set forth, upon the appropriately verified written application of the record
holder thereof (or upon such other form of request as the Trustees may
determine) at such office or agency as may be designated from time to time for
that purpose in the Trust's then effective prospectus under the Securities Act
of 1933. The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of 1933.
Section 7.2 - Price. Shares shall be redeemed at their net asset value
determined as set forth in Article VIII hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Article VIII hereof after
receipt of such application.
Section 7.3 - Payment. Payment of the redemption price of Shares of any
series shall be made in cash or in property out of the assets of such series to
the Shareholder of record at such time and in the manner, not inconsistent with
the 1940 Act or other applicable laws, as may be specified from time to time in
the Trust's then effective prospectus under the Securities Act of 1933, subject
to the provisions of Section 7.4 hereof.
Section 7.4 - Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 7.6 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 7.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on
deposits. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Article VIII after the termination of such suspension, and payment
shall be made within seven days after the date upon which the application was
made plus the period after such applications during which the determination of
net asset value was suspended.
Section 7.5 - Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify the Trust or any series of the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such Person a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 7.1.
The holders of Shares of other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
Section 7.6 - Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as to whether
conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which said stock exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired (as to
which in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension as provided in Section 7.4 hereof.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Subject to Section 6.9 hereof, the Trustees, in their absolute discretion,
may prescribe and shall set forth in the By-Laws or in a duly adopted vote of
the Trustees such bases and times for determining the per Share or net asset
value of the Shares of any series or net income attributable to the Shares of
any series, or the declaration and payment of dividends and distributions on the
Shares of any series, as they may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1 - Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
Section 9.2 - Termination of Trust.
(a) The Trust may be terminated (i) by a Majority Shareholder Vote of
the holders of its Shares, or (ii) by the Trustees by written notice to the
Shareholders. Any series of the Trust may be terminated (i) by a Majority
Shareholder Vote of the holders of Shares of that Series, or (ii) by the
Trustees by written notice to the Shareholders of that series. Upon the
termination of the Trust or any series of the Trust:
(i) The Trust or series of the Trust shall carry on no business except
for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
series of the Trust and all the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or series of the Trust shall have
been wound up, including the power to fulfill or discharge the contracts of the
Trust or series of the Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining
Trust Property or Trust Property of the series to one or more persons at public
or private sale for consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its liabilities, and
to do all other acts appropriate to liquidate its business; provided, that any
sale, conveyance, assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property shall require Shareholder approval in
accordance with Section 9.4 hereof, and any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially all of the Trust
Property allocated or belonging to any series shall require the approval of the
Shareholders of such series as provided in Section 9.6 hereof; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property of the series, in cash
or in kind or partly in cash and partly in kind, among the Shareholders of the
Trust or the series according to their respective rights.
(b) After termination of the Trust or series and distribution to the
Shareholders of the Trust or series as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder with
respect to the Trust or series, and the rights and interests of all Shareholders
of the Trust or series shall thereupon cease.
Section 9.3 - Amendment Procedure.
(a) This Declaration may be amended by a Majority Shareholder Vote of the
Shareholders of the Trust or by any instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of not less
than a majority of the Shares of the Trust. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to designate series in
accordance with Section 6.9 hereof, to change the name of the Trust, to supply
any omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary or advisable to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code of 1986, as amended, but the Trustees shall not be
liable for failing so to do.
(b) No amendment which the Trustees shall have determined shall affect the
rights, privileges or interests of holders of a particular series of Shares, but
not the rights, privileges or interests of holders of Shares of the Trust
generally, may be made except with the vote or consent by a Majority Shareholder
Vote of such series.
(c) Notwithstanding any other provision hereof, no amendment may be made
under this Section 9.3 which would change any rights with respect to the Shares,
or any series of Shares, by reducing the amount payable thereon upon liquidation
of the Trust or by diminishing or eliminating any voting rights pertaining
thereto, except with a Majority Shareholder Vote of Shares or series of Shares.
Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(d) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
(e) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
Section 9.4 - Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for such purpose by the Majority Shareholder Vote of the Trust, or by an
instrument or instruments in writing without a meeting, consented to by the
Majority Shareholder Vote of the Trust provided, however, that if such merger,
consolidation, sale, lease or exchange is recommended by the Trustees, the vote
or written consent of the holders of a majority of Shares outstanding shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of The Commonwealth of Massachusetts. Nothing contained
herein shall be construed as requiring approval of shareholders for any sale of
assets in the ordinary course of the business of the Trust.
Section 9.5 - Incorporation, Reorganization. With the approval of the
holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
Section 9.6 - Incorporation or Reorganization of Series. With the approval
of a Majority Shareholder Vote of any series, the Trustees may sell, lease or
exchange all of the Trust Property allocated or belonging to that series, or
cause to be organized or assist in organizing a corporation or corporations
under the laws of any other jurisdiction, or any other trust, unit investment
trust, partnership, association or other organization, to take over all of the
Trust Property allocated or belonging to that series and to sell, convey and
transfer such Trust Property to any such corporation, trust, unit investment
trust, partnership, association, or other organization in exchange for the
Shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
Whenever ten (10) or more Shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least $25,000 or at least
1% of the Shares outstanding, whichever is less, shall apply to the Trustees in
writing, stating that they wish to communicate with other Shareholders with a
view to obtaining signatures to a request for a meeting of Shareholders for the
purpose of removing one or more Trustees pursuant to Section 2.2 hereof and
accompany such application with a form of communication and request which they
wish to transmit, the Trustees shall within five business days after receipt of
such application either:
(a) afford to such applicants access to a list of the names and addresses
of all Shareholders as recorded on the books of the Trust; or
(b) inform such applicants as to the approximate number of Shareholders of
record, and the approximate cost of mailing to them the proposed communication
and form of request. If the Trustees elect to follow the course specified in (b)
above, the Trustees, upon the written request of such applicants, accompanied by
a tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record, unless within five business days after such tender the Trustees mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority of the
Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion.
ARTICLE XI
MISCELLANEOUS
Section 11.1 - Filing. This Declaration, as amended, and any subsequent
amendment hereto shall be filed in the office of the Secretary of The
Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of The Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, integrating into a single instrument all of
the provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu of
the original Declaration and the various amendments thereto.
Section 11.2 - Governing Law. This Declaration is executed by the Trustees
and delivered in The Commonwealth of Massachusetts and with reference to the
laws thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said Commonwealth.
Section 11.3 - Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4 - Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders, (iv) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (v) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (vi) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 11.5 - Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration; provided however, that such determination shall not
affect any of the remaining provisions of the Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
<PAGE>
ANNEX A
Pursuant to Section 6.9 of the Declaration, the Trustees of the Trust have
established and designated twenty six series of Shares (as defined in the
Declaration), such series having the following special and relative rights:
1. The series are designated:
Bond Series
Capital Appreciation Series
Conservative Growth Series
Emerging Growth Series
Equity Income Series
Government Securities Series
High Yield Series
International Growth Series
International Growth and Income Series
Managed Sectors Series
Massachusetts Investors Growth Stock Series
MFS/Foreign & Colonial Emerging Markets Equity Series
Money Market Series
New Discovery Series
Research Growth and Income Series
Research International Series
Research Series
Strategic Income Series
Total Return Series
Utilities Series
Value Series
World Asset Allocation Series
World Governments Series
World Growth Series
World Total Return Series
Zero Coupon Series, Portfolio 2000
2. The series shall be authorized to invest in cash, securities, instruments
and other property as from time to time described in the Trust's then
currently effective registration statement under the Securities Act of
1933. Each Share of Beneficial Interest of the Series ("Share") shall be
redeemable, shall be entitled to one vote or fraction thereof in respect
of a fractional share on matters on which Shares of the series shall be
entitled to vote, shall represent a pro rata beneficial interest of the
assets allocated to or belonging to the series, and shall be entitled to
receive its pro rata share of the net assets of the series upon
liquidation of the series, all as provided in Section 6.9 of the
Declaration.
3. Shareholders of the series shall vote separately as a class from
shareholders of each other Series, on any matter to the extent required
by, and any matter shall be deemed to have been effectively acted upon
with respect to the series as provided in Rule 18f-2, as from time to time
in effect, under the Investment Company Act of 1940, as amended, or any
successor rule, and by the Declaration.
4. The assets and liabilities of the Trust shall be allocated among the
series of the Trust as set forth in Section 6.9 of the Declaration.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and
expenses or to change the designation of any series now or hereafter
created, or to otherwise change the special and relative rights of any
series.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this 29th day
of December 1997.
SAMUEL ADAMS J. KERMIT BIRCHFIELD
- -------------------------- --------------------------
Samuel Adams J. Kermit Birchfield
University Lane 33 Way Road
Manchester MA 01944 Gloucester, MA 01930
WILLIAM R. GUTOW DAVID D. HORN
- -------------------------- --------------------------
William R. Gutow David D. Horn
3 Rue Dulac 56 Pinckney Street
Dallas, TX 75230 Boston, MA 02114
GARTH MARSTON JOHN D. MCNEIL
- -------------------------- --------------------------
Garth Marston John D. McNeil
90 Beacon Street 10 McKenzie Avenue
Boston, MA 02108 Toronto, Ontario
Canada M4W 1J9
DERWYN F. PHILLIPS
- --------------------------
Derwyn F. Phillips
1250 West Southwinds Blvd.
Vero Beach FL 32963
<PAGE>
EXHIBIT NO. 99.2
AMENDED AND RESTATED
BY-LAWS
OF
MFS/SUN LIFE SERIES TRUST
FEBRUARY 6, 1998
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
MFS/SUN LIFE SERIES TRUST
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property" and "Trustees" have the respective
meanings given them in the amended and restated Declaration of Trust of MFS/Sun
Life Series Trust, dated December 29, 1997, as amended from time to time.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the principal
office of the Trust in The Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other places
without as well as within the Commonwealth as the Trustees may from time to time
determine.
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. Meetings of the Shareholders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request of Shareholders holding in the aggregate not less than ten
percent (10%) of the outstanding Shares of the Trust having voting rights, if
shareholders of all series are required under the Declaration to vote in the
aggregate and not by individual series at such meeting, or of any series or
class if shareholders of such series or class are entitled under the Declaration
to vote by individual series or class, such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without The Commonwealth of Massachusetts on such day and at such time
as the Trustees shall designate.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
address as recorded on the register of the Trust, mailed at least (ten) 10 days
and not more than (sixty) 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice. No notice need be given
to any Shareholder who shall have failed to inform the Trust of his current
address or if a written waiver of notice, executed before or after the meeting
by the Shareholder or his attorney thereunto authorized, is filed with the
records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than sixty (60) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purpose.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the Clerk, or
with such other officer or agent of the Trust as the Clerk may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
vote of a majority of the Trustees, proxies may be solicited in the name of one
or more Trustees or one or more of the officers of the Trust. When any Share is
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Share. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
The placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained pursuant to procedures
reasonably designed to verify that such instructions have been authorized by
such Shareholder shall constitute execution of such proxy by or on behalf of
such Shareholder. If the holder of any such Share is a minor or a person of
unsound mind, and subject to guardianship or to the legal control of any other
person as regards the charge or management of such Share, he may vote by his
guardian or such other person appointed or having such control, and such vote
may be given in person or by proxy. Any copy, facsimile telecommunication or
other reliable reproduction of a proxy may be substituted for or used in lieu of
the original proxy for any and all purposes for which the original proxy could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original proxy or
the portion thereof to be returned by the Shareholder.
SECTION 5. QUORUM, ADJOURNMENT AND REQUIRED VOTE. A majority of
outstanding Shares entitled to vote shall constitute a quorum at any meeting of
Shareholders, except that where any provision of law, the Declaration or these
By-laws permits or requires that holders of any series or class shall vote as a
series or class, then a majority of the aggregate number of Shares of that
series or class entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series or class. In the absence of a quorum,
a majority of outstanding Shares entitled to vote present in person or by proxy,
or, where any provision of law, the Declaration or these By-laws permits or
requires that holders of any series or class shall vote as a series or class, a
majority of outstanding Shares of that series or class entitled to vote present
in person or by proxy, may adjourn the meeting from time to time until a quorum
shall be present. Only Shareholders of record shall be entitled to vote on any
matter. Each full Share shall be entitled to one vote and fractional Shares
shall be entitled to a vote of such fraction. Except as otherwise provided any
provision of law, the Declaration or these By-laws, Shares representing a
majority of the votes cast shall decide any matter (i.e., abstentions and broker
non-votes shall not be counted) and a plurality shall elect a Trustee, provided
that where any provision of law, the Declaration or these By-Laws permits or
requires that holders of any series or class shall vote as a series or class,
then a majority of the Shares of that series or class cast on the matter shall
decide the matter (i.e., abstentions and broker non-votes shall not be counted)
insofar as that series or class is concerned.
SECTION 6. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
SECTION 7. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the Chairman or by any one
of the Trustees at the time being in office. Notice of the time and place of
each meeting other than regular or stated meetings shall be given by the
Secretary or an Assistant Secretary, or the Clerk or an Assistant Clerk or by
the officer or Trustee calling the meeting and shall be mailed to each Trustee
at least two days before the meeting, or shall be telegraphed, cabled, or
wirelessed or sent by facsimile or other electronic means to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. Except as provided by law the Trustees may
meet by means of a telephone conference circuit or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, which telephone conference meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone conference meeting shall constitute presence in person at such
meeting. Any action required or permitted to be taken at any meeting of the
Trustees may be taken by the Trustees without a meeting if all the Trustees
consent to the action in writing and the written consents are filed with the
records of the Trustees' meetings. Such consents shall be treated as a vote for
all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees shall
be present at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration or these By-Laws) the act of a
majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) Trustees to hold office at the
pleasure of the Trustees which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to the Executive
Committee except those powers which by law, the Declaration or these By-Laws
they are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time, the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation a Committee
may elect its own Chairman.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may:
(i) provide for stated meetings of any Committee;
(ii) specify the manner of calling and notice required for special
meetings of any Committee;
(iii) specify the number of members of a Committee required to
constitute a quorum and the number of members of a Committee
required to exercise specified powers delegated to such
Committee;
(iv) authorize the making of decisions to exercise specified powers
by written assent of the requisite number of members of a
Committee without a meeting; and
(v) authorize the members of a Committee to meet by means of a
telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records of
decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
SECTION 3. ADVISORY BOARD. The Trustees may appoint an Advisory Board to
consist in the first instance of not less than three (3) members. Members of
such Advisory Board shall not be Trustees or officers and need not be
Shareholders. A member of such Advisory Board shall hold office for such period
as the Trustees may by resolution provide. Any member of such board may resign
therefrom by a written instrument signed by him which shall take effect upon
delivery to the Trustees. The Advisory Board shall have no legal powers and
shall not perform the functions of Trustees in any manner, such Advisory Board
being intended merely to act in an advisory capacity. Such Advisory Board shall
meet at such times and upon such notice as the Trustees may by resolution
provide.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
Chairman, a President, a Treasurer and a Clerk, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, a
Secretary and one or more Assistant Secretaries, one or more Assistant
Treasurers, and one or more Assistant Clerks. The Trustees may delegate to any
officer or Committee the power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise provided
by law, the Declaration or these By-Laws, the Chairman, the President, the
Treasurer and the Clerk shall hold office until his resignation has been
accepted by the Trustees or until his respective successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. Any two or more offices may be held by the same person. Any
officer may be, but none need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause by a vote of a majority
of the Trustees. Any officer or agent appointed by any officer or Committee may
be removed with or without cause by such appointing officer or Committee.
SECTION 4. POWERS AND DUTIES OF THE CHAIRMAN. The Chairman may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and any Committees of the Trustees, the Chairman shall at all times
exercise a general supervision and direction over the affairs of the Trust. The
Chairman shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. The Chairman shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The Chairman shall have such other powers and duties as,
from time to time, may be conferred upon or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF THE PRESIDENT. In the absence or
disability of the Chairman, the President shall perform all the duties and may
exercise any of the powers of the Chairman, subject to the control of the
Trustees. The President shall perform such other duties as may be assigned to
him from time to time by the Trustees or the Chairman.
SECTION 6. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
SECTION 7. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to such custodian
as the Trustees may employ pursuant to Article X hereof. The Treasurer shall
render a statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required to do so by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
SECTION 8. POWERS AND DUTIES OF THE CLERK. The Clerk shall keep the
minutes of all meetings of the Shareholders in proper books provided for that
purpose; he shall have custody of the seal of the Trust; he shall have charge of
the Share transfer books, lists and records unless the same are in the charge of
the Transfer Agent. He or the Secretary shall attend to the giving and serving
of all notices by the Trust in accordance with the provisions of these By-Laws
and as required by law; and subject to these By-Laws, he shall in general
perform all duties incident to the office of Clerk and such other duties as from
time to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF THE SECRETARY. The Secretary, if any,
shall keep the minutes of all meetings of the Trustees. He shall perform such
other duties and have such other powers in addition to those specified in these
By-Laws as the Trustees shall from time to time designate. If there be no
Secretary or Assistant Secretary, the Clerk shall perform the duties of
Secretary.
SECTION 10. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him by the Trustees. Each Assistant Treasurer shall
give a bond for the faithful discharge of his duties, if required to do so by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
SECTION 11. POWERS AND DUTIES OF ASSISTANT CLERKS. In the absence or
disability of the Clerk, any Assistant Clerk designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Clerk. The
Assistant Clerks shall perform such other duties as from time to time may be
assigned to them by the Trustees.
SECTION 12. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all of the duties, and may exercise any of the powers, of the
Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them by the Trustees.
SECTION 13. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE
ADVISORY BOARD. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January in
each year and shall end on the last day of December in that year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed,
cabled or wirelessed or sent by facsimile or other electronic means for the
purposes of these By-Laws when it has been delivered to a representative of any
telegraph, cable or wireless company with instruction that it be telegraphed,
cabled or wirelessed or when a confirmation of such facsimile having been sent,
or a confirmation that such electronic means has sent the notice being
transmitted, is generated. Any notice shall be deemed to be given at the time
when the same shall be mailed, telegraphed, cabled or wirelessed or when sent by
facsimile or other electronic means.
ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times employ
a bank or trust company having a capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the Declaration, these By-Laws and the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the
same upon written order;
(ii) to receive and receipt for any monies due to the Trust and
deposit the same in its own banking department or elsewhere as
the Trustees may direct; and
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and accounts
of the Trust and furnish clerical and accounting services; and
(v) if authorized to do so by the Trustees, to compute the net
income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all Trust Property held by it as specified in such
vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least five million dollars ($5,000,000).
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust or its custodian.
SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled,
and shall order the same to be delivered by the custodian only upon
completion of a sale, exchange, transfer, pledge, or other
disposition thereof, and upon receipt by the custodian of the
consideration therefor or a certificate of deposit or a receipt of
an issuer or of its Transfer Agent, all as the Trustees may
generally or from time to time require or approve, or to a successor
custodian; and the Trustees shall cause all funds owned by the Trust
or to which it may become entitled to be paid to the custodian, and
shall order the same disbursed only for investment against delivery
of the securities acquired, or in payment of expenses, including
management compensation, and liabilities of the Trust, including
distributions to shareholders, or to a successor custodian;
provided, however, that nothing herein shall prevent delivery of
securities for examination to the broker selling the same in accord
with the "street delivery" custom whereby such securities are
delivered to such broker in exchange for a delivery receipt
exchanged on the same day for an uncertified check of such broker to
be presented on the same day for certification.
(b) In case of the resignation, removal or inability to serve of any
such custodian, the Trust shall promptly appoint another bank or
trust company meeting the requirements of this Article X as
successor custodian. The agreement with the custodian shall provide
that the retiring custodian shall, upon receipt of notice of such
appointment, deliver the funds and property of the Trust in its
possession to and only to such successor, and that pending
appointment of a successor custodian, or a vote of the Shareholders
to function without a custodian, the custodian shall not deliver
funds and property of the Trust to the Trust, but may deliver them
to a bank or trust company doing business in Boston, Massachusetts,
of its own selection, having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at
least $5,000,000, as the property of the Trust to be held under
terms similar to those on which they were held by the retiring
custodian.
ARTICLE XI
SALE OF SHARES OF THE TRUST
The Trustees may from time to time issue and sell or cause to be issued
and sold Shares for cash or other property, which shall in every case be paid or
delivered to the Custodian as agent of the Trust before the delivery of any
certificate for such shares. The Shares, including additional Shares which may
have been repurchased by the Trust (herein sometimes referred to as "treasury
shares"), may not be sold at a price less than the net asset value thereof (as
defined in Article XII hereof) determined by or on behalf of the Trustees next
after the sale is made or at some later time after such sale.
No Shares need be offered to existing Shareholders before being offered to
others. No Shares shall be sold by the Trust (although Shares previously
contracted to be sold may be issued upon payment therefor) during any period
when the determination of net asset value is suspended by declaration of the
Trustees pursuant to the provisions of Article XII hereof. In connection with
the acquisition by merger or otherwise of all or substantially all the assets of
an investment company (whether a regulated or private investment company or a
personal holding company), the Trustees may issue or cause to be issued Shares
and accept in payment therefor such assets valued at not more than market value
thereof in lieu of cash, notwithstanding that the federal income tax basis to
the Trust of any assets so acquired may be less than the market value, provided
that such assets are of the character in which the Trustees are permitted to
invest the funds of the Trust.
The Trustees, in their sole discretion, may cause the Trust to redeem all
of the Shares of the Trust held by any Shareholder if the value of such Shares
is less than a minimum amount established from time to time by the Trustees.
ARTICLE XII
NET ASSET VALUE OF SHARES
The term "net asset value" per Share of any class or series of Shares
shall mean: (i) the value of all assets of that series or class; (ii) less total
liabilities of such series or class; (iii) divided by the number of Shares of
such series or class outstanding, in each case at the time of such
determination, all as determine by or under the direction of the Trustees. Such
value shall be determined on such days and at such time as the Trustees may
determine. Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such securities;
and with respect to other securities and assets, at the fair value as determined
in good faith by or pursuant to the direction of the Trustees, provided,
however, that the Trustees, without shareholder approval, may alter the method
of appraising portfolio securities insofar as permitted under the 1940 Act, and
the rules, regulations and interpretations thereof promulgated or issued by the
Securities and Exchange Commission or insofar as permitted by any order of the
Securities and Exchange Commission. The Trustees may delegate any powers and
duties under this Article XII with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the value per share last
determined to be determined again in a similar manner and may fix the time when
such predetermined value shall become effective.
ARTICLE XIII
DIVIDENDS AND DISTRIBUTIONS
SECTION 1. LIMITATIONS ON DISTRIBUTIONS. The total of distributions to
Shareholders of a particular series or class paid in respect of any one fiscal
year, subject to the exceptions noted below, shall, when and as declared by the
Trustees, be approximately equal to the sum of:
(i) the net income, exclusive of the profits or losses realized
upon the sale of securities or other property, of such series
or class for such fiscal year, determined in accordance with
generally accepted accounting principles (which, if the
Trustees so determine, may be adjusted for net amounts
included as such accrued net income in the price of Shares of
such series or class issued or repurchased), but if the net
income of such series or class exceeds the amount distributed
by less than one cent per share outstanding at the record date
for the final dividend, the excess shall be treated as
distributable income of such series or class for the following
fiscal year; and
(ii) in the discretion of the Trustees, an additional amount which
shall not substantially exceed the excess of profits over
losses on sales of securities or other property allocated or
belonging to such series or class for such fiscal year.
The decision of the Trustees as to what, in accordance with generally accepted
accounting principles, is income and what is principal shall be final, and
except as specifically provided herein the decision of the Trustees as to what
expenses and charges of the Trust shall be charged against principal and what
against income shall be final, all subject to any applicable provisions of the
1940 Act and rules, regulations and orders of the Commission promulgated
thereunder. For the purposes of the limitation imposed by this Section 1, Shares
issued pursuant to Section 2 of this Article XIII shall be valued at the amount
of cash which the Shareholders would have received if they had elected to
receive cash in lieu of such Shares.
Inasmuch as the computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give to the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes. Any payment made to
Shareholders pursuant to clause (ii) of this Section 1 shall be accompanied by a
written statement showing the source or sources of such payment, and the basis
of computation thereof.
SECTION 2. DISTRIBUTIONS PAYABLE IN CASH OR SHARES. The Trustees shall
have power, to the fullest extent permitted by the laws of The Commonwealth of
Massachusetts but subject to the limitation as to cash distributions imposed by
Section 1 of this Article XIII, at any time or from time to time to declare and
cause to be paid distributions payable at the election of any Shareholder of any
series or class (whether exercised before or after the declaration of the
distribution) either in cash or in Shares of such series, provided that the sum
of:
(i) the cash distribution actually paid to any Shareholder, and
(ii) the net asset value of the Shares which that Shareholder
elects to receive, in effect at such time at or after the
election as the Trustees may specify, shall not exceed the
full amount of cash to which that Shareholder would be
entitled if he elected to receive only cash.
In the case of a distribution payable in cash or Shares at the election of a
Shareholder, the Trustees may prescribe whether a Shareholder, failing to
express his election before a given time shall be deemed to have elected to take
Shares rather than cash, or to take cash rather then Shares, or to take Shares
with cash adjustment of fractions.
The Trustees, in their sole discretion, may cause the Trust to require
that all distributions payable to a shareholder in amounts less than such amount
or amounts determined from time to time by the Trustees be reinvested in
additional shares of the Trust rather than paid in cash, unless a shareholder
who, after notification that his distributions will be reinvested in additional
shares in accordance with the preceding phrase, elects to receive such
distributions in cash. Where a shareholder has elected to receive distributions
in cash and the postal or other delivery service is unable to deliver checks to
the shareholder's address of record, the Trustees, in their sole discretion, may
cause the Trust to require that such Shareholder's distribution option will be
converted to having all distributions reinvested in additional shares.
SECTION 3. STOCK DIVIDENDS. Anything in these By-Laws to the contrary
notwithstanding, the Trustees may at any time declare and distribute pro rata
among the Shareholders of any series or class a "stock dividend" out of either
authorized but unissued Shares of such series or class or treasury Shares of
such series or class or both.
ARTICLE XIV
DERIVATIVE CLAIMS
No Shareholder shall have the right to bring or maintain any court action,
proceeding or claim on behalf of the Trust or any series or class thereof
without first making demand on the Trustees requesting the Trustees to bring or
maintain such action, proceeding or claim. Such demand shall be excused only
when the plaintiff makes a specific showing that irreparable injury to the Trust
or any series or class thereof would otherwise result. Such demand shall be
mailed to the Clerk of the Trust at the Trust's principal office and shall set
forth in reasonable detail the nature of the proposed court action, proceeding
or claim and the essential facts relied upon by the Shareholder to support the
allegations made in the demand. The Trustees shall consider such demand within
45 days of its receipt by the Trust. In their sole discretion, the Trustees may
submit the matter to a vote of Shareholders of the Trust or any series or class
thereof, as appropriate. Any decision by the Trustees to bring, maintain or
settle (or not to bring, maintain or settle) such court action, proceeding or
claim, or to submit the matter to a vote of Shareholders, shall be made by the
Trustees in their business judgment and shall be binding upon the Shareholders.
Any decision by the Trustees to bring or maintain a court action, proceeding or
suit on behalf of the Trust or any series or class thereof shall be subject to
the right of the Shareholders under Article VI, Section 6.8 of the Declaration
to vote on whether or not such court action, proceeding or suit should or should
not be brought or maintained.
ARTICLE XV
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed,
restated, or new By-Laws may be adopted:
(i) by Majority Shareholder Vote, or
(ii) by the Trustees,
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration or these By-Laws, a vote of the Shareholders or if such amendment,
adoption or repeal changes of affects the provision of Sections 1 and 4 of
Article X or the provisions of this Article XIV.
<PAGE>
EXHIBIT NO. 99.5(a)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 24th day of May, 1985, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS" or
the "Adviser").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment Company Act of 1940 and is
engaged in business as an open-end investment company that issues Shares of
Beneficial Interest (without par value) ("Shares") that are divided into four
separate series of shares: (1) the "Money Market Series", (2) the "High Yield
Series", (3) the "Capital Appreciation Series" and (4) the "Government
Guaranteed Series"; and
WHEREAS, the Adviser is willing to provide business management services to the
Trust on the terms and conditions hereinafter set forth;
NOW, THEREOFRE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenant and agree as follows:
1. Duties of the Adviser. The Adviser shall provide each series of the
Trust with such investment advice and supervision as the Trustees may from time
to time consider necessary for the proper supervision of the assets of each
series. The Adviser shall act as Adviser to each such series and shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of each series shall be held uninvested, subject always to the restrictions of
the Trust's Declaration of Trust, dated May 9, 1983, and the Trust's By-Laws, as
each may be amended from time to time (respectively, the "Declaration" and the
"By-Laws"), to the provisions of the Investment Company Act of 1940 and the
Rules, Regulations and orders thereunder, and to the Trust's then-current
Prospectus. The Adviser shall also make recommendations as to the exercise of
voting rights, rights to consent to corporate action and any other rights
pertaining to the securities in the portfolio represented by the Shares of each
series. Should the Trustees at any time, however, make any definite
determination as to investment policy with respect to any one or more series or
all series collectively and notify the Adviser thereof in writing, the Adviser
shall be bound by such determination for the period, if any, specified in such
notice or until similarly notified that such determination has been revoked. The
Adviser shall take, on behalf of each series of the Trust, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities of each such series for the Trust's account with brokers or
dealers selected by it, and to that end the Adviser is authorized as the agent
of the Trust to give instructions to the Custodian of the Trust as to deliveries
of securities and payments of cash for the account of the Trust. In connection
with the selection of such brokers or dealers and the placing of such orders for
the Money Market Series, the High Yield Series and the Government Guaranteed
Series, the Adviser is directed to seek execution at the best available price.
Subject to this requirement of seeking the best available price, such securities
may be bought from or sold to broker/dealers who have furnished statistical,
research, and other information or services to the Adviser. For the Capital
Appreciation Series, the Adviser is directed to seek execution of portfolio
transactions at the best available price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement, the
Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise, solely by reason of its having
caused the Trust on behalf of the Capital Appreciation Series to pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to the Capital Appreciation Series and to other clients of the
Adviser as to which the Adviser exercises investment discretion.
2. Allocation of Charges and Expenses. The Adviser shall furnish at it
owns expense all necessary administrative services, including office space,
equipment, clerical personnel, investment advisory facilities, and executive and
supervisory personnel for managing the investments of each series of the Trust,
effecting the portfolio transactions of each series of the Trust, and, in
general, administering the Trust's affairs. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustee, officers or agents of
the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Trust will pay all of its own expenses including, without limitation,
compensation of those Trustees who are not "affiliated" with the Adviser;
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Trust; fees and expenses of independent
auditors, of legal counsel and of any transfer agent or registrar of the Trust;
expenses of independent auditors, of legal counsel and of any transfer agent or
registrar of the Trust; expenses of repurchasing and redeeming shares; expenses
of preparing, printing and mailing prospectuses, shareholder reports, notices,
proxy statements and reports to shareholders, governmental officers or
commissions; brokerage and other expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance premiums;
fees and expenses of the custodian for all services to the Trust, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of calculating the net asset value of shares of each series in the
manner described in the Trust's then-current Prospectus; and expenses of
shareholder meetings.
3. Compensation of the Adviser. For the services to be rendered and the
facilities to be provided, the Trust shall pay to the Adviser a separate
investment advisory fee for each series that is to be computed and paid monthly.
Such computations shall commence on the effective date of this Agreement and
shall be calculated as follows: (i) 0.50% of the average net assets of the Money
Market Series for the Trust's then-current fiscal year; (ii) 0.75% of the
average net assets of the High Yield Series for the Trust's then-current fiscal
year; (iii) 0.75% of the average net assets of the Capital Appreciation Series
for the Trust's then-current fiscal year; and (iv) 0.55% of the average net
assets of the Government Guaranteed Series for the Series Fund's then-current
fiscal year. Payment of the foregoing fee is subject to the provision that
within 30 days following the close of any fiscal year of each series of the
Trust, the Adviser will pay to each such series a sum equal to the amount by
which the operating expenses of such series, but excluding interest, taxes,
brokerage commissions and extraordinary expenses, incurred during such fiscal
year exceed one and one-quarter percent (1.25%) of the average net assets of
such series for the fiscal year. If the Adviser shall serve for less than the
whole of any period specified in this Section 3, the compensation to the Adviser
shall be prorated.
4. Covenants of the Adviser. The Adviser agrees that it will not deal with
itself, or with the Trustees of the Trust as principals in making purchases or
sales of securities or other property for the account of the Trust, will not
take a long or short position in the Shares of any series of the Trust except as
provided by the Declaration and will comply with all other provisions of the
Declaration and By-Laws and the then-current Prospectus of the Trust relative to
the Adviser and its Directors and officers.
5. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder. As used in this Section 5, the term "Adviser" shall
include Directors, officers and employees of the Adviser as well as the
corporation itself.
6. Activities of the Adviser. The services of the Adviser to the Trust are
not to be deemed to be exclusive, MFS being free to render investment advisory
and/or other services to others. The Adviser may permit other fund clients to
use the initials "MFS" in their names. The Trust agrees that if the Adviser
shall for any reason no longer serve as the Adviser to the Trust, the Trust will
change its name so as to delete the initials "MFS". It is understood that
Trustees, officers, and shareholders of the Trust are or may be or become
interested in the Adviser, as Directors, officers, employees, or otherwise and
that Directors, officers and employees of the Adviser are or may become
similarly interested in the Trust and that the Adviser may be or become
interested in the Trust as a shareholder or otherwise.
7. Severability of this Agreement. If this Agreement shall be deemed or
held to be invalid or unenforceable or shall terminate with respect to any
series of the Trust, such invalidity, unenforceability or termination shall not
have any effect on this Agreement as it applies to other series of the Trust and
this Agreement shall continue in full force and effect with regard to such other
series.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1986 on which date it will terminate unless its
continuance after November 1, 1986, is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Trust.
This Agreement may be terminated with respect to one or more series of the Trust
at any time without the payment of any penalty by the Trustees or by "vote of a
majority of the outstanding voting securities" of the series to be terminated,
or by the Adviser, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by "vote of a
majority of the outstanding voting securities" of each series affected thereby.
The terms "specifically approved at least annually", "vote of a majority of the
outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, all as of the day and year first above written. The undersigned
Trustee of the Trust has executed this Agreement not individually, but as
Trustee under the Declaration, and the obligations of this Agreement are not
binding upon any of the Trustees or shareholders of the Trust, individually, but
bind only the trust estate of the Trust.
MFS/SUN LIFE SERIES TRUST
By: JOHN D. MCNEIL
--------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETT FINANCIAL SERVICES COMPANY
By: RICHARD B. BAILEY
--------------------------------
Richard B. Bailey
Chairman and Director
<PAGE>
EXHIBIT NO. 99.5(b)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 23rd day of July, 1986, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS" or
the "Adviser").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment Company Act of 1940 and is
engaged in business as an open-end investment company that issues Shares of
Beneficial Interest (without par value) ("Shares") that are divided into seven
separate series of shares;
WHEREAS, the Adviser is willing to provide business management services to the
Trust with respect to the "Conservative Growth Series" the "Government Plus
Securities Series" and the "Zero Coupon Series" of the Trust (the "Series") on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenant and agree as follows:
1. Duties of the Adviser. The Adviser shall provide each of the Series
with such investment advice and supervision as the Trustees may from time to
time consider necessary for the proper supervision of the assets of each Series.
The Adviser shall act as Adviser to each Series and shall furnish continuously
an investment program and shall determine from time to time what securities
shall be purchased, sold or exchanged and what portion of the assets of each
Series shall be held uninvested , subject always to the restrictions of the
Trust's Declaration of Trust, dated February 15, 1985, and the Trust's By-Laws,
as each may be amended from time to time (respectively, the "Declaration" and
the "By-Laws"), to the provisions of the Investment Company Act of 1940 and the
Rules, Regulations and orders thereunder, and to the Trust's then-current
Prospectus. The Adviser shall also make recommendations as to the exercise of
voting rights, rights to consent to corporate action and any other rights
pertaining to the securities in the portfolio represented by the Shares of each
Series. Should the Trustees at any time, however, make any definite
determination as to investment policy with respect to any one or more of the
Series or all Series collectively and notify the Adviser thereof in writing, the
Adviser shall be bound by such determination for the period, if any, specified
in such notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of each Series, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities of each Series for the Trust's account with brokers or
dealers selected by it, and to that end the Adviser is authorized as the agent
of the Trust to give instructions to the Custodian of the Trust s to deliveries
of securities and payments of cash for the account of the Trust. In connection
with the selection of such brokers or dealers and the placing of such orders for
the Government Plus Securities Series and Zero Coupon Series, the Adviser is
directed to seek execution at the best available price. Subject to this
requirement of seeking the best available price, such securities may be bought
from or sold to broker/dealers who have furnished statistical, research, and
other information or services to the Adviser. For the Conservative Growth
Series, the Adviser is directed to seek execution of portfolio transactions at
the best available price by responsible brokerage firms at reasonably
competitive commission rates. In fulfilling this requirement, the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise, solely by reason of its having caused the Trust on
behalf of the Conservative Growth Series to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Conservative Growth Series and to other clients of the Adviser as to which
the Adviser exercises investment discretion.
2. Allocation of Charges and Expenses. The Adviser shall furnish at its
own expense all necessary administrative services, including office space,
equipment, clerical personnel, investment advisory facilities, and executive and
supervisory personnel for managing the investments of each Series, effecting the
portfolio transactions of each Series, and, in general, administering the
Trust's affairs. The Adviser shall arrange, if desired by the Trust, for
Directors, officers and employees of the Adviser or its "affiliates" to service
without compensation as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of those
Trustees who are not "affiliated" with the Adviser; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Trust; fees and expenses of independent auditors, of legal counsel and of
any transfer agent or registrar of the Trust; expenses of repurchasing and
redeeming shares; expenses of preparing, printing and mailing prospectuses,
shareholder reports, notices, proxy statements and reports to shareholders,
governmental officers or commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Trust, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of
each Series in the manner described in the Trust's then-current Prospectus; and
expenses of shareholder meetings.
3. Compensation of the Adviser. For the services to be rendered and the
facilities to be provided, the Trust shall pay to the Adviser a separate
investment advisory fee for each series that is to be computed and paid monthly.
Such computations shall commence on the effective date of this Agreement and
shall be calculated as follows: (i) 0.55% of the average net assets of the
Conservative Growth Series for the Trust's then-current fiscal year; (ii) 0.55%
of the average net asset of the Government Plus Series for the Trust
then-current fiscal year; and (ii) 0.25% of the average net assets of the Zero
Coupon Series for the Trust's then-current fiscal year. Payment of the foregoing
fee is subject to the provision that within 30 days following the close of any
fiscal year of each series of the Trust, the Adviser will pay to each Series a
sum equal to the amount by which the operating expenses of such series, but
excluding interest, taxes, brokerage commissions and extraordinary expenses,
incurred during such fiscal year exceed one and one-quarter percent (1.25%) of
the average net assets of such series for the fiscal year. If the Adviser shall
serve for less than the whole of any period specified in this Section 3, the
compensation to the Adviser shall be prorated.
4. Covenants of the Adviser. The Adviser agrees that it will not deal with
itself, or with the Trustees of the Trust as principals in making purchases or
sales of securities or other property for the account of the Trust, will not
take a long or short position in the Shares of any of the Series except as
provided by the Declaration and will comply with all other provisions of the
Declaration and By-Laws and the then-current Prospectus of the Trust relative to
the Adviser and its Directors and officers.
5. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder. As used in this Section 5, the term "Adviser" shall
include Directors, officers and employees of the Adviser as well as the
corporation itself.
6. Activities of the Adviser. The services of the Adviser to the Trust are
not to be deemed to be exclusive, MFS being free to render investment advisory
and/or other services to others. The Adviser may permit other fund clients to
use the initials "MFS" in their names. The Trust agrees that if the Adviser
shall for any reason no longer serve as the Adviser to the Trust, the Trust will
change its name so as to delete the initials "MFS". It is understood that
Trustees, officers, and shareholders of the Trust, are or may be or become
interested in the Adviser, as Directors, officers, employees, or otherwise and
that Directors, officers and employees of the Adviser are or may become
similarly interested in the Trust and that the Adviser may be or become
interested in the Trust as a shareholder or otherwise.
7. Severability of this Agreement. If this Agreement shall be deemed or
held to be invalid of unenforceable or shall terminate with respect to any
Series, such invalidity, unenforceability or termination shall not have any
effect on this Agreement as it applied to other Series and this Agreement shall
continue in full force and effect with regard to such other Series.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1987 on which date it will terminate unless its
continuance after November 1, 1987 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Trust.
This Agreement may be terminated with respect to one or more Series at any
time without the payment of any penalty by the Trustees or by "vote of a
majority of the outstanding voting securities" of the series to be terminated,
or by the Adviser, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by "vote
of a majority of the outstanding voting securities" of each Series affected
thereby.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names, and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned Trustee of the Trust has executed this Agreement not individually,
but as Trustee under the Declaration, and the obligations of this Agreement are
not binding upon any of the Trustees or shareholders of the Trust, individually,
but bind only the trust estate of the Trust.
MFS/SUN LIFE SERIES TRUST
By: JOHN D. MCNEIL
--------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: RICHARD B. BAILEY
--------------------------------
Richard B. Bailey
Chairman and Director
<PAGE>
EXHIBIT NO. 99.5(c)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 26th day of January, 1988, by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation
("MFS" or the "Adviser").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment Company Act of 1940 and is
engaged in business as an open-end investment company that issues Shares of
Beneficial Interest (without par value) ("Shares") that are divided into nine
separate series of shares;
WHEREAS, the Adviser is willing to provide business management services to the
Trust with respect to the "Government Markets Series" the "Total Return Series"
and the "Managed Sectors Series" of the Trust (collectively, the "Series") on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenants and agree as follows:
1. Duties of the Adviser. The Adviser shall provide each Series with
such investment advice and supervision as the Trustees may from time to time
consider necessary for the proper supervision of the assets of each Series. The
Adviser shall act as Adviser to each Series and shall furnish continuously an
investment program and shall determine from time to time what securities shall
be purchased, sold or exchanged and what portion of the restrictions of the
Trust's Declaration of Trust, dated February 15, 1985, and the Trust's By-Laws,
as may be amended from time to time (respectively, the "Declaration" and the
"By-Laws"), to the provisions of the Investment Company Act of 1940 and the
Rules, Regulations and orders thereunder, and to the Trust's then-current
Prospectus. The Adviser shall also make recommendations as to the exercise of
voting rights, rights to consent to corporate action and any other rights
pertaining to the securities in the portfolio represented by the Shares of each
Series. Should the Trustees at any time, however, make any definite
determination s to investment policy with respect to any one or more of the
Series or all Series collectively and notify the Adviser thereof in writing, the
adviser shall be bound by such determination for the period, if any, specified
in such notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of each Series, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities of each Series for the Trust's account with brokers or
dealers selected by it, and to that end the Adviser is authorized as the agent
of the Trust to give instructions to the Custodian of the Trust as to deliveries
of securities and payments of cash for the account of the Trust. In connection
with the selection of such brokers or dealers and the placing of such orders for
the Government Market Series and the Total Return Series, the Adviser is
directed to seek execution at the best available price. Subject to this
requirement of seeking the best available price, such securities may be bought
from or sold to broker/dealers who have furnished statistical, research, and
other information or services to the Adviser. For the Managed Sectors Series,
the Adviser is directed to seek execution of portfolio transactions at the best
available price by responsible brokerage firms at reasonable competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise, solely by reason of its having caused the Trust on
behalf of the Managed Sectors Series to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Managed Sectors Series and to other clients of the Adviser as to which use
Adviser exercises investment discretion.
2. Allocation of Charges and Expenses. The Adviser shall furnish at its
own expense all necessary administrative services, including office space,
equipment, clerical personnel, investment advisory facilities, and executive and
supervisory personnel for managing the investments of each Series, effecting the
portfolio transactions of each Series, and, in general, administering the
Trust's affairs. The Adviser shall arrange, if desired by the Trust, for
Directors, officers and employees of the Adviser or its "affiliates" to serve
without compensation as Trustees, officers, or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of those
Trustees who are not "affiliated" with the Adviser; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Trust; fees and expenses of independent auditors, of legal counsel and of
any transfer agent or registrar of the Trust; expenses of repurchasing and
redeeming shares; expenses of preparing, printing, and mailing prospectus,
shareholder reports, notices, proxy statements and reports to shareholders,
governmental officers or commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Trust, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of
each Series in the manner described in the trust's then-current Prospectus; and
expenses of shareholder meetings.
3. Compensation of the Adviser. For the services to be rendered and the
facilities to be provided, the Trust shall pay to the Adviser a separate
investment advisory fee for each series that is to be computed and paid monthly.
Such computations shall commence on the effective date of this Agreement and
shall be calculated at an annual rate of 0.75% of the first $300 million of
average daily net assets of the Series and 0.675% of the average daily net
assets of each Series in excess of $300 million. Payment of the foregoing fee is
subject to the provision that within 30 days following the close of any fiscal
year of each series of the Trust, the Adviser will pay to each Series a sum
equal to the amount by which the operating expenses of such series, but
excluding interest, taxes, brokerage commissions and extraordinary expenses,
incurred during such fiscal year exceed one and one-quarter percent (1.25%) of
the average net assets of such series for the fiscal year. If the Adviser shall
serve for less than the whole of any period specified in this Section 3, the
compensation to the Adviser shall be prorated.
4. Covenants of the Adviser. The Adviser agrees that it will not deal
with itself, or with the Trustees of the Trust as principals in making purchases
of sales of securities or other property for the account of the Trust, will not
take a long or short position in the Shares of any of the Series except as
provided by the Declaration and will comply with all other provisions of the
Declaration and By-Laws and the then-current Prospectus of the Trust relative to
the Adviser and its Directors and officers.
5. Limitation of Liability of the Adviser. The Adviser shall not be
liable for any error of judgement or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management of
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder. As used in this Section 5, the term "Adviser" shall
include Directors, officers, and employees of the Adviser as well s the
corporation itself.
6. Activities of the Adviser. The services of the Adviser to the Trust
are not to be deemed to be exclusive, MFS being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Trust agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Trust, the
Trust will change its name so as to delete the initials "MFS". It is understood
that Trustees, officers, and shareholders of the Trust are or may be or become
interested in the Adviser, as Directors, officers, employees, or otherwise and
that Directors, officers and employees of the Adviser are or may become
similarly interested in the Trust as a shareholder or otherwise.
7. Severability of this Agreement. If this Agreement shall be deemed or
held to be invalid or unenforceable or shall terminate with respect to any
Series, such invalidity, unenforceability or termination shall not have any
effect on this Agreement as it applies to the Series and this Agreement shall
continue in full force and effect with regard to such other Series.
8. Duration, Termination and Amendments of this Agreement. This
Agreement shall become effective as of the day and year first above written and
shall govern the relations between the parties hereto thereafter, and shall
remain in force until November 1, 1988, on which date it will terminate unless
its continuance after November 1, 1988 is "specifically approved at least
annually" (i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Trust.
This Agreement may be terminated with respect to one or more Series at
any time without the payment of any penalty by the Trustees or by "vote of a
majority of the outstanding securities" of the series to be terminated, or by
the Adviser, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party. This agreement shall automatically terminate
in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of each Series
affected thereby.
The terms "specifically approved at lest annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested persons", when used in the Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, all as of the day and year first above written. The undersigned
Trustee of the Trust has executed this agreement not individually, but as
Trustee under the Declaration, and the obligations of this Agreement are not
binding upon any of the Trustees of shareholders of the Trust, individually, but
bind only the trust estate of the Trust.
MFS/SUN LIFE SERIES TRUST
By: JOHN D. MCNEIL
------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: RICHARD B. BAILEY
------------------------------
Richard B. Bailey
Chairman and Director
<PAGE>
EXHIBIT NO. 99.5(d)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of November, 1993, by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of the WORLD GROWTH SERIES (the "Fund"), a series of the
Trust, and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware Corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940, and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement the Adviser shall not be deemed
to have acted unlawfully or to have breached any duty, created by this Agreement
or otherwise, solely by reason of its having caused the Fund to pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to the Fund and to other clients of the Adviser as to which the
Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements, and thereby delegate any or all of its duties hereunder, with one or
more investment advisors with such terms and conditions as the Adviser may
determine provided that such sub-investment advisory agreements have been
approved by a majority of the Trustees of the Trust who are not "interested
persons" of the Trust, or the Adviser or the Sub-Adviser and by vote of a
majority of the outstanding voting securities" of the Fund. Subject to the
provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-advisor or for any loss arising out of any
investment made by any sub-advisor or for any act or omission in the execution
and management of the Fund by any sub-advisor.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at a rate equal to 0.90% of the Fund's
average daily net assets on an annualized basis. If the Adviser shall serve for
less than the whole of any period specified in this Article 3, the compensation
payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and will comply with
all other provisions of the Declaration and the By-Laws and the then-current
Prospectus and Statement of Additional Information of the Trust relative to the
Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust, and that the
Adviser may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1994, on which date it will terminate unless its
continuance after November 1, 1994, is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee as of the
Trust has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE WORLD GROWTH SERIES
By: JOHN D. MCNEIL
----------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: A. KEITH BRODKIN
----------------------------
A. Keith Brodkin,
Chairman
<PAGE>
EXHIBIT NO. 99.5(e)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of November, 1993, by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of the UTILITIES SERIES (the "Fund"), a series of the Trust,
and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware Corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940, and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement the Adviser shall not be deemed
to have acted unlawfully or to have breached any duty, created by this Agreement
or otherwise, solely by reason of its having caused the Fund to pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to the Fund and to other clients of the Adviser as to which the
Adviser exercises investment discretion.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at an annual rate equal to 0.75% of the
first $300 million of the Fund's average daily net assets and 0.675% of the
Fund's average daily net assets in excess of $300 million. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and will comply with
all other provisions of the Declaration and the By-Laws and the then-current
Prospectus and Statement of Additional Information of the Trust relative to the
Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust, and that the
Adviser may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1994, on which date it will terminate unless its
continuance after November 1, 1994, is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee as of the
Trust has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE UTILITIES SERIES
By: JOHN D. MCNEIL
-----------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By A. KEITH BRODKIN
-----------------------------
A. Keith Brodkin,
Chairman
<PAGE>
EXHIBIT NO. 99.5(f)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 16th day of September,
1994, by and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust
(the "Trust"), on behalf of the RESEARCH SERIES (the "Fund"), a series of the
Trust, and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware Corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund the placing of such orders,
the Adviser is directed to seek for the Fund execution at the most reasonable
price by responsible brokerage firms at reasonably competitive commission rates.
In fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements with one or more investment advisors with such terms and conditions
as the Adviser may determine provided that such sub-investment advisory
agreements have been approved by a majority of the Trustees of the Trust who are
not "interested persons" of the Trust, or the Adviser or the Sub-Adviser and by
"vote of a majority of the outstanding voting securities" of the Fund. Subject
to the provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-advisor or for any loss arising out of any
investment made by any sub-advisor or for any act or omission in the execution
and management of the Fund by any sub-advisor.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at an annual rate equal to 0.75% of the
first $300 million of the Fund's average daily net assets and 0.675% of the
Fund's average daily net assets in excess of $300 million. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and the By-Laws and
the then-current Prospectus and Statement of Additional Information of the Trust
relative to the Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement.
This Agreement shall become effective on the date first above written
and shall govern the relations between the parties hereto thereafter, and shall
remain in force until November 1, 1994 at which date it will terminate unless
its continuance after November 1, 1994 is "specifically approved at least
annually" (i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by a "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE RESEARCH SERIES
By: JOHN D. MCNEIL
-------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: ARNOLD D. SCOTT
-------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(g)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 16th day of September,
1994, by and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust
(the "Trust"), on behalf of the WORLD ASSET ALLOCATION SERIES (the "Fund"), a
series of the Trust, and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
Corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealer selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund the placing of such orders,
the Adviser is directed to seek for the Fund execution at the most reasonable
price by responsible brokerage firms at reasonably competitive commission rates.
In fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements with one or more investment advisors with such terms and conditions
as the Adviser may determine provided that such sub-investment advisory
agreements have been approved by a majority of the Trustees of the Trust who are
not "interested persons" of the Trust, or the Adviser or the Sub-Adviser and by
"vote of a majority of the outstanding voting securities" of the Fund. Subject
to the provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-advisor or for any loss arising out of any
investment made by any sub-advisor or for any act or omission in the execution
and management of the Fund by any sub-advisor.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at an annual rate equal to 0.75% of the
first $300 million of the Fund's average daily net assets and 0.675% of the
Fund's average daily net assets in excess of $300 million. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and the By-Laws and
the then-current Prospectus and Statement of Additional Information of the Trust
relative to the Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1994 at which date it will terminate unless its
continuance after November 1, 1994 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by a "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE WORLD ASSET ALLOCATION SERIES
By: JOHN D. MCNEIL
-------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: ARNOLD D. SCOTT
-------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(h)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 16th day of September,
1994, by and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust
(the "Trust"), on behalf of the WORLD TOTAL RETURN SERIES (the "Fund"), a series
of the Trust, and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
Corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund the placing of such orders,
the Adviser is directed to seek for the Fund execution at the most reasonable
price by responsible brokerage firms at reasonably competitive commission rates.
In fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements with one or more investment advisors with such terms and conditions
as the Adviser may determine provided that such sub-investment advisory
agreements have been approved by a majority of the Trustees of the Trust who are
not "interested persons" of the Trust, or the Adviser or the Sub-Adviser and by
"vote of a majority of the outstanding voting securities" of the Fund. Subject
to the provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-advisor or for any loss arising out of any
investment made by any sub-advisor or for any act or omission in the execution
and management of the Fund by any sub-advisor.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at an annual rate equal to 0.75% of the
first $300 million of the Fund's average daily net assets and 0.675% of the
Fund's average daily net assets in excess of $300 million. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and the By-Laws and
the then-current Prospectus and Statement of Additional Information of the Trust
relative to the Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1994 at which date it will terminate unless its
continuance after November 1, 1994 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by a "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE WORLD TOTAL RETURN SERIES
By: JOHN D. MCNEIL
-------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: ARNOLD D. SCOTT
-------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(i)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of May, 1995, by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of the EMERGING GROWTH SERIES (the "Fund"), a series of the
Trust, and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware Corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealer selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund the placing of such orders,
the Adviser is directed to seek for the Fund execution at the most reasonable
price by responsible brokerage firms at reasonably competitive commission rates.
In fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements with one or more investment advisors with such terms and conditions
as the Adviser may determine provided that such sub-investment advisory
agreements have been approved by a majority of the Trustees of the Trust who are
not "interested persons" of the Trust, or the Adviser or the Sub-Adviser and by
"vote of a majority of the outstanding voting securities" of the Fund. Subject
to the provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-advisor or for any loss arising out of any
investment made by any sub-advisor or for any act or omission in the execution
and management of the Fund by any sub-advisor.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at an annual rate equal to 0.75% of the
first $300 million of the Fund's average daily net assets and 0.675% of the
Fund's average daily net assets in excess of $300 million. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and the By-Laws and
the then-current Prospectus and Statement of Additional Information of the Trust
relative to the Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1995 at which date it will terminate unless its
continuance after November 1, 1995 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by a "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE VALUE SERIES
By: JOHN D. MCNEIL
-------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: ARNOLD D. SCOTT
-------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(j)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of September, 1995 by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH SERIES (the
"Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation
(the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1: DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper management of its funds. The Adviser shall act
as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated February 15, 1985 and By-Laws, each as amended from time to time
(respectively, the "Declaration" and the "By-Laws"), to the provisions of the
1940 Act and the rules and regulations thereunder and to the Fund's then-current
Prospectus and Statement of Additional Information. Should the Trustees at any
time, however, make any determination as to investment policy and notify the
Adviser thereof in writing, the Adviser shall be bound by such determination for
the period, if any, specified in such notice or until similarly notified that
such determination has been revoked. The Adviser shall take, on behalf of the
Fund, all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers,
dealers or other entities selected by it, and to that end the Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to deliveries of securities and payments of cash for the account of the
Fund. In connection with the selection of such brokers, dealers or other
entities and the placing of such orders, the Adviser is directed to seek for the
Fund execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement the
Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining the Trust's organization, and investment advisory
facilities and executive and supervisory personnel for managing the investments
and effecting the portfolio transactions of the Fund. The Adviser shall arrange,
if desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Trust will pay all of its own expenses
including, without limitation, compensation of Trustees of the Trust who are not
affiliated persons of the Trust or the Adviser, governmental fees, interest
charges, taxes, membership dues in the Investment Company Institute allocable to
the Trust, fees and expenses of independent auditors, of legal counsel and of
any transfer agent, registrar or dividend disbursing agent of the Trust,
expenses of repurchasing and redeeming shares and servicing shareholder
accounts, expenses of preparing, printing and mailing stock certificates,
prospectuses, periodic reports, notices and proxy statements to shareholders and
to governmental officers and commissions, brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions,
insurance premiums, fees and expenses of the custodian for all services to the
Trust, including safekeeping of funds and securities, keeping of books and
accounts and calculation of the net asset value of shares of the Fund, expenses
of shareholder meetings, and expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes (except to the extent that any Distribution
Agreement to which the Trust is a party on behalf of the Fund provides that
another party is to pay some or all of such expenses).
ARTICLE 3: COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at a rate equal to 0.975% of
the first $500 million of the Fund's average daily net assets on an annualized
basis and 0.925% thereafter. If the Adviser shall serve for less than the whole
of any period specified in this Article 3, the compensation payable to the
Adviser with respect to the Fund shall be prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor
as principals in making purchases or sales of securities or other property for
the account of the Fund, except as permitted by the 1940 Act, will not take a
long or short position in the shares of the Fund, except as provided by the
Declaration, and will comply with all other provisions of the Declaration and
By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser, and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that Trustees, officers, and shareholders of the Trust
are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until November 1, 1996, and each year thereafter but only so long as its
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust, or by vote of a
majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less that thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by vote
of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: CERTAIN TERMS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A
copy of the Declaration of the Trust is on file with the Secretary of State of
The Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of more than one series of the Trust, the parties hereto
also agree that the obligations of each series hereunder shall be several and
not joint, in accordance with its proportionate interest hereunder, and the
parties hereto agree not to proceed against any series for the obligations of
another series.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MFS/SUN LIFE SERIES TRUST,
on behalf of MFS/FOREIGN &
COLONIAL INTERNATIONAL
GROWTH SERIES
By: BONNIE S. ANGUS
------------------------
Bonnie S. Angus
Secretary and Clerk
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
------------------------
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(k)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of September, 1995 by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME
SERIES (the "Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1: DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper management of its funds. The Adviser shall act
as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated February 15, 1985 and By-Laws, each as amended from time to time
(respectively, the "Declaration" and the "By-Laws"), to the provisions of the
1940 Act and the rules and regulations thereunder and to the Fund's then-current
Prospectus and Statement of Additional Information. Should the Trustees at any
time, however, make any determination as to investment policy and notify the
Adviser thereof in writing, the Adviser shall be bound by such determination for
the period, if any, specified in such notice or until similarly notified that
such determination has been revoked. The Adviser shall take, on behalf of the
Fund, all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers,
dealers or other entities selected by it, and to that end the Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to deliveries of securities and payments of cash for the account of the
Fund. In connection with the selection of such brokers, dealers or other
entities and the placing of such orders, the Adviser is directed to seek for the
Fund execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement the
Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining the Trust's organization, and investment advisory
facilities and executive and supervisory personnel for managing the investments
and effecting the portfolio transactions of the Fund. The Adviser shall arrange,
if desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Trust will pay all of its own expenses
including, without limitation, compensation of Trustees of the Trust who are not
affiliated persons of the Trust or the Adviser, governmental fees, interest
charges, taxes, membership dues in the Investment Company Institute allocable to
the Trust, fees and expenses of independent auditors, of legal counsel and of
any transfer agent, registrar or dividend disbursing agent of the Trust,
expenses of repurchasing and redeeming shares and servicing shareholder
accounts, expenses of preparing, printing and mailing stock certificates,
prospectuses, periodic reports, notices and proxy statements to shareholders and
to governmental officers and commissions, brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions,
insurance premiums, fees and expenses of the custodian for all services to the
Trust, including safekeeping of funds and securities, keeping of books and
accounts and calculation of the net asset value of shares of the Fund, expenses
of shareholder meetings, and expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes (except to the extent that any Distribution
Agreement to which the Trust is a party on behalf of the Fund provides that
another party is to pay some or all of such expenses).
ARTICLE 3: COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at a rate equal to 0.975% of
the first $500 million of the Fund's average daily net assets on an annualized
basis and 0.925% thereafter. If the Adviser shall serve for less than the whole
of any period specified in this Article 3, the compensation payable to the
Adviser with respect to the Fund shall be prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor
as principals in making purchases or sales of securities or other property for
the account of the Fund, except as permitted by the 1940 Act, will not take a
long or short position in the shares of the Fund, except as provided by the
Declaration, and will comply with all other provisions of the Declaration and
By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser, and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that Trustees, officers, and shareholders of the Trust
are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until November 1, 1996, and each year thereafter but only so long as its
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust, or by vote of a
majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less that thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by vote
of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: CERTAIN TERMS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A
copy of the Declaration of the Trust is on file with the Secretary of State of
The Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of more than one series of the Trust, the parties hereto
also agree that the obligations of each series hereunder shall be several and
not joint, in accordance with its proportionate interest hereunder, and the
parties hereto agree not to proceed against any series for the obligations of
another series.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MFS/SUN LIFE SERIES TRUST,
on behalf of MFS/FOREIGN &
COLONIAL INTERNATIONAL
GROWTH AND INCOME SERIES
By: BONNIE S. ANGUS
-------------------------
Bonnie S. Angus
Secretary and Clerk
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
-------------------------
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(l)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of September, 1995 by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
(the "Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1: DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper management of its funds. The Adviser shall act
as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated February 15, 1985 and By-Laws, each as amended from time to time
(respectively, the "Declaration" and the "By-Laws"), to the provisions of the
1940 Act and the rules and regulations thereunder and to the Fund's then-current
Prospectus and Statement of Additional Information. Should the Trustees at any
time, however, make any determination as to investment policy and notify the
Adviser thereof in writing, the Adviser shall be bound by such determination for
the period, if any, specified in such notice or until similarly notified that
such determination has been revoked. The Adviser shall take, on behalf of the
Fund, all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers,
dealers or other entities selected by it, and to that end the Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to deliveries of securities and payments of cash for the account of the
Fund. In connection with the selection of such brokers, dealers or other
entities and the placing of such orders, the Adviser is directed to seek for the
Fund execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement the
Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining the Trust's organization, and investment advisory
facilities and executive and supervisory personnel for managing the investments
and effecting the portfolio transactions of the Fund. The Adviser shall arrange,
if desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Trust will pay all of its own expenses
including, without limitation, compensation of Trustees of the Trust who are not
affiliated persons of the Trust or the Adviser, governmental fees, interest
charges, taxes, membership dues in the Investment Company Institute allocable to
the Trust, fees and expenses of independent auditors, of legal counsel and of
any transfer agent, registrar or dividend disbursing agent of the Trust,
expenses of repurchasing and redeeming shares and servicing shareholder
accounts, expenses of preparing, printing and mailing stock certificates,
prospectuses, periodic reports, notices and proxy statements to shareholders and
to governmental officers and commissions, brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions,
insurance premiums, fees and expenses of the custodian for all services to the
Trust, including safekeeping of funds and securities, keeping of books and
accounts and calculation of the net asset value of shares of the Fund, expenses
of shareholder meetings, and expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes (except to the extent that any Distribution
Agreement to which the Trust is a party on behalf of the Fund provides that
another party is to pay some or all of such expenses).
ARTICLE 3: COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at a rate equal to 1.25% of
the Fund's average daily net assets on an annualized basis. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund shall be prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor
as principals in making purchases or sales of securities or other property for
the account of the Fund, except as permitted by the 1940 Act, will not take a
long or short position in the shares of the Fund, except as provided by the
Declaration, and will comply with all other provisions of the Declaration and
By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser, and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that Trustees, officers, and shareholders of the Trust
are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until November 1, 1996, and each year thereafter but only so long as its
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust, or by vote of a
majority of the outstanding voting securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less that thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by vote
of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: CERTAIN TERMS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A
copy of the Declaration of the Trust is on file with the Secretary of State of
The Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of more than one series of the Trust, the parties hereto
also agree that the obligations of each series hereunder shall be several and
not joint, in accordance with its proportionate interest hereunder, and the
parties hereto agree not to proceed against any series for the obligations of
another series.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MFS/SUN LIFE SERIES TRUST,
on behalf of MFS/FOREIGN &
COLONIAL EMERGING
MARKETS EQUITY SERIES
By: BONNIE S. ANGUS
-------------------------
Bonnie S. Angus
Secretary and Clerk
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
-------------------------
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(m)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser") and FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under
the laws of England and Wales (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides MFS/Foreign & Colonial International
Growth Series (the "Fund"), a series of MFS/Sun Life Series Trust (the "Trust"),
an open-end investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), business services pursuant to the terms and
conditions of an investment advisory agreement dated September 1, 1995 (the
"Advisory Agreement") between the Adviser and the Trust, on behalf of the Fund;
and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the Trustees
of the Trust and the Adviser, the Sub-Adviser will: (a) manage such Fund's
assets on behalf of the Fund in accordance with the Fund's investment objective,
policies and limitations as stated in the Fund's then current Prospectus (the
"Prospectus") and Statement of Additional Information (the "Statement"), and the
Trust's Declaration of Trust, dated February 15, 1985 and Amended and Restated
By-Laws, each as from time to time in effect (respectively, the "Declaration"
and the "By-Laws") and in compliance with the 1940 Act and the rules,
regulations and orders thereunder; (b) make investment decisions for the Fund;
(c) place purchase and sale orders for portfolio transactions for the Fund; (d)
manage otherwise uninvested cash assets of the Fund; (e) as the agent of the
Fund, give instructions (including trade tickets) to the custodian and any
sub-custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund (the Sub-Adviser
shall promptly notify the Adviser of such instructions); (f) employ professional
portfolio managers to provide research services to the Fund; (g) attend periodic
meetings of the Board of Trustees of the Trust and (h) obtain all the
registrations, qualifications and consents, on behalf of the Fund, which are
necessary for the Fund to purchase and sell assets in each jurisdiction (other
than the United States) in which the Fund's assets are to be invested (the
Sub-Adviser shall promptly provide the Adviser with copies of any such
registrations, qualifications and consents). In providing these services, the
Sub-Adviser will furnish continuously an investment program with respect to the
Fund's assets. The Sub-Adviser shall be responsible for monitoring the Fund's
compliance with the Prospectus, the Statement, the Declaration, the By-Laws and
the 1940 Act and the rules, regulations and orders thereunder and in monitoring
such compliance the Sub-Adviser shall do so in the functional currency of the
Fund. The Adviser agrees to provide the Sub-Adviser with such assistance as may
be reasonably requested by the Sub-Adviser in connection with its activities
under this Agreement, including, without limitation, information concerning the
Fund, its funds available, or to become available, for investment and generally
as to the conditions of the Fund's affairs. From time to time the Adviser will
notify the Sub-Adviser of the aggregate U.S. Dollar amount of the Fund's assets.
The Adviser will have responsibility for exercising proxy, consent and other
rights pertaining to the Fund's portfolio securities; provided, however, that
the Sub-Adviser will, as requested, make recommendations to the Adviser as to
the manner in which such proxy, consent and other rights shall be exercised.
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspension or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus, the
Statement, the Declaration and the By-Laws have been delivered to the
Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change in the
investment policies of the Fund and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the Prospectus, the
Statement, the Declaration and the By-Laws. In addition, the Adviser will
promptly provide the Sub-Adviser with any procedures applicable to the
Sub-Adviser adopted from time to time by the Trustees of the Trust and agrees to
provide promptly to the Sub-Adviser copies of all amendments thereto.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the assets of the Fund.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust
or the Adviser, or both, as may be appropriate, quarterly reports of its
activities on behalf of the Fund, as required by applicable law or as otherwise
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may request from time to
time.
5. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund, the Sub-Adviser is directed to seek for the Fund
execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to allocate
similarly opportunities to sell or otherwise dispose of securities among the
Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter into
investment sub-advisory agreements with one or more investment advisers, (an
"Other Sub-Adviser"), to the Fund to perform some or all of the services for
which the Sub-Adviser is responsible pursuant to this Agreement upon such terms
and conditions as the Adviser and the Sub-Adviser may determine; provided,
however, that such investment sub-advisory agreements have been approved by a
majority of the Trustees of the Trust who are not interested persons of the
Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote of a majority of
the outstanding voting securities of the Fund; and, provided, further, that the
Sub-Adviser shall own a majority of the voting securities of any Other
Sub-Adviser. The Sub-Adviser may terminate the services of any Other Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Other Sub-Adviser unless and until a successor Other
Sub-Adviser is selected. The Sub-Adviser shall be liable for any error of
judgment or mistake of law by any Other Sub-Adviser and for any act or omission
in the execution and management of the Fund by any Other Sub-Adviser.
8. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser
compensation, computed and paid monthly in arrears in U.S. dollars, at a rate of
0.80% of the average daily net asset value of the Fund's assets on an annualized
basis. If the Sub-Adviser shall serve for less than the whole of any month, the
compensation payable to the Sub-Adviser with respect to the Fund will be
prorated. The Sub-Adviser will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust nor the Fund shall be liable to
the Sub-Adviser for the compensation of the Sub-Adviser. For the purpose of
determining fees payable to the Sub-Adviser, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Prospectus
and/or Statement. In the event that the Adviser reduces its management fee
payable under the Advisory Agreement in order to comply with the expense
limitations of a State securities commission or otherwise (but not a voluntary
reduction), the Sub-Adviser agrees to reduce its fee payable under this
Agreement by a pro rata amount.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. The Trust, on behalf of
the Fund, may enforce any obligations of the Sub-Adviser under this Agreement
and may recover directly from the Sub-Adviser for any liability it may have to
the Fund.
10. Activities of the Sub-Adviser. The services of the Sub-Adviser to
the Fund are not deemed to be exclusive, the Sub-Adviser being free to render
investment advisory and/or other services to others. The Sub-Adviser may permit
other fund clients to use the words "Foreign & Colonial" in their names. The
Adviser and the Trust agree that if the Sub-Adviser shall for any reason no
longer serve as the Sub-Adviser to the Fund, the Fund will change its name so as
to delete the words "Foreign & Colonial". It is understood that the Trustees,
officers and shareholders of the Trust, the Fund or the Adviser are or may be or
become interested in the Sub-Adviser or any person controlling, controlled by or
under common control with the Sub-Adviser, as trustees, officers, employees or
otherwise and that trustees, officers and employees of the Sub-Adviser or any
person controlling, controlled by or under common control with the Sub-Adviser
may become similarly interested in the Trust, the Fund or the Adviser and that
the Sub-Adviser may be or become interested in the Fund as a shareholder or
otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a)
will not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees
of the Trust or the Fund's distributor, as principals, agents, brokers or
dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized
to undertake investment business in the United Kingdom by virtue of
its membership in the Investment Management Regulatory Organisation
("IMRO") and is registered under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement,
and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will continue to meet for so long as
this Agreement remains in effect, any other applicable Federal or
State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met
in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services
contemplated by this Agreement; (v) will immediately notify the
Adviser in writing of the occurrence of any event that would
disqualify the Sub-Adviser from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing
of any change of control of the Sub-Adviser or any parent of the
Sub-Adviser resulting in an "assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by
the 1940 Act and the rules, regulations and orders thereunder and
the Advisers Act and the rules, regulations and orders thereunder,
records relating to investment transactions made by the Sub-Adviser
for the Fund as may be reasonably requested by the Adviser or the
Fund from time to time. The Sub-Adviser agrees that such records
are the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided however, that the Sub-Adviser may
retain copies of such records for archival purposes as required by
IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and, if it has
not already done so, will provide the Adviser and the Trust with a
copy of such code of ethics, and upon any amendment to such code of
ethics, promptly provide such amendment. At least annually the
Sub-Adviser will provide the Trust and the Adviser with a
certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the
best of his or her knowledge, compliance with the code of ethics
during the immediately preceding twelve (12) month period,
including any material violations of or amendments to the code of
ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its Form
ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser and the Trust.
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until November
1, 1996 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Adviser or of the Sub-Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund. This
Agreement may be terminated at any time without the payment of any penalty by
the Trustees of the Trust, by "vote of a majority of the outstanding voting
securities" of the Fund or by the Adviser, on not more than sixty days nor less
than thirty days written notice, or by the Sub-Adviser on not more than ninety
days nor less than sixty days written notice. This Agreement shall automatically
terminate in the event of its "assignment" or in the event that the Advisory
Agreement shall have terminated for any reason.
14. Amendments to this Agreement. This Agreement may be amended only if
such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser and by the Sub-Adviser.
15. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated persons" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
16. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser pursuant
to Section 12 hereof shall survive for the duration of this Agreement and the
Sub-Adviser shall immediately notify, but in no event later than five (5)
business days, the Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
-------------------------
Jeffrey L. Shames
President
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
-------------------------
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS/SUN LIFE SERIES TRUST,
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH SERIES
By: BONNIE S. ANGUS
--------------------------
Bonnie S. Angus
Secretary and Clerk
<PAGE>
EXHIBIT NO. 99.5(n)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser") and FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under
the laws of England and Wales (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides MFS/Foreign & Colonial Emerging Markets
Equity Series (the "Fund"), a series of MFS/Sun Life Series Trust (the "Trust"),
an open-end investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), business services pursuant to the terms and
conditions of an investment advisory agreement dated September 1, 1995 (the
"Advisory Agreement") between the Adviser and the Trust, on behalf of the Fund;
and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the Trustees
of the Trust and the Adviser, the Sub-Adviser will: (a) manage such Fund's
assets on behalf of the Fund in accordance with the Fund's investment objective,
policies and limitations as stated in the Fund's then current Prospectus (the
"Prospectus") and Statement of Additional Information (the "Statement"), and the
Trust's Declaration of Trust, dated February 15, 1985 and Amended and Restated
By-Laws, each as from time to time in effect (respectively, the "Declaration"
and the "By-Laws") and in compliance with the 1940 Act and the rules,
regulations and orders thereunder; (b) make investment decisions for the Fund;
(c) place purchase and sale orders for portfolio transactions for the Fund; (d)
manage otherwise uninvested cash assets of the Fund; (e) as the agent of the
Fund, give instructions (including trade tickets) to the custodian and any
sub-custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund (the Sub-Adviser
shall promptly notify the Adviser of such instructions); (f) employ professional
portfolio managers to provide research services to the Fund; (g) attend periodic
meetings of the Board of Trustees of the Trust and (h) obtain all the
registrations, qualifications and consents, on behalf of the Fund, which are
necessary for the Fund to purchase and sell assets in each jurisdiction (other
than the United States) in which the Fund's assets are to be invested (the
Sub-Adviser shall promptly provide the Adviser with copies of any such
registrations, qualifications and consents). In providing these services, the
Sub-Adviser will furnish continuously an investment program with respect to the
Fund's assets. The Sub-Adviser shall be responsible for monitoring the Fund's
compliance with the Prospectus, the Statement, the Declaration, the By-Laws and
the 1940 Act and the rules, regulations and orders thereunder and in monitoring
such compliance the Sub-Adviser shall do so in the functional currency of the
Fund. The Adviser agrees to provide the Sub-Adviser with such assistance as may
be reasonably requested by the Sub-Adviser in connection with its activities
under this Agreement, including, without limitation, information concerning the
Fund, its funds available, or to become available, for investment and generally
as to the conditions of the Fund's affairs. From time to time the Adviser will
notify the Sub-Adviser of the aggregate U.S. Dollar amount of the Fund's assets.
The Adviser will have responsibility for exercising proxy, consent and other
rights pertaining to the Fund's portfolio securities; provided, however, that
the Sub-Adviser will, as requested, make recommendations to the Adviser as to
the manner in which such proxy, consent and other rights shall be exercised.
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspension or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus, the
Statement, the Declaration and the By-Laws have been delivered to the
Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change in the
investment policies of the Fund and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the Prospectus, the
Statement, the Declaration and the By-Laws. In addition, the Adviser will
promptly provide the Sub-Adviser with any procedures applicable to the
Sub-Adviser adopted from time to time by the Trustees of the Trust and agrees to
provide promptly to the Sub-Adviser copies of all amendments thereto.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the assets of the Fund.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust
or the Adviser, or both, as may be appropriate, quarterly reports of its
activities on behalf of the Fund, as required by applicable law or as otherwise
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may request from time to
time.
5. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund, the Sub-Adviser is directed to seek for the Fund
execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to allocate
similarly opportunities to sell or otherwise dispose of securities among the
Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter into
investment sub-advisory agreements with one or more investment advisers, (an
"Other Sub-Adviser"), to the Fund to perform some or all of the services for
which the Sub-Adviser is responsible pursuant to this Agreement upon such terms
and conditions as the Adviser and the Sub-Adviser may determine; provided,
however, that such investment sub-advisory agreements have been approved by a
majority of the Trustees of the Trust who are not interested persons of the
Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote of a majority of
the outstanding voting securities of the Fund; and, provided, further, that the
Sub-Adviser shall own a majority of the voting securities of any Other
Sub-Adviser. The Sub-Adviser may terminate the services of any Other Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Other Sub-Adviser unless and until a successor Other
Sub-Adviser is selected. The Sub-Adviser shall be liable for any error of
judgment or mistake of law by any Other Sub-Adviser and for any act or omission
in the execution and management of the Fund by any Other Sub-Adviser.
8. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser
compensation, computed and paid monthly in arrears in U.S. dollars, at a rate of
1.00% of the average daily net asset value of the Fund's assets on an annualized
basis. If the Sub-Adviser shall serve for less than the whole of any month, the
compensation payable to the Sub-Adviser with respect to the Fund will be
prorated. The Sub-Adviser will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust nor the Fund shall be liable to
the Sub-Adviser for the compensation of the Sub-Adviser. For the purpose of
determining fees payable to the Sub-Adviser, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Prospectus
and/or Statement. In the event that the Adviser reduces its management fee
payable under the Advisory Agreement in order to comply with the expense
limitations of a State securities commission or otherwise (but not a voluntary
reduction), the Sub-Adviser agrees to reduce its fee payable under this
Agreement by a pro rata amount.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. The Trust, on behalf of
the Fund, may enforce any obligations of the Sub-Adviser under this Agreement
and may recover directly from the Sub-Adviser for any liability it may have to
the Fund.
10. Activities of the Sub-Adviser. The services of the Sub-Adviser to
the Fund are not deemed to be exclusive, the Sub-Adviser being free to render
investment advisory and/or other services to others. The Sub-Adviser may permit
other fund clients to use the words "Foreign & Colonial" in their names. The
Adviser and the Trust agree that if the Sub-Adviser shall for any reason no
longer serve as the Sub-Adviser to the Fund, the Fund will change its name so as
to delete the words "Foreign & Colonial". It is understood that the Trustees,
officers and shareholders of the Trust, the Fund or the Adviser are or may be or
become interested in the Sub-Adviser or any person controlling, controlled by or
under common control with the Sub-Adviser, as trustees, officers, employees or
otherwise and that trustees, officers and employees of the Sub-Adviser or any
person controlling, controlled by or under common control with the Sub-Adviser
may become similarly interested in the Trust, the Fund or the Adviser and that
the Sub-Adviser may be or become interested in the Fund as a shareholder or
otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a)
will not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees
of the Trust or the Fund's distributor, as principals, agents, brokers or
dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized
to undertake investment business in the United Kingdom by virtue of
its membership in the Investment Management Regulatory Organisation
("IMRO") and is registered under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement,
and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will continue to meet for so long as
this Agreement remains in effect, any other applicable Federal or
State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met
in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services
contemplated by this Agreement; (v) will immediately notify the
Adviser in writing of the occurrence of any event that would
disqualify the Sub-Adviser from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing
of any change of control of the Sub-Adviser or any parent of the
Sub-Adviser resulting in an "assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by
the 1940 Act and the rules, regulations and orders thereunder and
the Advisers Act and the rules, regulations and orders thereunder,
records relating to investment transactions made by the Sub-Adviser
for the Fund as may be reasonably requested by the Adviser or the
Fund from time to time. The Sub-Adviser agrees that such records
are the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided, however, that the Sub-Adviser may
retain copies of such records for archival purposes as required by
IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and, if it has
not already done so, will provide the Adviser and the Trust with a
copy of such code of ethics, and upon any amendment to such code of
ethics, promptly provide such amendment. At least annually the
Sub-Adviser will provide the Trust and the Adviser with a
certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the
best of his or her knowledge, compliance with the code of ethics
during the immediately preceding twelve (12) month period,
including any material violations of or amendments to the code of
ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its Form
ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser and the Trust.
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until November
1, 1996 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Adviser or of the Sub-Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund. This
Agreement may be terminated at any time without the payment of any penalty by
the Trustees of the Trust, by "vote of a majority of the outstanding voting
securities" of the Fund or by the Adviser, on not more than sixty days nor less
than thirty days written notice, or by the Sub-Adviser on not more than ninety
days nor less than sixty days written notice. This Agreement shall automatically
terminate in the event of its "assignment" or in the event that the Advisory
Agreement shall have terminated for any reason.
14. Amendments to this Agreement. This Agreement may be amended only if
such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser and by the Sub-Adviser.
15. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated persons" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
16. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser pursuant
to Section 12 hereof shall survive for the duration of this Agreement and the
Sub-Adviser shall immediately notify, but in no event later than five (5)
business days, the Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
---------------------------
Jeffrey L. Shames
President
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
---------------------------
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS/SUN LIFE SERIES TRUST,
on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
By: BONNIE S. ANGUS
------------------------------
Bonnie S. Angus
Secretary and Clerk
<PAGE>
EXHIBIT NO. 99.5(o)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the
laws of England and Wales (the "Sub-Adviser"), and FOREIGN & COLONIAL EMERGING
MARKETS LIMITED, a company incorporated under the laws of England and Wales
("FCEM").
WITNESSETH:
WHEREAS, Massachusetts Financial Services Company (the "Adviser")
provides MFS/Foreign & Colonial International Growth Series (the "Fund"), a
series of MFS/Sun Life Series Trust (the "Trust"), an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), business services pursuant to the terms and conditions of an
investment advisory agreement dated September 1, 1995 (the "Advisory Agreement")
between the Adviser and the Trust, on behalf of the Fund;
WHEREAS, the Sub-Adviser provides services to the Adviser pursuant to
the terms and conditions of a sub-advisory agreement dated September 1, 1995
(the "FCM Sub-Advisory Agreement") between the Adviser and the Sub-Adviser; and
WHEREAS, FCEM is willing to provide services to the Sub-Adviser on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of FCEM. Subject to the supervision of the Trustees of the
Trust, the Adviser and the Sub-Adviser, FCEM will: (a) manage such portion of
the Fund's assets as the Adviser, Sub-Adviser and FCEM shall from time to time
mutually designate (the "Designated Assets") on behalf of the Fund in accordance
with the Fund's investment objective, policies and limitations as stated in the
Fund's then current Prospectus (the "Prospectus") and Statement of Additional
Information (the "Statement"), and the Trust's Declaration of Trust, dated
February 15, 1985 and Amended and Restated By-Laws, each as from time to time in
effect (respectively, the"Declaration" and the "By-Laws") and in compliance with
the 1940 Act and the rules, regulations and orders thereunder; (b) make
investment decisions for the Fund with respect to the Designated Assets; (c)
place purchase and sale orders for portfolio transactions for the Fund with
respect to the Designated Assets; (d) manage otherwise uninvested cash assets of
the Fund with respect to the Designated Assets ; (e) as the agent of the Fund,
give instructions (including trade tickets) to the custodian and any
sub-custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund with respect to the
Designated Assets (FCEM shall promptly notify the Adviser and the Sub-Adviser of
such instructions); (f) employ professional portfolio managers to provide
research services to the Fund; (g) attend periodic meetings of the Board of
Trustees of the Trust and (h) obtain all the registrations, qualifications and
consents, on behalf of the Fund, which are necessary for the Fund to purchase
and sell assets in each jurisdiction (other than the United States) in which the
Designated Assets are to be invested (FCEM shall promptly provide the Adviser
and the Sub-Adviser with copies of any such registrations, qualifications and
consents). In providing these services, FCEM will furnish continuously an
investment program with respect to the Designated Assets. FCEM shall be
responsible for monitoring the Fund's compliance with the Prospectus, the
Statement, the Declaration, the By-Laws and the 1940 Act and the rules,
regulations and orders thereunder and in monitoring such compliance FCEM shall
do so in the functional currency of the Fund. FCEM shall only be responsible for
compliance with the above-mentioned restrictions in regards to the Designated
Assets. The Sub-Adviser agrees to provide FCEM with such assistance as may be
reasonably requested by FCEM in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund, its
funds available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets of the Fund shall be purchased or
sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or FCEM's overall responsibilities
with respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the Adviser
or the Sub-Adviser, or all of them, as may be appropriate, quarterly reports of
its activities on behalf of the Fund, as required by applicable law or as
otherwise requested from time to time by the Trustees of the Trust, the Adviser
or the Sub-Adviser, and such additional information, reports, evaluations,
analyses and opinions as the Trustees of the Trust, the Adviser or the
Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM deems
the purchase or sale of a security to be in the best interest of the Fund as
well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of 1.00% of the average daily net asset value
of the Designated Assets on an annualized basis. If FCEM shall serve for less
than the whole of any month, the compensation payable to FCEM with respect to
the Fund will be prorated. FCEM will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust, the Adviser nor the Fund shall
be liable to FCEM for the compensation of FCEM. For the purpose of determining
fees payable to FCEM, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or Statement. In the
event that the Sub-Adviser reduces its management fee payable under the FCM
Sub-Advisory Agreement in order to comply with the expense limitations of a
State securities commission or otherwise (but not a voluntary reduction), FCEM
agrees to reduce its fee payable under this Agreement by a pro rata amount.
7. Limitation of Liability of FCEM. FCEM shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. The Trust, on behalf of the
Fund, may enforce any obligations of FCEM under this Agreement and may recover
directly from FCEM for any liability it may have to the Fund.
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or under
common control with FCEM, as trustees, officers, employees or otherwise and that
trustees, officers and employees of FCEM or any person controlling, controlled
by or under common control with FCEM may become similarly interested in the
Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or become
interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with itself,
"affiliated persons" of FCEM, the Sub-Adviser, the Trustees of the Trust or the
Fund's distributor, as principals, agents, brokers or dealers in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the 1940 Act and the rules, regulations and orders
thereunder and subject to the prior written approval of the Adviser, (b) will
not take a long or short position in the shares of the Fund except as permitted
by the Declaration and (c) will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement
relative to FCEM and its trustees, officers, employees and affiliates.
10. Representations, Warranties and Additional Agreements of FCEM. FCEM
represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized
to undertake investment business in the United Kingdom by virtue of
its membership in the Investment Management Regulatory Organisation
("IMRO") and is registered under the laws of any jurisdiction in
which FCEM is required to be registered as an investment adviser in
order to perform its obligations under this Agreement, and will
continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or the Advisers
Act from performing the services contemplated by this Agreement;
(iii) has met, and will continue to meet for so long as this
Agreement remains in effect, any other applicable Federal or State
requirements, or the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by
this Agreement; (v) will immediately notify the Adviser and the
Sub-Adviser in writing of the occurrence of any event that would
disqualify FCEM from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser and the
Sub-Adviser in writing of any change of control of FCEM or any
parent of FCEM resulting in an "assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by
the 1940 Act and the rules, regulations and orders thereunder and
the Advisers Act and the rules, regulations and orders thereunder,
records relating to investment transactions made by FCEM for the
Fund as may be reasonably requested by the Adviser or the Fund from
time to time. FCEM agrees that such records are the property of the
Fund, and will be surrendered to the Fund promptly upon request;
provided, however, that FCEM may retain copies of such records for
archival purposes as required by IMRO.
(c) FCEM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser, the Sub-Adviser and the
Trust with a copy of such code of ethics, and upon any amendment to
such code of ethics, promptly provide such amendment. At least
annually FCEM will provide the Trust, the Sub-Adviser and the
Adviser with a certificate signed by the chief compliance officer
(or the person performing such function) of FCEM certifying, to the
best of his or her knowledge, compliance with the code of ethics
during the immediately preceding twelve (12) month period,
including any material violations of or amendments to the code of
ethics or the administration thereof.
(d) It has provided the Adviser, the Sub-Adviser and the Trust with a
copy of its Form ADV as most recently filed with the Securities and
Exchange Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser, the Sub-Adviser and the Trust.
11. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until November
1, 1996 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust, the
Adviser, the Sub-Adviser or FCEM at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust, or by "vote of a majority of the outstanding voting securities" of the
Fund. This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust, by "vote of a majority of the outstanding
voting securities" of the Fund or by the Adviser or the Sub-Adviser, on not more
than sixty days nor less than thirty days written notice, or by FCEM on not more
than ninety days nor less than sixty days written notice. This Agreement shall
automatically terminate in the event of its "assignment" or in the event that
the FCM Sub-Advisory Agreement or the Advisory Agreement shall have terminated
for any reason.
12. Amendments to this Agreement. This Agreement may be amended only if
such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser, by the Sub-Adviser and by FCEM.
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
9 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, by the Adviser's General Counsel in the case of
the Adviser, by FCEM's Secretary in the case of FCEM and by the Trust's
Secretary in the case of the Fund, or such other person as a party shall
designate by notice to the other parties. This Agreement constitutes the entire
agreement among the parties hereto and supersedes any prior agreement among the
parties relating to the subject matter hereof. The section headings of this
Agreement are for convenience of reference and do not constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
-----------------------------
FOREIGN & COLONIAL EMERGING
MARKETS LIMITED
By:
-----------------------------
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS/SUN LIFE SERIES TRUST
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH SERIES
By: BONNIE S. ANGUS
-------------------------------
Bonnie S. Angus
Secretary and Clerk
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
-------------------------------
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(p)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the
laws of England and Wales (the "Sub-Adviser"), and FOREIGN & COLONIAL EMERGING
MARKETS LIMITED, a company incorporated under the laws of England and Wales
("FCEM").
WITNESSETH:
WHEREAS, Massachusetts Financial Services Company (the "Adviser")
provides MFS/Foreign & Colonial Emerging Markets Equity Series (the "Fund"), a
series of MFS/Sun Life Series Trust (the "Trust"), an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), business services pursuant to the terms and conditions of an
investment advisory agreement dated September 1, 1995 (the "Advisory Agreement")
between the Adviser and the Trust, on behalf of the Fund;
WHEREAS, the Sub-Adviser provides services to the Adviser pursuant to
the terms and conditions of a sub-advisory agreement dated September 1, 1995
(the "FCM Sub-Advisory Agreement") between the Adviser and the Sub-Adviser; and
WHEREAS, FCEM is willing to provide services to the Sub-Adviser on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of FCEM. Subject to the supervision of the Trustees of the
Trust, the Adviser and the Sub-Adviser, FCEM will: (a) manage such portion of
the Fund's assets as the Adviser, Sub-Adviser and FCEM shall from time to time
mutually designate (the "Designated Assets") on behalf of the Fund in accordance
with the Fund's investment objective, policies and limitations as stated in the
Fund's then current Prospectus (the "Prospectus") and Statement of Additional
Information (the "Statement"), and the Trust's Declaration of Trust, dated
February 15, 1985 and Amended and Restated By-Laws, each as from time to time in
effect (respectively, the "Declaration" and the "By-Laws") and in compliance
with the 1940 Act and the rules, regulations and orders thereunder; (b) make
investment decisions for the Fund with respect to the Designated Assets; (c)
place purchase and sale orders for portfolio transactions for the Fund with
respect to the Designated Assets; (d) manage otherwise uninvested cash assets of
the Fund with respect to the Designated Assets; (e) as the agent of the Fund,
give instructions (including trade tickets) to the custodian and any
sub-custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund with respect to the
Designated Assets (FCEM shall promptly notify the Adviser and the Sub-Adviser of
such instructions); (f) employ professional portfolio managers to provide
research services to the Fund; (g) attend periodic meetings of the Board of
Trustees of the Trust and (h) obtain all the registrations, qualifications and
consents, on behalf of the Fund, which are necessary for the Fund to purchase
and sell assets in each jurisdiction (other than the United States) in which the
Designated Assets are to be invested (FCEM shall promptly provide the Adviser
and the Sub-Adviser with copies of any such registrations, qualifications and
consents). In providing these services, FCEM will furnish continuously an
investment program with respect to the Designated Assets. FCEM shall be
responsible for monitoring the Fund's compliance with the Prospectus, the
Statement, the Declaration, the By-Laws and the 1940 Act and the rules,
regulations and orders thereunder and in monitoring such compliance FCEM shall
do so in the functional currency of the Fund. FCEM shall only be responsible for
compliance with the above-mentioned restrictions in regards to the Designated
Assets. The Sub-Adviser agrees to provide FCEM with such assistance as may be
reasonably requested by FCEM in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund, its
funds available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets of the Fund shall be purchased or
sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or FCEM's overall responsibilities
with respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the Adviser
or the Sub-Adviser, or all of them, as may be appropriate, quarterly reports of
its activities on behalf of the Fund, as required by applicable law or as
otherwise requested from time to time by the Trustees of the Trust, the Adviser
or the Sub-Adviser, and such additional information, reports, evaluations,
analyses and opinions as the Trustees of the Trust, the Adviser or the
Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM deems
the purchase or sale of a security to be in the best interest of the Fund as
well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of 1.00% of the average daily net asset value
of the Designated Assets on an annualized basis. If FCEM shall serve for less
than the whole of any month, the compensation payable to FCEM with respect to
the Fund will be prorated. FCEM will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust, the Adviser nor the Fund shall
be liable to FCEM for the compensation of FCEM. For the purpose of determining
fees payable to FCEM, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or Statement. In the
event that the Sub-Adviser reduces its management fee payable under the FCM
Sub-Advisory Agreement in order to comply with the expense limitations of a
State securities commission or otherwise (but not a voluntary reduction), FCEM
agrees to reduce its fee payable under this Agreement by a pro rata amount.
7. Limitation of Liability of FCEM. FCEM shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. The Trust, on behalf of the
Fund, may enforce any obligations of FCEM under this Agreement and may recover
directly from FCEM for any liability it may have to the Fund.
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or under
common control with FCEM, as trustees, officers, employees or otherwise and that
trustees, officers and employees of FCEM or any person controlling, controlled
by or under common control with FCEM may become similarly interested in the
Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or become
interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with itself,
"affiliated persons" of FCEM, the Sub-Adviser, the Trustees of the Trust or the
Fund's distributor, as principals, agents, brokers or dealers in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the 1940 Act and the rules, regulations and orders
thereunder and subject to the prior written approval of the Adviser, (b) will
not take a long or short position in the shares of the Fund except as permitted
by the Declaration and (c) will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement
relative to FCEM and its trustees, officers, employees and affiliates.
10. Representations, Warranties and Additional Agreements of FCEM. FCEM
represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized
to undertake investment business in the United Kingdom by virtue of
its membership in the Investment Management Regulatory Organisation
("IMRO") and is registered under the laws of any jurisdiction in
which FCEM is required to be registered as an investment adviser in
order to perform its obligations under this Agreement, and will
continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or the Advisers
Act from performing the services contemplated by this Agreement;
(iii) has met, and will continue to meet for so long as this
Agreement remains in effect, any other applicable Federal or State
requirements, or the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by
this Agreement; (v) will immediately notify the Adviser and the
Sub-Adviser in writing of the occurrence of any event that would
disqualify FCEM from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser and the
Sub-Adviser in writing of any change of control of FCEM or any
parent of FCEM resulting in an "assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by
the 1940 Act and the rules, regulations and orders thereunder and
the Advisers Act and the rules, regulations and orders thereunder,
records relating to investment transactions made by FCEM for the
Fund as may be reasonably requested by the Adviser or the Fund from
time to time. FCEM agrees that such records are the property of the
Fund, and will be surrendered to the Fund promptly upon request;
provided, however, that FCEM may retain copies of such records for
archival purposes as required by IMRO.
(c) FCEM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser, the Sub-Adviser and the
Trust with a copy of such code of ethics, and upon any amendment to
such code of ethics, promptly provide such amendment. At least
annually FCEM will provide the Trust, the Sub-Adviser and the
Adviser with a certificate signed by the chief compliance officer
(or the person performing such function) of FCEM certifying, to the
best of his or her knowledge, compliance with the code of ethics
during the immediately preceding twelve (12) month period,
including any material violations of or amendments to the code of
ethics or the administration thereof.
(d) It has provided the Adviser, the Sub-Adviser and the Trust with a
copy of its Form ADV as most recently filed with the Securities and
Exchange Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser, the Sub-Adviser and the Trust.
11. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until November
1, 1996 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust, the
Adviser, the Sub-Adviser or FCEM at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust, or by "vote of a majority of the outstanding voting securities" of the
Fund. This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust, by "vote of a majority of the outstanding
voting securities" of the Fund or by the Adviser or the Sub-Adviser, on not more
than sixty days nor less than thirty days written notice, or by FCEM on not more
than ninety days nor less than sixty days written notice. This Agreement shall
automatically terminate in the event of its "assignment" or in the event that
the FCM Sub-Advisory Agreement or the Advisory Agreement shall have terminated
for any reason.
12. Amendments to this Agreement. This Agreement may be amended only if
such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser, by the Sub-Adviser and by FCEM.
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
9 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, by the Adviser's General Counsel in the case of
the Adviser, by FCEM's Secretary in the case of FCEM and by the Trust's
Secretary in the case of the Fund, or such other person as a party shall
designate by notice to the other parties. This Agreement constitutes the entire
agreement among the parties hereto and supersedes any prior agreement among the
parties relating to the subject matter hereof. The section headings of this
Agreement are for convenience of reference and do not constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
----------------------------------
FOREIGN & COLONIAL EMERGING
MARKETS LIMITED
By:
----------------------------------
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS/SUN LIFE SERIES TRUST
on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
By: BONNIE S. ANGUS
-------------------------------
Bonnie S. Angus
Secretary and Clerk
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
-------------------------------
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(q)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of May, 1996, by and between
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the "Adviser")
and FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the laws of
England and Wales (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides World Growth Series (the "Fund"), a series
of MFS/Sun Life Series Trust (the "Trust"), an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), business services pursuant to the terms and conditions of an investment
advisory agreement dated November 1, 1993 (the "Advisory Agreement") between the
Adviser and the Trust, on behalf of the Fund; and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. The Sub-Adviser will furnish the Adviser
with information and advice, including advice on the allocation of investments
among emerging market countries or regions, relating to such portion of the
Fund's assets as the Adviser shall from time to time designate (the "Designated
Assets"). Subject to the supervision of the Trustees of the Trust and the
Adviser, the Sub-Adviser will: (a) manage the Designated Assets on behalf of the
Fund in accordance with the Fund's investment objective, policies and
limitations as stated in the Trust's then current Prospectus (the "Prospectus")
and Statement of Additional Information (the "Statement"), and the Trust's
Declaration of Trust dated February 15, 1985, and By-Laws, each as from time to
time in effect (respectively, the "Declaration" and the "By-Laws") and in
compliance with the 1940 Act and the rules, regulations and orders thereunder;
(b) make investment decisions with respect to the Designated Assets; (c) place
purchase and sale orders for portfolio transactions with respect to the
Designated Assets; (d) manage otherwise uninvested cash assets with respect to
the Designated Assets; (e) as the agent of the Fund, give instructions
(including trade tickets) to the custodian and any sub-custodian of the Fund as
to deliveries of securities, transfers of currencies and payments of cash with
respect to the Designated Assets (the Sub-Adviser shall promptly notify the
Adviser of such instructions); (f) employ professional portfolio managers to
provide research services to the Fund; (g) attend periodic meetings of the Board
of Trustees of the Trust and (h) obtain all the registrations, qualifications
and consents, on behalf of the Fund, which are necessary for the Fund to
purchase and sell assets in each jurisdiction (other than the United States) in
which the Fund's Designated Assets are to be invested (the Sub-Adviser shall
promptly provide the Adviser with copies of any such registrations,
qualifications and consents). In providing these services, the Sub-Adviser will
furnish continuously an investment program with respect to the Designated
Assets. The Sub- Adviser shall be responsible for monitoring the Fund's
compliance with the Prospectus, the Statement, the Declaration, the By-Laws and
the 1940 Act and the rules, regulations and orders thereunder and in monitoring
such compliance the Sub-Adviser shall do so in the functional currency of the
Fund. The Sub-Adviser shall only be responsible for compliance with the
above-mentioned restrictions in regards to the Designated Assets. The Adviser
agrees to provide the Sub-Adviser with such assistance as may be reasonably
requested by the Sub-Adviser in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund, its
funds available, or to become available, for investment and generally as to the
conditions of the Fund's affairs. From time to time the Adviser will notify the
Sub-Adviser of the aggregate U.S. Dollar amount of the Designated Assets. The
Adviser will have responsibility for exercising proxy, consent and other rights
pertaining to the Designated Assets; provided, however, that the Sub-Adviser
will, as requested, make recommendations to the Adviser as to the manner in
which such proxy, consent and other rights shall be exercised.
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what Designated Assets shall be purchased or sold and
what portion, if any, of the Fund's Designated Assets shall be held uninvested.
It is understood that the Adviser undertakes to discuss with the Sub-Adviser any
such determinations of investment policy and any such suspension or restrictions
on the right of the Sub-Adviser to determine what Designated Assets Fund shall
be purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus, the
Statement, the Declaration and the By-Laws have been delivered to the
Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change in the
investment policies of the Fund and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the Prospectus, the
Statement, the Declaration and the By-Laws. In addition, the Adviser will
promptly provide the Sub-Adviser with any procedures applicable to the
Sub-Adviser adopted from time to time by the Trustees of the Trust and agrees to
provide promptly to the Sub-Adviser copies of all amendments thereto.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the Designated Assets.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust
or the Adviser, or both, as may be appropriate, quarterly reports of its
activities on behalf of the Fund, as required by applicable law or as otherwise
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may request from time to
time.
5. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund, the Sub-Adviser is directed to seek for the Fund
execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to allocate
similarly opportunities to sell or otherwise dispose of securities among the
Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter into
investment sub-advisory agreements with one or more investment advisers, (an
"Other Sub-Adviser"), to the Fund to perform some or all of the services for
which the Sub-Adviser is responsible pursuant to this Agreement upon such terms
and conditions as the Adviser and the Sub-Adviser may determine; provided,
however, that such investment sub-advisory agreements have been approved by a
majority of the Trustees of the Trust who are not interested persons of the
Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote of a majority of
the outstanding voting securities of the Fund; and, provided, further, that the
Sub-Adviser shall own a majority of the voting securities of any Other
Sub-Adviser. The Sub-Adviser may terminate the services of any Other Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Other Sub-Adviser unless and until a successor Other
Sub-Adviser is selected. The Sub-Adviser shall be liable for any error of
judgment or mistake of law by any Other Sub-Adviser and for any act or omission
in the execution and management of the Fund by any Other Sub-Adviser.
8. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser
compensation, computed and paid monthly in arrears in U.S. dollars, at a rate of
1.00% of the average daily net asset value of the Designated Assets. If the
Sub-Adviser shall serve for less than the whole of any month, the compensation
payable to the Sub-Adviser with respect to the Fund will be prorated. The
Sub-Adviser will pay its expenses incurred in performing its duties under this
Agreement. Neither the Trust nor the Fund shall be liable to the Sub-Adviser for
the compensation of the Sub-Adviser. For the purpose of determining fees payable
to the Sub-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Prospectus and/or Statement. In the
event that the Adviser reduces its management fee payable under the Advisory
Agreement in order to comply with the expense limitations of a State securities
commission or otherwise (but not a voluntary reduction), the Sub-Adviser agrees
to reduce its fee payable under this Agreement by a pro rata amount.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. The Trust, on behalf of
the Fund, may enforce any obligations of the Sub-Adviser under this Agreement
and may recover directly from the Sub-Adviser for any liability it may have to
the Fund.
10. Activities of the Sub-Adviser. The services of the Sub-Adviser to
the Fund are not deemed to be exclusive, the Sub-Adviser being free to render
investment advisory and/or other services to others. It is understood that the
Trustees, officers and shareholders of the Trust, the Fund or the Adviser are or
may be or become interested in the Sub-Adviser or any person controlling,
controlled by or under common control with the Sub-Adviser, as trustees,
officers, employees or otherwise and that trustees, officers and employees of
the Sub-Adviser or any person controlling, controlled by or under common control
with the Sub-Adviser may become similarly interested in the Trust, the Fund or
the Adviser and that the Sub-Adviser may be or become interested in the Fund as
a shareholder or otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a)
will not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees
of the Trust or the Fund's distributor, as principals, agents, brokers or
dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized
to undertake investment business in the United Kingdom by virtue of
its membership in the Investment Management Regulatory Organisation
("IMRO") and is registered under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement,
and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will continue to meet for so long as
this Agreement remains in effect, any other applicable Federal or
State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met
in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services
contemplated by this Agreement; (v) will immediately notify the
Adviser in writing of the occurrence of any event that would
disqualify the Sub-Adviser from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing
of any change of control of the Sub-Adviser or any parent of the
Sub-Adviser resulting in an "assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by
the 1940 Act and the rules, regulations and orders thereunder and
the Advisers Act and the rules, regulations and orders thereunder,
records relating to investment transactions made by the Sub-Adviser
for the Fund as may be reasonably requested by the Adviser or the
Fund from time to time. The Sub-Adviser agrees that such records
are the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided, however, that the Sub-Adviser may
retain copies of such records for archival purposes as required by
IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and, if it has
not already done so, will provide the Adviser and the Trust with a
copy of such code of ethics, and upon any amendment to such code of
ethics, promptly provide such amendment. At least annually the
Sub-Adviser will provide the Trust and the Adviser with a
certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the
best of his or her knowledge, compliance with the code of ethics
during the immediately preceding twelve (12) month period,
including any material violations of or amendments to the code of
ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its Form
ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser and the Trust.
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until November
1, 1996 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Adviser or of the Sub-Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund. This
Agreement may be terminated at any time without the payment of any penalty by
the Trustees of the Trust, by "vote of a majority of the outstanding voting
securities" of the Fund or by the Adviser, on not more than sixty days nor less
than thirty days written notice, or by the Sub-Adviser on not more than ninety
days nor less than sixty days written notice. This Agreement shall automatically
terminate in the event of its "assignment" or in the event that the Advisory
Agreement shall have terminated for any reason.
14. Amendments to this Agreement. This Agreement may be amended only if
such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser and by the Sub-Adviser.
15. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated persons" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
16. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser pursuant
to Section 12 hereof shall survive for the duration of this Agreement and the
Sub-Adviser shall immediately notify, but in no event later than five (5)
business days, the Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Trust or the Fund, or such
other person as a party shall designate by notice to the other parties. This
Agreement constitutes the entire agreement among the parties hereto and
supersedes any prior agreement among the parties relating to the subject matter
hereof. The section headings of this Agreement are for convenience of reference
and do not constitute a part hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: JEFFREY L. SHAMES
----------------------------
Jeffrey L. Shames
President
FOREIGN & COLONIAL
MANAGEMENT LTD.
By: JAMES OGLIVY
----------------------------
James Ogilvy
By: JONATHAN LUBRAN
----------------------------
Jonathan Lubran
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS/SUN LIFE SERIES TRUST
on behalf of WORLD GROWTH SERIES
By: BONNIE S. ANGUS
----------------------------
Bonnie S. Angus
Secretary and Clerk
<PAGE>
EXHIBIT NO. 99.5(r)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of May, 1996, by and between
FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the laws of
England and Wales (the "Sub-Adviser"), and FOREIGN & COLONIAL EMERGING MARKETS
LIMITED, a company incorporated under the laws of England and Wales ("FCEM").
WITNESSETH:
WHEREAS, Massachusetts Financial Services Company (the "Adviser")
provides World Growth Series (the "Fund"), a series of MFS/Sun Life Series Trust
(the "Trust"), an open-end investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), business services pursuant to
the terms and conditions of an investment advisory agreement dated November 1,
1993 (the "Advisory Agreement") between the Adviser and the Trust, on behalf of
the Fund; and
WHEREAS, the Sub-Adviser provides services to the Adviser pursuant to
the terms and conditions of a sub-advisory agreement dated May 1, 1996 (the "FCM
Sub-Advisory Agreement") between the Adviser and the Sub-Adviser; and
WHEREAS, FCEM is willing to provide services to the Sub-Adviser on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of FCEM. FCEM furnish the Sub-Adviser with information and
advice, including advice on the allocation of investments among emerging market
countries or regions, relating to such portion of the Fund's assets as the
Adviser, Sub-Adviser and FCEM shall from time to time designate (the "Designated
Assets"). Subject to the supervision of the Trustees of the Trust and the
Adviser and the Sub-Adviser, FCEM will: (a) manage the Designated Assets on
behalf of the Fund in accordance with the Fund's investment objective, policies
and limitations as stated in the Trust's then current Prospectus (the
"Prospectus") and Statement of Additional Information (the "Statement"), and the
Trust's Declaration of Trust dated February 15, 1985, and By-Laws, each as from
time to time in effect (respectively, the "Declaration" and the "By-Laws") and
in compliance with the 1940 Act and the rules, regulations and orders
thereunder; (b) make investment decisions with respect to the Designated Assets;
(c) place purchase and sale orders for portfolio transactions with respect to
the Designated Assets; (d) manage otherwise uninvested cash assets with respect
to the Designated Assets; (e) as the agent of the Fund, give instructions
(including trade tickets) to the custodian and any sub-custodian of the Fund as
to deliveries of securities, transfers of currencies and payments of cash with
respect to the Designated Assets (FCEM shall promptly notify the Adviser and the
Sub-Adviser of such instructions); (f) employ professional portfolio managers to
provide research services to the Fund; (g) attend periodic meetings of the Board
of Trustees of the Trust and (h) obtain all the registrations, qualifications
and consents, on behalf of the Fund, which are necessary for the Fund to
purchase and sell assets in each jurisdiction (other than the United States) in
which the Fund's Designated Assets are to be invested (FCEM shall promptly
provide the Adviser and the Sub-Adviser with copies of any such registrations,
qualifications and consents). In providing these services, FCEM will furnish
continuously an investment program with respect to the Designated Assets. FCEM
shall be responsible for monitoring the Fund's compliance with the Prospectus,
the Statement, the Declaration, the By-Laws and the 1940 Act and the rules,
regulations and orders thereunder and in monitoring such compliance FCEM shall
do so in the functional currency of the Fund. FCEM shall only be responsible for
compliance with the above-mentioned restrictions in regards to the Designated
Assets. The Sub-Adviser agrees to provide FCEM with such assistance as may be
reasonably requested by FCEM in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund, its
funds available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify the FCEM
thereof in writing, FCEM shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets shall be purchased or sold or held
uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or FCEM's overall responsibilities
with respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust,
the Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM deems
the purchase or sale of a security to be in the best interest of the Fund as
well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of 1.00% of the average daily net asset value
of the Designated Assets. If FCEM shall serve for less than the whole of any
month, the compensation payable to FCEM with respect to the Fund will be
prorated. FCEM will pay its expenses incurred in performing its duties under
this Agreement. Neither the Trust, the Adviser nor the Fund shall be liable to
FCEM for the compensation of FCEM. For the purpose of determining fees payable
to FCEM, the value of the Fund's net assets shall be computed at the times and
in the manner specified in the Prospectus and/or Statement. In the event that
the Sub-Adviser reduces its management fee payable under the FCM Sub-Advisory
Agreement in order to comply with the expense limitations of a State securities
commission or otherwise (but not a voluntary reduction), FCEM agrees to reduce
its fee payable under this Agreement by a pro rata amount.
7. Limitation of Liability of FCEM. FCEM shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. The Trust, on behalf of the
Fund, may enforce any obligations of FCEM under this Agreement and may recover
directly from FCEM for any liability it may have to the Fund.
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or under
common control with FCEM, as trustees, officers, employees or otherwise and that
trustees, officers and employees of FCEM or any person controlling, controlled
by or under common control with FCEM may become similarly interested in the
Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or become
interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with itself,
"affiliated persons" of FCEM, the Sub-Adviser, the Trustees of the Trust or the
Fund's distributor, as principals, agents, brokers or dealers in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the 1940 Act and the rules, regulations and orders
thereunder and subject to the prior written approval of the Adviser, (b) will
not take a long or short position in the shares of the Fund except as permitted
by the Declaration and (c) will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement
relative to FCEM and its trustees, officers, employees and affiliates.
10. Representations, Warranties and Additional Agreements of FCEM. FCEM
represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized
to undertake investment business in the United Kingdom by virtue of
its membership in the Investment Management Regulatory Organisation
("IMRO") and is registered under the laws of any jurisdiction in
which FCEM is required to be registered as an investment adviser in
order to perform its obligations under this Agreement, and will
continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or the Advisers
Act from performing the services contemplated by this Agreement;
(iii) has met, and will continue to meet for so long as this
Agreement remains in effect, any other applicable Federal or State
requirements, or the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by
this Agreement; (v) will immediately notify the Adviser and the
Sub-Adviser in writing of the occurrence of any event that would
disqualify FCEM from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser and the
Sub-Adviser in writing of any change of control of FCEM or any
parent of FCEM resulting in an "assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by
the 1940 Act and the rules, regulations and orders thereunder and
the Advisers Act and the rules, regulations and orders thereunder,
records relating to investment transactions made by FCEM for the
Fund as may be reasonably requested by the Adviser or the Fund from
time to time. FCEM agrees that such records are the property of the
Fund, and will be surrendered to the Fund promptly upon request;
provided, however, that FCEM may retain copies of such records for
archival purposes as required by IMRO.
(c) FCEM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Sub-Adviser and
the Trust with a copy of such code of ethics, and upon any
amendment to such code of ethics, promptly provide such amendment.
At least annually FCEM will provide the Trust, the Sub-Adviser and
the Adviser with a certificate signed by the chief compliance
officer (or the person performing such function) of FCEM
certifying, to the best of his or her knowledge, compliance with
the code of ethics during the immediately preceding twelve (12)
month period, including any material violations of or amendments to
the code of ethics or the administration thereof.
(d) It has provided the Adviser, the Sub-Adviser and the Trust with a
copy of its Form ADV as most recently filed with the Securities and
Exchange Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser, the Sub-Adviser and the Trust.
11. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until November
1, 1996 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust, the
Adviser, the Sub-Adviser or FCEM at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust, or by "vote of a majority of the outstanding voting securities" of the
Fund. This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust, by "vote of a majority of the outstanding
voting securities" of the Fund or by the Adviser or the Sub-Adviser, on not more
than sixty days nor less than thirty days written notice. This Agreement shall
automatically terminate in the event of its "assignment" or in the event that
the FCM Sub-Advisory Agreement or the Advisory Agreement shall have terminated
for any reason.
12. Amendments to this Agreement. This Agreement may be amended only if
such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser, by the Sub-Adviser and by FCEM.
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
12 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, by the Adviser's General Counsel in the case of
the Adviser, by FCEM's Secretary in the case of FCEM and by the Trust's
Secretary in the case of the Trust or the Fund, or such other person as a party
shall designate by notice to the other parties. This Agreement constitutes the
entire agreement among the parties hereto and supersedes any prior agreement
among the parties relating to the subject matter hereof. The section headings of
this Agreement are for convenience of reference and do not constitute a part
hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL
MANAGEMENT LTD.
By: JAMES OGILVY
----------------------------
James Ogilvy
FOREIGN & COLONIAL EMERGING
MARKETS LIMITED
By: AUDLEY TWISTON DAVIES
----------------------------
Audley Twiston Davies
By: KAREN CLARKE
----------------------------
Karen Clarke
<PAGE>
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS/SUN LIFE SERIES TRUST
on behalf of WORLD GROWTH SERIES
By: BONNIE S. ANGUS
---------------------------------
Bonnie S. Angus
Secretary and Clerk
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By: JEFFREY L. SHAMES
---------------------------------
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(s)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of May, 1996, by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust"), on behalf of the VALUE SERIES (the "Fund"), a series of the Trust, and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware Corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the Trustees of the Trust may
from time to time consider necessary for the proper supervision of the Fund's
assets. The Adviser shall act as Adviser to the Fund and as such shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held uninvested, subject always to the restrictions of the
Declaration of Trust of the Trust, dated February 15, 1985, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealer selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund the placing of such orders,
the Adviser is directed to seek for the Fund execution at the most reasonable
price by responsible brokerage firms at reasonably competitive commission rates.
In fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements with one or more investment advisors with such terms and conditions
as the Adviser may determine provided that such sub-investment advisory
agreements have been approved by a majority of the Trustees of the Trust who are
not "interested persons" of the Trust, or the Adviser or the Sub-Adviser and by
"vote of a majority of the outstanding voting securities" of the Fund. Subject
to the provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-advisor or for any loss arising out of any
investment made by any sub-advisor or for any act or omission in the execution
and management of the Fund by any sub-advisor.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser or
its "affiliates" to serve without compensation as Trustees, officers or agents
of the Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law. It is understood that
the Fund will pay all of its own expenses including, without limitation,
compensation of Trustees "not affiliated" with the Adviser; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of preparing,
printing and mailing shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of calculating the net asset value of shares of the
Fund; and expenses of shareholders' meetings.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid monthly at an annual rate equal to 0.75% of the
first $300 million of the Fund's average daily net assets and 0.675% of the
Fund's average daily net assets in excess of $300 million. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the Investment Company Act of 1940 and the Rules,
Regulations or orders thereunder, will not take a long or short position in the
shares of the Fund except as permitted by the Declaration and the By-Laws and
the then-current Prospectus and Statement of Additional Information of the Trust
relative to the Adviser and its Directors and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
5, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the
Trust and the Fund are not deemed to be exclusive, the Adviser being free to
render investment advisory and/or other services to others. The Adviser may
permit other fund clients to use the initials "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the Adviser
to the Fund, the Trust will change its name so as to delete the initials "MFS".
It is understood that the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Fund as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until November 1, 1996 at which date it will terminate unless its
continuance after November 1, 1996 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by a "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority
of the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST ON
BEHALF OF THE VALUE SERIES
By: JOHN D. MCNEIL
----------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
----------------------------------
Jeffrey L. Shames
Chairman
<PAGE>
EXHIBIT NO. 99.5(t)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 12th day of May, 1997 by
and between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the
"Trust") on behalf of RESEARCH GROWTH AND INCOME SERIES, a series of the Trust
(the "Fund"), and Massachusetts Financial Services Company, a Delaware
corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1: DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper management of its funds. The Adviser shall act
as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated May 9, 1983, and By-Laws, as amended from time to time
(respectively, the "Declaration" and the "By-Laws"), and to the provisions of
the Investment Company Act of 1940. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to investment policy and notify the Adviser thereof in writing,
the Adviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Adviser shall take, on behalf of the Fund, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers or dealers and the placing of such orders, the Adviser is
directed to seek for the Fund execution at the most favorable price by
responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees not affiliated with the
Adviser, governmental fees, interest charges, taxes, membership dues in the
Investment Company Institute allocable to the Fund, fees and expenses of
independent auditors, of legal counsel and of any transfer agent, registrar or
dividend disbursing agent of the Fund, expenses of repurchasing and redeeming
shares, expenses of preparing, printing and mailing stock certificates,
prospectuses, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions, brokerage and other expenses connected
with the execution of portfolio security transactions, insurance premiums, fees
and expenses of the custodian for all services to the Fund, including
safekeeping of funds and securities, keeping of books and accounts and
calculation of the net asset value of shares of the Fund, expenses of
shareholder meetings, and expenses relating to the issuance, registration and
qualification of shares of the Fund.
ARTICLE 3: COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities to be furnished as provided in Articles 1 and 2 above, the
Fund shall pay to the Adviser an investment advisory fee computed and paid
monthly. Such computation shall commence on the effective date of this Agreement
and shall be calculated at an annual rate of 0.75% of the average daily net
assets of the Account. If the Adviser shall serve for less than the whole of any
period specified in this Section 3, the compensation to the Adviser shall be
prorated.
ARTICLE 4: COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust as principals in making
purchases or sales of securities or other property for the account of the Fund,
will not take a long or short position in the shares of the Fund except as
provided by the Declaration, and will comply with all other provisions of the
Declaration and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 5: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As used in this Article 5, the term "Adviser"
shall include Directors, officers and employees of the Adviser as well as the
corporation itself.
ARTICLE 6: ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other Fund clients to use the letters
"MFS" in their names. The Fund agrees that if the Adviser shall for any reason
no longer serve as the Adviser to the Fund, the Fund will change its name so as
to delete the letters "MFS". It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Adviser, as
Directors, officers, employees, or otherwise and that Directors, officers and
employees of the Adviser are or may become similarly interested in the Fund and
that the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
ARTICLE 7: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until May 11, 1999 on which date it will terminate unless its continuance after
May 12, 1999 is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust, or by vote of a
majority of the outstanding voting securities of the Fund. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the Investment
Company Act of 1940 and the Rules and Regulations thereunder.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser, on not more than sixty days' nor less
that thirty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by vote
of a majority of the outstanding voting securities of the Fund.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person", and "interested persons", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject, however,
to such exemptions as my be granted by the Securities and Exchange Commission
under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration and the obligations of this Agreement are not binding upon any of
the Trustees or shareholders of the Trust, individually, but bind only the trust
estate applicable to the Fund.
MFS/SUN LIFE SERIES TRUST on behalf
of RESEARCH GROWTH AND INCOME SERIES
By: JAMES R. BORDEWICK, JR.
------------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: A. KEITH BRODKIN
------------------------------------
A. Keith Brodkin
Chairman
<PAGE>
EXHIBIT NO. 99.5(v)
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of May, 1998, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
on behalf of BOND SERIES, a series of the Trust (the "Fund"), and MASSACHUSETTS
FINANCIAL SERVICES COMPANY, a Delaware corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated December 29, 1997, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Fund's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved in accordance with applicable provisions of the Investment
Company Act of 1940. Subject to the provisions of Article 6, the Adviser shall
not be liable for any error of judgment or mistake of law by any sub-adviser or
for any loss arising out of any investment made by any sub-adviser or for any
act or omission in the execution and management of the Fund by any sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid annually at a rate equal 0.60% of the Fund's
average daily net assets. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser will be
prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its ability, with
compensation for the Adviser's services to be agreed upon with respect to each
such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor,
if any, as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the Investment
Company Act of 1940 and the Rules, Regulations or orders thereunder, will not
take a long or short position in the shares of the Fund except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and the By-Laws and the then-current Prospectus and Statement of Additional
Information of the Fund relative to the Adviser and its Directors and officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
6, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the initials "MFS." It is understood
that the Trustees, officers and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until May 1, 2000 on which date it will terminate unless its continuance
after May 1, 2000 is "specifically approved at least annually" (i) by the vote
of a majority of the Trustees of the Trust who are not "interested persons" of
the Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The Adviser acknowledges that the obligations of or arising
out of this Agreement are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust. If this Agreement is executed by the
Trust on behalf of one or more series of the Trust, the Adviser further
acknowledges that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
Agreement are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this Agreement.
ARTICLE 10. DEFINITIONS. The terms "specifically approved at least
annually," "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person," and "interested person," when used in this
Agreement, shall have the respective meanings specified, and shall be construed
in a manner consistent with, the Investment Company Act of 1940 and the Rules
and Regulations promulgated thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration.
MFS/SUN LIFE SERIES TRUST, on
behalf of BOND SERIES, one of its
series
By:
-------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
-------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(w)
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of May, 1998, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
on behalf of EQUITY INCOME SERIES, a series of the Trust (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated December 29, 1997, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Fund's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved in accordance with applicable provisions of the Investment
Company Act of 1940. Subject to the provisions of Article 6, the Adviser shall
not be liable for any error of judgment or mistake of law by any sub-adviser or
for any loss arising out of any investment made by any sub-adviser or for any
act or omission in the execution and management of the Fund by any sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid annually at a rate equal 0.75% of the Fund's
average daily net assets. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser will be
prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its ability, with
compensation for the Adviser's services to be agreed upon with respect to each
such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor,
if any, as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the Investment
Company Act of 1940 and the Rules, Regulations or orders thereunder, will not
take a long or short position in the shares of the Fund except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and the By-Laws and the then-current Prospectus and Statement of Additional
Information of the Fund relative to the Adviser and its Directors and officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
6, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the initials "MFS." It is understood
that the Trustees, officers and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until May 1, 2000 on which date it will terminate unless its continuance
after May 1, 2000 is "specifically approved at least annually" (i) by the vote
of a majority of the Trustees of the Trust who are not "interested persons" of
the Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The Adviser acknowledges that the obligations of or arising
out of this Agreement are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust. If this Agreement is executed by the
Trust on behalf of one or more series of the Trust, the Adviser further
acknowledges that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
Agreement are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this Agreement.
ARTICLE 10. DEFINITIONS. The terms "specifically approved at least
annually," "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person," and "interested person," when used in this
Agreement, shall have the respective meanings specified, and shall be construed
in a manner consistent with, the Investment Company Act of 1940 and the Rules
and Regulations promulgated thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration.
MFS/SUN LIFE SERIES TRUST, on
behalf of EQUITY INCOME SERIES,
one of its series
By:
----------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
----------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(x)
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of May, 1998, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
on behalf of MASSACHUSETTS INVESTORS GROWTH STOCK SERIES, a series of the Trust
(the "Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated December 29, 1997, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Fund's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved in accordance with applicable provisions of the Investment
Company Act of 1940. Subject to the provisions of Article 6, the Adviser shall
not be liable for any error of judgment or mistake of law by any sub-adviser or
for any loss arising out of any investment made by any sub-adviser or for any
act or omission in the execution and management of the Fund by any sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid annually at a rate equal 0.75% of the Fund's
average daily net assets. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser will be
prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its ability, with
compensation for the Adviser's services to be agreed upon with respect to each
such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor,
if any, as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the Investment
Company Act of 1940 and the Rules, Regulations or orders thereunder, will not
take a long or short position in the shares of the Fund except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and the By-Laws and the then-current Prospectus and Statement of Additional
Information of the Fund relative to the Adviser and its Directors and officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
6, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the initials "MFS." It is understood
that the Trustees, officers and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until May 1, 2000 on which date it will terminate unless its continuance
after May 1, 2000 is "specifically approved at least annually" (i) by the vote
of a majority of the Trustees of the Trust who are not "interested persons" of
the Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The Adviser acknowledges that the obligations of or arising
out of this Agreement are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust. If this Agreement is executed by the
Trust on behalf of one or more series of the Trust, the Adviser further
acknowledges that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
Agreement are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this Agreement.
ARTICLE 10. DEFINITIONS. The terms "specifically approved at least
annually," "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person," and "interested person," when used in this
Agreement, shall have the respective meanings specified, and shall be construed
in a manner consistent with, the Investment Company Act of 1940 and the Rules
and Regulations promulgated thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration.
MFS/SUN LIFE SERIES TRUST, on
behalf of MASSACHUSETTS
INVESTORS GROWTH STOCK
SERIES, one of its series
By:
--------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
--------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(y)
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of May, 1998, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
on behalf of NEW DISCOVERY SERIES, a series of the Trust (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated December 29, 1997, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Fund's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved in accordance with applicable provisions of the Investment
Company Act of 1940. Subject to the provisions of Article 6, the Adviser shall
not be liable for any error of judgment or mistake of law by any sub-adviser or
for any loss arising out of any investment made by any sub-adviser or for any
act or omission in the execution and management of the Fund by any sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid annually at a rate equal 0.90% of the Fund's
average daily net assets. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser will be
prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its ability, with
compensation for the Adviser's services to be agreed upon with respect to each
such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor,
if any, as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the Investment
Company Act of 1940 and the Rules, Regulations or orders thereunder, will not
take a long or short position in the shares of the Fund except as permitted by
the Declaration, and will comply with all other provisions of the Declaration
and the By-Laws and the then-current Prospectus and Statement of Additional
Information of the Fund relative to the Adviser and its Directors and officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this Article
6, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the initials "MFS." It is understood
that the Trustees, officers and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until May 1, 2000 on which date it will terminate unless its continuance
after May 1, 2000 is "specifically approved at least annually" (i) by the vote
of a majority of the Trustees of the Trust who are not "interested persons" of
the Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The Adviser acknowledges that the obligations of or arising
out of this Agreement are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust. If this Agreement is executed by the
Trust on behalf of one or more series of the Trust, the Adviser further
acknowledges that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
Agreement are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this Agreement.
ARTICLE 10. DEFINITIONS. The terms "specifically approved at least
annually," "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person," and "interested person," when used in this
Agreement, shall have the respective meanings specified, and shall be construed
in a manner consistent with, the Investment Company Act of 1940 and the Rules
and Regulations promulgated thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration.
MFS/SUN LIFE SERIES TRUST, on
behalf of NEW DISCOVERY SERIES,
one of its series
By:
-----------------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
Arnold D. Scott
-----------------------------------
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(z)
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of May, 1998, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
on behalf of RESEARCH INTERNATIONAL SERIES, a series of the Trust (the "Fund"),
and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the
Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated December 29, 1997, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Fund's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved in accordance with applicable provisions of the Investment
Company Act of 1940. Subject to the provisions of Article 6, the Adviser shall
not be liable for any error of judgment or mistake of law by any sub-adviser or
for any loss arising out of any investment made by any sub-adviser or for any
act or omission in the execution and management of the Fund by any sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining its organization and investment advisory
facilities and executive and supervisory personnel for managing the investments
and effecting the portfolio transactions of the Fund. The Adviser shall arrange,
if desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid annually at a rate equal 1.00% of the Fund's
average daily net assets. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser will be
prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its ability, with
compensation for the Adviser's services to be agreed upon with respect to each
such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor, if any, as principals in making purchases or sales of securities or
other property for the account of the Fund, except as permitted by the
Investment Company Act of 1940 and the Rules, Regulations or orders thereunder,
will not take a long or short position in the shares of the Fund except as
permitted by the Declaration, and will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement of
Additional Information of the Fund relative to the Adviser and its Directors and
officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties and obligations hereunder. As used
in this Article 6, the term "Adviser" shall include Directors, officers and
employees of the Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to
the Fund are not deemed to be exclusive, the Adviser being free to render
investment advisory and/or other services to others. The Adviser may permit
other fund clients to use the initials "MFS" in their names. The Fund agrees
that if the Adviser shall for any reason no longer serve as the Adviser to the
Fund, the Fund will change its name so as to delete the initials "MFS." It is
understood that the Trustees, officers and shareholders of the Trust are or may
be or become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until May 1, 2000 on which date it will terminate unless its continuance
after May 1, 2000 is "specifically approved at least annually" (i) by the vote
of a majority of the Trustees of the Trust who are not "interested persons" of
the Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The Adviser acknowledges that the obligations of or arising
out of this Agreement are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust. If this Agreement is executed by the
Trust on behalf of one or more series of the Trust, the Adviser further
acknowledges that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
Agreement are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this Agreement.
ARTICLE 10. DEFINITIONS. The terms "specifically approved at least
annually," "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person," and "interested person," when used in this
Agreement, shall have the respective meanings specified, and shall be construed
in a manner consistent with, the Investment Company Act of 1940 and the Rules
and Regulations promulgated thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration.
MFS/SUN LIFE SERIES TRUST, on
behalf of RESEARCH INTERNATIONAL
SERIES, one of its series
By: ---------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: ---------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(aa)
FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 1st day of May, 1998, by and
between MFS/SUN LIFE SERIES TRUST, a Massachusetts business trust (the "Trust"),
on behalf of STRATEGIC INCOME SERIES, a series of the Trust (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the
Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated December 29, 1997, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Fund's then-current Prospectus and
Statement of Additional Information. The Adviser shall also make recommendations
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to the investment policy and notify the Adviser thereof in
writing, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination shall be revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers or
dealers selected by it, and to that end, the Adviser is authorized as the agent
of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved in accordance with applicable provisions of the Investment
Company Act of 1940. Subject to the provisions of Article 6, the Adviser shall
not be liable for any error of judgment or mistake of law by any sub-adviser or
for any loss arising out of any investment made by any sub-adviser or for any
act or omission in the execution and management of the Fund by any sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining its organization and investment advisory
facilities and executive and supervisory personnel for managing the investments
and effecting the portfolio transactions of the Fund. The Adviser shall arrange,
if desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities provided, the Fund shall pay to the Adviser an investment
advisory fee computed and paid annually at a rate equal 0.75% of the Fund's
average daily net assets. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser will be
prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its ability, with
compensation for the Adviser's services to be agreed upon with respect to each
such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor, if any, as principals in making purchases or sales of securities or
other property for the account of the Fund, except as permitted by the
Investment Company Act of 1940 and the Rules, Regulations or orders thereunder,
will not take a long or short position in the shares of the Fund except as
permitted by the Declaration, and will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement of
Additional Information of the Fund relative to the Adviser and its Directors and
officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties and obligations hereunder. As used
in this Article 6, the term "Adviser" shall include Directors, officers and
employees of the Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to
the Fund are not deemed to be exclusive, the Adviser being free to render
investment advisory and/or other services to others. The Adviser may permit
other fund clients to use the initials "MFS" in their names. The Fund agrees
that if the Adviser shall for any reason no longer serve as the Adviser to the
Fund, the Fund will change its name so as to delete the initials "MFS." It is
understood that the Trustees, officers and shareholders of the Trust are or may
be or become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until May 1, 2000 on which date it will terminate unless its continuance
after May 1, 2000 is "specifically approved at least annually" (i) by the vote
of a majority of the Trustees of the Trust who are not "interested persons" of
the Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment".
This Agreement may be amended only if such amendment is approved by
"vote of a majority of the outstanding voting securities" of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The Adviser acknowledges that the obligations of or arising
out of this Agreement are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust. If this Agreement is executed by the
Trust on behalf of one or more series of the Trust, the Adviser further
acknowledges that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
Agreement are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this Agreement.
ARTICLE 10. DEFINITIONS. The terms "specifically approved at least
annually," "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person," and "interested person," when used in this
Agreement, shall have the respective meanings specified, and shall be construed
in a manner consistent with, the Investment Company Act of 1940 and the Rules
and Regulations promulgated thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above. The undersigned Trustee of the Trust
has executed this Agreement not individually, but as Trustee under the
Declaration.
MFS/SUN LIFE SERIES TRUST, on
behalf of STRATEGIC INCOME SERIES,
one of its series
By: ---------------------------
John D. McNeil
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: ---------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
EXHIBIT NO. 99.8(a)
CUSTODIAN AGREEMENT
This Agreement between MFS/Sun Life Series Trust, a voluntary
association having transferable shares, organized and existing under the laws of
The Commonwealth of Massachusetts ("the Company") and State Street Bank and
Trust Company, a corporation organized under the laws of The Commonwealth of
Massachusetts ("the Custodian"),
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
I. Employment of Custodian and Property to be Held by It.
The Company hereby employs the Custodian as the Custodian of the
Company pursuant to the provisions of the Declaration of Trust and By-Laws of
the Company. The Company agrees to deliver to the Custodian all securities and
cash owned by it, and all dividend checks or other income, payments of principal
or capital distributions received by the Company with respect to all securities
owned by the Company from time to time, and the cash consideration due to the
Company for such new shares of beneficial interest of the Company as may be
issued from time to time. The Custodian shall not be responsible for any
property of the Company not received by the Custodian.
II. Duties of Custodian with Respect to Property of the Company Held by the
Custodian.
The Custodian shall hold and dispose of all securities and cash owned
by the Company now or hereafter held by or deposited with the Custodian as
follows:
A. The Custodian shall release and deliver securities owned by the
Company in the following cases only:
(l) Upon sale of such securities for the account of the Company and
receipt of payment therefor;
(2) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided that, in any
such case, the cash is to be delivered to the Custodian;
(3) To the issuer thereof or its agent for transfer in the name of
the Company or the Custodian or a nominee of either or for exchange for a
different number of bonds or certificates representing the same aggregate face
amount or number of units; provided that, in any such case, the new securities
are to be delivered to the Custodian;
(4) To the broker selling the same, for examination, in accordance
with the "street delivery" custom;
(5) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of securities of
the issuer of such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement; provided
that, in any such case, the new securities and cash, if any, are to be delivered
to the Custodian;
(6) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for definitive
securities.
B. To the extent that securities held by the Custodian are in
registered form, they shall be registered in the name of the Company or in the
name of the Custodian or any nominee or nominees of the Custodian. All receipts
of securities by the Custodian under the terms of this Agreement may be in
"street name" or other good delivery form.
C. The Custodian shall collect all income and other payments with
respect to securities held hereunder when such securities are in the name of, or
in the process of transfer into the name of, the Custodian or a nominee of the
Custodian, on the record date for such income or other payments in the case of
registered securities, or are held by the Custodian on the date of payment by
the issuer thereof in the case of bearer securities. The Custodian shall also
execute ownership and other certificates and affidavits for all Federal and
State tax purposes in connection therewith and in connection with transfers of
securities. The Custodian shall hold all such income collected by it hereunder.
Without limiting the generality of the foregoing, the Custodian shall detach and
present for payment all coupons and other income items requiring presentation as
and when they become due and shall collect dividends and interest when due on
securities registered in the name of the Custodian or a nominee of the
Custodian.
D. The Custodian may at any time or times in its discretion appoint
(and may at any time remove) any other bank or trust company or other
responsible agent to carry out such of the provisions of Section A and G of this
Article II as the Custodian may from time to time direct, provided, however,
that the appointment of such agent shall not relieve the Custodian of any of its
responsibilities hereunder.
E. The Custodian shall make such arrangements with the Transfer Agent
of the Company as will enable the Custodian to make certain it receives the cash
consideration due to the Company for such new or treasury shares of the Company
as may be issued or sold from time to time by the Company. In connection with
such issuance of new or treasury shares of the Company, the Custodian shall make
such arrangements with the Transfer Agent as shall insure the timely
notification to the Transfer Agent and to the Company of the receipt of Federal
funds by the Custodian by means of the Federal Reserve Wire System in payment
for the issuance of such shares of the Company so that shares can be credited to
shareholder accounts and said funds may be invested promptly on the day of
receipt; and, upon mutual agreement between the Company and the Custodian, the
Custodian shall upon the receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, invest on the same day as
received the balance of all Federal funds received after a time agreed upon
between the Custodian and the Company in such investments as may be set forth in
said instructions.
At 9:00 a.m. on the second business day after the deposit of a check
into the Company's account, the Custodian agrees to make Federal funds available
to the Company in the amount of the check.
From such funds as may be available for the purpose but subject to the
limitations of Article VII of the Declaration of Trust, and applicable votes of
the Trustees of the Company pursuant thereto, the Custodian shall make available
to the Transfer Agent funds which the Transfer Agent certifies are necessary to
make payment to shareholders who have delivered to the Transfer Agent share
certificates (or stock powers if no certificates have been issued) together with
a request for redemption of their shares by the Company.
In connection with the redemption of shares of the Company pursuant to
Article VII of the Declaration of Trust, the Custodian shall be authorized upon
receipt of instructions from the Transfer Agent for the Company to wire Federal
funds to a commercial bank account designated by the redeeming shareholder.
In connection with the repurchase by the Company of shares of the
Company pursuant to the Declaration of Trust, the Custodian and the By-Laws, the
Custodian shall make certain that payments made to shareholders for such
purchases shall not be greater than the net asset value of such shares in effect
at the time of such purchase.
F. Funds held by the Custodian may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks or
trust companies and in such amounts as it may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust company and the
funds to be deposited with each shall be approved by vote of a majority of the
Trustees of the Company. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in that
capacity.
G. The Custodian shall pay out moneys of the Company only upon the
purchase of securities for the account of the Company and only against the
delivery of such securities to the Custodian; or in the case of repurchase
agreements entered into between the Company and the Custodian, or another bank,
(i) against delivery of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing purchase by the
Company of Securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the Company; or in
connection with conversion, exchange or surrender of securities owned by the
Company, or for the repurchase of shares issued by the Company or for the making
of any disbursements authorized by the Trustees of the Company pursuant to the
Declaration of Trust or the By-Laws, or for the payment of any expense or
liability incurred by the Company. Payments by the Custodian under the authority
of the preceding sentence shall include but shall not be limited to the
following payments for the account of the Company: interest, dividend
disbursements, taxes, management, accounting and legal fees, or operating
expenses of the Company, including registration and qualification costs and
other expenses of issuing and selling stock or changing its capital structure,
whether or not such expenses shall be in whole or in part capitalized or treated
as deferred expenses. The Custodian may in its discretion without express
authority from the Company make payments to itself or others for minor expenses
of handling securities or other similar items relating to its duties under this
Agreement, all such payments to be accounted for to the Company.
H. Payments of moneys and deliveries of securities by the Custodian
pursuant to the provisions of this Agreement shall be made only as directed from
time to time by a writing signed or initialed by such one or more person or
persons and in such manner as the Trustees of the Company shall have from time
to time authorized or upon oral instructions of such authorized persons provided
that such instructions are confirmed in writing as soon as practicable. Each
such writing shall set forth the transactions involved, including a specific
statement of the purpose for which such action is requested. The Custodian may
accept oral instructions if it reasonably believes them to have been given by a
person authorized to give instructions with respect to the transaction involved.
The Company shall cause all oral instructions to be confirmed in writing. Upon
receipt of a certificate of the President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary as to the authorization by
the Trustees of the Company accompanied by a detailed description of procedures
approved by the Trustees, instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Company's assets. Such payments or deliveries for purposes
not specifically set forth in this Agreement shall be made by the Custodian only
upon receipt of a certified copy of a resolution of the Company's Trustees,
signed by an officer of the Company and certified by its Treasurer, Secretary,
Clerk or Assistant Secretary specifying the amount of such payment on the
securities to be delivered, the purpose for which the payment or delivery is to
be made, declaring such purpose to be a proper purpose and naming the person or
persons to whom such payment or delivery is to be made, provided that no such
deliveries of securities shall be made other than to a properly bonded officer
or employee of the Company.
I. The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed, and shall be entitled to
receive as conclusive proof of any fact or matter required to be ascertained by
it hereunder, a certificate by the President, the Treasurer, the Assistant
Treasurer or the Secretary of the Company. The Custodian may receive and accept
a certified copy of a vote of the Trustees of the Company as conclusive evidence
(a) of the authority of any person to act in accordance with such vote or (b) of
any determination or any action by the Trustees pursuant to the Declaration of
Trust or the By-Laws as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of written notice to
the contrary.
III. Duties of Custodian with Respect to Books of Account and Computation of
Prices.
The Custodian shall keep the books of account of the Company and at the
request of the Company shall compute the net asset value per share of the
outstanding stock of the Company, the "net income" of the Company and the
offering price at which the shares are to be sold, at the times and in the
manner described in the prospectus of the Company.
All records maintained by the Custodian will be maintained in a form
acceptable to the Company and in compliance with the rules and regulations of
the Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder; all records will at all times be the property of the
Company and will be available for inspection and use by the Company.
IV. Use of a System for the Central Handling of Securities.
Notwithstanding any other provision of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance of its
duties hereunder to use the facilities of Depository Trust Company, Federal
Reserve Book-Entry System or any other book-entry system or any similar system
for the central handling of securities (hereinafter called a "securities
depository system" or "such system"), with which securities are authorized to be
deposited under the provisions of Section 17(f) of the Investment Company Act of
1940, as from time to time amended, subject to such rules, regulations and
orders as may be adopted by the Securities and Exchange Commission thereunder.
Without limiting the generality of such use, it is agreed that the following
provisions shall, subject to such rules, regulations and orders, apply thereto:
A. Such system may be used to hold, receive, exchange, release, deliver
and otherwise deal with the securities owned by the Company, including stock
dividends, rights and other items of like nature, and to receive and remit to
the Custodian all income and other payments thereon and to take all steps
necessary and proper in connection with the collection thereof.
B. Registration of the Company's securities may be made in the name of
any nominee or nominees used by such system.
C. Payment for securities purchased and sold may be made through the
clearing medium employed by such system for transactions of participants acting
through it.
D. Securities and any cash of the Company deposited in such system,
will at all times be segregated from any assets and cash controlled by the
Custodian in other than a fiduciary or custodian capacity but may be commingled
with other assets held in such capacities.
E. All books and records maintained by the Custodian which relate to
the Company's participation in these systems will at all time during the
Custodian's regular business hours be open to inspection by the Company's duly
authorized employees or agents, and the Company will be furnished with all the
information in respect of the services rendered to it as it may require.
F. The Custodian will make available to the Company copies of any
internal control reports concerning such systems made to it by either internal
or external auditors within ten days after receipt of such a report by the
Custodian.
G. The Custodian shall be subject to the same liability with respect to
all securities of the Company, and all cash, stock dividends, rights and items
of like nature to which the Company is entitled, held or received by such
system, as if the same were held or received by the Custodian at its own office.
V. Responsibility of Custodian.
The Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, certificate or other instrument believed by it to be
genuine and to be signed by the proper party or parties. It shall be entitled to
and may act upon advice of counsel (who may be counsel for the Company) on all
matters and shall be held only to the exercise of reasonable care and diligence
in carrying out all the provisions of this Agreement.
VI. Effective Period, Termination and Amendment, and Interpretive and
Additional Provisions.
This Agreement shall become effective as of its execution, and shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination, to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however, that the Company shall not amend or terminate this Agreement in
contravention of any applicable Federal or State regulations, or any provision
of the Declaration of Trust or By-Laws of the Company, and further provided,
that the Company may at any time by action of its Trustees substitute another
bank or trust company for the Custodian by giving notice as above to the
Custodian.
In connection with the operation of this Agreement, the Custodian and
the Company may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement, any such interpretive or
additional provisions to be signed by both parties and annexed hereto, provided
that no such interpretive or additional provisions shall contravene any
applicable Federal or State regulations, or any provision of the Declaration of
Trust or By-Laws. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
VII. Successor Custodian.
Upon termination hereof the Company shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
If a successor custodian is appointed by the Company, in accordance
with the By-laws, the Custodian shall, upon receipt of notice of such
appointment, deliver to and only to such successor custodian at the office of
the Custodian, duly endorsed and in form for transfer, all securities then held
hereunder and all funds or other properties of the Company deposited with or
held by it hereunder.
If no such successor custodian is appointed, the Custodian shall, in
like manner, at its office, upon receipt of a certified copy of a vote of the
shareholders pursuant to the By-Laws, deliver such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of shareholders shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall in no event deliver funds and property of the Company
to the Company, but shall have the right to deliver to a bank or trust company
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus and undivided profits, as shown by its last published
report of not less than $25,000,000 all securities, funds and other properties
held by the Custodian and all instruments held by it relative thereto and all
other property held by it under this Agreement. Thereafter such bank or trust
company shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Company to procure the certified copy above referred to, or of
the Company to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall remain
in full force and effect.
VIII. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian as agreed upon from time to time between the
Company and the Custodian.
IX. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
X. Use of a Sub-Custodian for Safekeeping of Foreign Securities.
Notwithstanding any other provision of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance of its
duties hereunder to (A) maintain accounts ("Foreign Accounts") in its name as
such Custodian with any foreign branch of the Chase Manhattan Bank, in
connection with the purchase, safekeeping and sale or redemption of securities
in foreign countries, such accounts to be maintained subject to the draft or
order of the Custodian, and (B) employ, from time to time, one or more
Sub-Custodians, but only in accordance with the terms and conditions as (i) may
be agreed upon between the Custodian and such Sub-Custodian and approved by the
Trustees of the Company and (ii) set forth in the Declaration of Trust and
By-Laws of the Company, to act as agent of the Custodian to carry out such of
the provisions of Article II of this Agreement as the Custodian may direct. It
is agreed that the following provisions shall apply to this Article X.
1. The Foreign Accounts or such Sub-Custodian may be used to hold,
receive, exchange, release, deliver and otherwise deal with the securities owned
by the Company, including stock dividends, rights and other items of like
nature, and to receive and remit to the Custodian all income and other payments
thereon and to take all steps necessary and proper in connection with the
collection thereof.
2. The Custodian shall be subject to the same liability with respect to
all securities of the Company, and all cash, stock dividends, rights and items
of like nature to which the Company is entitled, held or received by the Foreign
Accounts or such Sub-Custodian, as if the same were held or received by the
Custodian at its own offices.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
on the 24th day of May, 1985. The undersigned Trustee of MFS/Sun Life Series
Trust (the "Trust) has executed this Agreement not individually, but as a
Trustee under this Trust's Amended and Restated Declaration of Trust dated ,
1985, and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of the Trust individually, but bind only the Trust
estate.
MFS/Sun Life Series Trust
By: JOHN D. MCNEIL
----------------------
John D. McNeil
STATE STREET BANK AND TRUST COMPANY
By: ILLEGIBLE
----------------------
(Illegible)
Vice President
<PAGE>
EXHIBIT NO. 99.8(b)
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between STATE STREET BANK AND TRUST COMPANY (the
"Custodian") and MFS/SUN LIFE SERIES TRUST (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated May 24, 1985 (the "Custodian Contract") governing the terms and conditions
under which the Custodian maintains custody of the securities and other assets
of the Fund; and
WHEREAS, the Fund desires to amend the Custodian Contract to provide for
the maintenance of its foreign securities, and cash incidental to transactions
in such securities, in the custody of The Chase Manhattan Bank N.A. ("Chase")
and the banking institutions and foreign securities depositories it employs for
such purposes;
NOW, THEREFORE, in consideration of the mutual agreements contained in
the Custodian Contract and herein, the Custodian and the Fund hereby amend the
Custodian Contract and agree to the following terms and conditions and to amend
the Custodian Contract as follows:
1. The Fund hereby authorizes and instructs the Custodian to employ
Chase as sub-custodian for the Fund's foreign securities, and
cash incidental to transactions in such securities, on the terms
and conditions set forth in the Sub-Custody Contract between the
Custodian and Chase which is attached hereto as Exhibit "A" (the
"Sub-Custody Contract").
2. The Custodian hereby agrees to enter into the Sub-Custody
Contract and to provide such services to the Fund and in
accordance with such contract as necessary for foreign custody
services to be provided pursuant thereto.
3. Notwithstanding anything to the contrary in the Custodian
Contract, the Custodian shall not be liable to the Fund for any
loss, damage, cost, expense, liability or claim arising out of or
in connection with the maintenance of custody of the Fund's
foreign securities and cash by Chase or by any other banking
institution or securities depository employed pursuant to the
terms of the Sub-Custody Contract, except that the Custodian
shall be liable for any such loss, damage, cost, expense,
liability or claim to the extent attributable to the failure of
the Custodian to exercise reasonable care in the performance of
its duties thereunder. At the election of the Fund, the Fund
shall be entitled to be subrogated to the rights of the Custodian
under the Sub-Custody Contract with respect to any claims arising
thereunder against Chase or any other banking institution or
securities depository employed by Chase if and to the extent that
the Fund has not been made whole therefor.
4. As between the Custodian and the Fund, the Fund shall be solely
responsible to assure that the maintenance of foreign securities
and cash pursuant to the terms of the Sub-Custody Contract comply
with all applicable rules, regulations, interpretations and
orders of the Securities and Exchange Commission, and the
Custodian assumes no responsibility and makes no representations
as to such compliance.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
23rd day of July, 1986.
MFS/SUN LIFE SERIES TRUST
ATTEST: By: Bonnie S. Angus
-----------------------------
Secretary and Clerk
W. Thomas London STATE STREET BANK AND TRUST COMPANY
- -----------------------------
Treasurer
ATTEST: By: Illegible
-----------------------------
Vice President
Illegible
- -----------------------------
Assistant Secretary
<PAGE>
EXHIBIT NO. 99.9(a)
MFS/SUN LIFE SERIES TRUST
200 Berkeley Street
Boston, Massachusetts 02116
Date: August 1, 1985
Massachusetts Financial Service Center, Inc.
200 Berkeley Street
Boston, Massachusetts 02116
Shareholder Servicing Agent Agreement
Dear Sirs:
MFS/Sun Life Series Trust (the "Fund") is an open-end registered
investment company. The Fund has selected you to act as the Shareholder
Servicing Agent and you hereby agree to act as such Agent and perform the duties
and functions thereof in the manner and on the conditions hereinafter set forth.
Accordingly, the Fund hereby agrees with you as follows:
1. The Facility. You represent that you have the necessary computer
equipment, software and other office equipment ("Facility") adequate to perform
the services contemplated hereby as well as for other investment companies (such
investment companies, together with the Fund, are herein collectively referred
to as the "MFS Funds") for which Massachusetts Financial Services Company
("MFS") acts as investment adviser. The Facility is presently located at 50 Milk
Street, Boston, Massachusetts, and is to be dedicated solely to the performance
of services for the MFS Funds, provided that the Facility may be utilized to
perform services for others with the prior written permission of the MFS Funds.
2. Name. Unless otherwise directed in writing by MFS, you shall perform
the services contemplated hereby under the name "Massachusetts Financial Service
Center, Inc.", which name, any similar names and any logos of which shall remain
the property and under the control of MFS. Upon termination of this Agreement,
you shall cease to use such name or any similar name within a reasonable period
of time.
3. Services to be Performed. As Shareholder Servicing Agent ("Agent"),
you shall be responsible for administering and performing transfer and dividend
and distribution disbursing and plan agent functions in connection with the
issuance, transfer and redemption of the shares of beneficial interest
("Shares"). The details of the operating standards and procedures to be followed
by you shall be determined from time to time by agreement between you and the
Fund.
4. Standard of Service. As Agent for the Fund, you agree to provide
service equal to or better than that provided by you or others furnishing
shareholder services to other open-end investment companies ("Standard") at a
fee comparable to the fee paid you for your services hereunder. The Standard
shall include at least the following:
(a) Prompt reconciliation of any differences as to the number of
outstanding shares between various Facility records or between Facility
records and records of an MFS Fund's custodian;
(b) Prompt processing of shareholder correspondence and of other
matters requiring action by you;
(c) Prompt clearance of any daily volume backlog;
(d) Providing innovative services and technological
improvements;
(e) Meeting the requirements of any governmental authority
having jurisdiction over you or the Fund; and
(f) Prompt reconciliation of all bank accounts under your
control belonging to the Fund or MFS.
If any MFS Fund serviced by you is reasonably of the view that the
service provided by you does not meet the Standard, it shall give you written
notice specifying the particulars, and you then shall have 120 days in which to
restore the service so that it meets the Standard, except that such period shall
be 180 days with respect to meeting that portion of the Standard described above
in item (d) of this paragraph 4. If at the end of such period the Fund remains
reasonably of the view that the service provided by you, in the particulars
specified, does not meet the Standard, then the MFS Fund or Funds having a
majority of the accounts for which you are then Agent may, by appropriate action
(including the concurrence of a majority of the Trustees or Directors, as the
case may be, of such MFS Fund or Funds who are not interested persons of MFS),
elect to terminate this Agreement for cause as to all such Funds upon 90 days
notice to you. Upon termination hereof, the Fund shall pay you such compensation
as may be due to you as of the date of such termination, and shall likewise
reimburse you for any costs, expenses, and disbursements reasonably incurred by
you to such date in the performance of your duties hereunder.
5. Purchase of Facility. In the event that notice of termination of
this Agreement has been given pursuant to the provisions of paragraph 14 hereof,
for cause as defined in paragraph 4 hereof, the MFS Funds have the right, but
shall not be required (a) to purchase the Facility and assume the unexpired
portion of any leases of equipment or real estate relating to the Facility from
you at a price equal to your unrecovered acquisition value (as supported by the
schedules and records used in determining monthly billings) of the machinery,
equip-ment, software, furniture, fixtures and leasehold improvements included
in the Facility, and (b) to negotiate with persons then employed by you in the
operation of the Facility and to hire all of them in connection with the
purchase of the Facility from you by the MFS Funds. You agree to release each
such employee from any contractual obligations such person may have to you that
may interfere with such person's being hired at such time by the MFS Funds and
agree not to interfere with the negotiation and hiring of any such persons at
such time. In the event that the MFS Funds have given notice of termination of
this Agreement pursuant to the provisions of paragraph 14 hereof for reasons
other than cause as defined in paragraph 4 hereof, the MFS Funds shall purchase
the Facility under the terms and conditions set forth in subsections (a) and (b)
of this paragraph 5.
You shall effect the transfer of the Facility pursuant to this
paragraph 5 upon the termination date specified in the notice, or at such other
time as shall be agreed upon by the parties hereto.
6. Rights in Data and Confidentiality. You agree that all records,
data, files, input materials, reports, forms and other data received, computed
or stored in the performance of this Agreement are the exclusive property of the
Fund and that all such records and other data shall be furnished without
additional charge, except for actual processing costs, to the Fund in machine
readable as well as printed form immediately upon termination of this Agreement
or at the Fund's request. You shall safeguard and maintain the confidentiality
of the Fund's data and information supplied to you by the Fund and you shall not
transfer or disclose the Fund's data to any third party without the Fund's prior
written consent unless compelled to do so by order of a court or regulatory
authority.
7. Fees. The fee per Fund shareholder account for your shareholder
services hereunder shall not be in excess of such amount as shall be agreed in
writing between us. Such fee shall be payable in monthly installments of
one-twelfth of the annual fee. Such fee shall be subject to review at least
annually and fixed by the parties in good faith negotiation on the basis of a
statement of the expenses of the Facility prepared by you, which either you or
the Fund may require to be certified by a major accounting firm acceptable to
the parties. The party or parties requesting such certification shall bear all
expenses thereof. In addition to the foregoing fee, you will be reimbursed by
the Fund for out-of-pocket expenses reasonably incurred by you on behalf of the
Fund, including but not limited to expenses for stationery (including business
forms and checks), postage, telephone and telegraph line and toll charges, and
premiums for negotiable instrument insurance and similar items.
8. Record Keeping. You will maintain records in a form acceptable to
the Fund and in compliance with the rules and regulations of the Securities and
Exchange Commission, including, but not limited to, records required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder, which at all times will be the property of the Fund and will be
available for inspection and use by the Fund.
9. Duty of Care and Indemnification. You will at all times act in good
faith in performing your duties hereunder. You will not be liable or responsible
for delays or errors by reason of circumstances beyond your control, including
acts of civil or military authority, national emergencies, labor difficulties,
fire, mechanical breakdown beyond your control, flood or catastrophe, acts of
God, insurrection, war, riots or failure beyond your control of transportation,
communication or power supply. The Fund will indemnify you against and hold you
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit not resulting from your bad faith or negligence, and
arising out of, or in connection with, your duties on behalf of the Fund
hereunder. In addition, the Fund will indemnify you against and hold you
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit as a result of your acting in accordance with any
instructions reasonably believed by you to have been executed or orally
communicated by any person duly authorized by the Fund or its Principal
Underwriter, or as a result of acting in accordance with written or oral advice
reasonably believed by you to have been given by counsel for the Fund, or as a
result of acting in accordance with any instrument or share certificate
reasonably believed by you to have been genuine and signed, countersigned or
executed by any person or persons authorized to sign, countersign or execute the
same (unless contributed to by your gross negligence or bad faith). In any case
in which the Fund may be asked to indemnify you or hold you harmless, the Fund
shall be advised of all pertinent facts concerning the situation in question and
you will use reasonable care to identify and notify the Fund promptly concerning
any situation which presents or appears likely to present a claim for
indemnification against the Fund. The Fund shall have the option to defend you
against any claim which may be the subject of this indemnification, and in the
event that the Fund so elects such defense shall be conducted by counsel chosen
by the Fund and satisfactory to you and it will so notify you, and thereupon the
Fund shall take over complete defense of the claim and you shall sustain no
further legal or other expenses in such situation for which you seek
indemnification under this paragraph, except the expense of any additional
counsel retained by you. You will in no case confess any claim or make any
compromise in any case in which the Fund will be asked to indemnify you except
with the Fund's prior written consent. The obligations of the parties hereto
under this paragraph shall survive the termination of this Agreement.
If any officer of the Fund shall no longer be vested with authority to
sign for the Fund, written notice thereof shall forthwith be given to you by the
Fund and until receipt of such notice by it, you shall be fully indemnified and
held harmless by the Fund in recognizing and acting upon certificates or other
instruments bearing the signatures or facsimile signatures of such officer.
10. Insurance. You will notify the Fund should any of your insurance
coverage, as set forth on Exhibit A hereto, be changed for any reason, such
notification to include the date of change and reason or reasons therefor.
11. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed sufficient if mailed to either party at the
addresses set forth in this Agreement, or at such other addresses as the parties
hereto may designate by notice to each other.
12. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
13. Use of a Sub- or Co-Transfer Agent. Notwithstanding any other
provision of this Agreement, it is expressly understood and agreed that you are
authorized in the performance of your duties hereunder to employ, from time to
time, one or more Sub-Transfer Agents and/or Co-Transfer Agents.
14. Termination. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing, which, except in the case of termination, shall be signed by the party
against which enforcement of such change waiver or discharge is sought. Except
as otherwise provided in paragraph 4 hereof, this Agreement shall continue
indefinitely until terminated by 90 days' written notice given by the Fund to
you or by you to the Fund, provided that the Fund may terminate this Agreement
upon 15 days' written notice of termination and election of the right to
purchase the Facility pursuant to the provisions of paragraph 5 hereof. Upon
termination hereof, the Fund shall pay you such compensation as may be due to
you as of the date of such termination, and shall likewise reimburse you for any
costs, expenses, and disbursements reasonably incurred by you to such date in
the performance of your duties hereunder. You agree to cooperate with the Fund
and provide all necessary assistance in effectuating an orderly transition upon
termination of this Agreement.
15. Successor. In the event that in connection with termination a
successor to any of your duties or responsibilities hereunder is designated by
the Fund by written notice to you, you will, promptly upon such termination and
at the expense of the Fund, transfer to such successor a certified list of the
shareholders of the Fund (with name, address and tax identification or Social
Security number), an historical record of the account of each shareholder and
the status thereof, and all other relevant books, records, correspondence, and
other data established or maintained by you under this Agreement in form
reasonably acceptable to the Fund (if such form differs from the form in which
you have maintained the same, the Fund shall pay any expenses associated with
transferring the same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance from your
cognizant personnel in the establishment of books, records and other data by
such successor.
16. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. This
Agreement has been executed on behalf of the Fund by the undersigned not
individually, but in the capacity indicated, and the obligations of this
Agreement are not binding upon any of the Trustees or shareholders of the Fund
individually, but bind only the trust estate.
Very truly yours,
MFS/SUN LIFE SERIES TRUST
By JOHN D. MCNEIL
---------------------------
John D. McNeil
Title: Chairman
The foregoing is hereby accepted as of the date thereof.
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By H. ALDEN JOHNSON, JR.
---------------------------
H. Alden Johnson, Jr.
Title: President
The foregoing is hereby accepted as of the date thereof.
Massachusetts Financial
Service Center, Inc.
By: BRUCE AVERY
---------------------------
Bruce Avery
Title: President
<PAGE>
EXHIBIT NO. 99.13
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
67 Broad Street
New York, NY 10004
May 13, 1985
MFS/Sun Life Series Trust
200 Berkeley Street
Boston, Massachusetts 02116
Gentlemen:
In connection with our purchase of Shares of Beneficial Interest
(without par value) of MFS/Sun Life Series Trust (the "Shares") in the following
amounts:
25,238 Shares of the Money Market Series;
2,500 Shares of the High Yield Series;
2,500 Shares of the Capital Appreciation Series; and
2,500 Shares of the Government Guaranteed Series;
we hereby represent and warrant to you that we are purchasing said Shares as an
investment with no intention or redeeming or reselling the Shares of any Series
until a date at least two year hereafter or, except with regard to the Money
Market Series, until such time as the total assets of such respective Series
exceed $5 million, whichever occurs first.
Very truly yours,
Sun Life Insurance and Annuity
Company of New York
By: BONNIE S. ANGUS
---------------------------
Bonnie S. Angus
