As filed with the Securities and Exchange Commission on April 28, 1995
1933 Act File No. 2-96738
1940 Act File No. 811-4253
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 14
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15
MFS GOVERNMENT LIMITED MATURITY FUND
(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)
|X| on April 30, 1995 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 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
Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
its shares of Beneficial Interest (without par value), under the Securities Act
of 1933. The Registrant filed a Rule 24f-2 Notice for its fiscal year ended
December 31, 1994 on or about February 28, 1995.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Number Proposed Proposed
of shares maximum maximum
Title of securities being offering aggregate Amount of
being registered registered price per share offering price registration fee
<S> <C> <C> <C> <C>
Shares of Beneficial
Interest (without par value) 7,240,076 $8.52 $290,000 $100
</TABLE>
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 17,386,054 shares were redeemed during the fiscal year ended
December 31, 1994. 10,180,016 shares were used for reductions pursuant to
paragraph (c) of Rule 24f-2 during the current fiscal year. 7,206,038 shares is
the amount of redeemed shares used for reduction in this Amendment. Pursuant to
Rule 457(d) under the Securities Act of 1933, the maximum public offering price
of $8.52 per share on April 17, 1995 is the price used as the basis for
calculating the registration fee. While no fee is required for the 7,206,038
shares, Registrant has elected to register, for $100, an additional $290,000 of
shares (34,038 shares at $8.52 per share).
<PAGE>
MFS GOVERNMENT LIMITED MATURITY FUND
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).
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
1 (a), (b) Front Cover Page <F1>
2 (a) Expense Summary <F1>
(b), (c) <F1> <F1>
3 (a) Condensed Financial Information <F1>
(b) <F1> <F1>
(c) Information Concerning Shares of the <F1>
Fund - Performance Information
(d) Condensed Financial Information <F1>
4 (a) The Fund; Investment Objective and <F1>
Policies
(b), (c) Investment Objective and Policies <F1>
5 (a) The Fund; Management of the Fund - <F1>
Investment Adviser
(b) Front Cover Page; Management of <F1>
the Fund - Investment Adviser;
Back Cover Page
(c), (d) Management of the Fund - <F1>
Investment Adviser
(e) Management of the Fund - <F1>
Shareholder Servicing Agent;
Back Cover Page
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
(f) Expense Summary; Condensed <F1>
Financial Information
(g) Information Concerning Shares of <F1>
the Fund - Purchases
5A (a), (b), (c) <F2> <F2>
6 (a) Information Concerning Shares of <F1>
the Fund - Description of Shares,
Voting Rights and Liabilities;
Information Concerning Shares of
the Fund - Redemptions and
Repurchases; Information
Concerning Shares of the Fund -
Purchases; Information Concerning
Shares of the Fund - Exchanges
(b), (c), (d) <F1> <F1>
(e) Shareholder Services <F1>
(f) Information Concerning Shares of <F1>
the Fund - Distributions; Shareholder
Services - Distribution Options
(g) Information Concerning Shares of <F1>
the Fund - Tax Status; Information
Concerning Shares of the Fund -
Distributions
7 (a) Front Cover Page; Management of <F1>
the Fund - Distributor;
Back Cover Page
(b) Information Concerning Shares of <F1>
the Fund - Purchases; Information
Concerning Shares of the Fund -
Net Asset Value
(c) Information Concerning Shares of <F1>
the Fund - Purchases; Information
Concerning Shares of the Fund -
Exchanges; Shareholder Services
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
(d) Front Cover Page; Information <F1>
Concerning Shares of the Fund -
Purchases
(e) Information Concerning Shares of <F1>
the Fund - Distribution Plan;
Expense Summary
(f) Information Concerning Shares of <F1>
the Fund - Distribution Plan
8 (a) Information Concerning Shares of <F1>
the Fund - Redemptions and
Repurchases; Information
Concerning Shares of the Fund -
Purchases
(b), (c), (d) Information Concerning Shares of <F1>
the Fund - Redemptions and
Repurchases
9 <F1> <F1>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
10 (a), (b) <F1> Front Cover Page
11 <F1> Front Cover Page
12 <F1> Definitions
13 (a), (b), (c) <F1> Investment Objective,
Policies and Restrictions
(d) <F1> <F1>
14 (a), (b) <F1> Management of the Fund -
Trustees and Officers
(c) <F1> Management of the Fund -
Trustees and Officers;
Appendix A
15 (a) <F1> <F1>
(b), (c) <F1> Management of the Fund -
Trustees and Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser;
Management of the Fund -
Trustees and Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
(c) <F1> <F1>
(d) <F1> Management of the Fund -
Investment Adviser
(e) <F1> Portfolio Transactions and
Brokerage Commissions
(f) Information Concerning Distribution Plan
Shares of the Fund -
Distribution Plan
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
(g) <F1> <F1>
(h) <F1> Management of the Fund -
Custodian; Independent
Accountants and Financial
Statements; Back Cover
Page
(i) <F1> Management of Fund -
Shareholder Servicing
Agent
17 (a), (b), (c), <F1> Portfolio Transactions and
(d), (e) Brokerage Commissions
18 (a) Information Concerning Description of Shares
Shares of the Fund - Voting Rights and
Description of Shares, Liabilities
Voting Rights and
Liabilities
(b) <F1> <F1>
19 (a) Information Concerning Shareholder Services
Shares of the Fund - Purchases;
Shareholder Services
(b) Information Concerning Management of the Fund -
Shares of the Fund - Net Distributor; Determination of
Asset Value; Information Net Asset Value and Performance -
Concerning Shares of the Net Asset Value
Fund - Purchases
(c) <F1> <F1>
20 <F1> Tax Status
21 (a), (b) <F1> Management of the Fund -
Distributor; Distribution Plan
(c) <F1> <F1>
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
<S> <C> <C>
22 (a) <F1> <F1>
(b) <F1> Determination of Net Asset
Value and Performance
23 <F1> Independent Accountants
and Financial Statements
- -----------------------------
<FN>
<F1>Not Applicable
<F2>Contained in Annual Report
</TABLE>
<PAGE>
PROSPECTUS
May 1, 1995
MFS(R) GOVERNMENT Class A Shares of Beneficial Interest
LIMITED MATURITY FUND Class B Shares of Beneficial Interest
(A Member of the MFS Family of Funds(R)) Class C Shares of Beneficial Interest
- --------------------------------------------------------------------------------
Page
----
1. Expense Summary ............................................... 2
2. The Fund ...................................................... 3
3. Condensed Financial Information ............................... 4
4. Investment Objective and Policies ............................. 6
5. Management of the Fund ........................................ 9
6. Information Concerning Shares of the Fund ..................... 10
Purchases .................................................. 10
Exchanges .................................................. 15
Redemptions and Repurchases ................................ 16
Distribution Plans ......................................... 18
Distributions .............................................. 20
Tax Status ................................................. 20
Net Asset Value ............................................ 21
Description of Shares, Voting Rights and Liabilities ....... 21
Performance Information .................................... 22
7. Shareholder Services .......................................... 22
Appendix A .................................................... 25
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MFS GOVERNMENT LIMITED MATURITY FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
The investment objective of MFS Government Limited Maturity Fund (the "Fund") is
to preserve capital and provide high current income (compared to a portfolio
entirely invested in money market instruments). The Fund will seek to achieve
this objective by investing in obligations issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities. Under normal market
conditions, substantially all of the securities in the Fund's portfolio will
have remaining maturities of five years or less. See "Investment Objective and
Policies." The minimum initial investment generally is $1,000 per account (see
"Purchases").
The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information, dated May 1, 1995, which contains more detailed information about
the Fund and is incorporated into this Prospectus by reference. See page 24 for
a further description of the information set forth in the Statement of
Additional Information. A copy of the Statement of Additional Information may be
obtained without charge by contacting the Shareholder Servicing Agent (see back
cover for address and phone number).
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
<TABLE>
<CAPTION>
1. EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of public offering price) ........... 2.50% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable) ................................................. See Below<F1> 4.00% 0.00%
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ............................................... 0.40% 0.40% 0.40%
Rule 12b-1 Fees (after applicable fee reduction) .............. 0.15%<F2> 1.00%<F3> 1.00%<F3>
Other Expenses ................................................ 0.30% 0.37% 0.30%<F4>
----- ----- -----
Total Operating Expenses (after applicable fee reduction)<F5>... 0.85% 1.77% 1.70%
- ----------
<FN>
<F1>Purchases of $1 million or more are not subject to an initial sales charge; however, a contingent deferred sales charge (a
"CDSC") of 1% will be imposed on such purchases in the event of certain redemption transactions within 12 months following
such purchases (see "Purchases").
<F2>The Fund has adopted a Distribution Plan for its Class A shares in accordance with Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act"), which provides that it will pay distribution/ service fees aggregating up to (but not
necessarily all of) 0.35% per annum of the average daily net assets attributable to Class A shares (see "Distribution Plans").
Currently the 0.10% distribution/service fee paid to MFD is being waived. MFD will not accept future payments of this fee
unless it first obtains the approval of the Board of Trustees. Commencing as of May 1, 1993, service fee payments have been
reduced to 0.15% of the average daily net assets of the Fund attributable to Class A shares for an indefinite period. This
reduction may be amended or terminated at any time without notice to shareholders. After a substantial period of time,
distribution expenses paid under this Plan, together with the initial sales charge, may total more than the maximum sales
charge that would have been permissible if imposed entirely as an initial sales charge.
<F3>The Fund has adopted separate Distribution Plans for its Class B and its Class C shares in accordance with Rule 12b-1 under
the 1940 Act, which provide that it will pay distribution/service fees aggregating up to (but not necessarily all of) 1.00%
per annum of the average daily net assets attributable to the Class B shares under the Class B Distribution Plan and the Class
C shares under the Class C Distribution Plan (see "Distribution Plans"). Except in the case of the first year service fee, the
0.25% per annum service fee is currently reduced to 0.15% per annum of the average daily net assets of the Fund attributable
to Class B shares for an indefinite period. This reduction may be amended or terminated at any time without notice to
shareholders. After a substantial period of time, distribution expenses paid under these Plans, together with any CDSC payable
upon redemption of Class B shares, may total more than the maximum sales charge that would have been permissible if imposed
entirely as an initial sales charge.
<F4>Except for the shareholder servicing agent fee component, "Other Expenses" is based on Class A expenses incurred during the
fiscal year ended December 31, 1994. The shareholder servicing agent fee component of "Other Expenses" is a predetermined
percentage based on the Fund's net assets attributable to each class.
<F5>Absent any reductions, "Total Operating Expenses" would have been 0.95% for Class A shares.
</TABLE>
<PAGE>
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):
<TABLE>
<CAPTION>
PERIOD
------ CLASS A CLASS B CLASS C
---- ---------------------------- ----
<S> <C> <C> <C> <C>
<F1>
1 year ................................................ $ 33 $ 58 $ 18 $ 17
3 years ................................................ 51 85 55 54
5 years ................................................ 71 114 94 92
10 years ................................................ 127 182<F2> 182<F2> 201
- ----------
<FN>
<F1>Assumes no redemption.
<F2>Class B shares convert to Class A shares approximately eight years after purchase; therefore, years nine and ten reflect
Class A expenses.
</TABLE>
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. More complete descriptions of the following expenses are set
forth in the following sections of this Prospectus: (i) varying sales charges on
share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii)
management fee -- "Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution
plan) fees -- "Distribution Plans."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
2. THE FUND
The Fund is an open-end, diversified management investment company which was
originally organized as a business trust under the laws of The Commonwealth of
Massachusetts in 1985 and reorganized in July, 1988. Shares of the Fund are sold
continuously to the public and the Fund uses the proceeds to buy securities
(issued or guaranteed as to principal and interest by the U.S. Government, its
agencies, authorities or instrumentalities) for its portfolio. Shares of the
Fund are not government-guaranteed and will fluctuate in value, whereas bank
certificates of deposit are insured and offer a fixed return and U.S. Treasury
notes guarantee a return of principal and an income return if held to maturity.
Three classes of shares of the Fund are currently offered to the general public.
Class A shares are offered at net asset value plus an initial sales charge (or a
CDSC in the case of certain purchases of $1 million or more) and are subject to
a Distribution Plan providing for a distribution fee and a service fee. Class B
shares are offered at net asset value without an initial sales charge but are
subject to a CDSC and a Distribution Plan providing for a distribution fee and a
service fee which are greater than the Class A distribution and service fee;
Class B shares will convert to Class A shares approximately eight years after
purchase. Class C shares are offered at net asset value without an initial sales
charge or a CDSC but are subject to a Distribution Plan providing for an annual
distribution and service fee which are equal to the Class B annual distribution
fee and service fee. Class C shares do not convert to any other class of shares
of the Fund.
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. A majority of the Trustees of the Fund are not affiliated with the
Adviser. The Adviser is responsible for the management of the Fund's assets and
manages the Fund's portfolio from day to day in accordance with its investment
objective and policies. The selection of investments and the way they are
managed depend upon the conditions and trends in the economy and the financial
market places. The Fund also offers to buy back (redeem) its shares from its
shareholders at any time at net asset value, less the applicable CDSC.
3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which are
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Ernst & Young LLP, independent auditors for the year
ended December 31, 1994, as experts in accounting and auditing. The Financial
Highlights table has been included in reliance upon the report of Ernst & Young
LLP for the year ended December 31, 1994. For the period from February 28, 1989
to December 31, 1993, Coopers & Lybrand LLP served as the Fund's independent
accountants and were responsible for auditing the Fund's financial statements
and issuing reports for those fiscal years.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990<F1>
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of
period $ 8.99 $ 8.98 $ 9.06 $ 9.09 $ 9.33
------ ------ ------ ------ ------
Income from investment
operations<F3> -
Net investment income<F5> $ 0.54 $ 0.52 $ 0.49 $ 0.52 $ 0.53
Net realized and unrealized gain
(loss) on investments (0.61) 0.10 0.07 0.21 --
------ ------ ------ ------ ------
Total from investment operations $(0.07) $ 0.62 $ 0.56 $ 0.73 $ 0.53
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.50) $(0.51) $(0.45) $(0.49) $(0.48)
From net realized gain on
investments -- (0.10) (0.14) -- --
From paid-in capital -- -- (0.05) (0.27) (0.29)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.50) $(0.61) $(0.64) $(0.76) $(0.77)
------ ------ ------ ------ ------
Net asset value - end of period $ 8.42 $ 8.99 $ 8.98 $ 9.06 $ 9.09
====== ====== ====== ====== ======
Total return<F4> (0.76)% 7.00% 6.51% 8.44% 7.39%<F2>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F5>:
Expenses 0.89% 1.14% 1.38% 1.33% 1.40%<F2>
Net investment income 6.28% 5.62% 5.50% 5.89% 7.01%<F2>
PORTFOLIO TURNOVER 328% 247% 391% 1,256% 845%
NET ASSETS AT END OF PERIOD
(000 OMITTED) $257,154 $345,597 $296,788 $365,644 $427,849
<FN>
<F1>For the ten months ended December 31, 1990.
<F2>Annualized.
<F3>Per share data for the year ended December 31, 1994 is based on average shares outstanding.
<F4>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F5>The investment adviser and the distributor did not impose a portion of their management fee and distribution fee, respectively,
for the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would
have been:
Net investment income $ 0.53 $ 0.50 -- -- --
RATIOS (TO AVERAGE NET ASSETS):
Expenses 1.04% 1.34% -- -- --
Net investment income 6.13% 5.42% -- -- --
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS continued
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY YEAR ENDED DECEMBER 31,
------------------- -----------------------------
1990 1989<F1> 1994 1993<F2> 1994<F3>
- -----------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $ 9.51 $ 9.63 $ 8.98 $ 9.17 $ 8.62
------ ------ ------ ------ ------
Income from investment operations<F5> -
Net investment income<F7> $ 0.69 $ 0.23 $ 0.47 $ 0.12 $ 0.17
Net realized and unrealized gain
(loss) on investments 0.10 (0.11) (0.62) (0.17) (0.20)
------ ------ ------ ------ ------
Total from investment operations $ 0.79 $ 0.12 $(0.15) $(0.05) $(0.03)
------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.67) $(0.17) $(0.42) $(0.11) $(0.20)
From net realized gain on investments (0.14) (0.02) -- (0.03) --
From paid-in capital (0.16) (0.05) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.97) $(0.24) $(0.42) $(0.14) $(0.20)
------ ------ ------ ------ ------
Net asset value - end of period $ 9.33 $ 9.51 $ 8.41 $ 8.98 $ 8.39
====== ====== ====== ====== ======
Total return<F5> 8.43% 3.02%<F4>(1.65)% (1.54)%<F4> (0.33)%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F7>:
Expenses 1.43% 1.41%<F4> 1.79% 1.83%<F4> 1.62%<F4>
Net investment income 7.16% 6.97%<F4> 5.42% 4.58%<F4> 6.10%<F4>
PORTFOLIO TURNOVER 615% 170% 328% 247% 328%
NET ASSETS AT END OF PERIOD
(000 OMITTED) $350,011 $117,584 $23,918 $11,268 $3,403
<FN>
<F1> For the period from the commencement of investment operations, September
26, 1988 to February 28, 1989.
<F2> For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1993.
<F3> For the period from the commencement of offering of Class C shares, August
1, 1994 to December 31, 1994.
<F4> Annualized.
<F5> Per share data for the year ended December 31, 1994 is based on average
shares outstanding.
<F6> Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
<F7> The investment adviser and the distributor did not impose a portion of
their management fee and distribution fee, respectively, for the periods
indicated. If these fees had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment income -- -- $ 0.46 $ 0.11 --
RATIOS (TO AVERAGE NET ASSETS):
Expenses -- -- 1.82% 2.60%<F4> --
Net investment income -- -- 5.39% 3.82%<F4> --
</TABLE>
<PAGE>
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to preserve
capital and provide high current income (compared to a portfolio entirely
invested in money market instruments). Any investment involves risk and there
can be no assurance that the Fund will achieve its objective.
INVESTMENT POLICIES -- The Fund seeks to achieve its objective by investing in
obligations issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities ("Government Securities"). Under normal market
conditions, substantially all of the securities in the Fund's portfolio will
have remaining maturities of five years or less.
For purposes of the foregoing investment policy, securities having a certain
maturity will be deemed to include securities with an equivalent "duration" of
such securities. "Duration" is a commonly used measure of the longevity of a
debt instrument that takes into account the full stream of payments received on
the instrument, including both interest and principal payments, based on their
present values. A debt instrument's duration is derived by discounting principal
and interest payments to their present value using the instrument's current
yield to maturity and taking the dollar-weighted average time until those
payments will be received. Contractual rights to dispose of a security, call
options and prepayment assumptions may be considered in calculating duration
because such rights limit the period during which the Fund bears a market risk
with respect to the security.
U.S. GOVERNMENT SECURITIES: The Government Securities in which the Fund intends
to invest include (i) U.S. Treasury obligations, which differ only in their
interest rates, maturities and times of issuance: U.S. Treasury bills
(maturities of one year or less) and U.S. Treasury notes (maturities of one to
ten years), all of which are backed by the full faith and credit of the United
States; and (ii) obligations issued or guaranteed by U.S. Government agencies,
authorities or instrumentalities, some of which are backed by the full faith and
credit of the U.S. Treasury, e.g., direct pass-through certificates of the
Government National Mortgage Association ("GNMA"); some of which are supported
by the right of the issuer to borrow from the U.S. Government, e.g., obligations
of Federal Home Loan Banks; and some of which are backed only by the credit of
the issuer itself, e.g., obligations of the Student Loan Marketing Association
("SLMA"). For a description of obligations issued or guaranteed by U.S.
Government agencies, authorities or instrumentalities, see Appendix A.
Government Securities do not generally involve the credit risks associated with
other types of fixed income securities, although, as a result, the yields
available from Government Securities are generally lower than the yields
available from corporate interest-bearing securities. Like other fixed income
securities, however, the values of Government Securities change as interest
rates fluctuate. THEREFORE, THE NET ASSET VALUE OF THE SHARES OF AN OPEN-END
INVESTMENT COMPANY SUCH AS THE FUND, WHICH INVESTS IN FIXED INCOME SECURITIES,
CHANGES AS THE GENERAL LEVELS OF INTEREST RATES FLUCTUATE. WHEN INTEREST RATES
DECLINE, THE VALUE OF A PORTFOLIO INVESTED IN SUCH SECURITIES CAN BE EXPECTED TO
RISE. CONVERSELY, WHEN INTEREST RATES RISE, THE VALUE OF A PORTFOLIO INVESTED IN
SUCH SECURITIES CAN BE EXPECTED TO DECLINE. Although changes in the value of the
Fund's portfolio securities subsequent to their acquisition are reflected in the
net asset value of shares of the Fund, such changes will not affect the income
received by the Fund from such securities. While the Fund seeks to maintain a
relatively high, stable dividend, no specific level of income or yield
differential can ever be assured since available yields vary over time.
When and if available, Government Securities may be purchased at a discount from
face value. However, the Fund does not intend to hold such securities to
maturity for the purpose of achieving potential capital gains, unless current
yields on these securities remain attractive.
In order to make the Fund an eligible investment for Federal Credit Unions
("FCUs") and national banks, the Fund will invest only in those Government
Securities that are eligible for investment by such institutions without
limitation, and will also generally be managed so as to qualify as an eligible
investment for such institutions. The Fund will comply with all investment
limitations applicable to FCUs including the requirement that a FCU may only
purchase Collateralized Mortgage Obligations (as described below) which would be
eligible under the high risk securities test of Part 703 of the National Credit
Union Administration Rules and Regulations.
Government Securities that the Fund may invest in also include zero coupon
Government Securities. The Fund will not invest in zero coupon Government
Securities with maturities exceeding 10 years and, under normal market
conditions, will not invest in zero coupon Government Securities with remaining
maturities exceeding five years. Zero coupon Government Securities are debt
obligations which are issued or purchased at a significant discount from face
value. The discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity at a rate of interest
reflecting the market rate of the security at the time of issuance. Zero coupon
Government Securities do not require the periodic payment of interest. Such
investments benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments may experience greater
volatility in market value than Government Securities which make regular
payments of interest. The Fund will accrue income on such investments for tax
and accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Fund's distribution
obligations.
MORTGAGE PASS-THROUGH SECURITIES: The Fund may invest in mortgage pass-through
securities that are Government Securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgage loans. Monthly payments
of interest and principal by the individual borrowers on mortgages are passed
through to the holders of the securities (net of fees paid to the issuer or
guarantor of the securities) as the mortgages in the underlying mortgage pools
are paid off. The average lives of mortgage pass-throughs are variable when
issued because their average lives depend on prepayment rates. The average life
of these securities is likely to be substantially shorter than their stated
final maturity as a result of unscheduled principal prepayments. Prepayments on
underlying mortgages result in a loss of anticipated interest, and all or part
of a premium, if any has been paid, and the actual yield (or total return) to
the Fund may be different than the quoted yield on the securities. Mortgage
prepayments generally increase with falling interest rates and decrease with
rising interest rates. Like other fixed income securities, when interest rates
rise the value of a mortgage pass-through security generally will decline;
however, when interest rates are declining, the value of mortgage pass-through
securities with prepayment features may not increase as much as that of other
fixed income securities. For a further description of mortgage pass-through
securities, see the Statement of Additional Information.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs," which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities (such collateral collectively herein referred
to as "Mortgage Assets"). Mortgage Assets underlying CMOs purchased by the Fund
must be Government Securities. The Fund may also invest a portion of its assets
in multiclass pass-through securities which are interests in a trust composed of
Mortgage Assets. The Fund may only invest in CMOs and multiclass pass-through
securities which are issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities.
In a CMO, a series of bonds or certificates is usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates, resulting in a loss of all
or part of the premium, if any has been paid.
The Fund may also invest in parallel pay CMOs and Planned Amortization Class
CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of
principal on each payment date to more than one class. PAC Bonds generally
require payments of a specified amount of principal on each payment date. PAC
Bonds are always parallel pay CMOs with the required principal payment on such
securities having the highest priority after interest has been paid to all
classes.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Fund's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize any risk.
"WHEN-ISSUED" SECURITIES: Some Government Securities may be purchased on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
will be delivered to the Fund at a future date usually beyond customary
settlement time. The commitment to purchase an obligation for which payment will
be made on a future date may be deemed a separate security. Although the Fund is
not limited as to the amount of Government Securities for which it has such
commitments, it is expected that under normal circumstances not more than 30% of
the Fund's total assets will be committed to such purchases. The Fund does not
pay for such obligations until received and does not start earning interest on
the obligations until the contractual settlement date. The Fund will establish a
segregated account consisting of cash, short-term money market instruments or
Government Securities equal to the amount of its commitments to purchase
securities issued on such basis.
MORTGAGE "DOLLAR ROLL" TRANSACTIONS: The Fund may enter into mortgage "dollar
roll" transactions with selected banks and broker-dealers pursuant to which the
Fund sells mortgage-backed securities for delivery in the future (generally
within 30 days) and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date. The Fund
will only enter into covered rolls. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction.
LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. Such loans will usually be made only to member banks of
the Federal Reserve System and member firms (and subsidiaries thereof) of the
New York Stock Exchange (the "Exchange") and would be required to be secured
continuously by collateral in cash, cash equivalents, or Government Securities
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. The Fund will continue to collect the equivalent of
interest on the securities loaned and will also receive either interest (through
investment of cash collateral) or a fee (if the collateral is Government
Securities).
- ----------------
For additional information concerning the use, risks and costs of "when- issued"
and "forward delivery" securities, mortgage "dollar roll" transactions, CMOs and
Mortgage Pass-Through Securities and the lending of securities, see the
Statement of Additional Information.
PORTFOLIO TRADING -- The Fund intends to fully manage its portfolio by buying
and selling Government Securities, as well as holding selected obligations to
maturity. In managing its portfolio, the Fund seeks to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. For a description of the strategies which may be used by the Fund in
managing its portfolio, which may include adjusting the average duration of the
portfolio in anticipation of a change in interest rates, see the Statement of
Additional Information.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD"),
and such other policies as the Trustees may determine, the Adviser may consider
sales of shares of the Fund and of the other investment company clients of MFD
as a factor in the selection of broker-dealers to execute the Fund's portfolio
transactions. From time to time, the Adviser may direct certain portfolio
transactions to broker-dealer firms which, in turn, have agreed to pay a portion
of the Fund's operating expenses (e.g., fees charged by the custodian of the
Fund's assets). For a further discussion of portfolio transactions, see the
Statement of Additional Information.
----------------
The objective and policies described in this Prospectus are not fundamental and
may be changed without shareholder approval.
The Statement of Additional Information includes a listing of investment
restrictions which govern the investment policies of the Fund. The Fund's
investment limitations and policies are adhered to at the time of purchase or
utilization of assets; a subsequent change in circumstances will not be
considered to result in a violation of policy.
5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the assets of the Fund pursuant to an
Investment Advisory Agreement, dated August 10, 1988, as amended (the "Advisory
Agreement"). The Adviser provides the Fund with investment advisory and
administrative services, as well as office facilities. Steven E. Nothern, a
Senior Vice President of the Adviser, has been the Fund's portfolio manager
since 1992. Mr. Nothern has been employed by the Adviser since 1986. Subject to
such policies as the Trustees may determine, the Adviser makes investment
decisions for the Fund. For these services and facilities, the Adviser receives
a management fee equal to the lesser of (i) 0.40% of the Fund's average daily
net assets or (ii) 0.38% of the Fund's average daily net assets plus 5.36% of
the Fund's gross income (i.e., income other than from the sale of securities,
and short term gains from futures transactions), in each case on an annualized
basis for the Fund's then-current fiscal year. Prior to April 1, 1994, the
Adviser received a management fee from the Fund computed and paid monthly in an
amount equal to the sum of 0.38% of the Fund's average daily net assets plus
5.36% of the Fund's gross income (i.e., income other than from the sale of
securities, and short-term gains from futures transactions), in each case on an
annualized basis for the Fund's then-current fiscal year. (For the period from
May 1, 1993 to April 1, 1994, however, the Adviser had voluntarily agreed to
establish its management fee as the lesser of (i) 0.55% of the Fund's average
daily net assets or (ii) the amount of such fee as otherwise calculated in
accordance with the Advisory Agreement with the Fund.) For the fiscal year ended
December 31, 1994 MFS received its management fees of $1,401,230 equivalent on
an annualized basis to 0.44% of the Fund's average daily net assets. If MFS had
not reduced its management fee, MFS would have received management fees under a
prior investment advisory agreement of $1,561,767 (of which $1,254,453 would
have been based on average daily net assets and $307,314 on gross income),
equivalent to 0.49% of the Fund's net assets on an average daily annualized
basis.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS Union
Standard Trust, MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun
Life Series Trust, Sun Growth Variable Annuity Fund, Inc. and seven variable
accounts, each of which is a registered investment company established by Sun
Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)") in
connection with the sale of Compass-2 and Compass-3 combination fixed/variable
annuity contracts. MFS and its wholly owned subsidiary, MFS Asset Management,
Inc., provide investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under management of the MFS organization were approximately
$35 billion on behalf of approximately 1.6 million investor accounts as of March
31, 1995. As of such date, the MFS organization managed approximately $19.2
billion of assets in fixed income portfolios and fixed income portfolios of MFS
Asset Management, Inc. MFS is a wholly owned 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, Jeffrey L.
Shames, Arnold D. Scott, John D. McNeil and John R. Gardner. Mr. Brodkin is the
Chairman, Mr. Shames is the President and Mr. Scott is the Secretary and a
Senior Executive Vice President, of MFS. Messrs. McNeil and Gardner are the
Chairman and the President, respectively, of Sun Life. Sun Life, a mutual life
insurance company, is one of the largest international life insurance companies
and has been operating in the United States since 1895, establishing a
headquarters here in 1973. The executive officers of MFS report to the Chairman
of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is the Chairman, President
and a Trustee of the Fund. W. Thomas London, James O. Yost, Stephen E. Cavan,
and James R. Bordewick, Jr., all of whom are officers of MFS, are officers of
the Fund.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency,
certain dividend disbursing agency and other services for the Fund.
6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased at the public offering price through any
securities dealer, certain banks and other financial institutions having selling
agreements with MFD. Non-securities dealer financial institutions will receive
transaction fees that are the same as commission fees to dealers. Securities
dealers and other financial institutions may also charge their customers fees
relating to investments in the Fund.
The Fund offers three classes of shares which bear sales charges and
distribution fees in different forms and amounts:
CLASS A SHARES: Class A shares are offered at net asset value per share plus an
initial sales charge (or CDSC in the case of certain purchases of $1 million or
more) as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SALES CHARGE<F1> AS
PERCENTAGE OF:
-------------------------------- DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
Less than $50,000 .......................................................... 2.50% 2.56% 2.25%
$50,000 but less than $100,000 ............................................. 2.25 2.30 2.00
$100,000 but less than $250,000 ............................................ 2.00 2.04 1.75
$250,000 but less than $500,000 ............................................ 1.75 1.78 1.50
$500,000 but less than $1,000,000 .......................................... 1.50 1.52 1.25
$1,000,000 or more ......................................................... None<F2> None<F2> (See Below)<F2>
- ----------
<FN>
<F1>Because of rounding in the calculation of offering price, actual sales charges may be more or less than those calculated using
the percentages above.
<F2>A CDSC may apply in certain instances. MFD will pay a commission on purchases of $1 million or more (see below).
</TABLE>
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC may be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% on the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.
In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment occurred, will age one month on the last day of the month and
each subsequent month. Except as noted below, the CDSC on Class A shares will be
waived in the case of: (i) exchanges (except that if the shares acquired by
exchange were then redeemed within 12 months of the initial purchase (other than
in connection with subsequent exchanges to other MFS Funds), the charge would
not be waived); (ii) distributions to participants from a retirement plan
qualified under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") (a "Retirement Plan"), due to: (a) a loan from the plan (repayments
of loans, however, will constitute new sales for purposes of assessing the
CDSC); (b) "financial hardship" of the participant in the plan, as that term is
defined in Treasury Regulation Section 1.401(k)-1(d)(2), as amended from time to
time; or (c) the death of a participant in such a plan; (iii) distributions from
a 403(b) plan or an Individual Retirement Account ("IRA") due to death,
disability or attainment of age 59 1/2; (iv) tax-free returns of excess
contributions to an IRA; (v) distributions by other employee benefit plans to
pay benefits; and (vi) certain involuntary redemptions and redemptions in
connection with certain automatic withdrawals from a qualified Retirement Plan.
The CDSC on Class A shares will not be waived, however, if the Retirement Plan
withdraws from the Fund except if the Retirement Plan has invested its assets in
Class A shares of one or more of the MFS Funds for more than 10 years from the
later to occur of (i) January 1, 1993 or (ii) the date such retirement plan
first invests its assets in Class A shares of one or more of the MFS Funds, the
CDSC on Class A shares will be waived in the case of a redemption of all of the
Retirement Plan's shares (including shares of any other class) in all MFS Funds
(i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), unless, immediately prior to the redemption, the aggregate amount
invested by the Retirement Plan in Class A shares of the MFS Funds (excluding
the reinvestment of distributions) during the prior four year period equals 50%
or more of the total value of the Retirement Plan's assets in the MFS Funds, in
which case the CDSC will not be waived. The CDSC on Class A shares will be
waived upon redemption by a Retirement Plan where the redemption proceeds are
used to pay expenses of the Retirement Plan or certain expenses of participants
under the Retirement Plan (e.g., participant account fees), provided that the
Retirement Plan's sponsor subscribes to the MFS FUNDamental 401(k) Plan(sm) or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. The CDSC on Class A shares will be waived upon the transfer of
registration from shares held by a Retirement Plan through a single account
maintained by the Shareholder Servicing Agent to multiple Class A share accounts
maintained by the Shareholder Servicing Agent on behalf of individual
participants in the Retirement Plan, provided that the Retirement Plan's sponsor
subscribes to the MFS FUNDamental 401(k) Plan(sm) or another similar
recordkeeping system made available by the Shareholder Servicing Agent. Any
applicable CDSC will be deferred upon an exchange of Class A shares of the Fund
for units of participation of the MFS Fixed Fund (a bank collective investment
fund) (the "Units"), and the CDSC will be deducted from the redemption proceeds
when such Units are subsequently redeemed (assuming the CDSC is then payable).
No CDSC will be assessed upon an exchange of Units for Class A shares of the
Fund. For purposes of calculating the CDSC payable upon redemption of Class A
shares of the Fund or Units acquired pursuant to one or more exchanges, the
period during which the Units are held will be aggregated with the period during
which the Class A shares are held. MFD will receive all CDSCs which it intends
to apply for the benefit of the Fund.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 2 1/4% and MFD retains
approximately 1/4 of 1% of the public offering price. The sales charge may vary
depending on the number of shares of the Fund as well as certain MFS Funds and
other funds owned or being purchased, the existence of an agreement to purchase
additional shares during a 13-month period (or a 36-month period for purchases
of $1 million or more) or other special purchase programs. A description of the
Right of Accumulation, Letter of Intent and Group Purchases privileges by which
the sales charge may be reduced is set forth in the Statement of Additional
Information. Purchases of $1 million or more for each shareholder account will
be aggregated over a 12-month period (commencing from the date of the first such
purchase) for purposes of determining the level of commissions to be paid during
that period with respect to such account.
Class A shares of the Fund may be sold at their net asset value to the officers
of the Fund, to any of the subsidiary companies of Sun Life, to eligible
Directors, officers, employees (including retired employees) and agents of MFS,
Sun Life or any of their subsidiary companies, to any trust, pension,
profit-sharing or any other benefit plan for such persons, to any trustees and
retired trustees of any investment company for which MFD serves as distributor
or principal underwriter, and to certain family members of such individuals and
their spouses, provided such shares will not be resold except to the Fund. Class
A shares of the Fund may be sold at net asset value to any employee, partner,
officer or trustee of any sub-adviser to any MFS Fund and to certain family
members of such individuals and their spouses, or to any trust, pension,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative, provided such shares will not be resold except to the Fund.
Class A shares of the Fund may also be sold at their net asset value to any
employee or registered representative of any dealer or other financial
institution which has a sales agreement with MFD or its affiliates, to certain
family members of such employee or representative and their spouses, or to any
trust, pension, profit-sharing or other retirement plan for the sole benefit of
such employee or representative, as well as to clients of MFS Asset Management,
Inc. Class A shares may be sold at net asset value, subject to appropriate
documentation, through a dealer where the amount invested represents redemption
proceeds from a registered open-end management investment company not
distributed or managed by MFD or its affiliates if: (i) the redeemed shares were
subject to an initial sales charge or a deferred sales charge (whether or not
actually imposed); (ii) such redemption has occurred no more than 90 days prior
to the purchase of Class A shares of the Fund; and (iii) the Fund, MFD or its
affiliates have not agreed with such company or its affiliates, formally or
informally, to sell Class A shares at net asset value or provide any other
incentive with respect to such redemption and sale. Class A shares of the Fund
may also be sold at net asset value where the amount invested represents
redemption proceeds from the MFS Fixed Fund. In addition, Class A shares of the
Fund may be sold at net asset value in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies. Insurance company separate accounts may also purchase Class A shares
of the Fund at their net asset value. Class A shares of the Fund may be
purchased at net asset value by Retirement Plans whose third party
administrators have entered into an administrative services agreement with MFD
or one or more of its affiliates to perform certain administrative services,
subject to certain operational requirements specified from time to time by MFD
or one or more of its affiliates. Class A shares of the Fund may be purchased at
net asset value through certain broker-dealers and other financial institutions
which have entered into an agreement with MFD which includes a requirement that
such shares be sold for the benefit of clients participating in a "wrap account"
or a similar progam under which such clients pay a fee to such broker-dealer or
other financial institution.
Class A shares of the Fund may be purchased at net asset value by certain
Retirement Plans subject to the Employee Retirement Income Security Act of 1974,
as amended, subject to the following:
(i) the sponsoring organization must demonstrate to the satisfaction of MFD
that either (a) the employer has at least 25 employees or (b) the aggregate
purchases by the Retirement Plan of Class A shares of the MFS Funds will be
in an amount of at least $250,000 within a reasonable period of time, as
determined by MFD in its sole discretion; and
(ii) a CDSC of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.
Dealers who initiate and are responsible for purchases of Class A shares of the
Fund in this manner will be paid a commission by MFD, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, MFD may pay a commission, on sales in excess of $5 million to certain
retirement plans, of 1.00% to certain dealers which, at MFD's invitation, enter
into an agreement with MFD in which the dealer agrees to return any commission
paid to it on the sale (or on a pro rata portion thereof) if the shareholder
redeems his or her shares within a period of time after purchase as specified by
MFD. Purchases of $1 million or more for each shareholder account will be
aggregated over a 12-month period (commencing from the date of the first such
purchase) for purposes of determining the level of commissions to be paid during
that period with respect to such account.
Class A shares of the Fund may be purchased at net asset value by Retirement
Plans through certain broker-dealers and other financial institutions which have
entered into an agreement with MFD which includes certain minimum size
qualifications for such retirement plans and provides that the broker-dealer or
other financial institution will perform certain administrative services with
respect to the plan's account. Class A shares of the Fund may be sold at net
asset value through the automatic reinvestment of Class A and Class B
distributions which constitute required withdrawals from qualified Retirement
Plans. Furthermore, Class A shares of the Fund may be sold at net asset value
through the automatic reinvestment of distributions of dividends and capital
gains of other MFS Funds pursuant to the Distribution Investment Program (see
"Shareholder Services" in the Statement of Additional Information).
CLASS B SHARES: Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC as follows:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
---------------- --------------
First ................................................ 4%
Second ............................................... 4%
Third ................................................ 3%
Fourth ............................................... 3%
Fifth ................................................ 2%
Sixth ................................................ 1%
Seventh and following ................................ 0%
----------
For Class B shares purchased prior to January 1, 1993, the Fund imposes a CDSC
as a percentage of the original purchase price or redemption proceeds as
applicable:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First ................................................ 6%
Second ............................................... 5%
Third ................................................ 4%
Fourth ............................................... 3%
Fifth ................................................ 2%
Sixth ................................................ 1%
Seventh and following ................................ 0%
No CDSC is paid upon an exchange of shares. For purposes of calculating the
CDSC upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. See "Redemptions and Repurchases --
Contingent Deferred Sales Charge" for further discussion of the CDSC.
The CDSC on Class B shares will be waived upon the death or disability (as
defined in section 72(m)(7) of the Code) of any investor, provided the account
is registered (i) in the case of a deceased individual, solely in the deceased
individual's name, (ii) in the case of a disabled individual, solely or jointly
in the disabled individual's name or (iii) in the name of a living trust for the
benefit of the deceased or disabled individual. The CDSC on Class B shares will
also be waived in the case of redemptions of shares of the Fund pursuant to a
systematic withdrawal plan. In addition, the CDSC on Class B shares will be
waived in the case of distributions from an IRA, SAR-SEP or any other retirement
plan qualified under sections 401(a) or 403(b) of the Code, due to death or
disability, or in the case of required minimum distributions from any such
retirement plan due to attainment of age 70 1/2. The CDSC on Class B shares will
be waived in the case of distributions from a Retirement Plan due to (i) returns
of excess contribution to the plan, (ii) retirement of a participant in the
plan, (iii) a loan from the plan (repayments of loans, however, will constitute
new sales for purposes of assessing the CDSC), (iv) "financial hardship" of the
participant in the plan, as that term is defined in Treasury Regulation
1.401(k)-1(d)(2), as amended from time to time; and (v) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the plan). The CDSC on Class B shares will also be waived
upon redemptions by (i) officers of the Fund, (ii) any of the subsidiary
companies of Sun Life, (iii) eligible Directors, officers, employees (including
retired and former employees) and agents of MFS, Sun Life or any of their
subsidiary companies, (iv) any trust, pension, profit-sharing or any other
benefit plan for such persons, (v) any trustees and retired trustees of any
investment company for which MFD serves as distributor or principal underwriter,
and (vi) certain immediate family members of such individuals and their spouses,
provided in each case that the shares will not be resold except to the Fund. The
CDSC on Class B shares will also be waived in the case of redemptions by any
employee or registered representative of any dealer or other financial
institutions which has a sales agreement with MFD, by certain family members of
any such employee or representative and their spouses or by any trust, pension,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative and by clients of MFS Asset Management, Inc. A Retirement Plan
that has invested its assets in Class B shares of one or more of the MFS Funds
for more than 10 years from the later to occur of (i) January 1, 1993 or (ii)
the date the Retirement Plan first invests its assets in Class B shares of one
or more of the funds in the MFS Funds will have the CDSC on Class B shares
waived in the case of a redemption of all the Retirement Plan's shares
(including shares of any other class) in all MFS Funds (i.e., all the assets of
the Retirement Plan invested in the MFS Funds are withdrawn), except that if,
immediately prior to the redemption, the aggregate amount invested by the
Retirement Plan in Class B shares of the MFS Funds (excluding the reinvestment
of distributions) during the prior four year period equals 50% or more of the
total value of the Retirement Plan's assets in the MFS Funds, then the CDSC will
not be waived. The CDSC on Class B shares will be waived upon redemption by a
Retirement Plan where the redemption proceeds are used to pay expenses of the
Retirement Plan or certain expenses of participants under the Retirement Plan
(e.g., participant account fees), provided that the Retirement Plan's sponsor
subscribes to the MFS FUNDamental 401(k) Plan(sm) or another similar
recordkeeping system made available by the Shareholder Servicing Agent. The CDSC
on Class B shares will be waived upon the transfer of registration from shares
held by a Retirement Plan through a single account maintained by the Shareholder
Servicing Agent to multiple Class B share accounts provided that the Retirement
Plan's sponsor subscribes to the MFS FUNDamental 401(k) Plan (sm) or another
similar recordkeeping system made available by the Shareholder Servicing Agent.
The CDSC on Class B shares may also be waived in connection with the acquisition
or liquidation of the assets of other investment companies or personal holding
companies.
CONVERSION OF CLASS B SHARES: Class B shares of the Fund that remain outstanding
for approximately eight years will convert to Class A shares of the Fund. Shares
purchased through the reinvestment of distributions paid in respect of Class B
shares will be treated as Class B shares for purposes of the payment of the
distribution and service fees under the Distribution Plan applicable to Class B
shares. However, for purposes of conversion to Class A shares, all shares in a
shareholder's account that were purchased through the reinvestment of dividends
and distributions paid in respect of Class B shares (and which have not
converted to Class A shares as provided in the following sentence) will be held
in a separate sub-account. Each time any Class B shares in the shareholder's
account (other than those in the sub-account) convert to Class A shares, a
portion of the Class B shares then in the sub-account will also convert to Class
A shares. The portion will be determined by the ratio that the shareholder's
Class B shares not acquired through reinvestment of dividends and distributions
that are converting to Class A shares bear to the shareholder's total Class B
shares not acquired through reinvestment. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that such conversion will not
constitute a taxable event for Federal tax purposes. There can be no assurance
that such ruling or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be subject to higher
expenses than Class A shares for an indefinite period.
CLASS C SHARES: Class C shares of the Fund are offered at net asset value
without an initial sales charge or a CDSC. Class C shares do not convert to any
other class of shares of the Fund. The maximum investment in Class C shares that
may be made is $5,000,000 per transaction.
Class C shares are not currently available for purchase by any Retirement Plan
if the Retirement Plan and/or the sponsoring organization subscribe to the MFS
FUNDamental 401(k) Plan or another similar 401(a) or 403(b) recordkeeping
program made available by the Shareholder Servicing Agent.
GENERAL: Except as described below, the minimum initial investment is $1,000 per
account and the minimum additional investment is $50 per account. Accounts being
established for monthly automatic investments and under payroll savings programs
and tax-deferred retirement programs (other than IRAs) involving the submission
of investments by means of group remittal statements are subject to a $50
minimum on initial and additional investments per account. The minimum initial
investment for IRAs is $250 per account and the minimum additional investment is
$50 per account. Accounts being established for participation in the Automatic
Exchange Plan are subject to a $50 minimum on initial and additional investments
per account. There are also other limited exceptions to these minimums for
certain tax-deferred retirement programs. Any minimums may be changed at any
time at the discretion of MFD. The Fund reserves the right to cease offering its
shares at any time.
For shareholders who elect to participate in certain investment programs (e.g.,
the Automatic Investment Plan) or other shareholder services, MFD or its
affiliates may either (i) give a gift of nominal value, such as a hand-held
calculator, or (ii) make a nominal charitable contribution on their behalf.
A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from the
Fund (such as Right of Accumulation, Letter of Intent and certain recordkeeping
services) that the Fund ordinarily provides.
Purchases and exchanges should be made for investment purposes only. The Fund
and MFD each reserve the right to reject any specific purchase order or to
restrict purchases by a particular purchaser (or group of related purchasers).
The Fund or MFD may reject or restrict any purchases by a particular purchaser
or group, for example, when such purchase is contrary to the best interests of
Fund's other shareholders or otherwise would disrupt the management of the Fund.
MFD may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by MFD) which follow a
timing pattern, and with individuals or entities acting on such shareholders'
behalf (collectively, "market timers"), setting forth the terms, procedures and
restrictions with respect to such exchanges. In the absence of such an
agreement, it is the policy of the Fund and MFD to reject or restrict purchases
by market timers if (i) more than two exchange purchases are effected in a timed
account in the same calendar quarter or (ii) a purchase would result in shares
being held in timed accounts by market timers representing more than (x) one
percent of the Fund's net assets or (y) specified dollar amounts in the case of
certain MFS Funds which may include the Fund and which may change from time to
time. The Fund and MFD each reserve the right to request market timers to redeem
their shares at net asset value, less any applicable CDSC, if either of these
restrictions is violated.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A, Class B, and Class C shares. In
some instances, promotional incentives to dealers may be offered only to certain
dealers who have sold or may sell significant amounts of Fund shares. From time
to time, MFD may pay dealers 100% of the applicable sales charge on sales of
Class A shares of certain specified MFS Funds sold by such dealer during a
specified sales period. In addition, MFD or its affiliates may, from time to
time, pay dealers an additional commission equal to 0.50% of the net asset value
of all of the Class B shares of certain specified MFS Funds sold by such dealer
during a specified sales period. In addition, from time to time, MFD, at its
expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell shares of the Fund. The staff
of the SEC has indicated that dealers who receive more than 90% of the sales
charge may be considered underwriters. Such concessions provided by MFD may
include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives, payment for travel expenses, including lodging, incurred by
registered representatives and members of their families or other invited guests
to various locations for such seminars or training programs, seminars for the
public, advertising and sales campaigns regarding one or more MFS Funds, and/or
other dealer-sponsored events. In some instances, these concessions may be
offered to dealers or only to certain dealers who have sold or may sell, during
specified periods, certain minimum amounts of shares of the Fund. From time to
time, MFD may make expense reimbursements for special training of a dealer's
registered representatives in group meetings or to help pay the expenses of
sales contests. Other concessions may be offered to the extent not prohibited by
the laws of the state or any self-regulatory agency, such as the NASD.
The Glass-Steagall Act prohibits national banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of the
prohibition has not been clearly defined, MFD believes that such Act should not
preclude banks from entering into agency agreements with MFD (as described
above). If, however, a bank were prohibited from so acting, the Trustees would
consider what actions, if any, would be necessary to continue to provide
efficient and effective shareholder services. It is not expected that
shareholders would suffer any adverse financial consequence as a result of these
occurrences. State laws on this issue may differ from the interpretation of
federal law expressed herein. In addition, banks and financial institutions may
be required to register as broker-dealers pursuant to state securities laws.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged at net asset value for shares of the same
class of any of the other MFS Funds (if available for sale). In addition, Class
C shares may be exchanged at net asset value for shares of MFS Money Market
Fund. Shares of one class may not be exchanged for shares of any other class.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received for an established account by the Shareholder
Servicing Agent in proper form (i.e., if in writing -- signed by the record
owner(s) exactly as the shares are registered; if by telephone -- proper account
identification is given by the dealer or shareholder of record) and each
exchange must involve either shares having an aggregate value of at least $1,000
($50 in the case of retirement plan participants whose sponsoring organizations
subscribe to the MFS FUNDamental 401(k) Plan or another similar 401(k)
recordkeeping system made available by the Shareholder Servicing Agent) or all
the shares in the account. If an Exchange Request is received by the Shareholder
Servicing Agent on any business day prior to the close of regular trading on the
Exchange, the exchange usually will occur on that day if all the requirements
set forth above have been complied with at that time. No more than five
exchanges may be made in any one Exchange Request by telephone. Additional
information concerning this exchange privilege and prospectuses for any of the
other MFS Funds may be obtained from investment dealers or the Shareholder
Servicing Agent. A shareholder should read the prospectus of the other MFS Fund
and consider the differences in objectives and policies before making any
exchange. For federal and (generally) state income tax purposes, an exchange is
treated as a sale of the shares exchanged and, therefore, an exchange could
result in a gain or loss to the shareholder making the exchange. Exchanges by
telephone are automatically available to most non-retirement plan accounts and
certain retirement plan accounts. For further information regarding exchanges by
telephone see "Redemptions By Telephone." The exchange privilege (or any aspect
of it) may be changed or discontinued and is subject to certain limitations,
including certain restrictions on purchases by market timers. Special
procedures, privileges and restrictions with respect to exchanges may apply to
market timers who enter into an agreement with MFD, as set forth in such
agreement (see "Purchases").
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which the Fund is open for business by redeeming shares at their net
asset value or by selling such shares to the Fund through a dealer (a
repurchase). Since the net asset value of shares of the account fluctuates,
redemptions or repurchases, which are taxable transactions, are likely to result
in gains or losses to the shareholder. When a shareholder withdraws an amount
from his account, the shareholder is deemed to have tendered for redemption a
sufficient number of full and fractional shares in his account to cover the
amount withdrawn. The proceeds of a redemption (except, in certain cases,
redemptions of Class A or Class C shares made by check, see below) or repurchase
will normally be available within seven days, except that for shares purchased,
or received in exchange for shares purchased, by check (including certified
checks or cashier's checks), payment of redemption proceeds may be delayed for
up to 15 days from the purchase date in an effort to assure that such check has
cleared. Payment of redemption proceeds may be delayed for up to seven days from
the redemption date if the Fund determines that such a delay would be in the
best interest of all its shareholders.
A. REDEMPTION BY MAIL -- Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption, or letter of instruction, together with his share
certificates (if any were issued) all in "good order" for transfer. "Good order"
generally means that the stock power, written request for redemption, letter of
instruction or certificate must be endorsed by the record owner(s) exactly as
the shares are registered and the signature(s) must be guaranteed in the manner
set forth below under the caption "Signature Guarantee." In addition, in some
cases, "good order" may require the furnishing of additional documents. The
Shareholder Servicing Agent may make certain de minimis exceptions to the above
requirements for redemption. Within seven days after receipt of a redemption
request in "good order" by the Shareholder Servicing Agent, the Fund will make
payment in cash of the net asset value of the shares next determined after such
redemption request was received, reduced by the amount of any applicable CDSC
described above and the amount of any income tax required to be withheld, except
during any period in which the right of redemption is suspended or date of
payment is postponed because the Exchange is closed or trading on the Exchange
is restricted, or, to the extent otherwise permitted by the 1940 Act, if an
emergency exists (see "Tax Status").
B. REDEMPTION BY TELEPHONE -- Each Class A shareholder may redeem an amount from
his account by telephoning the Shareholder Servicing Agent toll-free at (800)
225-2606. Shareholders wishing to avail themselves of this telephone redemption
privilege must so elect on their Account Application, designate thereon a
commercial bank and account number to receive the proceeds of such redemption,
and sign the Account Application Form with the signature(s) guaranteed in the
manner set forth below under the caption "Signature Guarantee." The proceeds of
such a redemption, reduced by any applicable CDSC described above and the amount
of any income tax required to be withheld, are mailed by check to the designated
account, without charge. As a special service, investors may arrange to have
proceeds in excess of $1,000 wired in federal funds to the designated account.
If a telephone redemption request is received by the Shareholder Servicing Agent
by the close of regular trading on the Exchange on any business day, shares will
be redeemed at the closing net asset value of the shares on that day. Subject to
the conditions described in this section, proceeds of a redemption are normally
mailed or wired on the next business day following the date of receipt of the
order for redemption. The Shareholder Servicing Agent will not be responsible
for any losses resulting from unauthorized telephone transactions if it follows
reasonable procedures designed to verify the identify of the caller. The
Shareholder Servicing Agent will request personal or other information from the
caller, and will normally also record calls. Shareholders should verify the
accuracy of confirmation statements immediately after their receipt.
C. REPURCHASE THROUGH A DEALER -- If a shareholder desires to sell his shares at
their net asset value through his securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. IF THE DEALER RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE
CLOSE OF REGULAR TRADING ON THE EXCHANGE AND COMMUNICATES IT TO MFD BEFORE THE
CLOSE OF BUSINESS ON THE SAME DAY, THE SHAREHOLDER WILL RECEIVE THE NET ASSET
VALUE CALCULATED ON THAT DAY.
D. REDEMPTION BY CHECK -- Only Class A and Class C shares may be redeemed by
check. A shareholder owning Class A or Class C shares of the Fund may elect to
have a special account with State Street Bank and Trust Company (the "Bank") for
the purpose of redeeming Class A or Class C shares from his or her account by
check. The Bank will provide each Class A and Class C shareholder, upon request,
with forms of checks drawn on the Bank. Only shareholders having accounts in
which no share certificates have been issued will be permitted to redeem shares
by check. Checks may be made payable in any amount not less than $500.
Shareholders wishing to avail themselves of this redemption by check privilege
should so request on their Account Application, must execute signature cards
(for additional information, see the Account Application) with signature(s)
guaranteed in the manner set forth under the caption "Signature Guarantee," and
must return any Class A or Class C share certificates issued to them. Additional
documentation will be required from corporations, partnerships, fiduciaries or
other such institutional investors. All checks must be signed by the
shareholder(s) of record exactly as the account is registered before the Bank
will honor them. The shareholders of joint accounts may authorize each
shareholder to redeem by check. The check may not draw on monthly dividends
which have been declared but not distributed. SHAREHOLDERS WHO PURCHASE CLASS A
OR CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS OR CASHIER'S CHECKS) MAY
WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY HAVE BEEN ON THE FUND'S BOOKS
FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO THE BANK FOR PAYMENT, A
SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL BE REDEEMED TO COVER THE
AMOUNT OF THE CHECK, ANY APPLICABLE CDSC (IN THE CASE OF CLASS A SHARES) AND THE
AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD. IF THE AMOUNT OF THE CHECK
PLUS ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE
WITHHELD IS GREATER THAN THE VALUE OF THE CLASS A OR CLASS C SHARES HELD IN THE
SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND THE SHAREHOLDER
MAY BE SUBJECT TO EXTRA CHARGES. TO AVOID DISHONOR OF CHECKS DUE TO FLUCTUATION
IN ACCOUNT VALUE, SHAREHOLDERS ARE ADVISED AGAINST REDEEMING ALL OR MOST OF
THEIR ACCOUNT BY CHECK. Checks should not be used to close a Fund account
because when the check is written, the shareholder will not know the exact total
value of the account on the day the check clears. There is presently no charge
to the shareholder for the maintenance of this special account or for the
clearance of any checks, but the Fund and the Bank reserve the right to impose
such charges or to modify or terminate the redemption-by-check privilege at any
time.
GENERAL: Shareholders of the Fund who have redeemed their shares have a one-time
right to reinvest the redemption proceeds in the same class of shares of any of
the MFS Funds (if shares of such Fund are available for sale) at net asset value
(with a credit for any CDSC paid) within 90 days of the redemption pursuant to
the Reinstatement Privilege. If the shares credited for any CDSC paid are then
redeemed within six years of the initial purchase in the case of Class B shares,
or within 12 months of the initial purchase for certain Class A share purchases,
a CDSC will be imposed upon redemption. Such purchases under the Reinstatement
Privilege are subject to all limitations in the Statement of Additional
Information regarding this privilege.
Subject to the Fund's compliance with applicable regulations, the Fund has
reserved the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder receives a distribution in kind, the
shareholder could incur brokerage or transaction charges in converting the
securities to cash.
Due to the relatively high cost of maintaining small accounts, the Fund reserves
the right to redeem shares in any account for their then-current value (which
will be promptly paid to the shareholder) if at any time the total investment in
such account drops below $500 because of redemptions, except in the case of
accounts being established for monthly automatic investments and certain payroll
savings programs, Automatic Exchange Plan accounts, and tax-deferred retirement
plans, for which there is a lower minimum investment requirement. See
"Purchases." Shareholders will be notified that the value of their account is
less than the minimum investment requirement and allowed 60 days to make an
additional investment before the redemption is processed. No CDSC will be
imposed with respect to such involuntary redemptions.
SIGNATURE GUARANTEE: In order to protect shareholders to the greatest extent
possible against fraud, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent.
CONTINGENT DEFERRED SALES CHARGE: Investments ("Direct Purchases") in Class A or
Class B shares will be subject to a CDSC for a period of 12 months (in the case
of purchases of $1 million or more of Class A shares) or six years (in the case
of purchases of Class B shares). Purchases of Class A shares made during a
calendar month, regardless of when during the month the investment occurred,
will age one month on the last day of the month and each subsequent month. Class
B shares purchased on or after January 1, 1993 will be aggregated on a calendar
month basis -- all transactions made during a calendar month, regardless of when
during the month they have occurred, will age one year at the close of business
on the last day of such month in the following calendar year and each subsequent
year. For Class B shares of the Fund purchased prior to January 1, 1993,
transactions will be aggregated on a calendar year basis -- all transactions
made during a calendar year, regardless of when during the year they have
occurred, will age one year at the close of business on December 31 of that year
and each subsequent year. At the time of a redemption, the amount by which the
value of a shareholder's account for a particular class represented by Direct
Purchases exceeds the sum of the six calendar year aggregations (12 months in
the case of purchase of $1 million or more of Class A shares) of Direct
Purchases may be redeemed without charge ("Free Amount"). Moreover, no CDSC is
ever assessed on additional shares acquired through the automatic reinvestment
of dividends or capital gain distributions ("Reinvested Shares").
Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC, and (ii) the amount of the redemption
equal to the then-current value of Reinvested Shares is not subject to the CDSC,
but (iii) any amount of redemption in excess of the aggregate of the
then-current value of Reinvested Shares and the Free Amount is subject to a
CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible rate.
The CDSC to be imposed upon redemptions will be calculated as set forth in
"Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except that, with respect to transfers of registration to an IRA
rollover account, the CDSC will be waived if the shares being reregistered would
have been eligible for a CDSC waiver had they been redeemed.
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (the "Rule"), after having concluded that there is a reasonable
likelihood that the plans would benefit the Fund and its shareholders.
CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the
Fund will pay MFD a distribution/service fee aggregating up to (but not
necessarily all of) 0.35% of the average daily net assets attributable to Class
A shares annually in order that MFD may pay expenses on behalf of the Fund
related to the distribution and servicing of Class A shares. The expenses to be
paid by MFD on behalf of the Fund include a service fee to securities dealers
which enter into a sales agreement with MFD of up to 0.25% per annum of the
Fund's average daily net assets attributable to Class A shares that are owned by
investors for whom such securities dealer is the holder or dealer of record.
This fee is intended to be partial consideration for all personal services
and/or account maintenance services rendered by the dealer with respect to Class
A shares. MFD may from time to time reduce the amount of the service fee paid
for shares sold prior to a certain date. MFD may also retain a distribution fee
of 0.10% per annum of the Fund's average daily net assets attributable to Class
A shares as partial consideration for services performed and expenses incurred
in the performance of MFD's obligations under its distribution agreement with
the Fund. MFD, however, is currently waiving this 0.10% per annum distribution
fee and will not in the future accept payment of this fee unless it first
obtains the approval of the Board of Trustees. In addition, to the extent that
the aggregate of the foregoing fees does not exceed 0.35% per annum of the
average daily net assets of the Fund attributable to Class A shares, the Fund is
permitted to pay other distribution-related expenses, including commissions to
dealers and payments to wholesalers employed by MFD for sales at or above a
certain dollar level. Service fee payments under the Class A Distribution Plan
have been reduced for an indefinite period of time to 0.15% of the net assets of
the Fund attributable to Class A shares. This reduction may be amended or
terminated at any time without notice to shareholders. Fees payable under the
Class A Distribution Plan are charged to, and therefore reduce, income allocated
to Class A shares. Service fees may be reduced for a securities dealer that is
the holder or dealer of record for an investor who owns shares of the Fund
having a net asset value at or above a certain dollar level. Dealers may from
time to time be required to meet certain criteria in order to receive service
fees. MFD or its affiliates are entitled to retain all service fees payable
under the Class A Distribution Plan for which there is no dealer of record or
for which qualification standards have not been met as partial consideration for
personal services and/or account maintenance services performed by MFD or its
affiliates to shareholder accounts. Certain banks and other financial
institutions that have agency agreements with MFD will receive service fees that
are the same as service fees to dealers.
CLASS B DISTRIBUTION PLAN. The Class B Distribution Plan provides that the
Fund will pay MFD a daily distribution fee equal on an annual basis to 0.75% of
the Fund's average daily net assets attributable to Class B shares and will pay
MFD a service fee of up to 0.25% per annum of the Fund's average daily net
assets attributable to Class B shares (which MFD will in turn pay to securities
dealers which enter into a sales agreement with MFD at a rate of up to 0.25% per
annum of the Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be additional consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to Class B shares. Fees payable under the Class B Distribution Plan
are charged to, and therefore reduce, income allocated to Class B shares. Except
in the case of the first year service fee, the service fee is reduced to 0.15%
of the Fund's average daily net assets attributable to Class B shares that are
owned by investors for whom that securities dealer is the holder or dealer of
record. This reduction may be amended or terminated without notice to
shareholders. The first year service fee will be paid as noted below. The Class
B Distribution Plan also provides that MFD will receive all CDSCs attributable
to Class B shares (see "Redemptions and Repurchases" above) which do not reduce
the distribution fee. MFD will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee at a rate equal to 0.25% per annum
of the purchase price of such shares and, as compensation therefor, MFD may
retain the service fee paid by the Fund with respect to such shares for the
first year after purchase. Therefore, the total amount paid to a dealer upon the
sale of shares is 4.00% of the purchase price of the shares (commission rate of
3.75% plus service fee equal to 0.25% of the purchase price). Dealers will
become eligible for additional service fees with respect to such shares
commencing in the 13th month following the purchase. Dealers may from time to
time be required to meet certain criteria in order to receive service fees. MFD
or its affiliates are entitled to retain all service fees payable under the
Class B Distribution Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by MFD or its affiliates
to shareholder accounts. The purpose of the distribution fee payments to MFD
under the Class B Distribution Plan is to compensate MFD for its distribution
services to the Fund. Since MFD's compensation is not directly tied to its
expenses, the amount of compensation received by MFD during any year may be more
or less than its actual expenses. For this reason, this type of distribution fee
arrangement is characterized by the staff of the SEC as being of the
"compensation" variety. However, the Fund is not liable for any expenses
incurred by MFD in excess of the amount of compensation it receives. The
expenses incurred by MFD, including commissions to dealers, are likely to be
greater than the distribution fees for the next several years, but thereafter
such expenses may be less than the amount of the distribution fees. Certain
banks and other financial institutions that have agency agreements with MFD will
receive agency transaction and service fees that are the same as commissions and
service fees to dealers.
CLASS C DISTRIBUTION PLAN. The Class C Distribution Plan provides that the
Fund will pay MFD a distribution fee of up to 0.75% per annum of the Fund's
average daily net assets attributable to Class C shares and will annually pay
MFD a service fee of up to 0.25% of the Fund's average daily net assets
attributable to Class C shares (which MFD in turn pays to securities dealers
which enter into a sales agreement with MFD at a rate of up to 0.25% per annum
of the Fund's daily net assets attributable to Class C shares owned by investors
for whom that securities dealer is the holder or dealer of record). The
distribution/service fees attributable to Class C shares are designed to permit
an investor to purchase such shares through a broker-dealer without the
assessment of an initial sales charge or a CDSC while allowing MFD to compensate
broker-dealers in connection with the sale of such shares. The service fee is
intended to be additional consideration for all personal services and/or account
maintenance services rendered with respect to Class C shares. MFD or its
affiliates are entitled to retain all service fees payable under the Class C
Distribution Plan with respect to accounts for which there is no dealer of
record as partial consideration for personal services and/or account maintenance
services performed by MFD or its affiliates for shareholder accounts. The
purpose of the distribution payments to MFD under the Class C Distribution Plan
is to compensate MFD for its distribution services to the Fund. Distribution fee
payments under the Plan will be used by MFD to pay securities dealers a
distribution fee in an amount equal on an annual basis to 0.75% of the Fund's
average daily net assets attributable to Class C shares owned by investors for
whom that securities dealer is the holder or dealer of record. (Therefore, the
total amount of distribution/ service fees paid to a dealer on an annual basis
is 1.00% of the Fund's average daily net assets attributable to Class C shares
owned by investors for whom the securities dealer is the holder or dealer of
record.) MFD also pays expenses of printing prospectuses and reports used for
sales purposes, expenses with respect to the preparation and printing of sales
literature and other distribution-related expenses, including, without
limitation, the compensation of personnel and all costs of travel, office
expense and equipment. Since MFD's compensation is not directly tied to its
expenses, the amount of compensation received by MFD during any year may be more
or less than its actual expenses. For this reason, this type of distribution fee
arrangement is characterized by the staff of the SEC as being of the
"compensation" variety. However, the Fund is not liable for any expenses
incurred by MFD in excess of the amount of compensation it receives. Certain
banks and other financial institutions that have agency agreements with MFD will
receive agency transaction and service fees that are the same as distribution
and service fees to dealers. Fees payable under the Class C Distribution Plan
are charged to, and therefore reduce, income allocated to Class C shares.
DISTRIBUTIONS
Substantially all of the Fund's net investment income for any calendar year is
declared as dividends daily and paid to its shareholders as dividends on a
monthly basis. Dividends generally are distributed on the first business day of
the following month. The Fund may make one or more distributions during the
calendar year to its shareholders from any long-term capital gains, and may also
make one or more distributions during the calendar year to its shareholders from
short-term capital gains. Shareholders may elect to receive dividends and
capital gain distributions in either cash or additional shares of the same class
to which a distribution is made. See "Tax Status" and "Shareholder Services --
Distribution Options" below. Distributions paid by the Fund with respect to
Class A shares will generally be greater than those paid with respect to Class B
and Class C shares because expenses attributable to Class B and Class C shares
will generally be higher.
TAX STATUS
In order to minimize the taxes the Fund would otherwise be required to pay, the
Fund has elected to be treated and intends to qualify each year as a "regulated
investment company" under Subchapter M of the Code, and to make distributions to
its shareholders in accordance with the timing requirements set out in the Code.
It is expected that the Fund will not be required to pay entity level federal
income or excise taxes.
Shareholders of the Fund normally will have to pay federal income taxes, and any
state or local taxes, on the dividends and capital gain distributions they
receive from the Fund, whether paid in cash or additional shares. The Fund
expects that none of its distributions will be eligible for the
dividends-received deduction for corporations. A statement setting forth the
federal income tax status of all dividends and distributions for each calendar
year, including the portion taxable as ordinary income, the portion taxable as
long-term capital gain, the portion, if any, representing a return of capital
(which is generally free of current taxes but results in a basis reduction), the
portion representing interest on U.S. government obligations and the amount, if
any, of federal income tax withheld, will be sent to each shareholder promptly
after the end of such year.
Certain Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before the Fund makes a distribution of net
capital gains or net short-term capital gains may thus pay the full price for
the shares and then effectively receive a portion of the purchase price back as
a taxable distribution.
The Fund intends to withhold U.S. federal income tax at the rate of 30% on
dividends and other payments that are subject to such withholding and that are
made to persons who are neither citizens nor residents of the U.S., regardless
of whether a lower rate may be permitted under an applicable treaty. The Fund is
also required in certain circumstances to apply backup withholding of 31% of
taxable dividends and certain redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. However, backup withholding will not
be applied to payments that have been subject to 30% withholding.
Prospective investors should read the Fund's Account Application for additional
information regarding backup withholding of federal income tax and should
consult their own tax advisers as to the tax consequences to them of an
investment in the Fund.
STATE AND LOCAL TAXES. Distributions of the Fund which are derived from
interest on obligations of the U.S. Government and certain of its agencies,
authorities and instrumentalities (but generally not from capital gains realized
upon the disposition of such obligations) may be exempt from state and local
taxes in certain states. The Fund intends to advise shareholders of the
proportion of its distributions which consists of such interest. Residents of
certain states may be subject to an intangibles tax or a personal property tax
on all or a portion of the value of their shares. Shareholders should consult
their tax advisers regarding the possible exclusion of such portion of their
distributions from the Fund for state and local income tax purposes.
NET ASSET VALUE
The net asset value per share of each class of shares of the Fund is determined
each day during which the Exchange is open for trading. This determination is
made once each day as of the close of regular trading on the Exchange by
deducting the amount of the liabilities attributable to the class from the value
of the assets attributable to the class and dividing the difference by the
number of shares of the class outstanding. Assets in the Fund's portfolio are
valued on the basis of their market or other fair value, as described in the
Statement of Additional Information. The net asset value per share of each class
of shares is effective for orders received by the dealer prior to its
calculation and received by MFD prior to the close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has three classes of shares, entitled Class A, Class B and Class C
Shares of Beneficial Interest (without par value). Each share of a class
represents an equal proportionate interest in the Fund with each other share of
that class subject to any liabilities of the particular class. Shareholders are
entitled to one vote for each share held and may vote in the election of
Trustees and on other matters submitted to meetings of shareholders. Each class
of shares of the Fund will vote separately on any material increase in the fees
under its Distribution Plan or on any other matter that affects solely that
class of shares, but will otherwise vote together with all other classes of
shares of the Fund on all other matters. The Fund has reserved the right to
create series of shares and to issue additional classes of shares. Each class of
shares of a series would participate equally in the earnings, dividends and
assets attributable to that class of that particular series. Shareholders of
each series would be entitled to vote separately to approve investment advisory
agreements or changes in investment restrictions, but shares of all series would
vote together in the election of Trustees and selection of accountants. The Fund
does not intend to hold annual shareholder meetings. The Fund's Declaration of
Trust provides that a Trustee may be removed from office in certain instances
(see "Description of Shares, Voting Rights and Liabilities" in the Statement of
Additional Information).
Shares have no pre-emptive or conversion rights (except as set forth above in
"Purchases -- Conversion of Class B Shares"). Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed (e.g., fidelity bonding and errors and omissions insurance)
and the Fund itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of shares and may also quote fund
rankings in the relevant fund category from various sources, such as the Lipper
Analytical Services, Inc. and Wiesenberger Investment Companies Service. Yield
quotations are based on the annualized net investment income per share of each
class over a 30-day period stated as a percent of the maximum public offering
price of the shares of that class on the last day of that period. The yield
calculation for Class B shares assumes no CDSC is paid. The current distribution
rate for each class is generally based upon the total amount of dividends per
share paid by the Fund to shareholders of that class during the past 12 months
and is computed by dividing the amount of such dividends by the maximum public
offering price of that class at the end of such period. Current distribution
rate calculations for Class B shares assume no CDSC is paid. The current
distribution rate differs from the yield calculation because it may include
distributions to shareholders from sources other than dividends and interest,
such as premium income from option writing, short-term capital gains, and return
of invested capital, and is calculated over a different period of time. Total
rate of return quotations reflect the average annual percentage change over
stated periods in the value of an investment in a class of shares of the Fund
made at the maximum public offering price of the shares of that class with all
distributions reinvested and which, if quoted for periods of six years or less,
will give effect to the imposition of the CDSC assessed upon redemptions of the
Fund's Class B shares. Such total rate of return quotations may be accompanied
by quotations which do not reflect the deduction of an initial sales charge and
which will thus be higher. All performance quotations are based on historical
performance and are not intended to indicate future performance. Yield reflects
only net portfolio income as of a stated time and current distribution rate
reflects only the rate of distributions paid by the Fund over a stated period of
time, while total rate of return reflects all components of investment return
over a stated period of time. The Fund's quotations may from time to time be
used in advertisements, shareholder reports or other communications to
shareholders. For a discussion of the manner in which the Fund will calculate
its yield, current distribution rate and total rate of return, see the Statement
of Additional Information. For further information about the Fund's performance
for the fiscal year ended December 31, 1994, please see the Fund's Annual
Report. A copy of the Annual Report may be obtained without charge by contacting
the Shareholder Servicing Agent (see back cover for address and phone number).
In addition to information provided in shareholder reports, the Fund may, in its
discretion, from time to time, make a list of all or a portion of its portfolio
holdings available to investors upon request.
7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund should contact the Shareholder Servicing
Agent (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account.
Cancelled checks, if any, will be sent to shareholders monthly. At the end of
each calendar year, each shareholder will receive information regarding the tax
status of reportable dividends and distributions for that year (see "Tax
Status").
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified;
-- Dividends in cash; capital gain distributions reinvested in additional
shares;
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the last business day of the month. Dividends and
capital gain distributions in amounts less than $10 will automatically be
reinvested in additional shares of the Fund. If a shareholder has elected to
receive dividends and/or capital gain distributions in cash and the postal or
other delivery service is unable to deliver checks to the shareholder's address
of record, such shareholder's distribution option will automatically be
converted to having all dividends and other distributions reinvested in
additional shares. Any request to change a distribution option must be received
by the Shareholder Servicing Agent by the record date for a dividend or
distribution in order to be effective for that dividend or distribution. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the Statement of Additional Information) anticipates purchasing
$50,000 or more of Class A shares of the Fund alone or in combination with
shares of any class of other MFS Funds or the MFS Fixed Fund (a bank collective
investment fund) within a 13-month period (or 36-month period for purchases of
$1 million or more), the shareholder may obtain such shares at the same reduced
sales charge as though the total quantity were invested in one lump sum, subject
to escrow arrangements and the appointment of an attorney for redemptions from
the escrow amount if the intended purchases are not completed, by completing the
Letter of Intent section of the Account Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of any class of shares of that
shareholder in the MFS Funds or the MFS Fixed Fund (a bank collective investment
fund) reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic payments,
as designated on the Account Application and based upon the value of his
account. Each payment under a Systematic Withdrawal Plan (a "SWP") must be at
least $100, except in certain limited circumstances. The aggregate withdrawals
of Class B shares in any year pursuant to a SWP will not be subject to a CDSC
and are generally limited to 10% of the value of the account at the time of the
establishment of the SWP. The CDSC will not be waived in the case of SWP
redemptions of Class A shares which are subject to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds (and, in the case of Class C shares, for shares of MFS Money
Market Fund) if such funds are available for sale under the Automatic Exchange
Plan, a dollar cost averaging program. The Automatic Exchange Plan provides for
automatic monthly or quarterly exchanges of funds from the shareholder's account
in an MFS Fund for investment in the same class of shares of other MFS Funds
selected by the shareholder. Under the Automatic Exchange Plan, exchanges of at
least $50 each may be made to up to four different funds. A shareholder should
consider the objectives and policies of a fund and review its prospectus before
electing to exchange money into such fund through the Automatic Exchange Plan.
No transaction fee is imposed in connection with exchange transactions under the
Automatic Exchange Plan. However, exchanges from MFS Money Market Fund, MFS
Government Money Market Fund or Class A shares of MFS Cash Reserve Fund will be
subject to any applicable sales charge. For federal and (generally) state income
tax purposes, an exchange is treated as a sale of the shares exchanged and,
therefore, could result in a capital gain or loss to the shareholder making the
exchange. See the Statement of Additional Information for further information
concerning the Automatic Exchange Plan. Investors should consult their tax
advisers for information regarding the potential capital gain and loss
consequences of transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of
shares regardless of fluctuating share offering prices, a shareholder should
consider his financial ability to continue his purchases through periods of low
price levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS -- Except as noted under "Purchases -- Class C
Shares," shares of the Fund may be purchased by all types of tax-deferred
retirement plans, including IRAs, SEP-IRA plans, 401(k) plans, 403(b) plans and
other corporate pension and profit-sharing plans. Investors should consult with
their tax advisers before establishing any of the tax-deferred retirement plans
described above.
----------------
The Fund's Statement of Additional Information, dated May 1, 1995, contains more
detailed information about the Fund, including, but not limited to, information
related to: (i) investment objective, policies and restrictions; (ii) Trustees,
officers and investment adviser; (iii) portfolio transactions; (iv) the method
used to calculate performance quotations of the Fund; (v) various services and
privileges provided for the benefit of shareholders; (vi) the Class A, Class B
and Class C Distribution Plans; (vii) determination of net asset value of shares
of the Fund; and (viii) certain voting rights of shareholders.
<PAGE>
APPENDIX A
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES, AUTHORITIES OR INSTRUMENTALITIES
FHA DEBENTURES -- are debentures issued by the Federal Housing Administration
and fully and unconditionally guaranteed by the U.S. Government.
GNMA CERTIFICATES -- are mortgage-backed securities, with timely payment
guaranteed by the full faith and credit of the U.S. Government which represent
partial ownership interests in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is also insured or guaranteed by the Federal
Housing Administration, the Veterans Administration or the Farmers Home
Administration.
FHLMC BONDS -- are bonds issued and guaranteed by the Federal Home Loan Mortgage
Corporation and are not guaranteed by the U.S. Government.
FNMA BONDS -- are bonds issued and guaranteed by the Federal National Mortgage
Association and are not guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and long-term
bonds issued by public housing and urban renewal agencies in connection with
programs administered by the Department of Housing and Urban Development of the
U.S. Government, the payment of which is guaranteed by the full faith and credit
of the U.S. Government.
SBA DEBENTURES -- are debentures issued and guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association and are not guaranteed by the U.S. Government.
TITLE XI BONDS -- are ship financing bonds issued under Title XI of the Merchant
Marine Act of 1936, as amended, and guaranteed by the Maritime Administration of
the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by the
Washington Metropolitan Area Transit Authority and guaranteed by the full faith
and credit of the U.S. Government.
The list of securities set forth above does not purport to be an exhaustive
compilation of all debt obligations issued or guaranteed by U.S. Government
agencies, authorities or instrumentalities. The Fund reserves the right to
invest in debt obligations issued or guaranteed by U.S. Government agencies,
authorities or instrumentalities in addition to those listed above.
<PAGE>
[Logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GOVERNMENT LIMITED
MATURITY FUND
Prospectus
May 1, 1995
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Shareholder Servicing Agent
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll-free: (800) 225-2606
Mailing Address:
P.O. Box 2281
Boston, MA 02107-9906
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
[logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GOVERNMENT LIMITED
MATURITY FUND
500 Boylston Street
Boston, MA 02116
MGL-1 5/95/106.5M 28/228
<PAGE>
[Logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GOVERNMENT STATEMENT OF
LIMITED MATURITY FUND ADDITIONAL INFORMATION
(A Member of the MFS Family of Funds(R)) May 1, 1995
- --------------------------------------------------------------------------------
Page
----
1. Definitions ............................................... 2
2. Investment Objective, Policies and Restrictions ........... 2
3. Management of the Fund .................................... 5
Trustees ............................................... 5
Officers ............................................... 5
Investment Adviser ..................................... 6
Custodian .............................................. 6
Shareholder Servicing Agent ............................ 7
Distributor ............................................ 7
4. Portfolio Transactions and Brokerage Commissions .......... 7
5. Shareholder Services ...................................... 8
Investment and Withdrawal Programs ..................... 8
Exchange Privilege ........................................ 10
Tax-Deferred Retirement Plans ............................. 10
6. Tax Status ................................................... 11
7. Determination of Net Asset Value and Performance ............. 12
8. Distribution Plans ........................................... 13
9. Description of Shares, Voting Rights and Liabilities ......... 15
10. Independent Auditors and Financial Statements ................ 16
Appendix A ................................................... 17
MFS GOVERNMENT LIMITED MATURITY FUND
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information (the "SAI") sets forth information
which may be of interest to investors but which is not necessarily included in
the Fund's Prospectus, dated May 1, 1995. This SAI should be read in conjunction
with the Prospectus, a copy of which may be obtained without charge by
contacting the Shareholder Servicing Agent (see last page for address and phone
number).
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
1. DEFINITIONS
"Fund" -- MFS(R) Government Limited Maturity
Fund, a Massachusetts business
trust. The Fund was known as "MFS
Government Premium Account" until
its name was changed on August 3,
1992, and as "MFS Government
Premium Fund" until its name was
changed on May 1, 1993.
"MFS" or the "Adviser" -- Massachusetts Financial Services
Company, a Delaware corporation.
"MFD" -- MFS Fund Distributors, Inc., a
Delaware corporation.
"Prospectus" -- The Prospectus, dated May 1, 1995,
of the Fund.
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE AND POLICIES. The investment objective and policies of the
Fund are described in the Prospectus and below. The following discussion of the
Fund's investment policies and restrictions supplements and should be read in
conjunction with the information set forth in the "Investment Objective and
Policies" section of the Prospectus.
The Fund may invest in collateralized mortgage obligations, multiclass
pass-through securities issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities and in zero coupon Government
Securities (as defined in the Prospectus).
MORTGAGE PASS-THROUGH SECURITIES: The Fund may invest in mortgage pass-through
securities as described in the Prospectus.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
the Government National Mortgage Association ("GNMA")); or guaranteed by
agencies, authorities or instrumentalities of the U.S. Government (such as the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations).
Interests in pools of mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by prepayments of principal resulting from the
sale, refinancing or foreclosure of the underlying property, net of fees or
costs which may be incurred. Some mortgage pass-through securities (such as
securities issued by the GNMA) are described as "modified pass-through." These
securities entitle the holder to receive all interests and principal payments
owed on the mortgages in the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether the mortgagor actually makes the
payment.
The principal governmental guarantor of mortgage pass-through securities is
GNMA, a wholly owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of Federal Housing Administration ("FHA") insured or Veteran's
Administration ("VA") guaranteed mortgages. These guarantees, however, do not
apply to the market value or yield of mortgage pass-through securities. GNMA
securities are often purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.
Government-related guarantors (i.e., whose guarantees are not backed by the full
faith and credit of the U.S. Government) include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional residential mortgages (i.e., mortgages not insured
or guaranteed by any governmental agency) from a list of approved
seller/servicers which include state and federally-chartered savings and loan
associations, mutual savings banks, commercial banks, credit unions and mortgage
bankers. Pass-through securities issued by FNMA are guaranteed as to timely
payment by FNMA of principal and interest.
FHLMC was created by Congress in 1970 as a corporate instrumentality of the U.S.
Government for the purpose of increasing the availability of mortgage credit for
residential housing. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages (i.e., not federally insured or
guaranteed) from FHLMC's national portfolio. FHLMC guarantees timely payment of
interest and ultimate collection of principal regardless of the status of the
underlying mortgage loans.
REPURCHASE AGREEMENTS: As described in the Prospectus, the Fund may enter into
repurchase agreements only with sellers who are primary reporting dealers that
report to the Federal Reserve Bank of New York and with the 100 largest U.S.
commercial banks. The securities that the Fund purchases and holds through its
agent are Government Securities, the values of 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 Fund,
or the purchase and repurchase prices may be the same, with interest at a
standard rate due to the Fund together with the repurchase price on repurchase.
In either case, the income to the Fund is unrelated to the interest rate on the
Government Securities.
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 Fund will have the right to liquidate the securites. If at the time
the Fund 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 Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
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 Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
"WHEN-ISSUED" SECURITIES: The Fund may purchase securities on a "when-issued" or
on a "forward delivery" basis. When the Fund commits to purchase Government
Securities on a "when- issued" or "forward delivery" basis, it will set up
procedures consistent with Securities and Exchange Commission ("SEC") policies
concerning such purchases. Since those policies currently recommend that an
amount of the Fund's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, the Fund will always have cash,
short-term money market instruments or Government Securities sufficient to cover
any commitments or to limit any potential risk. The Fund does not intend to make
such purchases for speculative purposes. The Fund will only make commitments to
purchase securities on a when-issued or delayed-delivery basis with the
intention of actually acquiring the securities. However, the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. When the time comes to pay for when-issued or
delayed-delivery securities, the Fund will meet its obligations from then
available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued or delayed-delivery
securities themselves (which may have a value greater or less than the Fund's
payment obligation).
MORTGAGE "DOLLAR ROLL" TRANSACTIONS: As described in the Prospectus, the Fund
may enter into mortgage "dollar roll" transactions pursuant to which it sells
mortgage-backed securities for delivery in the future and simultaneously
contracts to repurchase substantially similar securities on a specified future
date. During the roll period, the Fund foregoes principal and interest paid on
the mortgage-backed securities. The Fund is compensated for the lost interest by
the difference between the current sales price and the lower price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. The Fund may also be
compensated by receipt of a commitment fee.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs," which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Collateral underlying CMOs purchased by the
Fund must be Government Securities. Typically, CMOs are collateralized by
certificates issued by GNMA, FNMA or FHLMC (such collateral collectively
hereinafter referred to as "Mortgage Assets"). The Fund may also invest a
portion of its assets in multiclass pass-through securities which are interests
in a trust composed of Mortgage Assets. In the case of the Fund, these Mortgage
Assets must be Government Securities. The Fund may only invest in CMOs and
multiclass pass-through securities which are issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities. Unless the context
indicates otherwise, all references herein to CMOs include multiclass
pass-through securities. Payments of principal of and interest on the Mortgage
Assets, and any reinvestment income thereon, provide the funds to pay debt
service on the CMOs or make scheduled distributions on the multiclass
pass-through securities.
In a CMO, a series of bonds or certificates is usually issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates resulting in a loss of all or part of the premium if any has
been paid. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semiannual basis. The principal of and interest on the Mortgage
Assets may be allocated among the several classes of a series of a CMO in
innumerable ways. In a common structure, payments of principal, including any
principal prepayments, 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.
The Fund may also invest in parallel pay CMOs and Planned Amortization Class
CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of
principal on each payment date to more than one class. 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. PAC Bonds generally require payments of a specified amount of
principal on each payment date. PAC Bonds are always parallel pay CMOs with the
required principal payment on such securities having the highest priority after
interest has been paid to all classes.
LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities. Such loans usually are made only to member banks
of the Federal Reserve System and to member firms (and subsidiaries thereof) of
the New York Stock Exchange (the "Exchange"), and are secured continuously by
collateral in cash, cash equivalents or Government Securities maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Fund would have the right to call a loan and obtain the securities
loaned at any time on customary industry settlement notice (which will not
usually exceed five days). During the existence of a loan, the Fund would
continue to receive the equivalent of the interest paid by the issuer on the
securities loaned and would also receive compensation based on investment of the
collateral. 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 Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which could be earned currently from securities loans
of this type justifies the attendant risk. If the Adviser determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the value of the Fund's total assets.
----------------
PORTFOLIO TRADING: The Fund intends to fully manage its portfolio by buying and
selling Government Securities, as well as holding selected obligations to
maturity. In managing its portfolio the Fund seeks to take advantage of market
developments and yield disparities, which may include use of the following
strategies:
(1) selling one type of Government Security (e.g., Treasury bonds) and
buying another (e.g., GNMA direct pass-through certificates) when disparities
arise in the relative values of each; and
(2) changing from one Government Security to an essentially similar
Government Security when their respective yields are distorted due to market
factors.
The Fund will also use the techniques described above under "Repurchase
Agreements" and " "When-Issued" Securities" to manage its portfolio.
These strategies may result in increases or decreases in the Fund's current
income available for distribution to the Fund's shareholders and in the holding
by the Fund of obligations which sell at moderate to substantial premiums or
discounts from face value. Moreover, if the Fund's expectations of changes in
interest rates or its evaluation of the normal yield relationship between two
obligations proves to be incorrect, the Fund's income, net asset value per share
and potential capital gain may be decreased or its potential capital loss may be
increased.
The Fund will engage in portfolio trading if it believes a transaction net of
costs (including custodian charges) will help in attaining its investment
objective. See "Portfolio Transactions and Brokerage Commissions."
The objective and the policies described above may be changed without
shareholder approval.
INVESTMENT RESTRICTIONS. The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of its
shares (which, as used in this Statement of Additional Information, means the
lesser of (i) more than 50% of the outstanding shares of the Fund (or a class,
as applicable) or (ii) 67% or more of the outstanding shares of the Fund (or a
class, as applicable) present at a meeting if holders of more than 50% of the
outstanding shares of the Fund (or a class, as applicable) are represented at
such meeting in person or by proxy):
The Fund may not:
(1) borrow money or pledge, mortgage or hypothecate in excess of 1/3 of its
assets, and then only as a temporary measure for extraordinary or emergency
purposes or except as contemplated by clause (6) below (the Fund intends to
borrow money only from banks and only to accommodate requests for the
repurchase of shares of the Fund while effecting an orderly liquidation of
portfolio securities) (for the purpose of this restriction, collateral
arrangements with respect to options, Futures Contracts, Options on Futures
Contracts and collateral arrangements with respect to initial and variation
margins are not considered a pledge of assets);
(2) purchase any security or evidence of interest therein on margin, except
that the Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of securities and except that the Fund may
make deposits on margin in connection with Futures Contracts and related
options;
(3) write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent the writing, purchasing and
selling of puts, calls or combinations thereof with respect to Government
Securities and with respect to Futures Contracts or the purchase, ownership,
holding or sale of contracts for the future delivery of fixed income
securities;
(4) underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;
(5) purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell Futures Contracts and related options;
(6) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of the
Fund's total assets (taken at market value) is held as collateral for such
sales at any one time (it is the present intention of management to make such
sales only for the purpose of deferring realization of gain or loss for
Federal income tax purposes; such sales would not be made of securities
subject to outstanding options);
(7) make loans to other persons except through the lending of its portfolio
securities not in excess of 30% of its total assets (taken at market value)
and except through the use of repurchase agreements (for these purposes the
purchase of all or a portion of an issue of debt securities in accordance with
the Fund's investment objective and policies shall not be considered the
making of a loan);
(8) purchase securities of any issuer if such purchase at the time thereof
would cause more than 10% of the voting securities of such issuer to be held
by the Fund;
(9) purchase securities of any issuer if such purchase at the time thereof
would cause more than 5% of the Fund's assets (taken at market value) to be
invested in the securities of such issuer (other than securities or
obligations issued or guaranteed by the United States, any state or political
subdivision thereof, or any political subdivision of any such state, or any
agency or instrumentality of the United States or of any state or of any
political subdivision of any state or the United States); or
(10) issue any senior security (as that term is defined in the Investment
Company Act of 1940 (the "1940 Act")), if such issuance is specifically
prohibited by the 1940 Act or the rules and regulations promulgated thereunder
(for the purpose of this restriction, collateral arrangements with respect to
options, Futures Contracts and Options on Futures Contracts and collateral
arrangements with respect to initial and variation margin are not deemed to be
the issuance of a senior security).
The Fund has also adopted a policy which is fundamental and which provides that
the Fund's assets will be invested in Government Securities and related
repurchase agreements.
The Fund has also adopted the following policies which are not fundamental and
which may be changed without shareholder approval. The Fund will not knowingly
invest in securities which are restricted securities under the Securities Act of
1933, unless the Board of Trustees has determined that such securities are
liquid based upon trading markets for the specific security, if, as a result
thereof, more than 15% of the Fund's total assets (taken at market value) would
be so invested. The Fund will also not invest more than 10% of its assets in
repurchase agreements maturing in more than seven days.
STATE AND FEDERAL RESTRICTIONS: In order to comply with certain state and
federal statutes and policies, the Fund will not, as a matter of operating
policy, (i) invest more than 5% of its total assets at the time of investment in
companies which, including predecessors, have a record of less than three years'
continuous operation, (ii) 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 Fund, or is an officer or Director of
the Adviser if, after the purchase of the securities of such issuer by the Fund,
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, (iii) invest for the purpose of exercising
control or management, (iv) purchase securities issued by any registered
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 Fund shall not purchase the securities of any registered
investment company if such purchase at the time thereof would cause more than
10% of the total assets of the Fund (taken at market value) to be invested in
the securities of such issuers or would cause more than 3% of the outstanding
voting securities of any such issuer to be held by the Fund and, provided
further, that the Fund shall not purchase securities issued by any open-end
investment company, or (v) invest more than 10% of its assets (taken at market
value) in securities (including repurchase agreements maturing in more than
seven days) for which there are no readily available market quotations. These
policies are not fundamental and may be changed by the Fund without shareholder
approval in response to changes in the various state and federal requirements.
APPLICABLITY OF RESTRICTIONS: Except with respect to Investment Restriction (1),
these investment restrictions 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.
3. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. The Adviser is responsible for the investment management of the Fund's
assets, and the officers of the Fund are responsible for its 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
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman
RICHARD B. BAILEY*
Private Investor; Massachusetts Financial Services Company, former Chairman
(until September 30, 1991)
MARSHALL N. COHAN
Private Investor
Address: 2524 Bedford Mews Drive, Wellington, Florida
LAWRENCE H. COHN, M.D.
Brigham and Women's Hospital, Chief of Cardiac Surgery; Harvard Medical School,
Professor of Surgery
Address: 75 Francis Street, Boston, Massachusetts
THE HON. SIR J. DAVID GIBBONS, KBE
Edmund Gibbons Limited, Chief Executive Officer; The Bank of N.T. Butterfield &
Son Ltd., Chairman
Address: 21 Reid Street, Hamilton, Bermuda
ABBY M. O'NEILL
Private Investor; Rockefeller Financial Services, Inc. (investment advisers),
Director
Address: Room 5600, 30 Rockefeller Plaza, New York, New York
WALTER E. ROBB, III
Benchmark Advisors, Inc. (corporate financial consultants), President and
Treasurer
Address: 110 Broad Street, Boston, Massachusetts
ARNOLD D. SCOTT*
Massachusetts Financial Services Company, Senior Executive Vice President and
Secretary
JEFFREY L. SHAMES*
Massachusetts Financial Services Company, President
J. DALE SHERRATT
Insight Resources, Inc. (acquisition planning specialists), President
Address: One Liberty Square, Boston, Massachusetts
WARD SMITH
NACCO Industries (holding company), Chairman (prior to June, 1994); Sundstrand
Corporation (diversified mechanical manufacturer), Director; Society
Corporation (bank holding company) Director (prior to April, 1992); Society
National Bank (commercial bank), Director (prior to April, 1992)
Address: 5875 Landerbrook Drive, Mayfield Heights, Ohio
OFFICERS
W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President
STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, General Counsel
and Assistant Secretary
JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel (since September 1990); associated with a major law firm (prior to
August, 1990)
JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President
- ----------
*"Interested persons" (as defined in the 1940 Act) of the Adviser, whose address
is 500 Boylston Street, Boston, Massachusetts 02116.
Each Trustee and officer holds comparable positions with certain MFS
affiliates or with certain other funds of which MFS or a subsidiary of MFS is
the investment adviser or distributor. Mr. Brodkin, the Chairman of MFD,
Messrs. Shames and Scott, Directors of MFD, and Mr. Cavan, the Secretary of
MFD, hold similar positions with certain other MFS affiliates. Mr. Bailey is a
Director of Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada
(U.S.)"), the corporate parent of MFS.
The Fund pays the compensation of non-interested Trustees (who currently receive
a fee of $1,250 per year plus $225 per meeting and committee meeting attended
together with such Trustees' out-of-pocket expenses) and the Fund has adopted a
retirement plan for non-interested Trustees and Mr. Bailey. Under this plan, a
Trustee will retire upon reaching age 75 and if the Trustee has completed at
least five years of service, he would be entitled to annual payments during his
lifetime of up to 50% of such Trustee's average annual compensation (based on
the three years prior to his retirement) depending on his length of service. A
Trustee may also retire prior to age 75 and receive reduced payments if he has
completed at least five years of service. Under the plan, a Trustee (or his
beneficiaries) will also receive benefits for a period of time in the event the
Trustee is disabled or dies. These benefits will also be based on the Trustee's
average annual compensation and length of service. There is no retirement plan
provided by the Fund for the interested Trustees (except Mr. Bailey). The Fund
will accrue compensation expenses each year to cover current year's service and
amortize past service cost.
Set forth in Appendix A hereto is certain information concerning the cash
compensation paid to non-interested Trustees and Mr. Bailey and benefits
accrued, and estimated benefits payable, under the retirement plan.
As of March 31, 1995, all officers and Trustees as a group owned less than 1% of
the outstanding shares of the Fund.
As of March 31, 1995, Merrill Lynch, Pierce, Fenner and Smith Inc., MFBFX 98437,
P.O. Box 45286, Jacksonville, Florida 32232-5286 was the record owner of
approximately 6.89% of the outstanding Class B shares of the Fund.
The Fund's Declaration of Trust provides that it 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 Fund, unless, as
to liabilities to the Fund or its shareholders, it is finally adjudicated that
they engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or with respect to any
matter, unless it is adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interest of the Fund. In
the case of settlement, such indemnification will not be provided unless it has
been determined pursuant to the Declaration of Trust, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned 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.
The Adviser manages the assets of the Fund pursuant to an Investment Advisory
Agreement, dated August 10, 1988, as amended (the "Advisory Agreement"). The
Adviser provides the Fund with overall investment advisory and administrative
services, as well as general office facilities. Subject to such policies as the
Trustees may determine, the Adviser makes investment decisions for the Fund. For
its services and facilities, the Adviser receives a management fee equal to the
lesser of (i) 0.40% of the Fund's average daily net assets or (ii) 0.38% of the
Fund's average daily net assets plus 5.36% of the Fund's gross income (i.e.,
income other than from the sale of securities, and short term gains from futures
transactions), in each case on an annualized basis for the Fund's then-current
fiscal year. Prior to April 1, 1994, the Adviser received a management fee,
computed and paid monthly, in an amount equal to the sum of 0.38% of the average
daily net assets of the Fund plus 5.36% of the Fund's gross income (i.e., income
other than from the sale of securities, short-term gains from options and
futures transactions and premium income from options written), in each case on
an annualized basis for the Fund's then-current fiscal year. (For the period
from May 1, 1993 to April 1, 1994, however, the Adviser had voluntarily agreed
to establish its management fee as the lesser of (i) 0.55% of the Fund's average
daily net assets or (ii) the amount of such fee as otherwise calculated in
accordance with the Advisory Agreement, with the Fund.)
For the Fund's fiscal year ended December 31, 1992, MFS received management fees
under the Advisory Agreement of $2,432,843. For the fiscal years ended December
31, 1993 and 1994. MFS voluntarily reduced its management fees to $1,857,409 and
$1,401,230, respectively. If MFS had not reduced its management fees, MFS would
have received management fees of $2,264,078 and $1,561,767, respectively, under
the Advisory Agreement.
In order to comply with the requirements of certain state securities
commissions, the Adviser will reduce its management fee or otherwise reimburse
the Fund for any expenses, exclusive of interest, taxes and brokerage
commissions incurred by the Fund in any fiscal year to the extent such expenses
exceed the most restrictive of such state expense limitations. The Adviser will
make appropriate adjustments to such reimbursements in response to any amendment
or recission of the various state requirements.
The Fund pays all of its expenses (other than those assumed by the Adviser or
MFD), including: Trustee fees (discussed above); governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund; fees and expenses of independent accountants, of legal counsel, and of
any transfer agent, registrar and dividend disbursing agent of the Fund;
expenses of repurchasing and redeeming shares; expenses of preparing, printing
and mailing share certificates, shareholder reports, notices, proxy statements
to shareholders 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 State
Street Bank and Trust Company, the Fund's 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 shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses for such purposes are borne by the Fund
except that its Distribution Agreement with MFD, the Fund's principal
underwriter, requires MFD to pay for prospectuses that are to be used for sales
purposes. For a list of the Fund's expenses, including the compensation paid to
the Trustees who are not officers of MFS, during its fiscal year ended December
31, 1994 see "Financial Statements -- Statement of Operations" in the Annual
Report to shareholders. Payment by the Fund of brokerage commission for
brokerage and research services of value to the Adviser in serving its clients
is discussed under the caption "Portfolio Transactions and Brokerage
Commissions" below.
The Adviser pays the compensation of the Fund's officers and of any Trustee who
is an officer of MFS. The Adviser also furnishes at its own expense all
necessary administrative services, including office space, equipment, clerical
personnel, investment advisory facilities, and all executive and supervisory
personnel necessary for managing the Fund's investments, effecting the Fund's
portfolio transactions and, in general, administering the Fund's affairs.
The Advisory Agreement will remain in effect until August 1, 1995, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Objective, Policies and Restrictions --
Investment Restrictions above") and, in either case, by a majority of the
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party. The Advisory Agreement terminates automatically if it is
assigned and may be terminated without penalty by vote of a majority of the
Fund's outstanding voting securities (as defined in "Investment Objective,
Policies and Restrictions -- Investment Restrictions") or by either party on not
more than 60 days' nor less than 30 days' written notice. The Advisory Agreement
further provides that MFS may render services to others and may permit fund
clients in addition to the Fund to use the initials "MFS" in their names. The
Advisory Agreement also provides that neither the Adviser 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 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 under the Advisory Agreement.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest on the 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 of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as principal in securities transactions. The Custodian also acts as the dividend
disbursing agent of the 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.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, dated August 10, 1988 (the "Agency Agreement")
with the Fund. 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 each class of shares of the Fund. For these services, the
Shareholder Servicing Agent will receive a fee based on the net assets of each
class of shares of the Fund, computed and paid monthly. In addition, the
Shareholder Servicing Agent will be reimbursed by the Fund for certain expenses
incurred by the Shareholder Servicing Agent on behalf of the Fund. For the
fiscal year ended December 31, 1994, the Fund paid the Shareholder Servicing
Agent $489,301 under its Agency Agreement. State Street Bank and Trust Company,
the dividend and distribution disbursing agent of the Fund, has contracted with
the Shareholder Servicing Agent to administer and perform certain dividend and
distribution disbursing functions for the Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the continuous
offering of shares of the Fund pursuant to a Distribution Agreement, dated
January 1, 1995 (the "Distribution Agreement") with the Fund. Prior to January
1, 1995, MFS Financial Services, Inc. ("FSI"), another wholly owned subsidiary
of MFS, was the Fund's distributor. Where this SAI refers to MFD in relation to
the receipt or payment of money with respect to a period or periods prior to
January 1, 1995, such reference shall be deemed to include FSI, as the
predecessor in interest to MFD.
CLASS A SHARES: MFD acts as agent in selling Class A shares of the Fund to
dealers. The public offering price of Class A shares of the Fund is their net
asset value next computed after the sale plus a sales charge which varies based
upon the quantity purchased. The public offering price of Class A shares of the
Fund is calculated by dividing net asset value of a Class A share by the
difference (expressed as a decimal) between 100% and the sales charge percentage
of offering price applicable to the purchase (see "Purchases" in the
Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS Funds")
and other Funds (as noted under Right of Accumulation) by any person, including
members of a family unit (e.g., husband, wife and minor children) and bona fide
trustees, and also applies to purchases made under the Right of Accumulation or
a Letter of Intent (see "Investment and Withdrawal Programs" below). A group
might qualify to obtain quantity sales charge discounts (see "Investment and
Withdrawal Programs" in this SAI).
Class A shares of the Fund may be sold at their net asset value to certain
persons or in certain instances as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others with
whom MFS, MFD and/or the Fund have business relationships, and because the sales
effort, if any, involved in making such sales is negligible.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The difference
between the total amount invested and the sum of (a) the net proceeds to the
Fund and (b) the dealer commission, is the commission paid to the distributor.
Because of rounding in the computation of offering price, the portion of the
sales charge paid to the distributor may vary and the total sales charge may be
more or less than the sales charge calculated using the sales charge expressed
as a percentage of offering price or as a percentage of the net amount invested
as listed in the Prospectus. In the case of the maximum sales charge, the dealer
retains 2 1/4% and MFD retains approximately 1/4 of 1% of the public offering
price. In addition, MFD pays a commission to dealers who initiate and are
responsible for purchases of $1 million or more as described in the Prospectus.
For the fiscal year ended December 31, 1993 and 1994, the contingent deferred
sales charge ("CDSC") imposed on redemption of Class A shares were $25,971 and
$238,743, respectively.
CLASS B SHARES AND CLASS C SHARES: MFD acts as agent in selling Class B and
Class C shares to dealers. The public offering price of Class B and Class C
shares is their net asset value next computed after the sale (see "Purchases" in
the Prospectus).
GENERAL: On occasion, MFD may obtain brokers loans from various banks, including
the custodian banks for the MFS Funds, to facilitate the settlement of sales of
shares of the Fund to dealers. MFD may benefit from its temporary holding of
funds paid to it by investment dealers for the purchase of Fund shares. Neither
MFD nor dealers are permitted to delay placing orders to benefit themselves by a
price change.
During the fiscal year ended December 31, 1994, MFD received sales charges of
$43,591 and dealers received sales charges of $345,947 (as their concession on
gross sales charges of $389,538) for selling Class A shares of the Fund; the
Fund received $59,857,104 representing the aggregate net asset value of such
shares. During the Fund's fiscal year ended December 31, 1993, MFD received
sales charges of $72,839 and dealers received sales charges of $964,003 (as
their concession on gross sales charges of $1,036,842) for selling Class A
shares of the Fund; the Fund received $163,442,347 representing the aggregate
net asset value of such shares. During the Fund's fiscal year ended December 31,
1992, MFD received sales charges of $178,016 and dealers received sales charges
of $667,107 (as their concession on gross sales of $845,123) for selling Class A
shares of the Fund; the Fund received $47,049,574 representing the aggregate net
asset value of such shares.
For the fiscal year ended December 31, 1994 and for the period from September 7,
1993 through December 31, 1993, the CDSC imposed on redemption of Class B shares
was $2,897 and $192,283, respectively.
The Distribution Agreement will remain in effect until August 1, 1996, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares and, in either case, by a majority of the Trustees who are not
parties to the Distribution Agreement or interested persons of any such party.
The Distribution Agreement terminates automatically if it is assigned and may be
terminated without penalty by either party on not more than 60 days' nor less
than 30 days' notice.
4. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. The Fund's portfolio manager may serve other
clients of the Adviser or any subsidiary of the Adviser in a similar capacity.
The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and broker-dealers through which it seeks this result. Government
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. 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. The Adviser attempts to
negotiate with underwriters to decrease the commission or concession for the
benefit of the Fund. The Adviser normally seeks to deal directly with the
primary market makers unless, in its opinion, better prices are available
elsewhere. Securities firms may receive brokerage commissions on transactions
involving options, Futures Contracts and Options on Futures Contracts and the
purchase and sale of underlying securities upon exercise of options. The
brokerage commissions associated with buying and selling options may be
proportionately higher than those associated with general securities
transactions. Subject to the requirement of seeking execution at the most
favorable price, securities may, as authorized by the Advisory Agreement, be
bought from or sold to dealers who have furnished statistical, research and
other information or services to the Adviser. At present no arrangements for the
recapture of commission payments are in effect.
Consistent with the foregoing primary consideration, the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the "NASD") and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of the other investment company clients of MFD as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for that of one or more of the other clients of the Adviser
or any subsidiary of the Adviser. Investment decisions for the 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 the Fund is concerned.
In some cases, however, the Fund believes that its ability to participate in
volume transactions will produce better executions for the Fund.
5. SHAREHOLDER SERVICES
INVESTMENT AND WITHDRAWAL PROGRAMS -- The Fund makes available the following
programs designed to enable shareholders to add to their investment or withdraw
from it with a minimum of paper work. These are described below and in certain
cases, in the Prospectus. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $50,000 or more of Class A shares of the Fund
alone or in combination with shares of Class B or Class C of the Fund or any of
the classes of other MFS Funds or MFS Fixed Fund (a bank collective investment
fund) within a 13-month period (or 36-month period, in the case of purchases of
$1 million or more), the shareholder may obtain Class A shares of the Fund at
the same reduced sales charge as though the total quantity were invested in one
lump sum by completing the Letter of Intent section of the Account Application
or filing a separate Letter of Intent application (available from the
Shareholder Servicing Agent) within 90 days of the commencement of purchases.
Subject to acceptance by MFD and the conditions mentioned below, each purchase
will be made at a public offering price applicable to a single transaction of
the dollar amount specified in the Letter of Intent application. The shareholder
or his dealer must inform MFD that the Letter of Intent is in effect each time
shares are purchased. The shareholder makes no commitment to purchase additional
shares, but if his purchases within 13 months (or 36 months in the case of
purchases of $1 million or more) plus the value of shares credited toward
completion of the Letter of Intent do not total the sum specified, he will pay
the increased amount of the sales charge as described below. Instructions for
issuance of shares in the name of a person other than the person signing the
Letter of Intent application must be accompanied by a written statement from the
dealer stating that the shares were paid for by the person signing such Letter.
Neither income dividends nor capital gain distributions taken in additional
shares will apply toward the completion of the Letter of Intent. Dividends and
distributions of other MFS Funds automatically reinvested in shares of the Fund
pursuant to the Distribution Investment Program also will not apply toward
completion of the Letter of Intent.
Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder or
to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month period or 36-month period, as
applicable), the shareholder will be notified and the escrowed shares will be
released.
If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released by
the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in the
premises.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when that shareholder's new
investment, together with the current offering price value of all holdings of
all classes of that shareholder in the MFS Funds or the MFS Fixed Fund (a bank
collective investment fund) reaches a discount level. See "Purchases" in the
Prospectus for the sales charges on quantity discounts. For example, if a
shareholder owns shares with a current offering price value of $25,000 and
purchases an additional $25,000 of Class A shares of the Fund, the sales charge
for the $25,000 purchase would be at the rate of 2.25% (the rate applicable to
single transactions of $50,000). A shareholder must provide the Shareholder
Servicing Agent (or his investment dealer must provide MFD) with information to
verify that the quantity sales charge discount is applicable at the time the
investment is made.
DISTRIBUTION INVESTMENT PROGRAM: Distributions of dividends and capital gains
made by the Fund with respect to a particular class of shares may be
automatically invested in shares of the same class of one of the other MFS Funds
if shares of the fund are available for sale. Such investments will be subject
to additional purchase minimums. Distributions will be invested at net asset
value (exclusive of any sales charge) and will not be subject to a CDSC.
Distributions will be invested at the close of business on the payable date for
the distribution. A shareholder considering the Distribution Investment Program
should obtain and read the prospectus of the other fund and consider the
differences in objectives and policies before making any investment.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder Servicing
Agent to send him (or anyone he designates) regular periodic payments, as
designated on the Account Application and based upon the value of his account.
Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $100,
except in certain limited circumstances. The aggregate withdrawals of Class B
shares in any year pursuant to a SWP generally are limited to 10% of the value
of the account at the time of the establishment of the SWP. SWP payments are
drawn from the proceeds of share redemptions held in the shareholder's account
(which would be a return of principal and, if reflecting a gain, would be
taxable). Redemptions of Class B shares will be made in the following order: (i)
to the extent necessary, any "Free Amount"; (ii) any "Reinvested Shares" and
(iii) to the extent necessary, the "Direct Purchase" subject to the lowest CDSC
(as such terms are defined in "Contingent Deferred Sales Charge" in the
Prospectus). The CDSC will be waived in the case of redemptions of Class B
shares pursuant to a SWP, but will not be waived in the case of SWP redemptions
of Class A shares which are subject to a CDSC. To the extent that redemptions
for such periodic withdrawals exceed dividend income reinvested in the account,
such redemptions will reduce and may eventually exhaust the number of shares in
the shareholder's account. All dividend and capital gain distributions for an
account with a SWP will be reinvested in additional full and fractional shares
of the Fund at the net asset value in effect at the close of business on the
record date for such distributions. To initiate this service, shares having an
aggregate value of at least $10,000 either must be held on deposit by, or
certificates for such shares must be deposited with, the Shareholder Servicing
Agent. With respect to Class A shares, maintaining a withdrawal plan
concurrently with an investment program would be disadvantageous because of the
sales charges included in share purchases and the imposition of a CDSC on
certain redemptions. The shareholder by written instruction to the Shareholder
Servicing Agent may deposit into the account additional shares of the Fund,
change the payee or change the dollar amount of each payment. The Shareholder
Servicing Agent may charge the account for services rendered and expenses
incurred beyond those normally assumed by the Fund with respect to the
liquidation of shares. No charge is currently assessed against the account, but
one could be instituted by the Shareholder Servicing Agent on 60 days' notice in
writing to the shareholder in the event that the Fund ceases to assume the cost
of these services. The Fund may terminate any SWP for an account if the value of
the account falls below $5,000 as a result of share redemptions (other than as a
result of a SWP) or an exchange of shares of the Fund for shares of another MFS
Fund. Any SWP may be terminated at any time by either the shareholder or the
Fund.
INVEST BY MAIL: Additional investments of $50 or more may be made at any time
by mailing a check payable to the Fund directly to the Shareholder Servicing
Agent. The shareholder's account number and the name of his investment dealer
must be included with each investment.
GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group (1) gives its endorsement or authorization to the investment
program so it may be used by the investment dealer to facilitate solicitation of
the membership, thus effecting economies of sales effort; (2) has been in
existence for at least six months and has a legitimate purpose other than to
purchase mutual fund shares at a discount; (3) is not a group of individuals
whose sole organizational nexus is as credit cardholders of a company,
policyholders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar group; and (4) agrees to
provide certification of membership of those members investing money in the MFS
Funds upon the request of MFD.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds (if available for sale) under the Automatic Exchange Plan.
The Automatic Exchange Plan provides for automatic exchanges of funds from the
shareholder's account in an MFS Fund for investment in the same class of shares
of other MFS Funds selected by the shareholder. Under the Automatic Exchange
Plan, exchanges of at least $50 each may be made to up to four different funds
effective on the seventh day of each month or of every third month, depending
whether monthly or quarterly exchanges are elected by the shareholder. If the
seventh day of the month is not a business day, the transaction will be
processed on the next business day. Generally, the initial exchange will occur
after receipt and processing by the Shareholder Servicing Agent of an
application in good order. Exchanges will continue to be made from a
shareholder's account in any MFS Fund as long as the balance of the account is
sufficient to complete the exchanges. Additional payments made to a
shareholder's account will extend the period that exchanges will continue to be
made under the Automatic Exchange Plan. However, if additional payments are
added to an account subject to the Automatic Exchange Plan shortly before an
exchange is scheduled, such funds may not be available for exchanges until the
following month; therefore, care should be used to avoid inadvertently
terminating the Automatic Exchange Plan through exhaustion of the account
balance.
No transaction fee will be charged for exchanges in connection with the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund and Class A shares of MFS Cash Reserve Fund
will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions in
writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by the
record owner(s) exactly as shares are registered; if by telephone -- proper
account identification is given by the dealer or shareholder of record). Each
Exchange Change Request (other than termination of participation in the program)
must involve at least $50. Generally, if an Exchange Change Request is received
by telephone or in writing before the close of business on the last business day
of a month, the Exchange Change Request will be effective for the following
month's exchange.
A shareholder's right to make additional investments in any of the MFS Funds, to
make exchanges of shares from one MFS Fund to another and to withdraw from an
MFS Fund, as well as a shareholder's other rights and privileges, are not
affected by a shareholder's participation in the Automatic Exchange Plan.
The Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding the Automatic Exchange Plan, including the treatment of
any CDSC, see "Exchange Privilege" below.
REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the
other MFS Funds (except MFS Money Market Fund, MFS Government Money Market Fund
and Class A shares of MFS Cash Reserve Fund in the case where the shares are
acquired through direct purchase or reinvested dividends) who have redeemed
their shares have a one-time right to reinvest the redemption proceeds in the
same class of shares of any of the MFS Funds (if shares of the fund are
available for sale) at net asset value (without a sales charge) and, if
applicable, with credit for any CDSC paid. In the case of proceeds reinvested in
shares of MFS Money Market Fund, MFS Government Money Market Fund or Class A
shares of MFS Cash Reserve Fund, the shareholder has the right to exchange the
acquired shares for shares of another MFS Fund at net asset value pursuant to
the exchange privilege described below. Such a reinvestment must be made within
90 days of the redemption and is limited to the amount of the redemption
proceeds. If the shares credited for any CDSC paid are then redeemed within six
years of their initial purchase in the case of Class B shares or within 12
months of the initial purchase of certain Class A shares, a CDSC will be imposed
upon redemption. Although redemptions and repurchases of shares are taxable
events, a reinvestment within a certain period of time in the same fund may be
considered a "wash sale" and may result in the inability to recognize currently
all or a portion of a loss realized on the original redemption for federal
income tax purposes. Please see your tax adviser for further information.
EXCHANGE PRIVILEGE -- Subject to the requirements set forth below, some or all
of the shares in an account with the Fund for which payment has been received by
the Fund (i.e., an established account) may be exchanged for shares of the same
class of any of the other MFS Funds (if available for sale) at their net asset
value. In addition, Class C shares may be exchanged for shares of MFS Money
Market Fund at net asset value. Exchanges will be made only after instructions
in writing or by telephone (an "Exchange Request") are received for an
established account by the Shareholder Servicing Agent.
Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least $1,000 ($50 in the case of retirement plan participants whose sponsoring
organizations subscribe to the MFS FUNDamental 401(k) Plan or another similar
401(k) recordkeeping system made available by the Shareholder Servicing Agent)
or all the shares in the account. Each exchange involves the redemption of the
shares of the Fund to be exchanged and the purchase at net asset value (i.e.,
without a sales charge) of shares of the same class of the other MFS Fund. Any
gain or loss on the redemption of the shares exchanged is reportable on the
shareholder's federal income tax return, unless both the shares received and the
shares surrendered in the exchange are held in a tax-deferred retirement plan or
other tax-exempt account. If the Exchange Request is received by the Shareholder
Servicing Agent prior to the close of regular trading on the Exchange on any
business day, the exchange usually will occur on that day if all the
requirements set forth above have been complied with at that time. However,
payment of the redemption proceeds by the Fund, and thus the purchase of shares
of the other MFS Fund, may be delayed for up to seven days if the Fund
determines that such a delay would be in the best interest of all its
shareholders. No more than five exchanges may be made in any one Exchange
Request by telephone. Investment dealers which have satisfied criteria
established by MFD may also communicate a shareholder's Exchange Request to MFD
by facsimile subject to the requirements set forth above.
No CDSC is imposed on exchanges among the MFS Funds, although liability for the
CDSC is carried forward to the exchanged shares. For purposes of calculating the
CDSC upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares.
Additional information with respect to any of the MFS Funds, including a copy of
its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should obtain
and read the prospectus of the other MFS Fund and consider the differences in
objectives and policies before making any exchange. Shareholders of the other
MFS Funds (except shares of MFS Money Market Fund, MFS Government Money Market
Fund and Class A shares of MFS Cash Reserve Fund acquired through direct
purchase and dividends reinvested prior to June 1, 1992) have the right to
exchange their shares for shares of the MFS Funds, subject to the conditions, if
any, set forth in their respective prospectuses. In addition, unitholders of the
MFS Fixed Fund have the right to exchange their units (except units acquired
through direct purchases) for shares of the Fund, subject to the conditions, if
any, imposed upon such unitholders by the MFS Fixed Fund.
Any state income tax advantages for investment in shares of each state- specific
series of MFS Municipal Series Trust may only benefit residents of such states.
Investors should consult with their own tax advisers to be sure this is an
appropriate investment, based on their residency and each state's income tax
laws.
The exchange privilege (or any aspect of it) may be changed or discontinued and
is subject to certain limitations (see "Purchases" in the Prospectus).
TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund may be purchased by
certain types of tax-deferred retirement plans. MFD makes available through
investment dealers plans and/or custody agreements for the following:
Individual Retirement Accounts (IRAs) (for individuals and their non- employed
spouses who desire to make limited contributions to a tax-deferred retirement
program and, if eligible, to receive a federal income tax deduction for
amounts contributed);
Simplified Employee Pension (SEP-IRA) Plans;
Retirement Plans Qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended;
403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and
Certain other qualified pension and profit-sharing plans.
The plan documents provided by MFD designate a trustee or custodian (unless
another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested automatically.
For further details with respect to any plan, including fees charged by the
trustee, custodian or MFD, tax consequences and redemption information, see the
specific documents for that plan. Plan documents other than those provided by
MFD may be used to establish any of the plans described above. Third party
administrative services, available for some corporate plans, may limit or delay
the processing of transactions.
Investors should consult with their tax advisers before establishing any of the
tax-deferred retirement plans described above.
Class C shares are not currently available for purchase by any retirement plan
qualified under Internal Revenue Code section 401(a) or 403(b) if the retirement
plan and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k)
Plan or another similar 401(a) or 403(b) recordkeeping program made available by
the Shareholder Servicing Agent.
6. TAX STATUS
FEDERAL TAXES
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute to
shareholders all of its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code, it is not expected
that the Fund will be required to pay any federal income or excise taxes. If the
Fund should fail to qualify as a "regulated investment company" in any year, the
Fund would incur a regular corporate federal income tax upon its taxable income
and Fund distributions would generally be taxable as ordinary dividend income to
the shareholders.
Shareholders of the Fund normally will have to pay federal income taxes on the
dividends and capital gain distributions they receive from the Fund. Dividends
declared by the Fund in October, November or December and paid the following
January will be taxable to shareholders as if received on December 31 of the
year in which they are declared.
Dividends from ordinary income and distributions from net short-term capital
gains, whether paid in cash or invested in additional shares, are taxable to the
Fund's shareholders as ordinary income for federal income tax purposes.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), whether paid in cash or invested in
additional shares, are taxable to the Fund's shareholders as long-term capital
gains for federal income tax purposes without regard to the length of time
shareholders have owned their shares. No Fund distributions are expected to be
eligible for the dividends-received deduction for corporations. The Fund will
notify shareholders regarding the federal tax status of its distributions after
the end of each calendar year.
Any dividend or distribution of net capital gains or net short-term capital
gains will have the effect of reducing the per share net asset value of shares
in the Fund by the amount of the dividend or distribution. Shareholders
purchasing shares shortly before the record date of any such taxable dividend or
other distribution may thus pay the full price for the shares and then
effectively receive a portion of the purchase price back as a taxable
distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than twelve months and otherwise as a short-term capital gain or loss. However,
any loss realized upon a disposition of shares in the Fund held for six months
or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a redemption of shares may also be disallowed under rules relating
to wash sales. Gain may be increased (or loss reduced) upon a redemption of
Class A shares of the Fund within ninety days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) without
payment of an additional sales charge of Class A shares of the Fund or of
another MFS Fund (or any other shares of an MFS Fund generally sold subject to a
sales charge).
The Fund's current dividend and accounting policies will affect the amount,
timing and character of distributions to shareholders. Any investment in zero
coupon securities and certain securities purchased at a market discount will
cause the Fund to recognize income prior to the receipt of cash payments with
respect to these securities. In order to distribute this income and avoid a tax
on the Fund, the Fund may be required to liquidate portfolio securities that it
might otherwise have continued to hold, potentially resulting in additional
taxable gain or loss to the Fund.
Investment in residual interests of a CMO that has elected to be treated as a
real estate mortgage investment conduit, or "REMIC," can create complex tax
problems, especially if the Fund has state or local governments or other
tax-exempt organizations as investors.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% on any payments made to
Non-U.S. Persons that are subject to such withholding, regardless of whether a
lower treaty rate may be permitted. Any amounts overwithheld may be recovered by
such persons by filing a claim for refund with the U.S. Internal Revenue Service
within the time period applicable to such claims. The Fund is also required in
certain circumstances to apply backup withholding of 31% of taxable dividends
and the proceeds of redemptions and exchanges paid to a shareholder who does not
furnish to the Fund certain information and certifications or who is otherwise
subject to backup withholding. However, backup withholding will not be applied
to payments which have been subject to 30% withholding. Distributions received
from the Fund by Non-U.S. Persons may also be subject to tax under the laws of
their own jurisdiction.
STATE AND LOCAL TAXES Distributions of the Fund that are derived from interest
on obligations of the U.S. Government and certain of its agencies and
instrumentalities (but generally not from capital gains realized upon the
disposition of such obligations) may be exempt from state and local taxes in
certain states. The Fund intends to advise shareholders of the proportion of its
distributions which consist of such interest. Shareholders are urged to consult
their tax advisers regarding this, and other state and local income tax matters.
As long as it qualifies as a regulated investment company under the Code, the
Fund will not be required to pay Massachusetts income or excise taxes.
7. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE --
NET ASSET VALUE: The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this SAI, such Exchange is open for trading every weekday except for the
following holidays or the days on which they are observed: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.) This determination is made once during each
such day as of the close of regular trading on such Exchange by deducting the
amount of the liabilities attributable to the class from the value of the assets
attributable to the class and dividing the difference by the number of shares of
the class outstanding. Debt securities (other than short-term obligations) in
the Fund's portfolio are valued on the basis of valuations furnished by a
pricing service which utilizes both dealer-supplied valuations and electronic
data processing techniques which 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, without exclusive reliance upon exchange or over-the-counter prices, since
such valuations are believed to reflect the fair value of such securities. Use
of the pricing service has been approved by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued based
upon dealer supplied valuations. Other short-term obligations in the Fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. 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. A
share's net asset value is effective for orders received by the dealer prior to
its calculation and received by MFD prior to the close of that business day.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for each
class of shares for certain periods by determining the average annual compounded
rates of return over those periods that would cause an investment of $1,000
(made with all distributions reinvested and reflecting the CDSC or the maximum
public offering price) to reach the value of that investment at the end of the
periods. The Fund may also calculate (i) a total rate of return, which is not
reduced by the CDSC (4% maximum for Class B shares) and therefore may result in
a higher rate of return, (ii) a total rate of return assuming an initial account
value of $1,000, which will result in a higher rate of return since the value of
the initial account will not be reduced by the sales charge applicable to Class
A shares (2.50% maximum), and/or (iii) total rates of return which represent
aggregate performance over a period or year-by-year performance, and which may
or may not reflect the effect of the maximum or other sales charge or CDSC. The
Fund's annualized total rates of return for Class A shares, reflecting the
initial investment at the maximum public offering price, for the one- and
five-year periods ended December 31, 1994 and for the period from September 26,
1988, the Fund's commencement of investment operations, to December 31, 1994
were -3.23%, 4.62% and 5.44%, respectively. The Fund's annualized total rates of
return for Class A shares, not giving effect to the sales charge on the initial
investment, for the one- and five-year periods ended December 31, 1994 and for
the period from September 26, 1988, the Fund's commencement of investment
operations, to December 31, 1994 were -0.76%, 5.15% and 5.87% respectively. The
Fund's average annual total rates of return for Class B shares, reflecting the
CDSC, for the one-year period ended December 31, 1994 and for the period from
September 7, 1993 to December 31, 1994 were -5.40% and -4.44%, respectively. The
Fund's average annual total rates of return for Class B shares, not giving
effect to the CDSC, for the one-year period ended December 31, 1994 and for the
period from September 7, 1993 to December 31, 1994 were -1.65% and -1.62%,
respectively. The Fund's aggregate total rate of return for Class C shares from
August 1, 1994 to December 31, 1994 was -0.33%. The aggregate total rate of
return for Class C shares represents a limited time frame and, like the total
rates of return presented above for Class A and Class B shares, may not be
indicative of future performance. Total rate of return figures would have been
lower if fee waivers were not in place.
PERFORMANCE RESULTS: The performance results for Class A shares below, based on
an assumed initial investment of $10,000 in Class A shares, cover the period
from the Fund's commencement of investment operations, September 26, 1988, to
December 31, 1994. It has been assumed that dividends and capital gain
distributions were reinvested in additional shares. These performance results,
as well as any yield or total rate of return quotation provided by the Fund,
should not be considered as representative of the performance of the Fund in the
future since the net asset value and public offering price of shares of the Fund
will vary based not only on the type, quality and maturities of the securities
held in its portfolio, but also on changes in the current value of such
securities and on changes in the Fund's expenses. These factors and possible
differences in the methods used to calculate yields and total rates of return
should be considered when comparing the Fund's yield and total rate of return to
yields and total rates of return published for other investment companies or
other investment vehicles. Total rate of return reflects the performance of both
principal and income. Current net asset value and account balance information
may be obtained by calling 1-800-MFS-Talk (637-8255).
MFS GOVERNMENT LIMITED MATURITY FUND
VALUE OF
VALUE OF REINVESTED VALUE OF
YEAR ENDED INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
DECEMBER 31 INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
----------- --------------- ------------- ---------- -----
1988* $9,645 $0 $ 163 $ 9,808
1989 9,635 0 1,206 10,841
1990 9,200 0 2,161 11,361
1991 9,170 0 3,150 12,320
1992 9,089 0 4,033 13,122
1993 9,099 0 4,941 14,040
1994 8,522 0 5,412 13,934
*For the period from the commencement of investment operations, September 26,
1988, to December 31, 1988.
EXPLANATORY NOTES: The initial investment on September 26, 1988 has been reduced
by the maximum applicable sales charge (2.50%). No adjustment has been made for
any income taxes payable by shareholders.
YIELD: Any yield quotation for a class of shares of the Fund is based on the
annualized net investment income per share of that class of the Fund over a
30-day period. The yield is calculated by dividing the net investment income per
share allocated to a particular class of the Fund earned during the period by
the maximum public offering price per share of such class on the last day of
that period. The resulting figure is then annualized. Net investment income per
share of a class is determined by dividing (i) the dividends and interest earned
by the Fund allocated to that class during the period, minus accrued expenses of
such class for the period, by (ii) the average number of Fund shares of such
class entitled to receive dividends during the period multiplied by the maximum
public offering price per share of such class on the last day of the period. The
Fund's yield calculations for Class A shares assume a maximum sales charge of
2.50%. For Class B shares, the Fund's yield calculation assumes no CDSC is paid.
The yield for Class A shares of the Fund (assuming a maximum sales charge of
2.50%) for the 30-day period ended December 31, 1994 was 6.31% taking into
account the fee waiver; without the waiver, the yield would have been 6.21%. The
yield for Class B and Class C shares for the 30-day period ended December 31,
1994 was 5.58% and 5.63%, respectively.
CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, is not indicative of the amounts which were or will be
paid to the Fund's shareholders. Amounts paid to shareholders of each class are
reflected in the quoted "current distribution rate" for that class. The current
distribution rate for a class is computed by dividing the total amount of
dividends per share paid by the Fund to shareholders of that class during the
past 12 months by the maximum public offering price of that class at the end of
such period. Under certain circumstances, such as when there has been a change
in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends paid during
the past 12 months. The current distribution rate differs from the yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income for option writing,
short-term capital gains and return of invested capital, and is calculated over
a different period of time. The Fund's current distribution rate calculation for
Class A shares assumes a maximum sales charge of 2.50%. The Fund's current
distribution rate calculation for Class B shares assumes no CDSC is paid. The
current distribution rates for Class A shares and Class B shares of the Fund for
the 12-month period ended on December 31, 1994 were 5.80% and 5.02%,
respectively. The current distribution rate for Class C shares of the Fund
(based on the annualization of the last dividend paid during the last fiscal
year) was 6.14%.
From time to time, the Fund may, as appropriate, quote Fund rankings or reprint
all or a portion of evaluations of Fund performance and operations appearing in
various independent publications, including but not limited to the following:
Money, Fortune, U.S. News and World Report, Kiplinger's Personal Finance, The
Wall Street Journal, Barron's, Investors Business Daily, Newsweek, Financial
World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Salomon Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Advisor, Financial Planning on Wall Street, Standard and Poor's,
Individual Investor, The 100 Best Mutual Funds You Can Buy by Gordon K.
Williamson, Consumer Price Index, and Sanford C. Bernstein & Co. Fund
performance may also be compared to the performance of other mutual funds
tracked by financial or business publications or periodicals.
The Fund may also quote evaluations mentioned in independent radio or television
broadcasts.
From time to time, the Fund may use charts and graphs to illustrate the past
performance of various indices such as those mentioned above and illustrations
using hypothetical rates of return to illustrate the effects of compounding and
tax-deferral.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established as the first
open-end mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make
full public disclosure of its operations in shareholder reports.
-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management
firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to
register under the Securities Act of 1933 ("Truth in Securities Act" or
"Full Disclosure Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional
shares or cash.
-- 1976 -- MFS Municipal Bond Fund is among the first municipal bond funds
established.
-- 1979 -- Spectrum becomes the first combination fixed/variable annuity
with no initial sales charge.
-- 1981 -- MFS World Governments Fund is established as America's first
globally diversified fixed-income mutual fund.
-- 1984 -- MFS Municipal High Income Fund is the first open-end mutual fund
to seek high tax-free income from lower-rated municipal securities.
-- 1986 -- MFS Managed Sectors Fund becomes the first mutual fund to target
and shift investments among industry sectors for shareholders.
-- 1986 -- MFS Municipal Income Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.
-- 1987 -- MFS Multimarket Income Trust is the first closed-end,
multimarket high income fund listed on the New York Stock Exchange.
-- 1989 -- MFS Regatta becomes America's first non-qualified
market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS World Total Return Fund is the first global balanced fund.
-- 1993 -- MFS World Growth Fund is the first global emerging markets fund
to offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes money manager of MFS Union Standard Trust, the first
Trust to invest in companies deemed to be union-friendly by an Advisory
Board of senior labor officials, senior managers of companies with
significant labor contracts, academics and other national labor leaders
or experts.
8. DISTRIBUTION PLANS
The Trustees have adopted a Distribution Plan for each of Class A, Class B and
Class C shares (the "Distribution Plans") pursuant to Section 12(b) of the 1940
Act and Rule 12b-1 thereunder (the "Rule") after having concluded that there is
a reasonable likelihood that each Distribution Plan would benefit the Fund and
the respective class of shareholders. The Distribution Plans are designed to
promote sales, thereby increasing the net assets of the Fund. Such an increase
may reduce the expense ratio to the extent the Fund's fixed costs are spread
over a larger net asset base. Also, an increase in net assets may lessen the
adverse effects that could result were the Fund required to liquidate portfolio
securities to meet redemptions. There is, however, no assurance that the net
assets of the Fund will increase or that the other benefits referred to above
will be realized.
CLASS A DISTRIBUTION PLAN: The Distribution Plan relating to Class A shares (the
"Class A Distribution Plan") provides that the Fund will pay MFD up to (but not
necessarily all of) an aggregate of 0.35% of the average daily net assets
attributable to the Class A shares annually in order that MFD may pay expenses
on behalf of the Fund related to the distribution and servicing of its Class A
shares. The expenses to be paid by MFD on behalf of the Fund include a service
fee to securities dealers which enter into a sales agreement with MFD of up to
0.25% per annum of the portion of the Fund's average daily net assets
attributable to the Class A shares owned by investors for whom that securities
dealer is the holder or dealer of record. These payments are partial
consideration for personal services and/or account maintenance performed by such
dealers with respect to Class A shares. MFD may from time to time reduce the
amount of the service fee paid for shares sold prior to a certain date. MFD may
also retain a distribution fee of 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares as partial consideration for services
performed and expenses incurred in the performance of MFD's obligations as to
Class A shares under the Distribution Agreement with the Fund. MFD, however,
currently is waiving this 0.10% per annum distribution fee and will not in the
future accept payment of this fee unless it first obtains the approval of the
Board of Trustees. Any remaining funds may be used to pay for other distribution
related expenses as described in the Prospectus. Service fees may be reduced for
a securities dealer that is the holder or dealer of record for an investor who
owns shares of the Fund having an aggregate net asset value at or above a
certain dollar level. No service fee will be paid (i) to any securities dealer
who is the holder or dealer of record for investors who own shares having an
aggregate net asset value less than $750,000, or such other amount as may be
determined from time to time by MFD (MFD, however, may waive this minimum amount
requirement from time to time if the dealer satisfies certain criteria), or (ii)
to any insurance company which has entered into an agreement with the Fund and
MFD that permits such insurance company to purchase shares from the Fund at
their net asset value in connection with annuity agreements issued in connection
with the insurance company's separate accounts. Dealers may from time to time be
required to meet certain other criteria in order to receive service fees.
Effective as of May 1, 1993, service fee payments under this Plan have been
reduced for an indefinite period of time to 0.15% per annum of the Fund's net
assets attributable to Class A shares. This reduction may be amended or
rescinded at any time without notice to shareholders. Certain banks and other
financial institutions that have agency agreements with MFD will receive agency
transaction and service fees that are the same as commissions and service fees
to dealers. MFD or its affiliates are entitled to retain all service fees
payable under the Class A Distribution Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts. During the fiscal
year ended December 31, 1994, the Fund incurred expenses net of waiver of
$442,495 (equal to 0.15% of its average daily net assets) relating to the
distribution and servicing of its Class A shares, of which MFD retained $39,041.
CLASS B DISTRIBUTION PLAN: The Distribution Plan relating to Class B shares (the
"Class B Distribution Plan") provides that the Fund will pay MFD, as the Fund's
distributor for its Class B shares, a daily distribution fee equal on an annual
basis to 0.75% of the Fund's average daily net assets attributable to Class B
shares and will pay MFD an annual service fee of up to 0.25% of the Fund's
average daily net assets attributable to Class B shares (which MFD will in turn
pay to securities dealers which enter into a sales agreement with MFD at a rate
of up to 0.25% per annum of the Fund's average daily net assets attributable to
Class B shares owned by investors for whom that securities dealer is the holder
or dealer of record). This service fee is intended to be additional
consideration for all personal services and/or account maintenance services
rendered by the dealer with respect to Class B shares. Except in the case of the
first year service fee, the service fee is reduced to 0.15% per annum of the
Fund's average daily net assets attributable to Class B shares that are owned by
investors for whom that securities dealer is the holder or dealer of record.
This reduction may be amended or terminated without notice to shareholders. The
first year service fee will be paid as noted below. MFD will advance to dealers
the first-year service fee at a rate equal to 0.25% of the amount invested. As
compensation therefor, MFD may retain the service fee paid by the Fund with
respect to such shares for the first year after purchase. Dealers will become
eligible for additional service fees with respect to such shares commencing in
the 13th month following purchase. Except in the case of the first year service
fee, no service fee will be paid to any securities dealer who is the holder or
dealer of record for investors who own Class B shares having an aggregate net
asset value of less than $750,000 or such other amount as may be determined from
time to time by MFD. MFD, however, may waive this minimum amount requirement
from time to time if the dealer satisfies certain criteria. Dealers may from
time to time be required to meet certain other criteria in order to receive
service fees. MFD or its affiliates are entitled to retain all service fees
payable under the Class B Distribution Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by MFD to shareholder accounts.
The purpose of distribution payments to MFD under the Class B Distribution Plan
is to compensate MFD for its distribution services to the Fund. MFD pays
commissions to dealers as well as expenses of printing prospectuses and reports
used for sales purposes, expenses with respect to the preparation and printing
of sales literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution- related services, or
personnel, travel, office expenses and equipment. The Class B Distribution Plan
also provides that MFD will receive all CDSCs attributable to Class B shares
(see "Distribution Plans" and "Purchases" in the Prospectus).
In accordance with the Rule, all agreements relating to the Class B Distribution
Plan entered into between the Fund or MFD and other organizations must be
approved by the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Class B Distribution Plan or
in any agreement related to such Plan ("Class B Distribution Plan Qualified
Trustees"). The Class B Distribution Plan further provides that the selection
and nomination of Class B Distribution Plan Qualified Trustees shall be
committed to the discretion of the non-interested Trustees then in office.
During the fiscal year ended December 31, 1994, the Fund incurred expenses of
$207,041 (equal to 1.00% of its average daily net assets) relating to the
distribution and servicing of its Class B shares, of which MFD retained $1,721.
CLASS C DISTRIBUTION PLAN: The Distribution Plan relating to Class C shares (the
"Class C Distribution Plan") provides that the Fund will pay MFD a distribution
fee of up to 0.75% per annum of the Fund's average daily net assets attributable
to Class C shares and will pay MFD a service fee of up to 0.25% per annum of the
Fund's average daily net assets attributable to Class C shares (which MFD will
in turn pay to securities dealers which enter into a sales agreement with MFD at
a rate of up to 0.25% per annum of the Fund's daily net assets attributable to
Class C shares owned by investors for whom that securities dealer is the holder
or dealer of record).
The distribution/service fees attributable to Class C shares are designed to
permit an investor to purchase such shares through a broker-dealer without the
assessment of an initial sales charge or a CDSC while allowing MFD to compensate
broker-dealers in connection with the sale of such shares.
The service fee is intended to be additional consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. MFD or its affiliates are entitled to retain all service fees
payable under the Class C Distribution Plan with respect to accounts for which
there is no dealer of record as partial consideration for personal services
and/or account maintenance services performed by MFD or its affiliates for
shareholder accounts.
The purpose of the distribution payments to MFD under the Class C Distribution
Plan is to compensate MFD for its distribution services to the Fund.
Distribution payments under the Plan will be used by MFD to pay securities
dealers a distribution fee in an amount equal on an annual basis to 0.75% of the
Fund's average daily net assets attributable to Class C shares owned by
investors for whom securities dealer is the holder or dealer of record.
(Therefore, the total amount of distribution/service fees paid to a dealer on an
annual basis is 1.00% of the Fund's average daily net assets attributable to
Class C shares owned by investors for whom the securities dealer is the holder
or dealer of record.) MFD also pays expenses of printing prospectuses and
reports used for sales purposes, expenses with respect to the preparation and
printing of sales literature and other distribution-related expenses, including,
without limitation, the compensation of personnel and all costs of travel,
office expense and equipment. Since MFD's compensation is not directly tied to
its expenses, the amount of compensation received by MFD during any year may be
more or less than its actual expenses. For this reason, this type of
distribution fee arrangement is characterized by the staff of the SEC as being
of the "compensation" variety. However, the Fund is not liable for any expenses
incurred by MFD in excess of the amount of compensation it receives. Certain
banks and other financial institutions that have agency agreements with MFD will
receive agency transaction and service fees that are the same as distribution
and service fees to dealers. Fees payable under the Class C Distribution Plan
are charged to, and therefore reduce, income allocated to Class C shares.
For the period August 1, 1994 to December 31, 1994, the Fund incurred expenses
of $8,380 (equal to 1.00% of its average daily net assets) relating to the
distribution and servicing of its Class C shares, of which MFD retained $5.
GENERAL: Each of the Distribution Plans will remain in effect until August 1,
1995, and will continue in effect thereafter only if such continuance is
specifically approved at least annually by vote of both the Trustees and a
majority of the Trustees who are not "interested persons" or financially
interested parties to such Plan ("Distribution Plan Qualified Trustees"). Each
of the Distribution Plans also requires that the Fund and MFD each shall provide
to the Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under such Plan. Each of
the Distribution Plans may be terminated at any time by vote of a majority of
the Distribution Plan Qualified Trustees or by vote of the holders of a majority
of the respective class of the Fund's shares (as defined in "Investment
Restrictions"). All agreements relating to any of the Distribution Plans entered
into between the Fund or MFD and other organizations must be approved by the
Board of Trustees, including a majority of the Distribution Plan Qualified
Trustees. Agreements under any of the Distribution Plans must be in writing,
will be terminated automatically if assigned, and may be terminated at any time
without payment of any penalty, by vote of a majority of the Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the respective
class of the Fund's shares. None of the Distribution Plans may be amended to
increase materially the amount of permitted distribution expenses without the
approval of a majority of the respective class of the Fund's shares (as defined
in "Investment Restrictions") or may be materially amended in any case without a
vote of the Trustees and a majority of the Distribution Plan Qualified Trustees.
The selection and nomination of Distribution Plan Qualified Trustees shall be
committed to the discretion of the non-interested Trustees then in office. No
Trustee who is not an "interested person" has any financial interest in any of
the Distribution Plans or in any related agreement.
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's 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 Fund. The
Declaration of Trust further authorizes the Trustees to classify or reclassify
the shares of the Fund into one or more classes. Pursuant thereto, the Trustees
have authorized the issuance of three classes of shares of the Fund, Class A,
Class B and Class C shares. Each share of a class of the Fund represents an
equal proportionate interest in the assets of the Fund allocable to that class.
Upon liquidation of the Fund, the shareholders of each class of the Fund are
entitled to share pro rata in the Fund's net assets allocable to such class
available for distribution to its shareholders. The Fund reserves the right to
create and issue additional series of shares, in which case the shares of each
series would participate equally in the earnings, dividends and assets of the
particular series (subject to any class expenses) and each series may be
entitled to vote separately to approve investment advisory agreements or changes
in investment restrictions, but shareholders of all series would vote together
in the election of Trustees and the selection of accountants. The Fund reserves
the right to create additional classes of shares.
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 Fund's Declaration of Trust without the
affirmative vote of a majority of its shares. The Fund may merge or consolidate
with another organization or sell all or substantially all of its assets, if
approved by the vote of the holders of two-thirds of its outstanding shares,
except that if the Trustees recommend such merger, consolidation or sale, the
approval by vote of the holders of a majority of the Fund's outstanding shares
will be sufficient. The Fund may be terminated upon liquidation and distribution
of its assets, if approved by the vote of the holders of two-thirds of its
outstanding shares or by the Trustees by written notice. If not so terminated,
the Fund will continue indefinitely.
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund and provides for
indemnification and reimbursement of expenses out of Fund property for any
shareholder held personally liable for the obligations of the Fund. The 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 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 is
limited to circumstances in which both inadequate insurance existed and the Fund
itself was unable to meet its obligations.
The Fund's Declaration of Trust further provides that obligations of the Fund
are not binding upon the Trustees individually but only upon the property of the
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
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
10. INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
Ernst & Young LLP are the Fund's independent auditors, providing audit services,
tax return preparation, and assistance and consultation with respect to the
preparation of filings with the SEC for the fiscal year ended December 31, 1994.
The financial statements of the Fund, including the Portfolio of Investments and
Statement of Assets and Liabilities at December 31, 1994, and the Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights for the
year then ended, each of which is included in the Annual Report to Shareholders
of the Fund, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report therein. Such financial statements are incorporated by
reference into this SAI in reliance upon the report of Ernst & Young LLP given
upon their authority as experts in accounting and auditing.
Coopers & Lybrand LLP were the Fund's independent accountants from the
commencement of operations on September 26, 1988 to December 31, 1993 and are
responsible for providing audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the SEC. The
Statement of Changes in Net Assets for the year ended December 31, 1993 and the
Financial Highlights table for the period from September 26, 1988 to December
31, 1993 each of which is included in the Annual Report to Shareholders, were
audited by Coopers & Lybrand LLP and are incorporated by reference into this SAI
in reliance upon the report of Coopers & Lybrand LLP, independent accountants of
the Fund for its fiscal years through December 31, 1993.
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
TRUSTEE COMPENSATION TABLE
RETIREMENT BENEFIT ESTIMATED TOTAL TRUSTEE FEES
TRUSTEE FEES ACCRUED AS PART OF CREDITED YEARS FROM FUND AND
TRUSTEE FROM FUND<F1> FUND EXPENSE<F2> OF SERVICE<F2> FUND COMPLEX<F3>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter E. Robb, III $4,400 $2,237 17 $147,274
Marshall N. Cohan 4,400 1,566 14 147,274
Sir David Gibbons 3,725 1,117 13 132,024
Richard B. Bailey 3,500 536 10 226,221
Ward Smith 4,400 440 13 147,274
Abby M. O'Neill 3,275 339 10 125,924
Dr. Lawrence Cohn 3,725 186 18 133,524
J. Dale Sherratt 4,400 220 20 147,274
<FN>
<F1>For fiscal year ended December 31, 1994.
<F2>Based on normal retirement age of 75.
<F3>Information provided is provided for calendar year 1994. All Trustees served as Trustees of 36 funds within the MFS fund
complex (having aggregate net assets at December 31, 1994, of approximately $9,746,460,756) except Mr. Bailey, who served as
Trustee of 56 funds within the MFS fund complex (having aggregate net assets at December 31, 1994, of approximately
$24,474,119,825).
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT<F1>
YEARS OF SERVICE
------------------------------------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$2,950 $443 $ 738 $1,033 $1,475
3,330 500 833 1,166 1,665
3,710 557 928 1,299 1,855
4,090 614 1,023 1,432 2,045
4,470 671 1,118 1,565 2,235
4,850 728 1,213 1,698 2,425
<FN>
<F1>Other funds in the MFS fund complex provide similar retirement benefits to the Trustees.
</TABLE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606
MAILING ADDRESS
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street, Boston, MA 02116
MFS(R)
GOVERNMENT LIMITED
MATURITY FUND
500 BOYLSTON STREET
BOSTON, MA 02116
[logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
MGL-13-5/95/500 28/228
<PAGE>
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Front Cover: A 6-1/4" by 8-1/4" photo of a house. Annual Report for
Year Ended
[Logo] December 31, 1994
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) GOVERNMENT LIMITED MATURITY FUND
<TABLE>
<CAPTION>
MFS(R) GOVERNMENT
LIMITED MATURITY FUND
<S> <C>
TRUSTEES CUSTODIAN
A. Keith Brodkin* - Chairman and President State Street Bank and Trust Company
Richard B. Bailey* - Private Investor; INDEPENDENT AUDITORS
Former Chairman and Director (until 1991), Ernst & Young LLP
Massachusetts Financial Services Company
INVESTOR INFORMATION
Marshall N. Cohan - Private Investor; For MFS stock and bond market outlooks,
Former President and Treasurer (until 1989), call toll-free: 1-800-637-4458 anytime from
Skane Knit, Inc. a touch-tone telephone.
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery, For information on MFS mutual funds
Brigham and Women's Hospital; Professor of call your financial adviser or,for an
Surgery, Harvard Medical School information kit, call toll-free:
1-800-637-2929 any business day from
The Hon. Sir J. David Gibbons, KBE - Chairman, 9 a.m. to 5 p.m. Eastern time (or, leave
Bank of N.T. Butterfield & Son Ltd., a message anytime).
Hamilton, Bermuda
INVESTOR SERVICE
Abby M. O'Neill - Private Investor; MFS Service Center, Inc.
Director, Rockefeller Financial Services, Inc. P.O. Box 2281
(Investment Advisers) Boston, MA 02107-9906
Walter E. Robb, III - President and Treasurer, For general information, call toll free:
Benchmark Advisors, Inc. (Financial Consultants) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Arnold D. Scott* - Senior Executive Vice President,
Massachusetts Financial Services Company For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
Jeffrey L. Shames* - President and Chief Equity day from 9 a.m. to 5 p.m. Eastern time.
Officer, Massachusetts Financial Services Company (To use this service, your phone must be
equipped with a Telecommunications
J. Dale Sherratt - Former Chairman and Chief Device for the Deaf.)
Executive Officer (until 1989),
The Kendall Company; For share prices, account balances and
President, Insight Resources, Inc. exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
Ward Smith - Former Chairman (until 1994), telephone.
NACCO Industries; Director, Sundstrand
Corporation
--------------------------------
INVESTMENT ADVISER TOP-RATED SERVICE
Massachusetts Financial Services Company MFS was rated first when
500 Boylston Street securities firms evaluated the
Boston, Massachusetts 02116-3741 quality of service they receive
from 40 mutual fund companies.
PORTFOLIO MANAGER MFS got high marks for answering
Steven E. Nothern* calls quickly, processing
transactions accurately and
TREASURER sending statements out on time.
W. Thomas London* (Source: 1994 DALBAR Survey)
ASSISTANT TREASURER
James O. Yost*
--------------------------------
SECRETARY Cover photo: Through their wide
Stephen E. Cavan* range of investments, MFS mutual
funds help you share in
ASSISTANT SECRETARY America's growth.
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the 12 months ended December 31, 1994, Class A shares of the Fund
provided a total return of -0.76%, while Class B shares had a total return of
- -1.65%. Class C shares of the Fund just became available on August 1, 1994 and
had a cumulative total return of -0.33% for the period through December 31,
1994. All of these returns assume the reinvestment of distributions but exclude
the effects of any sales charges. During the same 12-month period, the return of
the Lehman Brothers One- to Five-Year Government Bond Index, a market-value
weighted index comprised of debt issued by the U.S. government and its agencies
with remaining maturities of one to five years, was -0.77%. A discussion of the
Fund's performance during the fiscal year ended December 31, 1994 may be found
in the Portfolio Performance and Strategy section of this letter. Complete
performance data may be found on pages three and four of this report.
Economic Outlook
The economic expansion, about to enter its fifth year, has gained firmer
underpinnings as employers have been stepping up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4% real (adjusted for inflation) gross domestic product
growth in 1994. Interest rates rose significantly in 1994, which should help
restrain, but not curtail, the economic expansion. Based on improving economic
fundamentals both here and abroad, we expect the business expansion to continue
well into 1995.
Interest Rates
Despite a stronger economy, inflation at the consumer level has remained
relatively benign at 2.7% in 1994, the fourth straight year of 3% or less. Due
to a prolonged period of below-trend-line growth and continued pressure on
corporations to emphasize effective cost controls, wage growth and unit labor
costs have remained subdued. However, as the economy has exhibited continuing
strength, various industrial commodity prices have been rising substantially
faster than consumer prices. Nevertheless, businesses have had difficulty
passing these price increases on to the consumer. With the economy continuing to
expand, we expect to see some upward movement in inflation from below 3% to the
3 1/2% range. The Federal Reserve Board has shown a willingness to raise
short-term rates to slow the economy and dampen inflationary pressures. The
Federal Reserve most recently raised the federal funds rate 75 basis points
(0.75%) on November 15, and we expect the Federal Reserve to raise short-term
rates again in the coming months if it believes that current efforts have not
been sufficient to dampen inflationary expectations. Although we believe
fundamentals are favorable for lower long-term rates sometime in 1995, this
likely will not occur until the Federal Reserve is comfortable that its policy
toward slowing the economic expansion has been successful. Thus, we believe that
long-term yields will move moderately higher in the near term.
Portfolio Performance and Strategy
As mentioned earlier, Class A shares of the Fund provided a total return of
- -0.76% during the fiscal year ended December 31, 1994, as compared to a return
of -0.77% for the Lehman Brothers One- to Five-Year Government Bond Index. Class
A shares also outperformed the -1.65% average return for other short-term U.S.
government funds as determined by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance.
Our focus during the past 12 months has been on preservation of principal,
and it remains our primary focus entering 1995. Currently, the portfolio is
structured defensively in anticipation of further increases in short-term
interest rates by the Federal Reserve. Considerable momentum in the expansion of
economic activity has carried unemployment to within one-tenth of a percent of
the previous business-cycle low. Additionally, business capacity utilization
rates are close to levels that historically have led to supply bottlenecks and
inflationary pressures. We believe the Federal Reserve will need to see evidence
that this economic momentum has been significantly blunted before signaling that
the current cycle of rising interest rates is complete.
Approximately 48% of the Fund's total net assets is invested in U.S.
Treasury securities with maturities of eight months or less. As we approach the
end of the credit tightening cycle, and we see indications that the Federal
Reserve's increase in interest rates is impacting economic growth, we expect to
invest these short-term holdings in the three- to five-year sector of the
Treasury market. By re-deploying these short-term holdings, we expect to be able
to lock in attractive yields and to position the portfolio to benefit from
opportunities for capital appreciation.
During 1995, we will look to further increase portfolio allocations to
government agency and mortgage-backed pass-through securities. Our current
mortgage holdings are primarily balloon and 15-year pass-through securities.
With declining mortgage refinancing activity and an anticipated slowdown in
housing activity, these securities should continue to benefit from very
favorable supply and demand technicals, limited extension risk and attractive
incremental yields relative to Treasuries (although it is important to remember
that principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity).
In order for the Fund to remain an eligible investment for Federal Credit
Unions and national banks, the Fund will continue not to invest in options or
futures and the more volatile mortgage-derivative securities. With our
relatively large holdings of cash and very short-term Treasury and mortgage
securities, we believe the portfolio is well-positioned to benefit from the
higher yields that may become available later in 1995.
We appreciate your support and welcome any questions or comments you may
have.
Page 2
A 1 1/2" by 1 5/8" photo of A. Keith Brodkin, Chairman and President
A 1 1/2" by 1 5/8" photo of Steven E. Nothern, Portfolio Manager
Respectfully,
/s/A. Keith Brodkin /s/Steven E. Nothern
Chairman and President Portfolio Manager
January 20, 1995
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PORTFOLIO MANAGER PROFILE
Steven Nothern began his career at MFS in 1986 in the Fixed Income Department. A
graduate of Middlebury College and Boston University, he was named Assistant
Vice President in 1987, Vice President in 1989 and Senior Vice President in July
of 1993. In 1992, he became Portfolio Manager of MFS Government Premium Fund,
now called MFS Government Limited Maturity Fund. Mr. Nothern is a Chartered
Financial Analyst (C.F.A.).
OBJECTIVE AND POLICIES
The Fund's investment objective is to preserve capital and provide high current
income (compared to a portfolio entirely invested in money market instruments).
The Fund seeks to achieve its objective by investing in obligations issued or
guaranteed by the U.S. government, its agencies, authorities or
instrumentalities, including mortgage-related securities*. Under normal market
conditions, substantially all of the securities in the Fund's portfolio will
have remaining maturities of five years or less.
*The government guarantee does not apply to shares of the Fund, which will
fluctuate with changes in market conditions.
TAX FORM SUMMARY
In January 1995, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1994.
PERFORMANCE
The information on the following page illustrates the historical performance of
MFS Government Limited Maturity Fund Class A shares in comparison to various
market indicators. Fund results reflect the deduction of the 2.50% maximum sales
charge; benchmark comparisons are unmanaged and do not reflect any fees or
expenses. You cannot invest in an index. All results reflect the reinvestment of
all dividends and capital gains.
Class B shares were offered effective September 7, 1993. Information on Class B
share performance appears on the next page.
Please note that effective August 1, 1994, Class C shares were offered.
Information on Class C share performance appears on the next page.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from October 1, 1988 to December 31, 1994)
Page 4
Line graph representing the growth of a $10,000 investment for the life-of-class
period ended December 31, 1994. The graph is scaled from $8,000 to $18,000 in
$2,000 segments. The years are marked from 1988 to 1994. There are three lines
drawn to scale. One is a solid line representing MFS Government Limited Maturity
Fund Class A, a second line of short dashes represents the Lehman Brothers 1-5
Year Government Bond Index, and a third line of long dashes represents the
Consumer Price Index.
MFS Government Limited
Maturity Fund Class A $13,934
Lehman Brothers 1-5 Year
Government Bond Index $15,796
Consumer Price Index $12,496
AVERAGE ANNUAL TOTAL RETURNS
Life of Class
through
1 Year 3 Years 5 Years 12/31/94+++
- ------------------------------------------------------------------------------
MFS Government Limited Maturity
Fund (Class A)
including 2.50% sales charge -3.23% +3.31% +4.62% +5.44%*
- ------------------------------------------------------------------------------
MFS Government Limited Maturity
Fund (Class A)
at net asset value -0.76% +4.19% +5.15% +5.87%*
- ------------------------------------------------------------------------------
MFS Government Limited Maturity
Fund (Class B) with CDSC+ -5.40% -- -- -4.44%**
- ------------------------------------------------------------------------------
MFS Government Limited Maturity
Fund (Class B) without CDSC -1.65% -- -- -1.62%**
- ------------------------------------------------------------------------------
MFS Government Limited Maturity
Fund (Class C) -- -- -- -0.33%#
- ------------------------------------------------------------------------------
Average short-term U.S.
government fund -1.65% +3.30% +6.06% +6.72%++
- ------------------------------------------------------------------------------
Lehman Brothers One- to Five-
Year Government Bond Index -0.77% +4.20% +7.03% +7.59%++
- ------------------------------------------------------------------------------
Consumer Price Index(S) +2.67% +2.78% +3.49% +3.63%++
- ------------------------------------------------------------------------------
In the above table, we have included the average annual total returns of all
short-term U.S. government funds (including the Fund) tracked by Lipper
Analytical Services, Inc. for the applicable time periods (108, 47, 33 and 27
funds for the 1-, 3- and 5-year periods ended December 31, 1994, and for the
period from October 1, 1988 through December 31, 1994, respectively). Because
these returns do not reflect any applicable sales charges, we have also included
the Fund's results at net asset value (no sales charge) for comparison.
All results are historical and, therefore, are not an indication of future
results. The principal value and income return of an investment in a mutual fund
will vary with changes in market conditions, and shares, when redeemed, may be
worth more or less than their original cost. Class C shares have no initial
sales charge or contingent deferred sales charge (CDSC), but along with Class B
shares, have higher annual fees and expenses than Class A shares.
All Class A share results reflect the applicable expense subsidy which is
explained in the Notes to Financial Statements. Had the subsidy not been in
effect, the results would have been less favorable. The subsidy may be rescinded
at any time.
*For the period from the commencement of offering of Class A shares, September
26, 1988 to December 31, 1994.
**For the period from the commencement of offering of Class B shares, September
7, 1993 to December 31, 1994.
+These returns reflect the current maximum Class B CDSC of 4%.
#Aggregate total return from August 1, 1994 (commencement of offering of Class
C shares).
++Benchmark comparisons begin on October 1, 1988.
(S)The Consumer Price Index is a popular measure of change in prices.
+++The Fund's policy of investing in U.S. government securities with average
lives of five years or less did not take effect until May 1, 1993.
PORTFOLIO OF INVESTMENTS - December 31, 1994
Bonds - 97.3%
- --------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------
U.S. Federal Agencies - 25.4%
Federal Home Loan Mortgage Corp., 7s, 1999 $19,245 $ 18,595,379
Federal Home Loan Mortgage Corp., 7.5s, 1999 21,122 20,705,961
Federal National Mortgage Assn., 8.5s,2001 - 2009 24,108 24,069,686
Federal National Mortgage Assn., 9s, 2003 - 2007 6,25 6,338,475
Federal National Mortgage Assn., 1993 -
M1, "A", 7.653s, 2020 2,596 2,541,949
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$ 72,251,450
- --------------------------------------------------------------------------------
U.S. Government Guaranteed - 71.9%
Government National Mortgage Association - 4.1%
GNMA, 7.5s, 2009 $ 38 $ 36,329
GNMA, 8s, 2004 - 2009 11,871 11,607,424
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$ 11,643,753
- --------------------------------------------------------------------------------
U.S. Treasury Obligations - 67.8%
U.S. Treasury Notes, 8.5s, 1995 $61,000 $ 61,552,660
U.S. Treasury Notes, 8.875s, 1995 73,500 74,292,330
U.S. Treasury Notes, 7.25s, 1996 30,000 29,765,700
U.S. Treasury Notes, 7.375s, 1997 27,50 27,207,675
-------------
$192,818,365
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Total U.S. Government Guaranteed $204,462,118
- --------------------------------------------------------------------------------
Total Bonds (Identified Cost, $284,572,459) $276,713,568
- --------------------------------------------------------------------------------
Repurchase Agreement - 1.0%
- --------------------------------------------------------------------------------
Lehman Brothers, dated 12/30/94, due 1/ 03/95, total to be received
$2,808,825 (secured by $2,105,000 U.S. Treasury Bonds, 11.25s, due 2/
15/15, market value $2,866,370), at
Cost $ 2,807 $ 2,807,000
- --------------------------------------------------------------------------------
Total Investments (Identified Cost, $287,379,459) $279,520,568
Other Assets, Less Liabilities - 1.7% 4,954,217
- --------------------------------------------------------------------------------
Net Assets - 100.0% $284,474,785
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $287,379,459) $279,520,568
Cash 672
Receivable for Fund shares sold 202,580
Interest receivable 6,073,510
Other assets 4,825
------------
Total assets $285,802,155
------------
Liabilities:
Payable for Fund shares reacquired $ 554,347
Distributions payable 553,062
Payable to affiliates -
Distribution fee 102,498
Management fee 6,236
Shareholder servicing agent fee 2,431
Accrued expenses and other liabilities 108,796
------------
Total liabilities $ 1,327,370
------------
Net assets $284,474,785
------------
Net assets consist of:
Paid-in capital $306,825,265
Unrealized depreciation on investments (7,858,891)
Accumulated net realized loss on investments (14,453,302)
Accumulated distributions in excess of net investment income (38,287)
-------------
Total $284,474,785
------------
Shares of beneficial interest outstanding 33,787,880
------------
Class A shares:
Net asset value and redemption price per share
(net assets of $257,153,776 / 30,537,522 shares of
beneficial interest outstanding) $8.42
----
Offering price per share (100/97.5 of net asset value per
share) $8.64
----
Class B shares:
Net asset value, offering price and redemption price per share
(net assets of $23,917,728 / 2,844,871 shares of beneficial
interest outstanding) $8.41
----
Class C shares:
Net asset value, offering price and redemption price per share
(net assets of $3,403,281 / 405,487 shares of beneficial
interest outstanding) $8.39
----
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended December 31, 1994
- --------------------------------------------------------------------------------
Net investment income:
Interest income $ 22,577,275
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Expenses -
Management fee $ 1,561,767
Trustees' compensation 40,877
Shareholder servicing agent fee (Class A) 442,495
Shareholder servicing agent fee (Class B) 45,549
Shareholder servicing agent fee (Class C) 1,257
Distribution and service fee (Class A) 735,827
Distribution and service fee (Class B) 207,041
Distribution and service fee (Class C) 8,380
Custodian fee 98,706
Postage 40,877
Auditing fees 33,287
Printing 24,856
Legal fees 8,130
Miscellaneous 191,040
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Total expenses $ 3,440,089
Reduction of expenses by investment adviser and distributor (453,869)
------------
Net expenses $ 2,986,220
------------
Net investment income $ 19,591,055
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) $(16,449,820)
Change in unrealized appreciation (depreciation) (6,309,503)
------------
Net realized and unrealized loss on investments $(22,759,323)
------------
Net decrease in net assets from operations $ (3,168,268)
------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended December 31, 1994 1993
- --------------------------------------------------------------------------------
Increase (decrease) in net
assets:
From operations -
Net investment income $ 19,591,055 $ 17,072,328
Net realized gain (loss) on
investments (16,449,820) 4,172,622
Net unrealized loss on
investments (6,309,503) (1,868,631)
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Increase (decrease) in net
assets from operations $ (3,168,268) $ 19,376,319
----------- -----------
Distributions declared to
shareholders -
From net investment income (Class A) $(16,948,072) $(16,882,753)
From net investment income (Class B) (1,023,255) (65,605)
From net investment income (Class C) (49,519) --
From net realized gain on
investments (Class A) -- (3,219,959)
From net realized gain on
investments (Class B) -- (27,163)
----------- -----------
Total distributions declared
to shareholders $(18,020,846) $(20,195,480)
----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 88,499,662 $175,118,644
Net asset value of shares
issued to shareholders in
reinvestment of distributions 11,313,407 12,865,498
Cost of shares reacquired (151,014,206) (127,087,569)
----------- -----------
Increase (decrease) in net
assets from Fund share
transactions $(51,201,137) $ 60,896,573
----------- -----------
Total increase (decrease)
in net assets $(72,390,251) $ 60,077,412
Net assets:
At beginning of period 356,865,036 296,787,624
----------- -----------
At end of period (including
undistributed (distributions
in excess of) net investment
income of $(38,287) and
$106,594, respectively) $284,474,785 $356,865,036
----------- -----------
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992 1991 1990<F1>
- -----------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value -
beginning of period $ 8.99 $ 8.98 $ 9.06 $ 9.09 $ 9.33
----- ----- ----- ----- -----
Income from investment
operations<F3> -
Net investment income<F5> $ 0.54 $ 0.52 $ 0.49 $ 0.52 $ 0.53
Net realized and unrealized
gain (loss) on investments (0.61) 0.10 0.07 0.21 --
----- ----- ----- ----- -----
Total from investment
operations $(0.07) $ 0.62 $ 0.56 $ 0.73 $ 0.53
----- ----- ----- ----- -----
Less distributions declared
to shareholders -
From net investment income $(0.50) $(0.51) $(0.45) $(0.49) $(0.48)
From net realized gain on
investments -- (0.10) (0.14) -- --
From paid-in capital -- -- (0.05) (0.27) (0.29)
----- ---- ---- ---- ----
Total distributions
declared to
shareholders $(0.50) $(0.61) $(0.64) $(0.76) $(0.77)
----- ----- ----- ----- -----
Net asset value -
end of period $ 8.42 $ 8.99 $ 8.98 $ 9.06 $ 9.09
===== ===== ===== ===== =====
Total return<F4> (0.76)% 7.00% 6.51% 8.44% 7.39%<F2>
Ratios (to average net assets)/Supplemental data<F5>:
Expenses 0.89% 1.14% 1.38% 1.33% 1.40%<F2>
Net investment income 6.28% 5.62% 5.50% 5.89% 7.01%<F2>
Portfolio turnover 328% 247% 391% 1,256% 845%
Net assets at end of period
(000 omitted) $257,154 $345,597 $296,788 $365,644 $427,849
<FN>
<F1>For the ten months ended December 31, 1990.
<F2>Annualized.
<F3>Per share data for the year ended December 31, 1994 is based on average shares outstanding.
<F4>Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
<F5>The investment adviser and the distributor did not impose a portion of
their management fee and distribution fee, respectively, for the periods
indicated. If these fees had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment income $ 0.53 $ 0.50 -- -- --
Ratios (to average
net assets):
Expenses 1.04% 1.34% -- -- --
Net investment income 6.13% 5.42% -- -- --
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------
Year Ended February 28, Year Ended December 31,
----------------------- ----------------------------------
1990 1989<F1> 1994 1993<F2> 1994<F3>
- --------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning
of period $ 9.51 $ 9.63 $ 8.98 $ 9.17 $ 8.62
------ ------ ------ ------ ------
Income from investment operations<F5> -
Net investment income<F7> $ 0.69 $ 0.23 $ 0.47 $ 0.12 $ 0.17
Net realized and unrealized gain (loss)
on investments 0.10 (0.11) (0.62) (0.17) (0.20)
------ ------ ------ ------ ------
Total from investment operations $ 0.79 $ 0.12 $(0.15) $(0.05) $(0.03)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.67) $(0.17) $(0.42) $(0.11) $(0.20)
From net realized gain on investments (0.14) (0.02) -- (0.03) --
From paid-in capital (0.16) (0.05) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.97) $(0.24) $(0.42) $(0.14) $(0.20)
------ ------ ------ ------ ------
Net asset value - end of period $ 9.33 $ 9.51 $ 8.41 $ 8.98 $ 8.39
====== ====== ====== ====== ======
Total return<F6> 8.43%<F4> 3.02%<F4> (1.65)% (1.54)%<F4> (0.33)%
Ratios (to average net assets)/Supplemental data(S):
Expenses 1.43% 1.41%<F4> 1.79% 1.83%<F4> 1.62%<F4>
Net investment income 7.16%<F4> 6.97%<F4> 5.42% 4.58%<F4> 6.10%<F4>
Portfolio turnover 615% 170% 328% 247% 328%
Net assets at end of period
(000 omitted) $350,011 $117,584 $23,918 $11,268 $3,403
<FN>
<F1>For the period from the commencement of investment operations, September 26, 1988 to February 28, 1989.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to
<F3>For the period from the commencement of offering of Class C shares, August 1, 1994 to December
<F4>Annualized.
<F5>Per share data for the year ended December 31, 1994 is based on average shares outstanding.
<F6>Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
<F7>The investment adviser and the distributor did not impose a portion of their management fee and
distribution fee, respectively, for the period indicated. If these fees had been incurred by the Fund, the
net investment income per share and the ratios would have been:
Net investment income -- -- $ 0.46 $ 0.11 --
Ratios (to average net assets):
Expenses -- -- 1.82% 2.60%<F4> --
Net investment income -- -- 5.39% 3.82%<F4> --
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Government Limited Maturity Fund (the Fund) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
(2) Significant Accounting Policies
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Securities
for which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the Fund to obtain those securities in the
event of a default under the repurchase agreement. The Fund monitors, on a daily
basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Security Loans - The Fund may lend its securities to member banks of the Federal
Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of securities
loaned. As with other extensions of credit, the Fund may bear the risk of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Fund receives compensation for lending its
securities in the form of fees or from all or a portion of the income from
investment of the collateral. The Fund would also continue to earn income on the
securities loaned. At December 31, 1994, the Fund had no securities on loan.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Interest payments received in additional securities are recorded on the
ex-interest date in an amount equal to the value of the security on such date.
Some government securities may be purchased on a "when-issued" or
"forward-delivery" basis, which means that the securities will be delivered to
the Fund at a future date usually beyond customary settlement time.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return and, consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV. Distributions to shareholders are recorded on the
ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended December 31, 1994, $1,715,090 was reclassified from
accumulated distributions in excess of net investment income to accumulated net
realized loss on investments, due to differences between book and tax accounting
for mortgage-backed securities. This change had no effect on the net assets or
net asset value per share.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. Class B and Class C shares were first offered to the
public on September 7, 1993 and August 1, 1994, respectively. The three classes
of shares differ in their respective shareholder servicing agent, distribution
and service fees. Shareholders of each class also bear certain expenses that
pertain only to that particular class. All shareholders bear the common expenses
of the Fund pro rata based on the average daily net assets of each class,
without distinction between share classes. Dividends are declared separately for
each class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses,
including distribution and shareholder service fees.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. Prior to
April 1, 1994, the management fee was computed daily and paid monthly at an
effective annual rate of 0.38% of average daily net assets and 5.36% of gross
income. Subsequent to April 1, 1994, the management fee was computed daily and
paid monthly at the lesser of 0.40% of average daily net assets or 0.38% of
average daily net assets and 5.36% of gross income. This amounted to $1,561,767
for the year ended December 31, 1994. The investment adviser did not impose a
portion of its fee ($160,537), which is reflected as a reduction of expenses in
the statement of operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Financial Services, Inc. (FSI)
and MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit
plan for all its independent Trustees. Included in Trustees' compensation is a
net periodic pension expense of $9,052 for the year ended December 31, 1994.
Distributor - FSI, a wholly owned subsidiary of MFS, as distributor, received
$43,591 as its portion of the sales charge on sales of Class A shares of the
Fund. Effective January 1, 1995, FSI became MFS Fund Distributors, Inc. (MFD).
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A Distribution Plan provides that the Fund will pay MFD up to 0.35% of
its average daily net assets attributable to Class A shares annually in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to 0.10%
per annum of the Fund's average daily net assets attributable to Class A shares,
commissions to dealers and payments to MFD wholesalers for sales at or above a
certain dollar level, and other such distribution-related expenses that are
approved by the Fund. MFD is currently waiving the 0.10% distribution fee which
amounted to $293,332 for the year ended December 31, 1994. Fees incurred under
the distribution plan during the year ended December 31, 1994 were 0.15% of
average daily net assets attributable to Class A shares on an annualized basis,
net of waiver, and amounted to $442,495 (of which MFD retained $39,041).
The Class B and Class C Distribution Plans provide that the Fund will pay MFD a
monthly distribution fee, equal to 0.75% per annum, and a quarterly service fee
of up to 0.25% per annum, of the Fund's average daily net assets attributable to
Class B and Class C shares. MFD will pay to securities dealers that enter into a
sales agreement with MFD, all or a portion of the service fee attributable to
Class B and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended to
be additional consideration for services rendered by the dealer with respect to
Class B and Class C shares. Fees incurred under the distribution plans for the
year ended December 31, 1994 were 1.00% of average daily net assets attributable
to Class B and Class C shares on an annualized basis and amounted to $207,041
and $8,380, respectively (of which MFD retained $1,721 and $5 for Class B and
Class C shares, respectively).
A contingent deferred sales charge is imposed on shareholder redemption of Class
A shares, on purchases of $1 million or more, in the event of a share redemption
within twelve months following the share purchase. A contingent deferred sales
charge is imposed on shareholder redemptions of Class B shares in the event of a
shareholder redemption within six years of purchase. MFD receives all contingent
deferred sales charges. Contingent deferred sales charges imposed during the
year ended December 31, 1994 were $238,743 and $192,283 for Class A and Class B
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
$442,495, $45,549 and $1,257 for Class A, Class B and Class C shares,
respectively, for its services as shareholder servicing agent. The fee is
calculated as a percentage of the average daily net assets of each class of
shares at an effective annual rate of up to 0.15%, up to 0.22% and up to 0.15%
attributable to Class A, Class B and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations, were as
follows:
Purchases Sales
- ------------------------------------------------------------------------------
U.S. government securities $975,629,391 $1,025,810,465
------------ --------------
The cost and unrealized depreciation in value of the investments owned by the
Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $ 287,732,975
--------------
Gross and net unrealized depreciation $ 8,212,407
--------------
At December 31, 1994, the Fund, for federal income tax purposes, had a capital
loss carryforward of $14,381,215, which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on December 31, 2002.
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
1994 1993
Class A Shares --------------------------- -------------------------
Year Ended December 31, Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,636,068 $ 57,795,004 17,800,353 $163,422,799
Shares issued to shareholders in
reinvestment of distributions 1,230,897 10,641,877 1,424,842 12,810,329
Shares reacquired (15,759,146) (137,039,970) (13,851,921) (126,694,108)
----------- ------------- ----------- ------------
Net increase (decrease) (7,892,181) $ (68,603,089) 5,373,274 $ 49,539,020
=========== ============= =========== ============
1994 1993<F1>
Class B Shares --------------------------- -------------------------
Year Ended December 31, Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
Shares sold 3,133,094 $ 27,198,600 1,292,601 $ 11,695,845
Shares issued to shareholders in
reinvestment of distributions 72,495 622,590 6,127 55,169
Shares reacquired (1,615,742) (13,879,579) (43,704) (393,461)
---------- ------------- --------- ------------
Net increase 1,589,847 $ 13,941,611 1,255,024 $ 11,357,553
========== ============= ========= ============
1994<F2>
Class C Shares ---------------------------
Year Ended December 31, Shares Amount
- --------------------------------------------------------------------
Shares sold 410,854 $ 3,506,058
Shares issued to shareholders in
reinvestment of distributions 5,799 48,940
Shares reacquired (11,166) (94,657)
---------- -------------
Net increase 405,487 $ 3,460,341
========== =============
<F1>For the period from the commencement of offering of Class B shares,
September 7, 1993 to December 31, 1993.
<F2>For the period from the commencement of offering of Class C shares, August
1, 1994 to December 31, 1994.
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS, or an affiliate of MFS, in an unsecured line of credit
with a bank which permits borrowings up to $300 million, collectively.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the
year ended December 31, 1994 was $4,753.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of MFS Government Limited Maturity Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Government Limited Maturity Fund, including the schedule of portfolio
investments, as of December 31, 1994, and the related statements of operations
and changes in net assets for the year then ended and the financial highlights
for the year then ended for Class A and Class B shares, and for the period from
August 1, 1994 (commencement of offering) to December 31, 1994 for Class C
shares. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The financial statements of MFS Government Limited Maturity Fund for the
year ended December 31, 1993 and the financial highlights for each of the three
years in the period ended December 31, 1993, for the ten months ended December
31, 1990, for the year ended February 28, 1990, for the period from September
26, 1988 (commencement of operations) to February 28, 1989, for Class A shares,
and for the period from September 7, 1993 (commencement of operations) to
December 31, 1993 for Class B shares, were audited by other auditors whose
report dated January 19, 1994 expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian and brokers, or other appropriate auditing
procedures where replies from brokers were not received. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Government Limited Maturity Fund as of December 31, 1994, and the results of its
operations, the changes in its net assets, and financial highlights for the year
then ended for Class A shares and Class B shares, and for the period August 1,
1994 to December 31, 1994 for Class C shares, in conformity with generally
accepted accounting principles.
/s/Ernst & Young LLP
Boston, Massachusetts
February 9, 1995
---------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
<TABLE>
THE MFS FAMILY OF FUNDS(r)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types of
securities in their portfolios. For free prospectuses containing more complete
information, including the exchange privilege and all charges and expenses, please
contact your financial adviser or call the MFS Service Center at 1-800-225-2606 any
business day from 8 a.m. to 8 p.m. Eastern time. This material should be read carefully
before investing or sending money.
<CAPTION>
STOCK LIMITED MATURITY BOND
<S> <C>
Massachusetts Investors Trust MFS(r) Government Limited Maturity Fund
Massachusetts Investors Growth Stock Fund MFS(r) Limited Maturity Fund
MFS(r) Capital Growth Fund MFS(r) Municipal Limited Maturity Fund
MFS(r) Emerging Growth Fund WORLD
MFS(r) Gold & Natural Resources Fund MFS(r) World Asset Allocation Fund
MFS(r) Growth Opportunities Fund MFS(r) World Equity Fund
MFS(r) Managed Sectors Fund MFS(r) World Governments Fund
MFS(r) OTC Fund MFS(r) World Growth Fund
MFS(r) Research Fund MFS(r) World Total Return Fund
MFS(r) Value Fund NATIONAL TAX-FREE BOND
STOCK AND BOND MFS(r) Municipal Bond Fund
MFS(r) Total Return Fund MFS(r) Municipal High Income Fund
MFS(r) Utilities Fund (closed to new investors)
BOND MFS(r) Municipal Income Fund
MFS(r) Bond Fund STATE TAX-FREE BOND
MFS(r) Government Mortgage Fund Alabama, Arkansas, California, Florida,
MFS(r) Government Securities Fund Georgia, Louisiana, Maryland, Massachusetts,
MFS(r) High Income Fund Mississippi, New York, North Carolina,
MFS(r) Intermediate Income Fund Pennsylvania, South Carolina Tennessee, Texas,
MFS(r) Strategic Income Fund Virginia, Washington, West Virginia
(formerly MFS(r) Income & Opportunity Fund) MONEY MARKET
MFS(r) Cash Reserve Fund
MFS(r) Government Money Market Fund
MFS(r) Money Market Fund
</TABLE>
<PAGE>
MFS(R)
GOVERNMENT BULK RATE
LIMITED U.S. POSTAGE
MATURITY P A I D
FUND PERMIT #55638
BOSTON, MA
500 Boylston Street
Boston, MA 02116
[Logo]
THE FIRST NAME IN MUTUAL FUNDS
MGL-2 2/95 18M 28/228/328
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Included in Part A:
For the four years ended December 31, 1994, for the
ten-month period ended December 31, 1990, for the
year ended February 28, 1990, and for the period
from September 26, 1988 (commencement of
operations) to February 28, 1989.
Financial Highlights
Financial Statements Included in Part B:
At December 31, 1994:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended December 31, 1994:
Statement of Operations*
For the two years ended December 31, 1994:
Statement of Changes in Net Assets*
- -----------------------------
* Incorporated herein by reference to the Fund's Annual Report to
Shareholders dated December 31, 1994, filed with the SEC on March 6,
1995.
(b) Exhibits
1 Amended and Restated Declaration of Trust,
dated February 8, 1995; filed herewith.
2 Amended and Restated By-Laws, dated
December 14, 1994; filed herewith.
3 Not Applicable.
4 (a) Form of Share Certificate for Class A
Shares. (8)
(b) Form of Share Certificate for Class B
Shares. (8)
(c) Form of Share Certificate for Class C
Shares. (9)
5 Investment Advisory Agreement, dated
August 10, 1988. (2)
6 (a) Distribution Agreement, dated January
1, 1995; filed herewith.
(b) Dealer Agreement between MFS Fund
Distributors, Inc. ("MFD"), and a dealer
dated December 28, 1994 and the Mutual
Fund Agreement between MFD and a bank or
NASD affiliate, dated December 28, 1994.
(10)
7 Retirement Plan for Non-Interested Person
Trustees, dated January 1, 1991. (6)
8 (a) Custodian Agreement, dated August 10,
1988. (2)
(b) Amendment No. 1 to Custodian Agreement,
dated August 10, 1988. (3)
(c) Amendment No. 2 to Custodian Agreement,
dated August 9, 1989. (6)
(d) Amendment No. 3 to Custodian Agreement,
dated October 1, 1989. (3)
(e) Amendment No. 4 to Custodian Agreement,
dated October 9, 1991. (6)
9 (a) Shareholder Servicing Agent Agreement,
dated August 10, 1988. (2)
(b) Amendment to Shareholder Servicing Agent
Agreement, dated December 31, 1992. (7)
(c) Amendment to Exhibit B of the Shareholder
Servicing Agent Agreement, dated September
7, 1993. (8)
(d) Amendment to Exhibit B of the Shareholder
Servicing Agent Agreement for Class C
shares, dated June 2, 1994. (9)
(e) Exchange Privilege Agreement, dated
September 1, 1993. (8)
(f) Loan Agreement by and among the Banks
named therein, the MFS Funds named
therein, and The First National Bank of
Boston, dated as of February 21, 1995.
(11).
(g) Dividend Disbursing Agency Agreement dated
August 10, 1988. (5)
10 Consent and Opinion of Counsel; filed
herewith.
11 (a) Consent of Ernst & Young; filed herewith.
(b) Consent of Coopers & Lybrand; filed
herewith.
12 Not Applicable.
13 Investment Representation Letters. (1)
14 (a) Forms for Individual Retirement Account
Disclosure Statement as currently in
effect. (4)
(b) Forms for MFS 403(b) Custodial Account
Agreement as currently in effect. (4)
(c) Forms for MFS Prototype Paired Defined
Contribution Plans and Trust Agreement as
currently in effect. (4)
<PAGE>
15 (a) Amended and Restated Distribution Plan
for Class A Shares, dated December 14,
1994; filed herewith.
(b) Distribution Plan for Class B Shares,
dated December 14, 1994; filed herewith.
(c) Distribution Plan for Class C Shares,
dated December 14, 1994; filed herewith.
16 Schedule of Computation for Performance
Quotations: Average Annual and Aggregate
Total Return, Distribution Rate and
Standardized Yield Calculation; filed
herewith.
17 Financial Data Schedules for each class;
filed herewith.
Power of Attorney, dated August 11, 1994;
filed herewith.
- -----------------------------
(1) Incorporated by reference to Post-Effective Amendment No. 1 filed with
the SEC on October 18, 1985.
(2) Incorporated by reference to Post-Effective Amendment No. 5 filed with
the SEC on April 28, 1989.
(3) Incorporated by reference to Post-Effective Amendment No. 6 filed with
the SEC on April 27, 1990.
(4) Incorporated by reference to Post-Effective Amendment No. 7 filed with
the SEC on March 1, 1991.
(5) Incorporated by reference to Post-Effective Amendment No. 9 filed with
the SEC on February 28, 1992. (N.B. mistakenly numbered Post-Effective
Amendment No. 8)
(6) Incorporated by reference to Post-Effective Amendment No. 10 filed with
the SEC on March 1, 1993.
(7) Incorporated by reference to Post-Effective Amendment No. 11 filed with
the SEC on June 18, 1993.
(8) Incorporated by reference to Post-Effective Amendment No. 12 filed with
the SEC on April 29, 1994.
(9) Incorporated by reference to Post-Effective Amendment No. 13 filed with
the SEC on June 1, 1994.
(10) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the SEC
on February 22, 1995.
(11) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS
Municipal Income Trust (File No. 811-4841) filed with the SEC on February
28, 1995.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C> <C>
Class A Shares of Beneficial Interest 9,384
(without par value) (as of March 31, 1995)
Class B Shares of Beneficial Interest 1,175
(without par value) (as of March 31, 1995)
Class C Shares of Beneficial Interest 129
(without par value) (as of March 31, 1995)
</TABLE>
<PAGE>
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Article V of Registrant's
Declaration of Trust, filed herewith as Exhibit 1 to this Post-Effective
Amendment No. 14 to the Registration Statement on Form N-1A filed and (b)
Section 4 of the Distribution Agreement between the Fund and MFS Fund
Distributors, Inc., filed herewith as Exhibit 6(a) to this Post-Effective
Amendment No. 14 to the Registrant's Registration Statement on Form N-1A.
The Trustees and Officers of the Registrant and the personnel
of the Registrant's investment adviser and principal underwriter 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
Massachusetts Financial Services Company ("MFS") serves as
investment adviser to the following open-end funds comprising the MFS Family of
Funds: Massachusetts Investors Trust, Massachusetts Investors Growth Stock Fund,
MFS Growth Opportunities Fund, MFS Government Securities Fund, MFS Government
Mortgage Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has three series: MFS Managed Sectors Fund, MFS Cash Reserve Fund and MFS World
Asset Allocation Fund), MFS Series Trust II (which has four series: MFS Emerging
Growth Fund, MFS Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold
& Natural Resources 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 OTC Fund), MFS Series Trust V (which has two series:
MFS Total Return Fund and MFS Research 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 Municipal Series Trust
(which has 19 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 Louisiana 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 Texas Municipal Bond
Fund, MFS Virginia Municipal Bond Fund, MFS Washington Municipal Bond Fund, MFS
West Virginia Municipal Bond Fund and MFS Municipal Income Fund) and MFS Series
Trust IX (which has three series: MFS Bond Fund, MFS Limited Maturity Fund and
MFS Municipal Limited Maturity Fund) (the "MFS Funds"). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
MFS also serves as investment adviser of the following
no-load, open-end funds: MFS Institutional Trust ("MFSIT") (which has two
series), MFS Variable Insurance Trust ("MVI") (which has twelve series) and MFS
Union Standard Trust ("UST") (which has two 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 aforementioned funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life
Series Trust ("MFS/SL"), Sun Growth Variable Annuity Fund, Inc. ("SGVAF"), 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. The principal business address of each is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company
organized under the laws of the Republic of Ireland and a subsidiary of MFS,
whose principal business address is 41-45 St. Stephen's Green, Dublin 2,
Ireland, serves as investment adviser to and distributor for MFS International
Funds (which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Governments Fund and MFS International Fund-Charter Income
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 Government 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 and MFS Meridian U.S. Equity
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 Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary
of MFS, serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned
subsidiary of MFS, serves as distributor for certain life insurance and annuity
contracts issued by Sun Life Assurance Company of Canada (U.S.).
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, MFS Institutional Trust, MFS Variable Insurance Trust and MFS
Union Standard Trust.
MFS Asset Management, Inc. ("AMI"), 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 A. Keith Brodkin, Jeffrey L. Shames,
Arnold D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the
Chairman, Mr. Shames is the President, Mr. Scott is a Senior Executive Vice
President and Secretary, James E. Russell is a Senior Vice President and the
Treasurer, Stephen E. Cavan is a Senior Vice President, General Counsel and an
Assistant Secretary, and Robert T. Burns is a Vice President and an Assistant
Secretary of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS GOVERNMENT MORTGAGE FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS GOVERNMENT LIMITED MATURITY FUND
MFS SERIES TRUST VI
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer, James R. Bordewick, Jr., Vice
President and Associate General Counsel of MFS, is Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, 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 is Assistant
Treasurer, and James R. Bordewick, Jr., is Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice
President of MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost is Assistant Treasurer, and James
R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T.
Swanson, Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, 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 is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, 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 is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D.
Laupheimer, Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L.
Schechter and David R. King, Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS UNION STANDARD TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost and
Karen C. Jordan are Assistant Treasurers and James R. Bordewick, Jr., is the
Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert J. Manning are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, 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, Vice
President of MFS, is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, and James O. Yost, is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the President, Arnold D.
Scott, Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of
MFS, is a Senior Vice President and Managing Director, Thomas J. Cashman, Jr., a
Vice President of MFS, is a Senior Vice President, Stanley T. Kwok is a Vice
President, Anthony F. Clarizio is an Assistant Vice President, Stephen E. Cavan
is a Director, Senior Vice President and the Clerk, James R. Bordewick, Jr. is a
Director, Senior Vice President and an Assistant Clerk, Robert T. Burns is an
Assistant Clerk and James E. Russell is the Treasurer.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary, and Ziad
Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James R. Bordewick, Jr., is the
Assistant Secretary and Ziad Malek is a Senior Vice President.
MFD
A. Keith Brodkin is the Chairman, 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, and James E. Russell is the Treasurer.
CIAI
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery, Executive
Vice President of MFS, is the Vice President, James E. Russell is the Treasurer,
Stephen E. Cavan is the Secretary, and Robert T. Burns is the Assistant
Secretary.
MFSC
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Joseph A. Recomendes, Senior Vice President of MFS, is
the President, James E. Russell is the Treasurer, Stephen E. Cavan is the
Secretary, and Robert T. Burns is the Assistant Secretary.
AMI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L.
Shames, Leslie J. Nanberg and Arnold D. Scott are Directors, Thomas J. Cashman
is the President and a Director, James E. Russell is the Treasurer and Robert T.
Burns is the Secretary.
<PAGE>
RSI
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery
are Directors, Arnold D. Scott is the Chairman, Douglas C. Grip, a Senior Vice
President of MFS, is the President, James E. Russell is the Treasurer, Stephen
E. Cavan is the Secretary, Robert T. Burns is the Assistant Secretary and Henry
A. Shea is an Executive Vice President.
In addition, the following persons, Directors or officers of
MFS, have the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive
Park, Wellesley Hills, Massachusetts
Director, Sun Life Insurance and Annuity
Company of New York, 67 Broad Street,
New York, New York
John R.Gardner President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Gardner is also an
officer and/or Director of various sub-
sidiaries 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)
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above.
(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 500 Boylston Street
Services Company Boston, MA 02116
(investment adviser)
MFS Fund Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116
State Street Bank and State Street South
Trust Company 5-West
(custodian) North Quincy, MA 02171
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116
<PAGE>
ITEM 31. MANAGEMENT SERVICES
(a) Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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 24th day of April, 1995.
MFS GOVERNMENT LIMITED
MATURITY FUND
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 April 24, 1995.
<PAGE>
SIGNATURE TITLE
A. KEITH BRODKIN* Chairman, President (Principal
A. Keith Brodkin Executive Officer) and Trustee
W. THOMAS LONDON* Treasurer (Principal Financial
W. Thomas London Officer and Principal Accounting
Officer)
RICHARD B. BAILEY* Trustee
Richard B. Bailey
MARSHALL N. COHAN* Trustee
Marshall N. Cohan
LAWRENCE H. COHN, M.D.* Trustee
Lawrence H. Cohn, M.D.
SIR J. DAVID GIBBONS* Trustee
Sir J. David Gibbons
ABBY M. O'NEILL* Trustee
Abby M. O'Neill
WALTER E. ROBB, III* Trustee
Walter E. Robb, III
ARNOLD D. SCOTT* Trustee
Arnold D. Scott
JEFFREY L. SHAMES* Trustee
Jeffrey L. Shames
J. DALE SHERRATT* Trustee
J. Dale Sherratt
WARD SMITH* Trustee
Ward Smith
*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 dated
August 11, 1994; filed herewith.
<PAGE>
POWER OF ATTORNEY
MFS GOVERNMENT LIMITED MATURITY FUND
The undersigned, Trustees and officers of MFS Government Limited
Maturity Fund (the "Registrant"), hereby severally constitute and appoint A.
Keith Brodkin, W. Thomas London, Stephen E. Cavan and James R. Bordewick, Jr.,
and each of them singly, as true and lawful attorneys, with full power to them
and each of them to sign for each of the undersigned, in the names of, and in
the capacities indicated below, any Registration Statement and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
for the purpose of registering the Registrant as a management investment company
under the Investment Company Act of 1940 and/or the shares issued by the
Registrant under the Securities Act of 1933 granting unto our said attorneys,
and each of them, acting alone, full power and authority to do and perform each
and every act and thing requisite or necessary or desirable to be done in the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys or any of them
may lawfully do or cause to be done by virtue thereof.
In WITNESS WHEREOF, the undersigned have hereunto set their hand on
this 11th day of August, 1994.
Signatures Title(s)
A. KEITH BRODKIN Chairman of the Board; Trustee; and
A. Keith Brodkin Principal Executive Officer
RICHARD B. BAILEY Trustee
Richard B. Bailey
MARSHALL N. COHAN Trustee
Marshall N. Cohan
LAWRENCE H. COHN Trustee
Lawrence H. Cohn
SIR J. DAVID GIBBONS Trustee
Sir J. David Gibbons
JEFFREY L. SHAMES Trustee
Jeffrey L. Shames
ABBY M. O'NEILL Trustee
Abby M. O'Neill
WALTER E. ROBB, III Trustee
Walter E. Robb, III
J. DALE SHERRATT Trustee
J. Dale Sherratt
WARD SMITH Trustee
Ward Smith
ARNOLD D. SCOTT Trustee
Arnold D. Scott
W. THOMAS LONDON Principal Financial and
W. Thomas London Accounting Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
1 Amended and Restated Declaration of Trust, dated February
8, 1995.
2 Amended and Restated By-Laws, dated December 14, 1994.
6(a) Distribution Agreement, dated January 1, 1995.
10 Consent and Opinion of Counsel.
11(a) Consent of Ernst & Young.
(b) Consent of Coopers & Lybrand.
15(a) Amended and Restated Distribution Plan for Class A Shares,
dated December 14, 1994.
(b) Distribution Plan for Class B Shares, dated December 14, 1994.
(c) Distribution Plan for Class C Shares, dated December 14, 1994.
16 Schedule of Computation for Performance Quotations: Average
Annual and Aggregate Total Return, Distribution Rate and
Standardized Yield Calculation.
27 Financial Data Schedules for each class.
Exhibit No. 99.1
MFS GOVERNMENT LIMITED MATURITY FUND
AMENDED AND RESTATED
DECLARATION OF TRUST
FEBRUARY 2, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I -- NAME AND DEFINITIONS
<S> <C> <C> <C>
Section 1.1 Name 1
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, DISTRIBUTOR AND TRANSFER AGENT
Section 4.1 Investment Adviser 10
Section 4.2 Distributor 11
Section 4.3 Transfer Agent 11
Section 4.4 Parties to Contract 11
<PAGE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
<S> <C> <C> <C>
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 16
Section 6.4 Issuance of Shares 16
Section 6.5 Register of Shares 16
Section 6.6 Transfer of Shares 17
Section 6.7 Notices 17
Section 6.8 Voting Powers 17
Section 6.9 Series Designation 18
Section 6.10 Class Designation 20
ARTICLE VII -- REDEMPTIONS
Section 7.1 Redemptions 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 of Redemption 22
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS 23
<PAGE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
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 31
</TABLE>
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MFS GOVERNMENT LIMITED MATURITY FUND
500 Boylston Street
Boston, MA 02116
AMENDED AND RESTATED DECLARATION OF TRUST, made as of this 2nd day of
February, 1995 by the Trustees hereunder.
WHEREAS, the Trust was established pursuant to a Declaration of Trust
dated March 11, 1985 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
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.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 - Name. The name of the trust created hereby is MFS
Government Limited Maturity Fund, the current address of which is 500 Boylston
Street, Boston, Massachusetts 02116.
<PAGE>
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 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) "Distributor" means the party, other than the Trust, to the
contract described in Section 4.2 hereof.
(e) "Interested Person" has the meaning given that term in the 1940
Act.
(f) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(g) "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.
(h) "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(i) "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.
(j) "Shareholder" means a record owner of outstanding Shares.
(k) "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.
(l) "Transfer Agent" means the party, other than the Trust, to a
contract described in Section 4.3 hereof.
(m) "Trust" means the trust created hereby.
(n) "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.
(o) "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).
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 instrumentalies 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 Trustee
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 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 Advisor, Distributor, 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, Distributor, 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 or of the Distributor and no Investment Adviser or Distributor of the
Trust, shall take long or short positions in the securities issued by the Trust.
The foregoing provision shall not prevent:
(a) the Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor 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 or of
the Distributor 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
(d) The Investment Adviser, the Distributor or any of their 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, DISTRIBUTOR 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 at 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 - Distributor. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of Shares whereby the
Trust may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
Section 4.3 - 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 4.4 - Parties to Contract. Any contract of the character
described in Sections 4.1, 4.2 or 4.3 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, 4.2 and 4.3 above or Custodian contracts, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all the contracts mentioned in this Section 4.4.
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, willful 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, willful 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 willful 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 of
officer, unless there has been either a determination that such Trustee or
officer did not engage in willful 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 or 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 or 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, the Distributor,
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), 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 or 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
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 this 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 or class 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 or 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. Insurance 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 of 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 1/1,000ths
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 or 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 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 thereunder 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 Section 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 the
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 or 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,
cost, 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 holder 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 other wise 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 in the aggregate, except that (i) when required by the
1940 Act to be voted by individual series, Shares shall not be voted in the
aggregate, 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 or 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.
Section 6.10 - Class Designation. The Trustees may, in their
discretion, authorize the division of Shares of the Trust (or any series of the
Trust) into one or more classes. All Shares of a class shall be identical with
each other and with the Shares of each other class of the Trust or the same
series of the Trust (as applicable), except for such variations between classes
as may be approved by the Board of Trustees and permitted by the 1940 Act or
pursuant to any exemptive order issued by the Securities and Exchange
Commission. The classes of Shares established pursuant to this Section 6.10 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 the postponement of the date of payment or redemption; provided
that applicable rules and regulations of the Commission shall govern as to
whether the 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 or 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 holders of not less than two-thirds of the Shares
outstanding and entitled to vote of the Trust, or such other vote as may be
established by the Trustees with respect to any series of Shares, or by an
instrument or instruments in writing, without a meeting, consented to by the
holders of not less than two-thirds of the Shares outstanding and entitled to
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 the Shares outstanding shall be sufficient
authorization; and any such merger, consolidation, sale or 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 of 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 of 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.
<PAGE>
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 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.
<PAGE>
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, 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 6.10 of the Declaration of Trust, the Trustees have
divided the shares of the Trust, to create three classes of Shares, within the
meaning of Section 6.10, as follows:
1. The three classes of Shares are designated "Class A Shares,"
"Class B Shares" and Class C Shares;
2. Class A Shares, Class B Shares and Class C Shares shall be
entitled to all the rights and preferences accorded to Shares
under the Declaration;
3. The purchase price of Class A Shares, Class B Shares and Class C
Shares, the method of determination of the net asset value of
Class A Shares, Class B Shares and Class C Shares, the price,
terms and manner of redemption of Class A Shares, Class B Shares
and Class C Shares, any conversion feature of the Class B Shares,
and the relative dividend rights of holders of Class A Shares,
Class B Shares and Class C Shares shall be established by the
Trustees of the Trust in accordance with the Declaration and shall
be set forth in the current prospectus and statement of additional
information of the Trust or any series thereof, as amended from
time to time, contained in the Trust's registration statement
under the Securities Act of 1933, as amended;
4. Class A Shares, Class B Shares and Class C Shares shall vote
together as a single class except that Shares of a class may vote
separately on matters affecting only that class and Shares of a
class not affected by a matter will not vote on that matter;
5. A class of Shares of the Trust may be terminated by the Trustees
by written notice to the Shareholders of the class.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this 2nd day
of February, 1995.
A. KEITH BRODKIN WALTER E. ROBB, III
A. Keith Brodkin Walter E. Robb, III
76 Farm Road 35 Farm Road
Sherborn, MA 01770 Sherborn, MA 01770
RICHARD B. BAILEY ARNOLD D. SCOTT
Richard B. Bailey Arnold D. Scott
63 Atlantic Avenue 20 Rowes Wharf
Boston, MA 02110 Boston, MA 02110
MARSHALL N. COHAN JEFFREY L. SHAMES
Marshall N. Cohan Jeffrey L. Shames
2524 Bedford Mews Drive 60 Brookside Road
Wellington, FL 33414 Needham, MA 02192
LAWRENCE H. COHN J. DALE SHERRATT
Lawrence H. Cohn J. Dale Sherratt
45 Singletree Road 86 Farm Road
Chestnut Hill, MA 02167 Sherborn, MA 01770
SIR J. DAVID GIBBONS WARD SMITH
Sir J. David Gibbons Ward Smith
"Leeward" 36080 Shaker Boulevard
5 Leeside Drive Huntington Valley, OH 44022
"Point Shares"
Pembroke, Bermuda HM 05
ABBY M. O'NEILL
Abby M. O'Neill
200 Sunset Road
Oyster Bay, NY 11771
Exhibit No.99.2
AMENDED AND RESTATED
BY-LAWS
OF
MFS GOVERNMENT LIMITED MATURITY FUND
DECEMBER 14, 1994
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
MFS GOVERNMENT LIMITED MATURITY FUND
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 Declaration of Trust of MFS Government Limited
Maturity Fund, dated March 11, 1985, 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 ($5,000,000.00) 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 issue receipts for any monies due to the Trust
and deposit the same in its own banking department or
elsewhere as the Trustees may direct;
(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 ($5,000,000.00)
or such foreign banks and securities depositories as meet the requirements of
applicable provisions of the 1940 Act or the rules and regulations thereunder.
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 substance of 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:
(i) 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 the custodian from paying for securities before such
securities are received by the custodian or the custodian from
delivering securities prior to receiving payment therefor in
accordance with the payment and delivery customs of the market
in which such securities are being purchased or sold .
(ii) 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 all or any part of 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.
Exhibit No.99.6(a)
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this first day of January, 1995, by and
between MFS GOVERNMENT LIMITED MATURITY FUND, a Massachusetts business trust
(the "Trust"), and MFS FUND DISTRIBUTORS, INC., a Delaware corporation (the
"Distributor");
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties hereto agree as follows:
1. The Trust grants to the Distributor the right, as agent of the
Trust, to sell Shares of Beneficial Interest, without par value, of the Trust
(the "Shares") upon the terms herein below set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use its
best efforts to find purchasers for Shares.
The Distributor shall have the right, as agent of the Trust, to order
from the Trust the Shares needed, but not more than the Shares needed (except
for clerical errors and errors of transmission) to fill unconditional orders for
Shares placed with the Distributor by dealers, banks or other financial
institutions or investors as set forth in the current Prospectus and Statement
of Additional Information (collectively, the "Prospectus") relating to the
Shares. The price which shall be paid to the Trust for the Shares so purchased
shall be the net asset value used in determining the public offering price on
which such orders were based. The Distributor shall notify the Custodian of the
Trust, at the end of each business day, or as soon thereafter as the orders
placed with it have been compiled, of the number of Shares and the prices
thereof which have been ordered through the Distributor since the end of the
previous day.
The right granted to the Distributor to place orders for Shares with
the Trust shall be exclusive, except that said exclusive right shall not apply
to Shares issued in the event that an investment company (whether a regulated or
private investment company or a personal holding company) is merged or
consolidated with the Trust or in the event that the Trust acquires by purchase
or otherwise, all (or substantially all) the assets or the outstanding shares of
any such company; nor shall it apply to Shares issued by the Trust as a stock
dividend or a stock split. The exclusive right to place orders for Shares
granted to the Distributor may be waived by the Distributor by notice to the
Trust in writing, either unconditionally or subject to such conditions and
limitations as may be set forth in the notice to the Trust. The Trust hereby
acknowledges that the Distributor may render distribution and other services to
other parties, including other investment companies. In connection with its
duties hereunder, the Distributor shall also arrange for computation of
performance statistics with respect to the Trust and arrange for publication of
current price information in newspapers and other publications.
2. The Shares may be sold through the Distributor to dealers, banks and
other financial institutions having sales agreements with the Distributor, upon
the following terms and conditions:
The public offering price, i.e., the price per Share at which the
Distributor or dealers, banks or other financial institutions purchasing Shares
through the Distributor may sell Shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to the Shares,
including a sales charge (where applicable) not to exceed the amount permitted
by Article III, Section 26 of the National Association of Securities Dealers,
Inc.'s Rule of Fair Practice, as amended from time to time. The Distributor
shall retain the sales charge (where applicable) less any applicable dealer or
comparable discount. If the resulting public offering price does not come out to
an even cent, the public offering price shall be adjusted to the nearer cent. In
addition, the Trust agrees that the Distributor may impose certain contingent
deferred sales charges (where applicable) in connection with the redemption of
Shares, not to exceed 6% of the net asset value of Shares, and the Distributor
shall retain (or receive from the Trust, as the case may be) all such contingent
deferred sales charges.
The Distributor may place orders for Shares at the net asset value for
such Shares (as established pursuant to paragraph l above) on behalf of such
purchasers and under such circumstances as the Prospectus describes, provided
that such sales comply with Rule 22d-1 under the Investment Company Act of 1940
or any exemptive order granted by the Securities and Exchange Commission. The
Distributor may also place orders for Shares at net asset value on behalf of
persons reinvesting the proceeds of the redemption or resale of Shares or shares
of other investment companies for which the Distributor acts as Distributor or
as otherwise provided in the current Prospectus.
The net asset value of Shares shall be determined by the Trust or by an
agent of the Trust, as of the close of regular trading of the New York Stock
Exchange on each business day on which said Exchange is open, in accordance with
the method set forth in the governing instruments (as hereinafter defined) of
the Trust. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
hour or hours as may from time to time be agreed upon in writing by the Trust
and Distributor. The Trust shall have the right to suspend the sale of Shares
if, because of some extraordinary condition, the New York Stock Exchange shall
be closed, or if conditions obtaining during the hours when the Exchange is open
render such action advisable, or for any other reasons deemed adequate by the
Trust.
3. The Trust agrees that it will, from time to time, take all necessary
action to register the offering and sale of Shares under the Securities Act of
l933, as amended (the "Act"), and applicable state securities laws.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or shall
be an employee of the Trust. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in the Distributor, as
Directors, officers and employees, or otherwise and that Directors, officers and
employees of the Distributor are or may become similarly interested in the Trust
and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct and
the employment, control and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it
will use its best efforts in all respects duly to conform with the requirements
of all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
Shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person's acquiring any Shares,
which may be based upon the Act or any other statute or common law, on account
of any wrongful act of the Distributor or any of its employees (including any
failure to conform with any requirement of any state or federal law or the Rules
of Fair Practice of the NASD relating to the sale of Shares) or on the ground
that the registration statement or Prospectus as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless any such act, statement or omission
was made in reliance upon information furnished to the Distributor by or on
behalf of the Trust, provided, however, that in no case (i) is the indemnity of
the Distributor in favor of any person indemnified to be deemed to protect the
Trust or any such person against any liability to which the Trust or any such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its or his duties or by reason of its or
his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Trust or upon such person (or after the Trust or such
person shall have received notice of such service on any designated agent), but
failure to notify the Distributor of any such claim shall not relieve it from
any liability which it may have to the Trust or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if the Distributor elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any such suit and retain such
counsel, the Trust or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Distributor does
not elect to assume the defense of any such suit, it shall reimburse the Trust
and such officers and Trustees or controlling person or persons, defendant or
defendants in such suit, for the reasonable fees and expenses of any counsel
retained by them. The Distributor agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any Shares.
Neither the Distributor nor any other person is authorized to give any
information or to make any representation on behalf of the Trust, other than
those contained in the registration statement or Prospectus filed with the
Securities and Exchange Commission under the Act (as said registration statement
or Prospectus may be amended or supplemented from time to time), covering the
Shares or other than those contained in periodic reports to shareholders of the
Trust.
5. The Trust will pay, or cause to be paid -
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required registration statement or Prospectus under the Act covering Shares
and all amendments and supplements thereto and any notices regarding the
registration of shares, and preparing and mailing to shareholders Prospectuses,
statements and confirmations and periodic reports (including the expense of
setting up in type any such registration statement, Prospectus or periodic
report);
(ii) the expenses (including auditing expenses) of qualification of the
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Trust as a dealer or broker, in such states as shall be selected
by the Distributor and the fees payable to each such state with respect to
shares sold and for continuing the qualification therein until the Distributor
notifies the Trust that it does not wish such qualification continued;
(iii) the cost of preparing temporary or permanent certificates for
Shares;
(iv) all fees and disbursements of the transfer agent of the Trust;
(v) the cost and expenses of delivering to the Distributor at its
office in Boston, Massachusetts, all Shares sold through it as Distributor
hereunder; and
(vi) all the federal and state issue and/or transfer taxes payable upon
the issue by or (in the case of treasury Shares) transfer from the Trust of any
and all Shares purchased through the Distributor hereunder.
The Distributor agrees that, after the Prospectus and periodic reports
have been set up in type, it will bear the expense (other than the cost of
mailing to shareholders of the Trust of printing and distributing any copies
thereof which are to be used in connection with the offering of Shares to
dealers, banks or other financial institutions or investors. The Distributor
further agrees that it will bear the expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it for
use by dealers, banks or other financial institutions in connection with the
offering of the Shares for sale to the public and expenses of advertising in
connection with such offering. The Distributor will also bear the expense of
sending confirmations and statements to dealers, banks and other financial
institutions having sales agreements with the Distributor. Nothing in this
paragraph 5 shall be deemed to prohibit or conflict with any payment by the
Trust to the Distributor pursuant to any Distribution Plan adopted as in effect
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
6. The Trust hereby authorizes the Distributor to repurchase, upon the
terms and conditions set forth in written instructions given by the Trust to the
Distributor from time to time, as agent of the Trust and for its account, such
Shares as may be offered for sale to the Trust from time to time; provided the
Distributor shall have the right, as stated above in paragraph 2 of this
Agreement, to retain (or to receive from the Trust, as the case may be) a
deferred sales charge not to exceed 6% of the net asset value of the Shares so
repurchased.
(a) The Distributor shall notify in writing the Custodian of the Trust,
at the end of each business day, or as soon thereafter as the repurchases have
been compiled, of the number of Shares repurchased for the account of the Trust
since the last previous report, together with the prices at which such
repurchases were made, and upon the request of any Officer or Trustee of the
Trust shall furnish similar information with respect to all repurchases made up
to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time. Unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Distributor, by telegraph or by written notice from the Trust. In
the event that the authorization of the Distributor is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the members of the Board of Trustees of the Trust.
(c) The Distributor shall have the right to terminate the operation of
this paragraph 6 upon giving to the Trust thirty days' written notice thereof.
(d) The Trust agrees to authorize and direct the Custodian to pay, for
the account of the Trust, the purchase price of any Shares so repurchased
against delivery of the certificates, if any, in proper form for transfer to the
Trust or for cancellation by the Trust.
(e) The Distributor shall receive no commission in respect of any
repurchase of Shares under the foregoing authorization and appointment as agent,
except in connection with contingent deferred sales charge as provided in the
current Prospectus relating to the Shares.
(f) The Trust agrees to reimburse the Distributor, from time to time
upon demand, for any reasonable expenses incurred in connection with the
repurchase of Shares pursuant to this paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts, any state or federal
tax laws, it shall notify the Distributor of the form of amendment which it
deems necessary or advisable and the reasons therefore. If the Distributor
declines to assent to such amendment, the Trust may terminate this Agreement
forthwith by written notice to the Distributor without payment of any penalty.
If, at any time during the existence of this Agreement, upon request by the
Distributor, the Trust fails (after a reasonable time) to make any changes in
its governing instruments or in its methods of doing business which are
necessary in order to comply with any requirements of federal or state laws or
regulations, laws or regulations of the Securities and Exchange Commission or of
a national securities association of which the Distributor is or may be a
member, relating to the sale of Shares, the Distributor may terminate this
Agreement forthwith by written notice to the Trust without payment of any
penalty.
8. The Distributor agrees that it will not take any long or short
positions in the Shares except as permitted by paragraphs l and 6 hereof.
Whenever used in this Agreement, the term "governing instruments" shall mean the
Declaration of Trust and the By-Laws of the Trust, as from time to time amended.
9. This Agreement shall become effective on January 1, 1995 and shall
continue in force until August 1, 1996 on which date it will terminate unless
its continuance after August 1, 1996, is specifically approved at least annually
(i) by the vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Trust or of the Distributor 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 that 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 l940 and the Rules and
Regulations thereunder.
This Agreement may be terminated as to any Fund at any time by either
party without payment of any penalty on not more than sixty days' or less than
thirty days' written notice to the other party.
l0. This Agreement shall automatically terminate in the event of its
assignment.
11. The terms "vote of a majority of the outstanding voting
securities", "interested person" and "assignment" shall have the respective
meanings specified in the Investment Company Act of l940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
12. This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.
13. A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Distributor
acknowledges 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. If this instrument is executed by the Trust on behalf of one or
more series of the Trust, the Distributor 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 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 Distributor also agrees that the obligations of each
series hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Distributor agrees not to proceed
against any series for the obligations of another series.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above.
MFS GOVERNMENT LIMITED MATURITY FUND
By: W. THOMAS LONDON
W. Thomas London as officer
and not individually
MFS FUND DISTRIBUTORS, INC.
By: WILLIAM W. SCOTT, JR.
William W. Scott, Jr.
President
Exhibit No. 99.10
April 25, 1995
MFS Government Limited Maturity Fund
500 Boylston Street
Boston, MA 02116
RE: POST-EFFECTIVE AMENDMENT NO. 14 TO REGISTRATION STATEMENT ON FORM
N-1A (FILE NO. 2-96738) (THE "REGISTRATION STATEMENT")
Gentlemen:
I am Vice President and Associate General Counsel of Massachusetts
Financial Services Company, which serves as investment adviser to MFS
Government Limited Maturity Fund (the "Fund") and the Assistant Secretary of
the Fund. I am admitted to practice law in The Commonwealth of Massachusetts.
The Fund was created under a written Declaration of Trust dated March 11,
1985, and executed and delivered in Boston, Massachusetts, as amended and
restated February 8, 1995 (the "Declaration of Trust"). The beneficial
interest thereunder is represented by transferable shares without par value.
The Trustees have the powers set forth in the Declaration of Trust, subject to
the terms, provisions and conditions therein provided.
I am of the opinion that the legal requirements have been complied with
in the creation of the Fund, and that said Declaration of Trust is legal and
valid.
Under Article III, Section 3.4 and Article VI, Section 6.4 of the
Declaration of Trust, the Trustees are empowered, in their discretion, from
time to time to issue shares of the Fund for such amount and type of
consideration, at such time or times and on such terms as the Trustees may
deem best. Under Article VI, Section 6.1, it is provided that the number of
shares of beneficial interest authorized to be issued under the Declaration of
Trust is unlimited.
By vote adopted on February 2, 1995, the Trustees of the Fund
determined to sell to the public the authorized but unissued shares of
beneficial interest of the Fund for cash at a price which will net the Fund
(before taxes) not less than the net asset value thereof, as defined in the
Fund's By-Laws, determined next after the sale is made or at some later time
after such sale.
<PAGE>
MFS Government Limited Maturity Fund
April 25, 1995
Page Two
The Fund is about to register under the Securities Act of 1933, as
amended, 7,240,076 shares of beneficial interest by Post-Effective Amendment
No. 14 to the Fund's Registration Statement. W. Thomas London, Treasurer of
the Fund, has certified that the Fund received cash consideration for the
issuance of each of the Shares of the Fund sold during the Fund's fiscal year
ended December 31, 1994, including the 10,180,016 shares which were sold in
reliance upon Rule 24f-2 of the General Rules and Regulations under the
Investment Company Act of 1940, as amended, at a price which netted the Fund
(before taxes) not less than the net asset value per share, as defined in the
Fund's Declaration of Trust, determined next after the sale was made.
Based on the foregoing, I am of the opinion that all necessary Fund
action precedent to the issue of the shares of the Fund, comprising the shares
covered by Post-Effective Amendment No. 14 to the Registration Statement has
been duly taken, and that all such shares may legally and validly be issued
for cash, and when sold will be fully paid and nonassessable, except as
described below, by the Fund upon receipt by the Fund or its agent of
consideration thereof in accordance with the terms described in the
Registration Statement. I express no opinion as to compliance with the
Securities Act of 1933, the Investment Company Act of 1940 and applicable
state "Blue Sky" or securities laws regulating the sale of securities.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation, or instrument entered into or executed by the
Fund or the Trustees. The Declaration of Trust provides for indemnification
out of the Fund property for all loss and expense of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
I consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to Post-Effective Amendment No. 14 to the
Registration Statement.
Very truly yours,
JAMES R. BORDEWICK, JR.
James R. Bordewick, Jr.
Exhibit No. 99.11(a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference made to our firm under the captions "Condensed
Financial Information" in the Prospectus and "Independent Auditors and Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in this Post-Effective Amendment No. 14 to Registration No. 2-96738
on Form N-1A of our report dated February 9, 1995, on the financial statements
and financial highlights of MFS Government Limited Maturity Fund, included in
the 1994 Annual Report to Shareholders.
ERNST & YOUNG LLP
Ernst & Young LLP
Boston, Massachusetts
April 24, 1995
Exhibit No. 99.11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 14
to the Registration Statement on Form N1-A (File No. 2-96738) of MFS Government
Limited Maturity Fund of our report dated February 14, 1994 on our audit of the
financial statements and financial highlights of the Fund, which report is
included in the annual report to shareholders for the year ended December 31,
1993.
We also consent to the reference to our Firm under the headings "Condensed
Financial Information" in the Prospectus, as supplemented, and "Independent
Auditors and Financial Statements" in the Statement of Additional Information,
as supplemented, both of which are included in such Registration Statement.
COOPERS & LYBRAND LLP
Coopers & Lybrand LLP
Boston, Massachusetts
April 26, 1995
Exhibit No. 99.15(a)
MFS GOVERNMENT LIMITED MATURITY FUND
AMENDED AND RESTATED DISTRIBUTION PLAN
AMENDED AND RESTATED DISTRIBUTION PLAN with respect to the shares of beneficial
interest to be designated "CLASS A" of the MFS GOVERNMENT LIMITED MATURITY FUND
(the "Fund"), a business trust organized and existing under the laws of The
Commonwealth of Massachusetts, dated the 10th day of August, 1985, amended and
restated the 12th day of December, 1990, amended and restated the 17th day of
August, 1993, and amended this 14th day of December, 1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company and is registered under the Investment Company Act of 1940 (the "Act");
and
WHEREAS, a plan of distribution pursuant to Rule 12b-1 of the Act was previously
adopted and approved by the Trustees of the Fund, including the Qualifying
Trustees (as defined below), and by the shareholders of the Fund; and
WHEREAS, the Fund intends to continue to distribute the Shares of Beneficial
Interest (without par value) of the Fund designated Class A Shares (the
"Shares") in part in accordance with Rule 12b-1 under the Act ("Rule 12b-1"),
and desires to adopt this amended and restated Distribution Plan (the "Plan") as
a plan of distribution pursuant to such Rule; and
WHEREAS, the Fund has entered into a distribution agreement (the "Distribution
Agreement") in a form approved by the Board of Trustees of the Trust (the "Board
of Trustees") in the manner specified in Rule 12b-1, with MFS Fund Distributors,
Inc., a Delaware corporation, as distributor (the "Distributor"), whereby the
Distributor provides facilities and personnel and renders services to the Fund
in connection with the offering and distribution of the Shares; and
WHEREAS, the Fund recognizes and agrees that the Distributor will enter into
agreements ("Dealer Agreements") with various securities dealers and other
financial intermediaries ("Dealers") pursuant to which the Dealers will act as
dealers of the Shares in connection with the offering of Shares; and
WHEREAS, the Distribution Agreement provides that a sales charge may be paid by
investors who purchase Shares and that the Distributor and Dealers will receive
such sales charge as partial compensation for their services in connection with
sale of Shares; and
WHEREAS, the Board of Trustees, in considering whether the Fund should adopt and
implement this Plan, has evaluated such information as it deemed necessary to an
informed determination as to whether this Plan should be adopted and implemented
and has considered such pertinent factors as it deemed necessary to form the
basis for a decision to use assets of the Fund for such purposes, and has
determined that there is a reasonable likelihood that the adoption and
implementation of this Plan will benefit the Fund and its Class A shareholders;
NOW, THEREFORE, the Board of Trustees hereby adopts this Plan for the Fund as a
plan of distribution relating to the Shares in accordance with Rule 12b-1 under
the Act, on the following terms and conditions:
1. As specified in the Distribution Agreement, the Distributor
shall provide facilities, personnel and a program with respect to the offering
and sale of Shares. Among other things, the Distributor shall be responsible for
all expenses of printing (excluding typesetting) and distributing prospectuses
to prospective shareholders and providing such other related services as are
reasonably necessary in connection therewith.
2. The Distributor shall bear all distribution-related expenses to
the extent specified in the Distribution Agreement in providing the services
described in Section 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. As partial consideration for the services performed and expenses
incurred in the performance of its obligations under the Distribution Agreement,
the Fund shall pay the Distributor a distribution fee periodically at a rate of
0.10% per annum of the average daily net assets of the Fund attributable to the
Shares.
4. As partial consideration for the personal services and/or
account maintenance services performed by each Dealer in the performance of its
obligations under its Dealer Agreement, the Fund shall pay each Dealer a service
fee periodically at a rate not to exceed 0.25% per annum of the portion of the
average daily net assets of the Fund that is represented by Shares that are
owned by investors for whom such Dealer is the holder or dealer of record. The
Distributor may from time to time reduce the amount of the service fee paid to a
Dealer for Shares sold prior to certain date.
5. In addition to fees payable pursuant to Sections 3 and 4 hereof,
the expenses permitted to be paid by the Fund pursuant to this Plan shall
include other distribution related expenses. These other distribution related
expenses may include, but are not limited to, a dealer commission and a payment
to wholesalers employed by the Distributor on net asset value purchases at or
above a certain dollar level.
The aggregate amount of fees and expenses paid pursuant to Sections
3 and 4 hereof and this Section 5 shall not exceed 0.35% per annum of the
average daily net assets of the Fund attributable to the Shares. No fees shall
be paid pursuant to Section 4 hereof or this Section 5 to any insurance company
which has entered into an agreement with the Fund and the Distributor that
permits such insurance company to purchase Shares from the Fund at their net
asset value in connection with annuity agreements issued in connection with the
insurance company's separate accounts. That portion of the Fund's average daily
net assets on which fees payable under Section 4 hereof and this Section 5 are
calculated may be subject to certain minimum amount requirements as may be
determined, and additional or different dealer or wholesaler qualification
standards that may be established, from time to time by the Distributor. The
Distributor shall be entitled to be paid any fees payable under Section 4 hereof
or this Section 5 with respect to accounts for which no Dealer of record exists
or qualification standards have not been met as partial consideration for
personal services and/or account maintenance services provided by the
Distributor to the Shares. The fees and expenses payable pursuant to Section 4
and this Section 5 may from time to time be paid by the Fund to the Distributor
and the Distributor will then pay these expenses on behalf of the Fund.
6. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the
responsibility for and control of the conduct of the affairs of the Fund.
7. This Plan shall become effective upon approval by a vote of the
Board of Trustees and vote of a majority of the Trustees who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any of the agreements related to the Plan (the
"Qualified Trustees"), such votes to be cast in person at a meeting called for
the purpose of voting on this Plan.
8. This Plan shall continue in effect indefinitely; provided,
however, that such continuance is subject to annual approval by a vote of the
Board of Trustees and a majority of the Qualified Trustees, such votes to be
cast in person at a meeting called for the purpose of voting on continuance of
this Plan. If such annual approval is not obtained, this Plan shall expire 12
months after the effective date of the last approval.
9. This Plan may be amended at any time by the Board of Trustees;
provided that (a) any amendment to increase materially the amount to be spent
for the services described herein shall be effective only upon approval by a
vote of a "majority of the outstanding voting securities" of the Shares and (b)
any material amendment of this Plan shall be effective only upon approval by a
vote of the Board of Trustees and a majority of the Qualified Trustees, such
votes to be cast in person at a meeting called for the purpose of voting on such
amendment. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees or by a vote of a "majority of the outstanding voting
securities" of the Shares.
10. The Distributor shall provide the Board of Trustees, and the
Board of Trustees shall review, at least quarterly, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
11. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Fund.
12. For the purposes of this Plan, the terms "interested person"
and "majority of the outstanding voting securities" are used as defined in the
Act. In addition, for purposes of determining the fees payable to Dealers and
wholesalers, the value of the Share's net assets shall be computed in the manner
specified in the Fund's then current prospectus for computation of the net asset
value of the Shares.
13. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in Section 10 hereof (collectively
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such Record shall be kept in an easily
accessible place for the first two years of said record keeping.
14. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the Act.
15. If any provision of this Plan shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Plan shall
not be affected thereby.
Exhibit 99.15(b)
MFS GOVERNMENT LIMITED MATURITY FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to be
designated "CLASS B" of MFS GOVERNMENT LIMITED MATURITY FUND (the "Fund"), a
Massachusetts business trust, dated September 1, 1993 and amended this 14th day
of December, 1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"); and
WHEREAS, the Fund intends to distribute the shares of beneficial interest
(without par value) of the Fund designated Class B Shares (the "Shares") in
accordance with Rule 12b-1 under the 1940 Act ("Rule 12b-1"), and desires to
adopt this Distribution Plan (the "Plan") as a plan of distribution pursuant to
such Rule; and
WHEREAS, the Fund desires for MFS Fund Distributors, Inc., a Delaware
corporation, to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Fund has entered into a distribution agreement (the
"Distribution Agreement") (in a form approved by the Board of Trustees of the
Fund in a manner specified in such Rule 12b-1) with the Distributor, whereby the
Distributor will provide facilities and personnel and render services to the
Fund in connection with the offering and distribution of the Shares; and
WHEREAS, the Fund recognizes and agrees that (a) the Distributor may
retain the services of firms or individuals to act as dealers (the "Dealers") of
the Shares in connection with the offering of Shares, and (b) the Distributor
may make payments for such services to the Dealers out of the fee paid to the
Distributor hereunder, any deferred sales charges imposed by the Distributor in
connection with the repurchase of Shares, its profits or any other source
available to it; and
WHEREAS, the Fund recognizes and agrees that the Distributor may impose
certain deferred sales charges in connection with the repurchase of Shares by
the Fund, and the Distributor may retain (or receive from the Fund, as the case
may be) all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Fund, in considering whether the
Fund should adopt and implement this Plan, has evaluated such information as it
deemed necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for such
purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Fund and its Class B
shareholders;
NOW, THEREFORE, the Board of Trustees of the Fund hereby adopts this Plan
for the Fund as a plan for distribution relating to the Shares in accordance
with Rule 12b-1, on the following terms and conditions:
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares. Among other things, the Distributor shall be responsible for
commissions payable to Dealers, all expenses of printing (excluding typesetting)
and distributing prospectuses to prospective shareholders and providing such
other related services as are reasonably necessary in connection therewith.
2. The Distributor shall bear all distribution-related expenses to the
extent specified in the Distribution Agreement in providing the services
described in paragraph 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. It is understood that the Distributor may impose certain deferred sales
charges in connection with the repurchase of Shares by the Fund and the
Distributor may retain (or receive from the Fund, as the case may be) all such
deferred sales charges. As additional consideration for all services performed
and expenses incurred in the performance of its obligations under the
Distribution Agreement, the Fund shall pay the Distributor a distribution fee
periodically at a rate of 0.75% per annum of the Fund's average daily net assets
attributable to the Shares.
4. As partial consideration for the personal services and/or account
maintenance services performed by each Dealer in the performance of its
obligations under its dealer agreement with the Distributor, the Fund shall pay
each Dealer a service fee periodically at a rate not to exceed 0.25% per annum
of the portion of the average daily net assets of the Fund that is represented
by Shares that are owned by investors for whom such Dealer is the holder or
dealer of record. That portion of the Fund's average daily net assets on which
the fees payable under this paragraph 4 hereof are calculated may be subject to
certain minimum amount requirements as may be determined, and additional or
different dealer qualification standards that may be established from time to
time, by the Distributor. The Distributor shall be entitled to be paid any fees
payable under this paragraph 4 hereof with respect to Shares for which no Dealer
of record exists or qualification standards have not been met as partial
consideration for personal services and/or account maintenance services provided
by the Distributor to the Shares. The service fee payable pursuant to this
paragraph 4 may from time to time be paid by the Fund to the Distributor and the
Distributor will then pay these fees on behalf of the Fund.
5. The Fund understands that agreements between the Distributor and the
Dealers may provide for payment of commissions to Dealers in connection with the
sales of Shares and may provide for a portion (which may be all or substantially
all) of the fees payable by the Fund to the Distributor under the Distribution
Agreement to be paid by the Distributor to the Dealers in consideration of the
Dealer's services as a dealer of the Shares. Except as described in paragraph 4,
nothing in this Plan shall be construed as requiring the Fund to make any
payment to any Dealer or to have any obligations to any Dealer in connection
with services as a dealer of the Shares. The Distributor shall agree and
undertake that any agreement entered into between the Distributor and any Dealer
shall provide that, except as provided in paragraph 4, such Dealer shall look
solely to the Distributor for compensation for its services thereunder and that
in no event shall such Dealer seek any payment from the Fund.
6. The Fund shall pay all fees and expenses of any independent auditor,
legal counsel, investment adviser, administrator, transfer agent, custodian,
shareholder servicing agent, registrar or dividend disbursing agent of the Fund;
expenses of distributing and redeeming Shares and servicing shareholder
accounts; expenses of preparing, printing and mailing prospectuses, shareholder
reports, notices, proxy statements and reports to governmental officers and
commissions and to shareholders of the Fund, except that the Distributor shall
be responsible for the distribution-related expenses as provided in paragraphs 1
and 2 hereof.
7. Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the responsibility for
and control of the conduct of the affairs of the Fund.
8. This Plan shall become effective upon (a) approval by a vote of at
least a "majority of the outstanding voting securities" of the Shares, and (b)
approval by a vote of the Board of Trustees and a vote of a majority of the
Trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "Qualified Trustees"), such votes to be cast in person
at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect indefinitely; provided that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Fund and a majority of the Qualified Trustees.
If such annual approval is not obtained, this Plan shall expire 12 months after
the effective date of the last approval.
10. This Plan may be amended at any time by the Board of Trustees;
provided that this Plan may not be amended to increase materially the amount of
permitted expenses hereunder without the approval of holders of a "majority of
the outstanding voting securities" of the Shares and may not be materially
amended in any case without a vote of a majority of both the Trustees and the
Qualified Trustees. This Plan may be terminated at any time by a vote of a
majority of the Qualified Trustees or by a vote of the holders of a "majority of
the outstanding voting securities" of the Shares.
11. The Fund and the Distributor shall provide the Board of Trustees, and
the Board of Trustees shall review, at least quarterly, a written report of the
amounts expended under this Plan and the purposes for which such expenditures
were made.
12. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Trust.
13. For the purposes of this Plan, the terms "interested persons",
"majority of the outstanding voting securities" and "specifically approved at
least annually" are used as defined in the 1940 Act. In addition, for purposes
of determining the fees payable to the Distributor hereunder, the value of the
Fund's net assets shall be computed in the manner specified in the Fund's
then-current prospectus and statement of additional information for computation
of the net asset value of the Shares of the Fund.
14. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 11 hereof (collectively,
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such record shall be kept in an easily
accessible place for the first two years of said record-keeping.
15. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
16. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
Exhibit 99.15(c)
MFS GOVERNMENT LIMITED MATURITY FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest
to be designated "CLASS C" of MFS GOVERNMENT LIMITED MATURITY FUND (the "Fund"),
Massachusetts business trust, dated June 2, 1994 and amended this 14th day of
December, 1994.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"); and
WHEREAS, the Fund intends to distribute the shares of beneficial
interest (without par value) of the Fund designated Class C Shares (the
"Shares") in accordance with Rule 12b-1 under the 1940 Act ("Rule 12b-1"), and
desires to adopt this Distribution Plan (the "Plan") as a plan of distribution
pursuant to such Rule; and
WHEREAS, the Fund desires for MFS Fund Distributors, Inc., a Delaware
corporation, to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Fund has entered into a distribution agreement (the
"Distribution Agreement") (in a form approved by the Board of Trustees of the
Fund in a manner specified in Rule 12b-1) with the Distributor, whereby the
Distributor will provide facilities and personnel and render services to the
Fund in connection with the offering and distribution of the Shares; and
WHEREAS, the Fund recognizes and agrees that (a) the Distributor may
retain the services of firms or individuals to act as dealers (the "Dealers") of
the Shares in connection with the offering of Shares, and (b) the Distributor
may make payments for such services to the Dealers out of the fee paid to the
Distributor hereunder, any deferred sales charges imposed by the Distributor in
connection with the repurchase of Shares, its profits or any other source
available to it; and
WHEREAS, the Fund recognizes and agrees that the Distributor may (but
is not required to) impose certain deferred sales charges in connection with the
repurchase of Shares by the Fund, and the Distributor may retain (or receive
from the Fund, as the case may be) all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Fund, in considering whether the
Fund should adopt and implement this Plan, has evaluated such information as it
deemed necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for such
purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Fund and its Class C
shareholders;
NOW, THEREFORE, the Board of Trustees of the Fund hereby adopts this
Plan for the Fund as a plan for distribution relating to the Shares in
accordance with Rule 12b-1, on the following terms and conditions:
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares. Among other things, the Distributor shall be responsible for any
commissions payable to Dealers (including any ongoing maintenance commissions),
all expenses of printing (excluding typesetting) and distributing prospectuses
to prospective shareholders and providing such other related services as are
reasonably necessary in connection therewith
2. The Distributor shall bear all distribution-related expenses to the
extent specified in the Distribution Agreement in providing the services
described in paragraph 1, including without limitation, the compensation of
personnel necessary to provide such services and all costs of travel, office
expenses (including rent and overhead), equipment, printing, delivery and
mailing costs.
3. It is understood that the Distributor may (but is not required to)
impose certain deferred sales charges in connection with the repurchase of
Shares by the Fund and the Distributor may retain (or receive from the Fund, as
the case may be) all such deferred sales charges. As additional consideration
for all services performed and expenses incurred in the performance of its
obligations under the Distribution Agreement, the Fund shall pay the Distributor
a distribution fee periodically at a rate not to exceed 0.75% per annum of the
Fund's average daily net assets attributable to the Shares.
4. As partial consideration for the personal services and/or account
maintenance services performed by each Dealer in the performance of its
obligations under its dealer agreement with the Distributor, the Fund shall pay
each Dealer a service fee periodically at a rate not to exceed 0.25% per annum
of the portion of the average daily net assets of the Fund that is represented
by Shares that are owned by investors for whom such Dealer is the holder or
dealer of record. That portion of the Fund's average daily net assets on which
the fees payable under this paragraph 4 hereof are calculated may be subject to
certain minimum amount requirements as may be determined, and additional or
different dealer qualification standards that may be established, from time to
time by the Distributor. The Distributor shall be entitled to be paid any fees
payable under this paragraph 4 hereof with respect to Shares for which no Dealer
of record exists or qualification standards have not been met as partial
consideration for personal services and/or account maintenance services provided
by the Distributor to the Shares. The service fee payable pursuant to this
paragraph 4 may from time to time be paid by the Fund to the Distributor and the
Distributor will then pay these fees to Dealers on behalf of the Fund or retain
them in accordance with this paragraph.
5. The Fund understands that agreements between the Distributor and the
Dealers may provide for payment of commissions to Dealers in connection with the
sales of Shares and may provide for a portion (which may be all or substantially
all) of the fees payable by the Fund to the Distributor under the Distribution
Agreement to be paid by the Distributor to the Dealers in consideration of the
Dealer's services as a dealer of the Shares. Except as described in paragraph 4,
nothing in this Plan shall be construed as requiring the Fund to make any
payment to any Dealer or to have any obligations to any Dealer in connection
with services as a dealer of the Shares. The Distributor shall agree and
undertake that any agreement entered into between the Distributor and any Dealer
shall provide that, except as provided in paragraph 4, such Dealer shall look
solely to the Distributor for compensation for its services thereunder and that
in no event shall such Dealer seek any payment from the Fund.
6. The Fund shall pay all fees and expenses of any independent auditor,
legal counsel, investment adviser, administrator, transfer agent, custodian,
shareholder servicing agent, registrar or dividend disbursing agent of the Fund;
expenses of distributing and redeeming Shares and servicing shareholder
accounts; expenses of preparing, printing and mailing prospectuses, shareholder
reports, notices, proxy statements and reports to governmental officers and
commissions and to shareholders of the Fund, except that the Distributor shall
be responsible for the distribution-related expenses as provided in paragraphs 1
and 2 hereof.
7. Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Declaration of Trust or By-Laws or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the responsibility for
and control of the conduct of the affairs of the Fund.
8. This Plan shall become effective upon (a) approval by a vote of at
least a "majority of the outstanding voting securities" of Class C, and (b)
approval by a vote of the Board of Trustees and a vote of a majority of the
Trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "Qualified Trustees"), such votes to be cast in person
at a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect indefinitely; provided that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Fund and a majority of the Qualified Trustees.
If such annual approval is not obtained, this Plan shall expire 12 months after
the effective date of the last approval.
10. This Plan may be amended at any time by the Board of Trustees;
provided that this Plan may not be amended to increase materially the amount of
permitted expenses hereunder without the approval of holders of a "majority of
the outstanding voting securities" of Class C and may not be materially amended
in any case without a vote of a majority of both the Trustees and the Qualified
Trustees. This Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees or by a vote of the holders of a "majority of the outstanding
voting securities" of Class C.
11. The Fund and the Distributor shall provide the Board of Trustees,
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts expended under this Plan and the purposes for which such
expenditures were made.
12. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Fund.
13. For the purposes of this Plan, the terms "interested persons",
"majority of the outstanding voting securities" and "specifically approved at
least annually" are used as defined in the 1940 Act. In addition, for purposes
of determining the fees payable to the Distributor hereunder, the value of the
Fund's net assets shall be computed in the manner specified in the Fund's
then-current prospectus and statement of additional information for computation
of the net asset value of the Shares of the Fund.
14. The Fund shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 11 hereof (collectively,
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such record shall be kept in an easily
accessible place for the first two years of said record-keeping.
15. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit No. 99.16
AVERAGE ANNUAL TOTAL RATE OF RETURN
FORMULA
P(1 + T)n = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value
<PAGE>
AGGREGATE TOTAL RATE OF RETURN
FORMULA
1000(1 + T) = ERV
T = aggregate total return
ERV = ending redeemable value
<PAGE>
STANDARDIZED YIELD CALCULATION
___ ___
| ___ ___ |
| | |6 |
| | | |
| | | |
| | | |
| | | |
| | | |
| | a - b | |
| | _____ + 1 | |
YIELD = 2 x | | c x d | |
| | | |
| | | |
| | | |
| | | |
| | |-1|
| | | |
| | | |
| |___ ___| |
|___ ___|
<PAGE>
DISTRIBUTION RATE
Distribution rate = a/d or bc/d
where
a = total last 12 months' dividends
b = current dividend per share
c = frequency of dividend payments
d = maximum offering price per share on last day of period
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF MFS GOVERNMENT LIMITED MATURITY FUND
FOR THE YEAR ENDED DECEMBER 31, 1994, QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> MFS GOVERNMENT LIMITED MATURITY FUND
CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 287,379,459
<INVESTMENTS-AT-VALUE> 279,520,568
<RECEIVABLES> 6,276,090
<ASSETS-OTHER> 4,825
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 285,802,155
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,327,370
<TOTAL-LIABILITIES> 1,327,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 306,825,265
<SHARES-COMMON-STOCK> 30,537,522
<SHARES-COMMON-PRIOR> 38,429,703
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (38,287)
<ACCUMULATED-NET-GAINS> (14,453,302)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,858,891)
<NET-ASSETS> 284,474,785
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,577,275
<OTHER-INCOME> 0
<EXPENSES-NET> 2,986,220
<NET-INVESTMENT-INCOME> 19,591,055
<REALIZED-GAINS-CURRENT> (16,449,820)
<APPREC-INCREASE-CURRENT> (6,309,503)
<NET-CHANGE-FROM-OPS> (3,168,268)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,948,072)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,636,068
<NUMBER-OF-SHARES-REDEEMED> (15,759,146)
<SHARES-REINVESTED> 1,230,897
<NET-CHANGE-IN-ASSETS> (72,390,251)
<ACCUMULATED-NII-PRIOR> 106,594
<ACCUMULATED-GAINS-PRIOR> 281,428
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,561,767
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,440,089
<AVERAGE-NET-ASSETS> 293,332,170
<PER-SHARE-NAV-BEGIN> 8.99
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> (0.61)
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.42
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0.00
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE FINANCIAL STATEMENTS OF MFS GOVERNMENT LIMITED MATURITY FUND
FOR THE YEAR ENDED DECEMBER 31, 1994, QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> MFS GOVERNMENT LIMITED MATURITY CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 287,379,459
<INVESTMENTS-AT-VALUE> 279,520,568
<RECEIVABLES> 6,276,090
<ASSETS-OTHER> 4,825
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 285,802,155
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,327,370
<TOTAL-LIABILITIES> 1,327,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 306,825,265
<SHARES-COMMON-STOCK> 2,844,871
<SHARES-COMMON-PRIOR> 1,255,024
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (38,287)
<ACCUMULATED-NET-GAINS> (14,453,302)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,858,891)
<NET-ASSETS> 284,474,785
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,577,275
<OTHER-INCOME> 0
<EXPENSES-NET> 2,986,220
<NET-INVESTMENT-INCOME> 19,591,055
<REALIZED-GAINS-CURRENT> (16,449,820)
<APPREC-INCREASE-CURRENT> (6,309,503)
<NET-CHANGE-FROM-OPS> (3,168,268)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,023,255)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,133,094
<NUMBER-OF-SHARES-REDEEMED> (1,615,742)
<SHARES-REINVESTED> 72,495
<NET-CHANGE-IN-ASSETS> (72,390,251)
<ACCUMULATED-NII-PRIOR> 106,594
<ACCUMULATED-GAINS-PRIOR> 281,428
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,561,767
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,440,089
<AVERAGE-NET-ASSETS> 20,599,725
<PER-SHARE-NAV-BEGIN> 8.98
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> (0.62)
<PER-SHARE-DIVIDEND> (0.42)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.41
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0.00
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF MFS GOVERNMENT LIMITED MATURITY FUND
FOR THE YEAR ENDED DECEMBER 31, 1994, QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> MFS GOVERNMENT LIMITED MATURITY CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 287,379,459
<INVESTMENTS-AT-VALUE> 279,520,568
<RECEIVABLES> 6,276,090
<ASSETS-OTHER> 4,825
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 285,802,155
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,327,370
<TOTAL-LIABILITIES> 1,327,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 306,825,265
<SHARES-COMMON-STOCK> 405,487
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (38,287)
<ACCUMULATED-NET-GAINS> (14,453,302)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,858,891)
<NET-ASSETS> 284,474,785
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,577,275
<OTHER-INCOME> 0
<EXPENSES-NET> 2,986,220
<NET-INVESTMENT-INCOME> 19,591,055
<REALIZED-GAINS-CURRENT> (16,449,820)
<APPREC-INCREASE-CURRENT> (6,309,503)
<NET-CHANGE-FROM-OPS> (3,168,268)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (49,519)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 410,854
<NUMBER-OF-SHARES-REDEEMED> (11,166)
<SHARES-REINVESTED> 5,799
<NET-CHANGE-IN-ASSETS> (72,390,251)
<ACCUMULATED-NII-PRIOR> 106,594
<ACCUMULATED-GAINS-PRIOR> 281,428
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,561,767
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,440,089
<AVERAGE-NET-ASSETS> 1,930,597
<PER-SHARE-NAV-BEGIN> 8.62
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> (0.20)
<PER-SHARE-DIVIDEND> (0.20)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.39
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0.00
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
