As filed with the Securities and Exchange Commission on November 28, 1995
1933 Act File No. 33-1657
1940 Act File No. 811-4492
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 13
AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14
MFS SERIES TRUST X
(formerly, MFS Government Mortgage 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, MA 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)
|X| immediately upon filing pursuant to paragraph (b)
|_| on [DATE] pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [DATE] pursuant to paragraph (a)(i)
|_| 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:
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
July 31, 1995 on September 29, 1995.
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
NUMBER PROPOSED PROPOSED
OF SHARES MAXIMUM MAXIMUM
TITLE OF SECURITIES BEING OFFERING AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER OFFERING PRICE REGISTRATION
SHARE FEE
- -------------------------------------------------------------------------------
SHARES OF BENEFICIAL
INTEREST (WITHOUT PAR 58,685,834 $6.73 $290,000 $100
VALUE)
- -------------------------------------------------------------------------------
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 90,173,490 shares were redeemed during the fiscal year ended July
31, 1995. 31,530,746 shares were used for reductions pursuant to paragraph (c)
of Rule 24f-2 during the current fiscal year. 58,642,744 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 $6.73 per
share on November 14, 1995 is the price used as the basis for calculating the
registration fee. While no fee is required for the 58,642,744 shares, the
Registrant has elected to register, for $100, an additional $290,000 of shares
(43,090 shares at $6.73 per share).
<PAGE>
MFS GOVERNMENT MORTGAGE FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in the Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Condensed Financial Information *
(b) * *
(c) Information Concerning Shares *
of the Fund - Performance
Information
(d) Condensed Financial Information *
4 (a) The Fund; Investment Objective *
and Policies
(b), (c) Investment Objective and Policies *
5 (a) The Fund; Management of the *
Fund - Investment Adviser
(b) Front Cover Page; - Management *
of the Fund - Investment Adviser;
Back Cover Page
(c), (d) Management of the Fund - *
Investment Adviser
(e) Management of the Fund - Shareholder *
Servicing Agent; Back Cover Page
<PAGE>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
(f) Expense Summary; Condensed *
Financial Information
(g) Investment Objective and Policies - *
Portfolio Trading; Information
Concerning Shares of the Fund -
Purchases
5A (a), (b), (c) ** **
6 (a) Information Concerning Shares of *
the Fund - Purchases; Information
Concerning Shares of the Fund -
Exchanges; Information Concerning
Shares of the Fund - Redemptions
and Repurchases; Information
Concerning Shares of the Fund -
Description of Shares, Voting
Rights and Liabilities
(b), (c), (d) * *
(e) Shareholder Services *
(f) Information Concerning Shares of *
the Fund - Distributions; Shareholder
Services - Distribution Options
(g) Information Concerning Shares of *
the Fund - Distributions; Information
Concerning Shares of the Fund -
Tax Status
7 (a) Front Cover Page; Management of *
the Fund - Distributor; Back
Cover Page
(b) Information Concerning Shares of *
the Fund - Purchases; Information
Concerning Shares of the Fund -
Net Asset Value
<PAGE>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
(c) Information Concerning Shares of *
the Fund - Purchases; Information
Concerning Shares of the Fund -
Exchanges; Shareholder Services
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases; Shareholder Services
(e) Expense Summary; Information *
Concerning Shares of the Fund -
Purchases; Information Concerning
Shares of the Fund - Distribution
Plans
(f) Information Concerning Shares of *
the Fund - Distribution Plans
8 (a) Information Concerning Shares of *
the Fund - Purchases; Information
Concerning Shares of the Fund -
Redemptions and Repurchases;
Shareholder Services
(b), (c), (d) Information Concerning Shares of *
the Fund - Redemptions and
Repurchases
9 * *
<PAGE>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * Definitions
13 (a), (b), (c) * Investment Objective,
Policies and
Restrictions
(d) * *
14 (a), (b) * Management of the Fund -
Trustees and Officers
(c) * Management of the Fund -
Trustees and Officers;
Appendix A
15 (a) * *
(b), (c) * 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) * *
(d) * Management of the Fund -
Investment Adviser
(e) * Portfolio Transactions
and Brokerage
Commissions
(f) Information Concerning Shares of Distribution Plans
the Fund - Distribution Plans
(g) * *
<PAGE>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
(h) * Management of the Fund -
Custodian; Independent
Accountants and
Financial Statements;
Back Cover Page
(i) * Management of the Fund -
Shareholder Servicing
Agent
17 (a), (b) (c), (d), (e) * Portfolio Transactions
and Brokerage
Commissions
18 (a) Information Concerning Shares of Description of Shares,
the Fund - Description of Voting Rights and
Shares, Voting Rights and Liabilities
Liabilities
(b) * *
19 (a) Information Concerning Shares of Shareholder Services
the Fund - Purchases; Shareholder
Services
(b) Information Concerning Shares of Management of the Fund -
the Fund - Net Asset Value; Distributor;
Information Concerning Shares of Determination of Net
the Fund - Purchases Asset Value
(c) * *
20 * Tax Status
21 (a), (b) * Management of the Fund -
Distributor;
Distribution Plans
(c) * *
22 (a) * *
(b) * Determination of Net
Asset Value and
Performance
<PAGE>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
23 * Independent Accountants
and Financial
Statements
* Not Applicable
** Contained in Annual Report
<PAGE>
MFS(R) GOVERNMENT
MORTGAGE FUND
(A member of the MFS Family of Funds(R))
PROSPECTUS
December 1, 1995
Class A Shares of Beneficial Interest
Class B Shares of Beneficial Interest
<TABLE>
<CAPTION>
Page
-------
<S> <C>
1. Expense Summary 2
2. The Fund 3
3. Condensed Financial Information 4
4. Investment Objectives and Policies 6
5. Management of the Fund 10
6. Information Concerning Shares of the Fund 12
Purchases 12
Exchanges 15
Redemptions and Repurchases 16
Distribution Plans 19
Distributions 20
Tax Status 20
Net Asset Value 21
Description of Shares, Voting Rights and Liabilities 21
Performance Information 21
7. Shareholder Services 22
Appendix A A-1
Appendix B B-1
</TABLE>
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 MORTGAGE FUND
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
This Prospectus pertains to the MFS Government Mortgage Fund (the "Fund"), a
diversified series of MFS Series Trust X (the "Trust"), an open-end
investment company presently consisting of four series. The primary
investment objective of the Fund is to provide a high level of current
income. The secondary objective of the Fund is to protect shareholders'
capital. The Fund seeks to achieve its objectives by investing, under normal
circumstances, at least 65% of its total assets in obligations issued or
guaranteed by the Government National Mortgage Association ("GNMA")
(including pass-through certificates of GNMA) and in obligations fully
collateralized or otherwise fully secured by obligations issued or guaranteed
by GNMA (see "Investment Objectives and Policies"). The minimum initial
investment is generally $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.
Investment products are not insured by the FDIC or any other government
agency, and are not deposits or other obligations of, or guaranteed by, any
financial institution. Shares of mutual funds are subject to investment risk,
including possible loss of the principal amount invested, and will fluctuate
in value. You may receive more or less than you paid when you redeem your
shares.
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 (the "SAI"), dated December 1, 1995, as amended or
supplemented from time to time, which contains more detailed information
about the Fund. The SAI is incorporated into this Prospectus by reference.
See page 24 for a further description of the information set forth in the
SAI. A copy of the SAI may be obtained without charge by contacting the
Shareholder Servicing Agent (see back cover for address and phone number).
Investors should read this Prospectus and retain it for future reference.
<PAGE>
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
Class A Class B
------------------- -----------
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares (as a
percentage of offering price) 4.75% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) See Below(1) 4.00%
Annual Operating Expenses (as a percentage of average net assets):
Management Fees 0.45%(2) 0.45%(2)
Rule 12b-1 Fees 0.35%(3) 1.00%(4)
Other Expenses 0.24% 0.29%
----------------- ---------
Total Operating Expenses 1.04%(2) 1.74%(2)
</TABLE>
(1) 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 "Information
Concerning Shares of the Fund--Purchases").
(2) Effective January 1, 1996, "Management Fees" will be reduced from 0.65%
to 0.45% of the Fund's average daily net assets on an annualized basis.
Therefore, through December 31, 1995, "Management Fees" will be 0.65% and
"Total Operating Expenses" for Class A and Class B shares of the Fund
will be 1.24% and 1.94%, respectively (see "Management of the Fund").
(3) The Fund has adopted a Distribution Plan for its Class A shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to Class A
shares (see "Distribution Plans"). Distribution expenses paid under this
Plan, together with the initial sales charge, may cause long-term
shareholders to pay more than the maximum sales charge that would have
been permissible if imposed entirely as an initial sales charge.
(4) The Fund has adopted a Distribution Plan for its Class B shares in
accordance with Rule 12b-1 under the 1940 Act, which provides that it
will pay distribution/service fees aggregating up to 1.00% per annum of
the average daily net assets attributable to Class B shares (see
"Distribution Plans"). Distribution expenses paid under this Plan,
together with any CDSC payable upon redemption of Class B shares, may
cause long-term shareholders to pay more than the maximum sales charge
that would have been permissible if imposed entirely as an initial sales
charge.
Example of Expenses
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at
the end of each of the time periods indicated (unless otherwise noted):
<TABLE>
<CAPTION>
Period Class A Class B
--------------- -------- ----------------------
<S> <C> <C> <C>
(1)
1 year $ 60 $ 60 $ 20
3 years 85 91 61
5 years 112 125 105
10 years 190 208 (2) 208 (2)
</TABLE>
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after
purchase; therefore, years nine and ten reflect Class A expenses.
2
<PAGE>
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund
will bear directly or indirectly. More complete descriptions of the following
Fund expenses are set forth in the following sections: (i) varying sales
charges on sale purchases"Purchases"; (ii) varying CDSCs"Purchases"; (iii)
management fees"Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution
plan) fees"Distribution Plans."
The "Example" set forth above should not be considered a representation of
past or future expenses of the Fund; actual expenses may be greater or less
than those shown.
2. THE FUND
The Fund is a diversified series of the Trust, an open-end management
investment company which was organized as a business trust under the laws of
The Commonwealth of Massachusetts in 1985. The Trust presently consists of
four series, each of which represents a portfolio with separate investment
objectives and policies. Shares of the Fund are continuously sold to the
public and the Fund then uses the proceeds to buy securities for its
portfolio. Two classes of shares of the Fund currently are offered to the
general public. Class A shares are offered at net asset value plus an initial
sales charge (or a CDSC in the case of certain purchases of $1 million or
more) and subject to a Distribution Plan providing for a distribution and
service fee. Class B shares are offered at net asset value without an initial
sales charge but subject to a CDSC and a Distribution Plan providing for a
distribution fee which is greater than the Class A distribution and service
fee. Class B shares will convert to Class A shares approximately eight years
after purchase.
The Trust's Board of Trustees provides broad supervision over the affairs of
the Fund. The Adviser is responsible for the management of the Fund's assets
and the officers of the Trust are responsible for the Fund's operations. The
Adviser manages the portfolio from day to day in accordance with the Fund's
investment objectives and policies. A majority of the Trustees are not
affiliated with the Adviser. The Fund also offers to buy back (redeem) its
shares from its shareholders at any time at net asset value, less any
applicable CDSC.
3
<PAGE>
3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to Shareholders which are
incorporated by reference into the SAI in reliance upon the report of
Deloitte & Touche LLP, independent certified public accountants, as experts
in accounting and auditing.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Eight
Year Months
Ended Ended
July 31, July 31, Year Ended November 30,
--------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------- -------- ---------- ------ ------ ------ --------
Class A
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 6.49 $ 6.85 $ 6.82 $ 6.95 $ 7.01 $ 7.86
------ -------- ---- ---- ---- ------
Income from investment operations # -
Net investment income (Section) $ 0.45 $ 0.29 $ 0.34 $ 0.46 $ 0.48 $ 0.53
Net realized and unrealized gain (loss)
on investments 0.14 (0.36) 0.20 0.09 0.25 (0.40)
------ -------- ---- ---- ---- ------
Total from investment operations $ 0.59 $(0.07) $ 0.54 $ 0.55 $ 0.73 $ 0.13
------ -------- ---- ---- ---- ------
Less distributions declared to shareholders
-
From net investment income $(0.42) $(0.20) $(0.47) $(0.42) $(0.44) $(0.49)
In excess of net realized gain on
investments -- -- (0.04) -- -- --
From paid-in capital -- (0.09) -- (0.26) (0.35) (0.49)
Tax return of capital (0.01) -- -- -- -- --
------ -------- ---- ---- ---- ------
Total distributions declared to
shareholders $(0.43) $(0.29) $(0.51) $(0.68) $(0.79) $(0.98)
------ -------- ---- ---- ---- ------
Net asset value - end of period $ 6.65 $ 6.49 $ 6.85 $ 6.82 $ 6.95 $ 7.01
====== ======== ==== ==== ==== ======
Total return++ 9.60% (1.51)%+ 8.11% 8.25% 11.00% 2.05%
Ratios (to average net assets)/Supplemental data (Section):
Expenses 1.25% 1.27%+ 1.38% 1.42% 1.44% 1.40%
Net investment income 6.99% 6.46%+ 6.30% 6.57% 6.91% 7.29%
Portfolio turnover 87% 37% 167% 484% 731% 507%
Net assets at end of period
(000,000 omitted) $ 534 $ 424 $ 522 $ 715 $ 886 $1,068
</TABLE>
+Annualized.
#Per share data for the periods subsequent to November 30, 1993 is based on
average shares outstanding.
++Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to October 1, 1989). If the charge
had been included, the results would have been lower.
(Section) The investment adviser did not impose a portion of its management
fee for the periods indicated. If this fee had been incurred by the
Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income -- $0.29 $0.34 -- -- --
Ratios (to average net assets):
Expenses -- 1.28%+ 1.46% -- -- --
Net investment income -- 6.45%+ 6.22% -- -- --
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Eight
Year Months Period
Ended Ended Ended
Year Ended November 30, July 31, July 31, Nov. 30,
--------------------------------------
1989 1988 1987 1986* 1995 1994 1993**
- --------------------------------------------- -------- ------ ------ ------ -------- ---------- ---------
Class A Class B
- --------------------------------------------- -------- ------ ------ ------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.82 $ 8.34 $ 9.82 $ 9.53 $ 6.49 $ 6.84 $ 6.97
------ ---- ---- ---- ------ -------- -------
Income from investment operations # -
Net investment income (Section) $ 0.59 $ 0.64 $ 0.75 $ 0.72 $ 0.41 $ 0.26 $ 0.38
Net realized and unrealized gain (loss)
on investments 0.48 (0.06) (1.08) 0.43 0.14 (0.35) (0.44)
------ ---- ---- ---- ------ -------- -------
Total from investment operations $ 1.07 $ 0.58 $(0.33) $ 1.15 $ 0.55 $(0.09) $(0.06)
------ ---- ---- ---- ------ -------- -------
Less distributions declared to shareholders
-
From net investment income $(0.58) $(0.64) $(0.82) $(0.65) $(0.38) $(0.18) $(0.07)
From net realized gain on investments -- -- (0.01) (0.21) -- -- --
From paid-in capital (0.45) (0.46) (0.32) -- -- (0.08) --
Tax return of capital -- -- -- -- (0.01) -- --
------ ---- ---- ---- ------ -------- -------
Total distributions declared to
shareholders $(1.03) $(1.10) $(1.15) $(0.86) $(0.39) $(0.26) $(0.07)
------ ---- ---- ---- ------ -------- -------
Net asset value - end of period $ 7.86 $ 7.82 $ 8.34 $ 9.82 $ 6.65 $ 6.49 $ 6.84
====== ==== ==== ==== ====== ======== =======
Total return++ 14.72% 7.39% (3.37)% 13.75%+ 8.81% (1.97)%+ (3.91)%+
Ratios (to average net assets)/Supplemental data(Section).:
Expenses 1.37% 1.38% 1.34% 1.00%+ 1.96% 1.94%+ 1.87%+
Net investment income 7.57% 7.88% 8.34% 9.54%+ 6.28% 5.80% 5.92%+
Portfolio turnover 489% 285% 212% 169% 87% 37% 167%
Net assets at end of period
(000,000 omitted) $1,380 $1,295 $1,129 $ 593 $ 812 $1,229 $1,628
*For the period from the commencement of investment operations, January 9, 1986 to November 30, 1986.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to November 30, 1993.
+Annualized.
#Per share data for the periods subsequent to November 30, 1993 is based on average shares outstanding.
++Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to October
1, 1989). If the charge had been included, the results would have been lower.
(Section).The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income -- -- -- -- -- -- $0.38
Ratios (to average net
assets):
Expenses -- -- -- -- -- -- 1.94%+
Net investment income -- -- -- -- -- -- 5.85%+
</TABLE>
5
<PAGE>
4. INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives--The Fund's primary investment objective is to provide
a high level of current income. The Fund's secondary objective is to protect
shareholders' capital. Any investment involves risk and there can be no
assurance that the Fund will achieve its objectives.
Investment Policies--The Fund seeks to achieve its investment objectives by
investing at least 65% of its total assets, under normal circumstances, in
obligations issued or guaranteed by GNMA (including pass-through certificates
of GNMA which are described below) and in obligations fully collateralized or
otherwise fully secured by obligations issued or guaranteed by GNMA. The Fund
may also invest in other securities that are issued or guaranteed as to
principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities ("Government Securities"). Such Government Securities
include (1) the following 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), U.S. Treasury notes (maturities of one to
10 years), and U.S. Treasury bonds (generally maturities of greater than 10
years) all of which are backed by the full faith and credit of the United
States; and (2) obligations issued or guaranteed by U.S. Government agencies
or instrumentalities, some of which are backed by the full faith and credit
of the U.S. Treasury; some of which are supported by the right of the issuer
to borrow from the U.S. Government, e.g., obligations of Federal Home Loan
Banks; some of which are backed only by the credit of the issuer itself,
e.g., obligations of the Student Loan Marketing Association; and some of
which are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations, e.g., obligations of the Federal National
Mortgage Association ("FNMA"). No assurance can be given that the U.S.
Government will provide financial support to these agencies and
instrumentalities because it is not obligated by law, in certain instances,
to do so. The primary types of Government Securities in which the Fund
invests are described in Appendix B.
The Fund may invest in pass-through certificates of GNMA. These certificates
are mortgage-backed securities which represent a partial ownership interest
in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan
included in the pool is either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. For a further description of
these and other such obligations and of the consequences of the prepayment of
mortgages underlying these certificates, see "Mortgage Pass-Through
Securities" below and Appendix B.
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.
Depending on market conditions, the Fund may temporarily take a defensive
position by investing a substantial portion of its assets in cash, short-term
Government Securities and related repurchase agreements.
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 fixed income 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 at higher yields
can be expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested at lower yields can be expected to decline. 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. The dividends paid by the Fund will increase
or decrease in relation to the income received by the Fund from its
investments which will in any case be reduced by the Fund's expenses before
being distributed to the Fund's shareholders.
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
6
<PAGE>
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 prepayment.
Prepayments on underlying mortgages result in a loss of anticipated interest,
and all or part of a premium if any has been paid, and the actual yield (or
total return) to the Fund may be different from 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.
Repurchase Agreements: The Fund may enter into repurchase agreements in order
to earn 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 SAI, the Fund has adopted certain procedures intended to
minimize risk.
"When-Issued" Securities: Some Government Securities may be purchased on a
"when-issued" or on a "forward delivery" basis, which means that the
securities will be delivered to the Fund at a future date usually beyond
customary settlement time. The commitment to purchase a security for which
payment will be made on a future date may be deemed a separate security.
Although the Fund is not limited as to the amount of Government Securities
for which it may have commitments to purchase on such bases, it is expected
that under normal circumstances the Fund will not commit more than 30% of its
total assets to such purchases. The Fund does not pay for the securities
until received, and does not start earning interest on the securities until
the contractual settlement date. While awaiting delivery of the securities
purchased on such bases, the Fund will hold cash, short-term money market
instruments or Government Securities in a segregated account.
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.
Zero Coupon Bonds: The Fund may invest in zero coupon bonds, which are debt
obligations issued or purchased at a significant discount from face value.
The Fund will only purchase zero coupon bonds which are Government
Securities. 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 bonds 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 due to changes in interest rates than debt
obligations 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.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities:
The Fund may invest a portion of its assets in collateralized mortgage
obligations ("CMOs") which are debt obligations collateralized by mortgage
loans or mortgage pass- through securities (such collateral collectively
hereinafter referred to as "Mortgage Assets"). Mortgage Assets underlying
CMOs purchased by the Fund must be issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities.
7
<PAGE>
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. 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. Certain classes of CMOs have priority over others with respect
to the receipt of prepayments on the mortgages. Therefore, depending on the
type of CMOs in which the Fund invests, the investment may be subject to a
greater or lesser risk of prepayment than other types of mortgage- related
securities.
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. For a further description of CMOs and the risks related to
transactions therein, see the SAI.
Stripped Mortgage-Backed Securities: The Fund may invest a portion of its
assets in stripped mortgage-backed securities ("SMBS") which are derivative
multiclass mortgage securities usually structured with two classes that
receive different proportions of the interest and principal distributions
from an underlying pool of mortgage assets. The Fund will only invest in SMBS
whose mortgage assets are issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities. For a further description of SMBS
and the risks related to transactions therein, see the SAI.
Swaps and Related Transactions: The Fund may enter into interest rate swaps
and other types of available swap agreements. Swaps involve the exchange by
the Fund with another party of cash payments based upon different interest
rate indexes, and other prices or rates, such as the value of mortgage
prepayment rates. For example, in the typical interest rate swap, the Fund
might exchange a sequence of cash payments based on a floating rate index for
cash payments based on a fixed rate.
The Fund may also purchase and sell caps, floors and collars. In a typical
cap or floor agreement, one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the
counterparty. For example, the purchase of an interest rate cap entitles the
buyer, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal
amount from the counterparty selling such interest rate cap. The sale of an
interest rate floor obligates the seller to make payments to the extent that
a specified interest rate falls below an agreed-upon level. A collar
arrangement combines elements of buying a cap and selling a floor.
Swaps, caps, floors and collars are highly specialized activities which
involve certain risks. See the SAI for further information on, and the risks
involved in, these activities.
Lending of Securities and Short Sales: The Fund may make loans of its
portfolio securities. Such loans will usually be made to member banks of the
Federal Reserve System and member firms (and subsidiaries thereof) of the New
York Stock Exchange (the "Exchange") under contracts calling for collateral
in U.S. Government securities, cash or an irrevocable letter of credit. 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). The Fund
may pay finder's and other fees in connection with securities loans. The Fund
may also make short sales involving either securities retained in the Fund's
portfolio or securities which the Fund has the right to acquire without
paying additional consideration.
Indexed Securities: The Fund may invest in indexed securities whose value is
linked to interest rates, commodities, indices or other financial indicators.
Most indexed securities are short to intermediate term fixed-income
securities whose values at maturity or interest rates rise or fall according
to the change in one or more specified underlying instruments. Indexed
securities
8
<PAGE>
may be positively or negatively indexed (i.e., their value may increase or
decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument or
to one or more options on the underlying instrument. Indexed securities may
be more volatile than the underlying instrument itself.
Portfolio Trading: The Fund intends to manage its portfolio by buying and
selling Government Securities, as well as holding selected obligations to
maturity, and by engaging in transactions involving related options, Futures
Contracts and swap transactions. In managing its portfolio the Fund seeks to
maximize the return on its portfolio by taking advantage of market
developments and yield disparities. For a description of the strategies which
may be used by the Fund in managing its portfolio, see the SAI.
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.
("NASD") and such other policies as the Trustees may determine, the Adviser
may consider sales of shares of the Fund and of other investment company
clients of MFD, the Fund's distributor, 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 trading, see the SAI.
Options on Fixed Income Securities: The Fund may write (sell) covered put and
call options on fixed income securities and purchase put and call options.
The Fund will write such options for hedging purposes and to increase its
return; however, it will not write such options for the purpose of attempting
to pay out a pre-established level of dividends or distributions. The Fund
may also write combinations of put and call options on the same security,
known as "straddles." The Fund may purchase put or call options in
anticipation of declines in the value of fixed income portfolio securities or
increases in the value of securities to be acquired.
For hedging purposes, the Fund may also enter into options on the yield
"spread," or yield differential, between two securities. This transaction is
referred to as a "yield curve" option. In contrast to other types of options,
a yield curve option is based on the difference between the yields of
designated securities rather than the actual prices of the individual
securities, and is settled through cash payments. Accordingly, a yield curve
option is profitable to the holder if this differential widens (in the case
of a call) or narrows (in the case of a put), regardless of whether the
yields of the underlying securities increase or decrease. Yield curve options
written by the Fund will be covered as described in the SAI. The trading of
yield curve options is subject to all the risks associated with trading other
types of options, as discussed below under "Risks of Investment in Options,
Futures Contracts and Options on Futures Contracts" and in the SAI. In
addition, such options present risks of loss even if the yield on one of the
underlying securities remains constant, if the spread moves in a direction or
to an extent which was not anticipated.
In certain instances, the Fund may enter into options on Treasury Securities.
This type of option is referred to as "reset" options or "adjustable strike"
options. These options provide for periodic adjustment of the strike price
and may also provide for the periodic adjustment of the premium during the
term of the option.
The Fund may purchase and sell options that are traded on U.S. exchanges, and
options traded over-the-counter, with broker- dealers who deal in these
options. The ability to terminate over-the-counter options is more limited
than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. The Fund will treat assets used to cover over-the-counter
options as illiquid unless the dealer is a primary dealer in U.S. Government
securities and has given the Fund the unconditional right to close such
options at a formula price, in which event only an amount of the cover
determined with reference to the formula will be considered illiquid. The
Fund may also write over-the-counter options with non-primary dealers and
will treat the assets used to cover these options as illiquid. See
"Investment Objectives, Policies and Restrictions--Options on Fixed Income
Securities" in the SAI for a further discussion of options on fixed income
securities, as well as the associated risks.
9
<PAGE>
Futures Contracts: The Fund may enter into futures contracts on fixed income
securities ("Futures Contracts"). Such transactions may be used to hedge
against anticipated future changes in interest rates which otherwise might
either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of Government Securities which the Fund intends
to purchase at a later date. Should interest rates move in an unexpected
manner, the Fund may not achieve the anticipated benefits of Futures
Contracts or may realize a loss.
The Fund may also enter into Futures Contracts for non-hedging purposes, to
the extent permitted by applicable law, which involves greater risks. See
"Investment Objectives, Policies and RestrictionsFutures Contracts" in the
SAI for a further discussion of Futures Contracts, as well as the associated
risks.
Options on Futures Contracts: The Fund may also purchase and write options on
Futures Contracts ("Options on Futures Contracts") for the purpose of
protecting against declines in the value of fixed income portfolio securities
or against increases in the cost of such securities to be acquired, as well
as for non-hedging purposes to the extent permitted by applicable law.
Purchases of Options on Futures Contracts may present less risk in hedging
the portfolio of the Fund than the purchase or sale of the underlying Futures
Contracts, because the potential loss is limited to the amount of the premium
paid for the option, plus related transaction costs. The writing of such
options, however, does not present less risk than the trading of Futures
Contracts, and will constitute only a partial hedge, up to the amount of the
premium received, less related transaction costs. In addition, if an option
is exercised, the Fund may suffer a loss on the transaction. See "Investment
Objectives, Policies and RestrictionsOptions on Futures Contracts" in the SAI
for a further discussion of Options on Futures Contracts, as well as the
associated risks.
Risks of Investment in Options, Futures Contracts and Options on Futures
Contracts: The Fund's use of options, Futures Contracts and Options on
Futures Contracts involves certain risks. For example, a lack of correlation
between the instrument underlying an option or Futures Contract and the
assets being hedged, or unexpected adverse price movements, could render the
Fund's hedging strategy unsuccessful and could result in losses. The Fund
also may enter into transactions in such instruments for non-hedging purposes
to the extent permitted by applicable law, which involves greater risk. In
particular, such transactions may result in losses for the Fund which are not
offset by gains on other portfolio positions, thereby reducing gross income.
There also can be no assurance that a liquid secondary market will exist for
any contract purchased or sold, and the Fund may be required to maintain a
position until exercise or expiration, which could result in losses. The SAI
contains a description of the nature and trading mechanics of options,
Futures Contracts and Options on Futures Contracts and includes a discussion
of the risks related to transactions therein.
The investment objectives and the policies described above may be changed
without shareholder approval.
The SAI includes a discussion of other investment policies and a listing of
specific investment restrictions which govern the Fund's investment policies.
The specific investment restrictions listed in the SAI may be changed without
shareholder approval unless indicated otherwise. 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 December 19, 1985, as amended (the
"Advisory Agreement"). The Adviser provides the Fund with overall investment
advisory and administrative services, as well as general office facilities.
James J. Calmas, a Vice President of the Adviser, is the Fund's portfolio
manager. Mr. Calmas became the portfolio manager of the Fund in January of
1993. Mr. Calmas joined the Adviser in 1988 as an Investment Analyst. 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, computed and paid monthly, equal
10
<PAGE>
to, commencing January 1, 1996, 0.45% of the Fund's average daily net asset
value; through December 31, 1995, the Adviser will be receiving a higher
management fee equal to the lesser of (i) 0.65% of the Fund's average daily
net assets or (ii) 0.30% of the Fund's average daily net assets and 6.1% 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 every case on an annualized basis for the Fund's
then-current fiscal year.
For the Fund's fiscal year ended July 31, 1995, management fees paid to MFS
under the Advisory Agreement amounted to $9,450,684 equivalent, on an
annualized basis, to 0.65% of the Fund's average daily net assets.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), 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 Institutional Trust, MFS Union Standard 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 various fixed/variable annuity
contracts. MFS and its wholly owned subsidiary, MFS Asset Management, Inc.,
also 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 the management of the MFS organization were
approximately $39.8 billion on behalf of over 1.8 million investor accounts
as of October 31, 1995. As of such date, the MFS organization managed
approximately $19.6 billion of assets in fixed income securities and $15.9
billion of assets in equity securities. 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 R. Gardner and John
D. McNeil. Mr. Brodkin is the Chairman, Mr. Shames is the President and Mr.
Scott is the Secretary and a Senior Executive Vice President of MFS. Messrs.
McNeil and Gardner are the Chairman and President, respectively, of Sun Life.
Sun Life, a mutual life insurance company, is one of the largest
international life insurance companies and has been operating in the U.S.
since 1895, establishing a headquarters office here in 1973. The executive
officers of MFS report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is also the Chairman,
President and a Trustee of the Fund. W. Thomas London, Stephen E. Cavan,
James R. Bordewick, Jr., and James O. Yost, who are officers of MFS, are also
officers of the Fund.
MFS has established a strategic alliance with Foreign & Colonial Management
Ltd. ("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the
world's oldest financial services institutions, the London-based Foreign &
Colonial Investment Trust PLC, which pioneered the idea of investment
management in 1868, and HYPO-BANK (Bayerische Hypotheken-und Weschsel-Bank
AG), the oldest publicly listed bank in Germany, founded in 1835. As part of
this alliance, the portfolio managers and investment analysts of MFS and
Foreign & Colonial will share their views on a variety of investment related
issues, such as the economy, securities markets, portfolio securities and
their issuers, investment recommendations, strategies and techniques, risk
analysis, trading strategies and other portfolio management matters. MFS will
have access to the extensive international equity investment expertise of
Foreign & Colonial and Foreign & Colonial will have access to the extensive
U.S. equity investment expertise of MFS. One or more MFS investment analysts
are expected to work for an extended period with Foreign & Colonial's
portfolio managers and investment analysts at their offices in London. In
return, one or more Foreign & Colonial employees are expected to work in a
similar manner at MFS' Boston offices.
In certain instances there may be securities which are suitable for the
Fund's portfolio as well as for portfolios of other clients of MFS or clients
of Foreign & Colonial. Some simultaneous transactions are inevitable when
several clients receive investment advice from MFS and Foreign & Colonial,
particularly when the same security is suitable for more than one client.
While in some cases this arrangement could have a detrimental effect on the
price or availability of the security as far as the Fund is concerned, in
other cases, it may produce increased investment opportunities for the Fund.
11
<PAGE>
Distributor--MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and 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
dealer and other financial institution ("dealers") having a selling agreement
with MFD. Dealers may also charge their customers fees relating to investment
in the Fund.
The Fund offers two classes of shares (Class A and B shares) which bear sales
charges and distribution fees in different forms and amounts, as described
below:
CLASS A SHARES: Class A shares are generally offered at net asset value plus
an initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.
Purchases Subject to Initial Sales Charge. Class A shares are offered at net
asset value plus an initial sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge* as Percentage of:
- --------------------------------------------------------------------------------------------
Dealer
Allowance as a
Offering Net Amount Percentage of
Amount of Purchase Price Invested Offering Price
- ---------------------------------------- ---------- ------------ -------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 4.00 4.17 3.20
$250,000 but less than $500,000 2.95 3.04 2.25
$500,000 but less than $1,000,000 2.20 2.25 1.70
$1,000,000 or more None** None** See Below**
</TABLE>
* Because of rounding in the calculation of offering price, actual sales
charges may be more or less then those calculated using the percentages
above.
** A CDSC will apply to such purchases, as discussed below.
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 4% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending
on the number of shares of the Fund as well as certain other MFS Funds owned
or being purchased, the existence of an agreement to purchase additional
shares during a 13-month period (or 36-month period for purchases of $1
million or more) or other special purchase programs. A description of the
Right of Accumulation, Letter of Intent and Group Purchase privileges by
which the sales charge may be reduced is set forth in the SAI.
Purchases Subject to a CDSC (but not subject to an initial sales charge). In
the following two circumstances, Class A shares are also offered at net asset
value without an initial sales charge but subject to a CDSC, equal to 1% of
the lesser of the value of the shares redeemed (exclusive of reinvested
dividend and capital gain distributions) or the total cost of such shares, in
the event of a share redemption within 12 months following the purchase:
(i) on investments of $1 million or more in Class A shares; and
(ii) on investments in Class A shares by certain retirement plans subject
to the Employee Retirement Income Security Act of 1974, as amended, if
the sponsoring organization demonstrates 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
12
<PAGE>
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.
In the case of such purchases, MFD will pay a commission to dealers as
follows: 1% on sales up to $5 million, plus 0.25% on the amount in excess of
$5 million. Purchases of $1 million or more for each shareholder account will
be aggregated over a 12-month period (commencing from the date of the first
such purchase) for purposes of determining the level of commissions to be
paid during the period with respect to such account. In addition, with
respect to sales to retirement plans under the second circumstance described
above, MFD may pay a commission on sales in excess of $5 million to certain
retirement plans of 1% 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.
See "Redemptions and Repurchases--Contingent Deferred Sales Charge" for
further discussion of the CDSC.
Waivers of Initial Sales Charge and CDSC. In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemptions of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus.
CLASS B SHARES: Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC upon redemption as follows:
<TABLE>
<CAPTION>
Year of Contingent
Redemption Deferred Sales
After Purchase Charge
- ------------------------- ----------------
<S> <C>
First 4%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
</TABLE>
For Class B shares purchased prior to January 1, 1993, the CDSC imposed upon
redemption is as follows:
<TABLE>
<CAPTION>
Year of Contingent
Redemption Deferred Sales
After Purchase Charge
- ------------------------- ----------------
<S> <C>
First 6%
Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
</TABLE>
The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions)
or the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividends or capital gain
distributions.
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 payable under the Fund's Class B Distribution Plan (see
"Distribution Plans" below) at a rate equal to 0.25% of the purchase price of
such shares. Therefore, the total amount paid to a dealer upon the sale of
Class B shares is 4% of the purchase price of the shares (commission rate of
3.75% plus a service fee equal to 0.25% of the purchase price).
See "Redemptions and Repurchases--Contingent Deferred Sales Charge" for
further discussion of the CDSC.
13
<PAGE>
Waivers of CDSC. In certain circumstances, the CDSC imposed upon redemption
of Class B shares is waived. These circumstances are described in Appendix A
to this Prospectus.
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 same 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. See "Distribution Plans"
below. However, for purposes of conversion to Class A shares, all shares in a
shareholder's account that were purchased through the reinvestment of
dividends and distributions paid in respect of Class B shares (and which have
not converted to Class A shares as provided in the following sentence) will
be held in a separate sub-account. Each time any Class B shares in the
shareholder's account (other than those in the sub-account) convert to Class
A shares, a portion of the Class B shares then in the sub-account will also
convert to Class A shares. The portion will be determined by the ratio that
the shareholder's Class B shares not acquired through reinvestment of
dividends and distributions that are converting to Class A shares bear to the
shareholder's total Class B shares not acquired through reinvestment. The
conversion of Class B shares to Class A shares is subject to the continuing
availability of a ruling from the Internal Revenue Service or an opinion of
counsel that such conversion will not constitute a taxable event for federal
tax purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B shares to Class A shares will not
occur if such ruling or opinion is not available. In such event, Class B
shares would continue to be subject to higher expenses than Class A shares
for an indefinite period.
General: The following information applies to purchases of all classes of the
Fund's shares.
Minimum Investment. 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
for sale at any time.
Right to Reject Purchase Orders/Market Timing. 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 the 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 shares 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.
Dealer Concessions. Dealers may receive different compensation with respect
to sales of Class A and Class B shares. In addition, from time to time, MFD
may pay dealers 100% of the applicable sales charge on sales of Class A
shares of certain
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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. 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 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. 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 state laws or any self-regulatory agency, such as the NASD.
Special Investment Programs. 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.
Restrictions on Activities of National Banks. 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. 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 in respect of shareholders who invested in the Fund through a
national bank. It is not expected that shareholders would suffer any adverse
financial consequence as a result of these occurrences. In addition, state
securities laws on this issue may differ from the interpretation of federal
law expressed herein and banks and financial institutions may be required to
register as broker-dealers pursuant to state law.
A shareholder whose shares are held in the name of, or controlled by, a
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.
Exchanges
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e.,
an established account) may be exchanged for shares of the same class of any
of the other MFS Funds at net asset value (if available for sale).
Exchanges among MFS Funds (excluding exchanges from MFS money market funds):
No initial sales charges or CDSC will be imposed in connection with an
exchange from shares of an MFS Fund to shares of any other MFS Fund, except
with respect to exchanges from an MFS money market fund to another MFS Fund
which is not an MFS money market fund (discussed below). With respect to an
exchange involving shares subject to a CDSC, the CDSC will be unaffected by
the exchange and the holding period for purposes of calculating the CDSC will
carry over to the acquired shares.
Exchanges From an MFS Money Market Fund: Special rules apply with respect to
the imposition of an initial sales charge or a CDSC for exchanges from an MFS
money market fund to another MFS Fund which is not an MFS money market fund.
These rules are described under the caption "Exchanges" in the Prospectuses
of those MFS money market funds.
Exchanges Involving the MFS Fixed Fund: Class A shares of any MFS Fund held
by certain qualified retirement plans may be exchanged for units of
participation of the MFS Fixed Fund (a bank collective investment fund) (the
"Units"), and Units may be exchanged for Class A shares of any MFS Fund. With
respect to exchanges between Class A shares subject to a CDSC and Units, the
CDSC will carry over to the acquired shares or Units and will be deducted
from the redemption proceeds when
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such shares or Units are subsequently redeemed, assuming the CDSC is then
payable (the period during which the Class A shares and the Units were held
will be aggregated for purposes of calculating the applicable CDSC). In the
event that a shareholder initially purchases Units and then exchanges into
Class A shares subject to an initial sales charge of an MFS Fund, the initial
sales charge shall be due upon such exchange, but will not be imposed with
respect to any subsequent exchanges between such Class A shares and Units
with respect to shares on which the initial sales charge has already been
paid. In the event that a shareholder initially purchases Units and then
exchanges into Class A shares subject to a CDSC of an MFS Fund, the CDSC
period will commence upon such exchange, and the applicability of the CDSC
with respect to subsequent exchanges shall be governed by the rules set forth
above in this paragraph.
General: A shareholder should read the prospectus of the other MFS Fund and
consider the differences in objectives, policies and restrictions before
making any exchange. 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 (generally, 4:00 p.m., Eastern time), the exchange will occur on
that day if all the requirements set forth above have been complied with at
that time and subject to the Fund's right to reject purchase orders. 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 dealers or the
Shareholder Servicing Agent. 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--General--Right to Reject Purchase Orders/Market Timing."
Redemptions and Repurchases
A shareholder may withdraw all or any portion of the value of his account on
any date on which the Fund is open for business by redeeming shares at their
net asset value (a redemption) or by selling such shares to the Fund through
a dealer (a repurchase). Certain redemptions and repurchases are, however,
subject to a CDSC. See "Contingent Deferred Sales Charge" below. Because 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 or repurchase will normally be
available within seven days, except for shares purchased or received in
exchange for shares purchased by check (including certified checks or
cashier's checks). Payment of redemption proceeds may be delayed for up to 15
days from the purchase date in an effort to assure that such check has
cleared.
REDEMPTION BY MAIL: Each shareholder may redeem all or any portion of the
shares in his account by mailing or delivering to the Shareholder Servicing
Agent (see back cover for address) a stock power with a written request for
redemption or a letter of instruction, together with his share certificates
(if any were issued), all in "good order" for transfer. "Good order"
generally means that the stock power, written request for redemption, letter
of instruction or certificate must be endorsed by the record owner(s) exactly
as the shares are registered and the signature(s) must be guaranteed in the
manner set forth below under the caption "Signature Guarantee." In addition,
in some cases "good order" will 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
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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 such Exchange is restricted or to the extent otherwise permitted
by the 1940 Act if an emergency exists. See "Tax Status" below.
REDEMPTION BY TELEPHONE: Each 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 bank and account number to receive the proceeds of such redemption,
and sign the Account Application Form with the signature(s) guaranteed in the
manner set forth below under the caption "Signature Guarantee." The proceeds
of such a redemption, reduced by the amount of any applicable CDSC and the
amount of any income tax required to be withheld, are mailed by check to the
designated account, without charge, if the redemption proceeds do not exceed
$1,000, and are wired in federal funds to the designated account if the
redemption proceeds exceed $1,000. If a telephone redemption request is
received by the Shareholder Servicing Agent by the close of regular trading
on the Exchange on any business day, shares will be redeemed at the closing
net asset value of the Fund on that day. Subject to the conditions described
in this section, proceeds of a redemption are normally mailed or wired on the
next business day following the date of receipt of the order for redemption.
The Shareholder Servicing Agent may be liable for any losses resulting from
unauthorized telephone transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. The Shareholder
Servicing Agent will request personal or other information from the caller,
and will normally also record calls. Shareholders should verify the accuracy
of confirmation statements immediately after their receipt.
REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares
through his 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,
reduced by the amount of any applicable CDSC and the amount of any income tax
required to be withheld.
REDEMPTION BY CHECK: Only Class A shares may be redeemed by check. A
shareholder owning Class A shares of the Fund may elect to have a special
account with State Street Bank and Trust Company (the "Bank") for the purpose
of redeeming Class A shares from his or her account by check. The Bank will
provide each Class A shareholder, upon request, with forms of checks drawn on
the Bank. Only shareholders having accounts in which no share certificates
have been issued will be permitted to redeem shares by check. Checks may be
made payable in any amount not less than $500. Shareholders wishing to avail
themselves of this redemption by check privilege should so request on their
Account Application, must execute signature cards (for additional
information, see the Account Application) with signature guaranteed in the
manner set forth under the caption "Signature Guarantee" below and must
return any Class A share certificates issued to them. Additional
documentation will be required from corporations, partnerships, fiduciaries
or other such institutional investors. All checks must be signed by the
shareholder(s) of record exactly as the account is registered before the Bank
will honor them. The shareholders of joint accounts may authorize each
shareholder to redeem by check. The check may not draw on monthly dividends
which have been declared but not distributed. Shareholders who purchase Class
A shares by check (including certified checks or cashier's checks) may write
checks against those shares only after they have been on the Fund's books for
15 days. When such a check is presented to the Bank for payment, a sufficient
number of full and fractional shares will be redeemed to cover the amount of
the check, any applicable CDSC and the amount of any income tax required to
be withheld. If the amount of the check, plus any applicable CDSC and the
amount of any income tax required to be withheld is greater than the value of
the Class A shares held in the shareholder's account, the check will be
returned unpaid, and the shareholder may be subject to extra charges. To
avoid dishonor of checks due to fluctuation in account value, shareholders
are advised against redeeming all or most of their account by check. Checks
should not be used to close a Fund account because when the check is written,
the shareholder will not know the exact total value of the account on the day
the check clears. There is presently no charge to the shareholder for the
maintenance of this special account or for the clearance of any checks, but
the Fund and the bank reserve the right to impose such charges or to modify
or terminate the redemption by check privilege at any time.
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<PAGE>
CONTINGENT DEFERRED SALES CHARGE: Investments in Class A or B shares ("Direct
Purchases") will be subject to a CDSC for a period of 12 months (in the case
of purchases of $1 million or more of Class A shares or purchases by certain
retirement plans 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
basisall 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 of shares represented by Direct Purchases
exceeds the sum of the six calendar year aggregations (12 months in the case
of purchases of $1 million or more of Class A shares or purchases by certain
retirement plans 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 a particular class, (i) any Free Amount is not subject to the
CDSC and (ii) the amount of redemption equal to the then-current value of
Reinvested Shares is not subject to the CDSC, but (iii) any amount of the
redemption in excess of the aggregate of the then-current value of
Reinvested Shares and the Free Amount is subject to a CDSC. The CDSC will
first be applied against the amount of Direct Purchases which will result in
any such charge being imposed at the lowest possible rate. The CDSC to be
imposed upon redemptions will be calculated as set forth in "Purchases"
above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except as described in Appendix A hereto.
GENERAL: The following information applies to redemptions and repurchases of
all classes of the Fund's shares.
Signature Guarantee. In order to protect shareholders 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.
Reinstatement Privilege. 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 twelve 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 SAI regarding this privilege.
In-Kind Distributions. Subject to 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
securities (instead of cash) from the Fund's portfolio. The securities in
such a distribution would be valued at the same amount as that assigned to
them in calculating the net asset value for the shares being sold. If a
shareholder received a distribution in-kind, the shareholder could incur
brokerage or transaction charges when converting the securities to cash.
Involuntary Redemptions/Small Accounts. 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 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 "PurchasesGeneralMinimum Investment." 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.
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Distribution Plans
The Trustees have adopted separate Distribution Plans for Class A and Class B
shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder
(the "Distribution Plans"), after having concluded that there is a reasonable
likelihood that the Distribution Plans would benefit the Fund and its
shareholders.
FEATURES COMMON TO EACH DISTRIBUTION PLAN: The Distribution Plans have
certain common features, as described below.
Service Fees. Each Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to
the class of shares to which the Distribution Plan relates (i.e., Class A or
Class B shares, as appropriate) (the "Designated Class") annually in order
that MFD may pay expenses on behalf of the Fund relating to the servicing of
shares of the Designated Class. The service fee is used by MFD to compensate
dealers which enter into a sales agreement with MFD in consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to shares of the Designated Class owned by investors for whom
such dealer is the dealer or holder of record. MFD may from time to time
reduce the amount of the service fees paid for shares sold prior to a certain
date. Service fees may be reduced for a 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. 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 each
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.
Distribution Fees. Each Distribution Plan provides that the Fund may pay
MFD a distribution fee based on the average daily net assets attributable to
the Designated Class as partial consideration for distribution services
performed and expenses incurred in the performance of MFD's obligations under
its distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plans, as does the
use by MFD of such distribution fees. Such amounts and uses are described
below in the discussion of the separate Distribution Plans. While the amount
of compensation received by MFD in the form of distribution fees during any
year may be more or less than the expense incurred by MFD under its
distribution agreement with the Fund, the Fund is not liable to MFD for any
losses MFD may incur in performing services under its distribution agreement
with the Fund.
Other Common Features. Fees payable under each Distribution Plan are
charged to, and therefore reduce, income allocated to shares of the
Designated Class. The Distribution Plans have substantially identical
provisions with respect to their operating policies and their initial
approval, renewal, amendment and termination.
Features Unique To Each Distribution Plan: The Distribution Plans have
certain features that are unique to each class of shares, as described below.
Class A Distribution Plan. Class A shares are generally offered pursuant to
an initial sales charge, a substantial portion of which is paid to or
retained by the dealer making the sale (the remainder of which is paid to
MFD). See "Purchases -- Class A Shares" above. In addition to the initial
sales charge, the dealer also generally receives the ongoing 0.25% per annum
service fee, as discussed above.
The distribution fee paid to MFD under the Class A Distribution Plan is equal,
on an annual basis, to 0.10% of the Fund's average daily net assets attributable
to Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commission to dealers with respect to purchases
of $1 million or more of Class A shares which are sold at net asset value but
which are subject to a 1% CDSC for one year after purchase). See "Purchases --
Class A Shares" above. In addition, to the extent that the aggregate service and
distribution fees paid under the Class A Distribution Plan do 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 such distribution-related expenses or other
distribution-related expenses.
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<PAGE>
Class B Distribution Plan. Class B shares are offered at net asset value
without an initial sales charge but subject to a CDSC. See "Purchases --
Class B Shares" above. MFD will advance to dealers the first year service fee
described above at a rate equal to 0.25% 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. Dealers
will become eligible to receive the ongoing 0.25% per annum service fee with
respect to such shares commencing in the thirteenth month following purchase.
Under the Class B Distribution Plan, the Fund pays MFD a distribution fee
equal, on an annual basis, to 0.75% of the Fund's average daily net assets
attributable to Class B shares. As noted above, this distribution fee may be
used by MFD to cover its distribution-related expenses under its distribution
agreement with the Fund (including the 3.75% commission it pays to dealers
upon purchase of Class B shares, as described under "Purchases -- Class B
Shares" above).
Current Level of Distribution and Service Fees. The Fund's Class A and
Class B distribution and service fees for its current fiscal year are 0.35%
and 1.00% per annum, respectively.
Distributions
The Fund intends to pay substantially all of its net investment income as
dividends on a monthly basis. In determining the net investment income
available for distributions, the Fund may rely on projections of its
anticipated net investment income over a longer term, rather than its actual
net investment income for the period. If the Fund earns less than projected,
or otherwise distributes more than its earnings for the year, a portion of
the distributions may constitute a return of capital. 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 class with respect to which the
distribution is made. See "Tax Status" and "Shareholder ServicesDistribution
Options" below. Distributions paid by the Fund with respect to Class A shares
will generally be greater than those paid with respect to Class B shares
because expenses attributable to Class B shares will generally be higher.
Tax Status
The Fund is treated as an entity separate from the other series of the Trust
for federal income tax purposes. In order to minimize the taxes the Fund
would otherwise be required to pay, the Fund intends to qualify each year as
a "regulated investment company" under Subchapter M of the Code, and to make
distributions to its shareholders in accordance with the timing requirements
imposed by the Code. It is 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.
Shareholders may not have to pay state or local taxes on dividends derived
from interest on U.S. Government obligations. Investors should consult with
their tax advisers in this regard. Shortly after the end of each calendar
year, each shareholder will receive a statement setting forth the federal
income tax status of all Fund dividends and distributions for that year,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gain, the portion representing interest on U.S. Government
obligations, the portion, if any, representing a return of capital (which is
free of current taxes but results in a basis reduction), and the amount, if
any, of federal income tax withheld.
Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before the Fund makes a 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.
The Fund intends to withhold U.S. federal income tax at a 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 law
or treaty. The Fund is also required in certain circumstances to apply backup
withholding at a rate of 31% on taxable dividends and redemption proceeds
paid to any shareholder (including a shareholder who is neither a citizen nor
a resident of the U.S.) who does not furnish to the Fund certain information
and certifications, or who is otherwise subject to backup withholding.
However, backup withholding will not be applied to payments which have
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<PAGE>
been subject to 30% withholding. Prospective investors should read the
Account Application for information regarding backup withholding of federal
income tax and should consult their own tax advisers as to the tax
consequences of an investment in the Fund.
Dividends 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 a disposition of such
obligations) may be exempt from state and local taxes in certain states.
Shareholders should consult their tax advisers regarding the possible
exclusion of such portion of their dividends for state and local income tax
purposes. 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.
Net Asset Value
The net asset value per share of each class of the Fund is determined each
day during which the Exchange is open for trading. This determination is made
once during each day as of the close of regular trading on the Exchange by
deducting the amount of the Fund's liabilities attributable to the class from
the value of the Fund's 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 SAI. The net asset value 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 two classes of shares, entitled Class A and Class B Shares of
Beneficial Interest (without par value). The Fund has reserved the right to
create and issue additional classes and series of shares, in which case each
class of shares of a series would participate equally in the earnings,
dividends and assets attributable to that class of shares of that particular
series. Shareholders are entitled to one vote for each share held and shares
of each series would be entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shares of all
series would vote together in the election of Trustees and selection of
accountants. Additionally, each class of shares of a series will vote
separately on any material increases in the fees under its Distribution Plan
or on any other matter that affects solely that class of shares, but will
otherwise vote together with all other classes of shares of the series on all
other matters. The Fund does not intend to hold annual shareholder meetings.
The Declaration of Trust provides that a Trustee may be removed from office
in certain instances (see "Description of Shares, Voting Rights and
Liabilities" in the SAI).
Each share of a class of the Fund represents an equal proportionate interest in
the Fund with each other class share, subject to the liabilities of the
particular class. Shares have no pre-emptive or conversion rights (except as
described above in "Information Concerning Shares of the
Fund--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 of the Fund 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 omission 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 Weisenberger Investment Companies
Service. Yield quotations will be based on the annualized net investment
21
<PAGE>
income per share of a class of the Fund over a 30 day period stated as a
percent of the maximum public offering price of shares of that class on the
last day of that period. 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 twelve 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 will reflect the average annual
percentage change over stated periods in the value of an investment in a
class of the Fund made at the maximum public offering price of shares of that
class with all distributions reinvested and which, if quoted for periods of
six years or less, will give effect to the imposition of the CDSC assessed
upon redemption of the Fund's Class B shares. Such total rate of return
quotations may be accompanied by quotations which do not reflect the
reduction in the value of the initial investment due to the sales charge or
the deduction of a CDSC, 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 SAI. For further
information about the Fund's performance for the fiscal year ended July 31,
1995, please refer to 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 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. At
the end of each calendar year, each shareholder will receive income tax
information regarding reportable dividends and capital gain distributions for
that year (see "Tax Status").
Distribution Options--The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
--Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified;
--Dividends in cash; capital gain distributions (except as provided below)
reinvested in additional shares;
--Dividends and capital gain distributions in cash.
With respect to the second option, the Fund may from time to time make
distributions from short-term capital gains on a monthly basis, and to the
extent such gains are distributed monthly, they shall be paid in cash; any
remaining short-term capital gains not so distributed shall be reinvested in
additional shares.
Reinvestments (net of any tax withholding) will be made in additional full
and fractional shares at the net asset value in effect at the close of
business on the record date. Checks for 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
22
<PAGE>
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 SAI) anticipates purchasing $100,000 or more of Class A
shares of the Fund alone or in combination with the total value of all shares
of all classes of other MFS Funds or the MFS Fixed Fund within a 13-month
period (or 36-month period for purchases of $1 million or more), the
shareholder may obtain such shares of the Fund at the same reduced sales
charge as though the total quantity were invested in one lump sum, subject to
escrow agreements and the appointment of an attorney for redemptions from the
escrow amount, if the intended purchases are not completed, by completing the
Letter of Intent section of the Account Application.
Right of Accumulation: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together
with the current offering price value of all holdings of all classes of
shares of that shareholder in the MFS Funds or the MFS Fixed Fund (a bank
collective investment fund) reaches a discount level.
Distribution Investment Program: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the
same class of another MFS Fund. Furthermore, distributions made by the Fund
may be automatically invested at net asset value (and without any applicable
CDSC) in shares of the same class of another MFS Fund, if shares of such Fund
are available for sale.
Systematic Withdrawal Plan: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic
payments based upon the value of his account. Each payment under a Systematic
Withdrawal Plan 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 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 other MFS Funds 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 in 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 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. 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 SAI 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.
23
<PAGE>
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 or falling price levels. Maintaining a dollar cost averaging program
concurrently with a withdrawal program could be disadvantageous because of
the sales charges included in share purchases in the case of Class A shares,
and because of the assessment of the CDSC for certain share redemptions in
the case of Class A shares.
Tax-Deferred Retirement Plans-Shares of the Fund may be purchased by all types
of tax-deferred retirement plans, including IRAs, SEP-IRA plans, 401(k)
plans, 403(b) plans and other corporate pension and profit-sharing plans.
Investors should consult with their tax advisers before establishing any of
the tax-deferred retirement plans described above.
The Fund's SAI, dated December 1, 1995, contains more detailed information
about the Fund, including, but not limited to, information related to (i)
investment objectives, policies and restrictions, (ii) its Trustees, officers
and investment adviser, (iii) portfolio transactions and brokerage
commissions, (iv) the method used to calculate yield, distribution rate and
total rate of return quotations of the Fund, (v) the Class A and Class B
Distribution Plans, and (vi) various services and privileges provided by the
Fund for the benefit of its shareholders, including additional information
with respect to the exchange privilege.
24
<PAGE>
Appendix A
WAIVERS OF SALES CHARGES
This Appendix sets forth the various circumstances in which all applicable
sales charges are waived (Section I), the initial sales charge and the
contingent deferred sales charge ("CDSC") for Class A shares are waived
(Section II), and the CDSC for Class B shares is waived (Section III).
I. WAIVERS OF ALL APPLICABLE SALES CHARGES
In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions
of Class A shares and on redemptions of Class B shares, as applicable,
are waived:
1. Dividend Reinvestment
(bullet) Shares acquired through dividend or capital gain reinvestment; and
(bullet) Shares acquired by automatic reinvestment of distributions of
dividends and capital gains of any fund in the MFS Family of Funds
("MFS Funds") pursuant to the Distribution Investment Program.
2. Certain Acquisitions/Liquidations
(bullet) Shares acquired on account of the acquisition or liquidation of
assets of other investment companies or personal holding companies.
3. Affiliates of an MFS Fund/Certain Dealers. Shares acquired by:
(bullet) Officers, eligible directors, employees (including retired
employees) and agents of Massachusetts Financial Services Company
("MFS"), Sun Life Assurance Company of Canada ("Sun Life") or any of
their subsidiary companies;
(bullet) Trustees and retired trustees of any investment company for which
MFS Fund Distributors, Inc. ("MFD") serves as distributor;
(bullet) Employees, directors, partners, officers and trustees of any
sub-adviser to any MFS Fund;
(bullet) Employees or registered representatives of dealers and other
financial institutions ("dealers") which have a sales agreement with
MFD;
(bullet) Certain family members of any such individual and their spouses
identified above and certain trusts, pension, profit- sharing or
other retirement plans for the sole benefit of such persons,
provided the shares are not resold except to the MFS Fund which
issued the shares; and
(bullet) Institutional Clients of MFS or MFS Asset Management, Inc. ("AMI").
4. Involuntary Redemptions (CDSC waiver only)
(bullet) Shares redeemed at an MFS Fund's direction due to the small size of
a shareholder's account. See "Redemptions and Repurchases -- General
-- Involuntary Redemptions/Small Accounts" in the Prospectus.
5. Retirement Plans (CDSC waiver only). Shares redeemed on account of
distributions made under the following circumstances:
Individual Retirement Accounts ("IRAs")
(bullet) Death or disability of the IRA Owner.
A-1
<PAGE>
Section 401(a) Plans ("401(a) Plans") and Section 403(b) Employer Sponsored
Plans ("ESP Plans")
(bullet) Death, disability or retirement of 401(a) or ESP Plan participant;
(bullet) Loan from 401(a) or ESP Plan (repayment of loans, however, will
constitute new sales for purposes of assessing sales charges);
(bullet) Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time);
(bullet) Termination of employment of 401(a) or ESP Plan participant
(excluding, however, a partial or other termination of the Plan);
(bullet) Tax-free return of excess 401(a) or ESP Plan contributions;
(bullet) To the extent that redemption proceeds are used to pay expenses (or
certain participant expenses) of the 401(a) or ESP Plan (e.g.,
participant account fees), provided that the Plan sponsor subscribes
to the MFS FUNDamental 401(k) Plan or another similar recordkeeping
system made available by MFS Service Center, Inc. (the "Shareholder
Servicing Agent"); and
(bullet) Distributions from a 401(a) or ESP Plan that has invested its assets
in 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 401(a)
or ESP Plan first invests its assets in one or more of the MFS
Funds. The sales charges will be waived in the case of a redemption
of all of the 401(a) or ESP Plan's shares in all MFS Funds (i.e.,
all the assets of the 401(a) or ESP Plan invested in the MFS Funds
are withdrawn), unless immediately prior to the redemption, the
aggregate amount invested by the 401(a) or ESP Plan in shares of the
MFS Funds (excluding the reinvestment of distributions) during the
prior four years equals 50% or more of the total value of the 401(a)
or ESP Plan's assets in the MFS Funds, in which case the sales
charges will not be waived.
Section 403(b) Salary Reduction Only Plans ("SRO Plans")
(bullet) Death or disability of SRO Plan participant.
6. Certain Transfers of Registration (CDSC waiver only). Shares transferred:
(bullet) To an IRA rollover account where any sales charges with respect to
the shares being reregistered would have been waived had they been
redeemed; and
(bullet) From a single account maintained for a 401(a) Plan to multiple
accounts maintained by the Shareholder Servicing Agent on behalf of
individual participants of such Plan, provided that the Plan sponsor
subscribes to the MFS
FUNDamental 401(k) Plan or another similar recordkeeping system made
available by the Shareholder Servicing Agent.
II. WAIVERS OF CLASS A SALES CHARGES
In addition to the waivers set forth in Section I above, in the
following circumstances the initial sales charge imposed on purchases of
Class A shares and the CDSC imposed on certain redemptions of Class A
shares are waived:
1. Investment of Redemption Proceeds from Unaffiliated Mutual Funds
(bullet) Shares acquired through the investment of redemption proceeds from
another open-end management investment company not distributed or
managed by MFD or its affiliates if: (i) the investment is made
through a dealer and appropriate documentation is submitted to MFD;
(ii) the redeemed shares were subject to an initial sales charge or
deferred sales charge (whether or not actually imposed); (iii) the
redemption occurred no more than 90 days prior to the purchase of
Class A shares; and (iv) the MFS Fund, MFD or its affiliates have
not agreed with such company or its
A-2
<PAGE>
affiliates, formally or informally, to waive sales charges on Class
A shares or provide any other incentive with respect to such
redemption and sale.
2. Wrap Account Investments
(bullet) Shares acquired by investments through certain dealers which have
entered into an agreement with MFD which includes a requirement that
such shares be sold for the sole benefit of clients participating in
a "wrap" account or a similar program under which such clients pay a
fee to such dealer.
3. Investment by Insurance Company Separate Accounts
(bullet) Shares acquired by insurance company separate accounts.
4. Retirement Plans
Administrative Services Arrangements
(bullet) Shares acquired by retirement plans whose third party administrators
or dealers have entered into an administrative services agreement
with MFD or one of its affiliates to perform certain administrative
services, subject to certain operational and minimum size
requirements specified from time to time by MFD or one or more of
its affiliates.
Reinvestment of Distributions from Qualified Retirement Plans
(bullet) Shares acquired through the automatic reinvestment in Class A
shares of Class A or Class B distributions which constitute
required withdrawals from qualified retirement plans.
Shares redeemed on account of distributions made under the following
circumstances:
IRAs
(bullet) Distributions made on or after the IRA owner has attained the age of
59-1/2 )years old; and
(bullet) Tax-free returns of excess IRA contributions.
401(a) Plans
(bullet) Distributions made on or after the 401(a) Plan participant has
attained the age of 59-1/2 years old; and
(bullet) Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a 401(a) Plan.
ESP Plans and SRO Plans
(bullet) Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59-1/2 years old.
III. WAIVERS OF CLASS B SALES CHARGES
In addition to the waivers set forth in Section I above, in the
following circumstances the CDSC imposed on redemptions of Class B
shares is waived:
1. Systematic Withdrawal Plan
(bullet) Systematic Withdrawal Plan redemptions with respect to up to 10% per
year of the account value at the time of establishment.
A-3
<PAGE>
2. Death of Owner
(bullet) Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a
living trust for the benefit of the deceased individual.
3. Disability of Owner
(bullet) Shares redeemed on account of the disability of the account owner if
shares are held either solely or jointly in the disabled
individual's name or in a living trust for the benefit of the
disabled individual (in which case a disability certification form
is required to be submitted to the Shareholder Servicing Agent).
4. Retirement Plans. Shares redeemed on account of distributions made
under the following circumstances:
IRAs, 401(a) Plans, ESP Plans and SRO Plans
(bullet) Distributions made on or after the IRA owner or the 401(a), ESP or
SRO Plan participant, as applicable, has attained the age of 70-1/2
years old, but only with respect to the minimum distribution under
applicable Internal Revenue Code ("Code") rules.
Salary Reduction Simplified Employee Pension Plans ("SAR-SEP Plans")
(bullet) Distributions made on or after the SAR-SEP Plan participant has
attained the age of 70-1/2 years old, but only with respect to the
minimum distribution under applicable Code rules; and
(bullet) Death or disability of a SAR-SEP Plan participant.
A-4
<PAGE>
Appendix B
Description of Obligations Issued or Guaranteed by
U.S. Government Agencies, Authorities or Instrumentalities
GNMA Certificates--are mortgage-backed securities which represent a partial
ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration.
The Fund will purchase only GNMA Certificates of the "modified pass-through"
type, which entitle the holder to receive its proportionate share of all
interest and principal payments owed on the mortgage pool, net of fees paid
to the issuer and GNMA. Payment of principal of and interest on GNMA
Certificates of the "modified pass-through" type is guaranteed by GNMA.
The average life of a GNMA Certificate is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal invested far in advance
of the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is
not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single-family dwelling mortgage with a 25- 30-year
maturity, the type of mortgage which backs the vast majority of GNMA
Certificates, is approximately 12 years. It is therefore customary practice
to treat GNMA Certificates as 30-year mortgage-backed securities which prepay
fully in the twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA
Certificates, the coupon rate of interest of GNMA Certificates is lower than
the interest paid on the VA-guaranteed or FHA-insured mortgages underlying
the GNMA Certificates.
The yield which will be earned on GNMA Certificates may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each
Certificate is affected by the prepayment of mortgages included in the
mortgage pool underlying the Certificates and the rate at which principal so
prepaid is reinvested. In addition, prepayment of mortgages included in the
mortgage pool underlying a GNMA Certificate purchased at a premium may result
in a loss to the Fund.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors,
GNMA Certificates are highly liquid instruments. Prices of GNMA Certificates
are readily available from securities dealers and depend on, among other
things, the level of market rates, the Certificate's coupon rate and the
prepayment experience of the pool of mortgages backing each Certificate.
FNMA Bonds--are bonds issued and guaranteed by the Federal National Mortgage
Association and are not guaranteed by the U.S. Government.
FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation and are not guaranteed by the U.S. Government.
Export-Import Bank Certificates--are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
Federal Agricultural Mortgage Corporation Certificates--are certificates of
beneficial interest guaranteed by the Federal Agricultural Mortgage
Corporation.
B-1
<PAGE>
Federal Agricultural Mortgage Corporation Bonds and Notes--are bonds and
notes guaranteed by the Federal Agricultural Mortgage Corporation.
Federal Farm Credit Banks Consolidated Systemwide Notes and Bonds--are bonds
issued and guaranteed by a cooperatively owned nationwide system of banks and
associations supervised by the Farm Credit Administration.
Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by the
Federal Home Loan Bank System.
Federal Home Loan Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Federal Home Loan
Bank System.
FHA Debentures--are debentures issued by the Federal Housing Authority of the
U.S. Government.
FICO Bonds and Notes--are bonds and notes issued and guaranteed by the
Financing Corporation.
GSA Participation Certificates--are participation certificates issued by the
General Services Administration of the U.S. Government.
Maritime Administration Bonds--are bonds issued by the Department of
Transportation of the U.S. Government.
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development
Act of 1970, the payment of which is guaranteed by the U.S. Government.
REFCORP Bonds and Notes--are bonds and notes issued and guaranteed by the
Resolution Funding Corporation.
SBA Debentures--are debentures fully 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.
Title XI Bonds--are bonds issued in accordance with the provisions of Title
XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
TVA Bonds and Notes--are bonds and notes issued and guaranteed by the
Tennessee Valley Authority.
U.S. Department of Veteran Affairs Certificates--are certificates of
beneficial interest guaranteed by the U.S. Department of Veteran Affairs.
Washington Metropolitan Area Transit Authority Bonds-- are bonds issued by
the Washington Metropolitan Area Transit Authority and guaranteed by the
Secretary of Transportation of the U.S. Government.
Although this list includes the primary types of Government Securities in
which the Fund invests (other than U.S. Treasury obligations), the Fund may
also invest in Government Securities other than those listed above.
B-2
<PAGE>
(Artwork Logo--MFS)
MFS(R) GOVERNMENT
MORTGAGE FUND
(A member of the MFS Family of Funds(R)
STATEMENT OF
ADDITIONAL INFORMATION
December 1, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Page
-----
1. Definitions 2
2. Investment Objectives, Policies and Restrictions 2
3. Management of the Fund 11
Trustees 11
Officers 11
Investment Adviser 12
Custodian 13
Shareholder Servicing Agent 13
Distributor 13
4. Portfolio Transactions and Brokerage Commissions 14
5. Shareholder Services 14
Investment and Withdrawal Programs 14
Exchange Privilege 16
Tax-Deferred Retirement Plans 17
6. Tax Status 17
7. Determination of Net Asset Value and Performance 18
8. Distribution Plans 21
9. Description of Shares, Voting Rights and Liabilities 22
10. Independent Accountants and Financial Statements 22
Appendix A 23
</TABLE>
MFS GOVERNMENT MORTGAGE FUND
A Series of MFS Series Trust X
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 December 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 back cover 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 Government Mortgage Fund, a
diversified series of MFS Series Trust
X (the "Trust"), a Massachusetts
business trust. The Trust was known as
MFS Government Mortgage Fund prior to
June 2, 1995, MFS Government Income Plus
Fund prior to March 1, 1993 and MFS
Government Income Plus Trust prior to
August 3, 1992.
"MFS" or the -- Massachusetts Financial Services
"Adviser" Company, a Delaware corporation.
"MFD" -- MFS Fund Distributors, Inc., a
Delaware corporation.
"Prospectus" -- The Prospectus of the Fund, dated
December 1, 1995, as amended or
supplemented from time to time.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives. The Fund's primary investment objective is to provide
a high level of current income. The secondary objective of the Fund is to
protect shareholders' capital. Any investment involves risk and there can be
no assurance that the Fund will achieve its objectives.
Investment Policies. The investment policies of the Fund are described in the
Prospectus. In addition, certain of the Fund's investment policies are
described in greater detail below.
Repurchase Agreements: The Fund may enter into repurchase agreements with
sellers who are member firms (or a subsidiary thereof) of the New York Stock
Exchange (the "Exchange") or members of the Federal Reserve System,
recognized primary U.S. Government securities dealers or institutions which
the Adviser has determined to be of comparable creditworthiness. The
securities that the Fund purchases and holds through its agent are U.S.
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 U.S. 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 securities. 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.
Mortgage Pass-Through Securities. The Fund may invest in mortgage
pass-through securities as described in the Prospectus. 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 Government National Mortgage Association ("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
the GNMA. GNMA is 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 FHA-insured or VA-guaranteed mortgages.
These guarantees, however, do not apply to the market value or yield of
mortgage pass-though 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 the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("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
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the availability of mortgage credit for residential housing. FHLMC issues
Participation Certificates 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.
"When-Issued" Securities: The Fund may purchase securities on a "when-issued"
or on a "forward delivery" basis. When the Fund commits to purchase U.S.
Government securities on a "when-issued" or "forward delivery" basis, it will
set up procedures consistent with policies promulgated by the Securities and
Exchange Commission (the "SEC"). 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 U.S. 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 forward 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 forward 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 forward 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 ("CMOs") which are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Collateral underlying CMOs
purchased by the Fund must be issued or guaranteed by the U.S. Government,
its agencies, authorities or instrumentalities. Typically, CMOs are
collateralized by certificates issued by the 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. These
Mortgage Assets must be 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. Certain CMOs may
be stripped (securities which provide only the principal or interest factor
of the underlying security). See "Stripped Mortgage-Backed Securities" below
for a discussion of the risks of investing in these stripped securities and
of investing in classes consisting primarily of interest payments or
principal payments.
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.
Stripped Mortgage-Backed Securities: The Fund may invest a portion of its
assets in stripped mortgage-backed securities ("SMBS"), which are derivative
multiclass mortgage securities.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions from a pool of
Mortgage Assets. The Fund will only invest in SMBS whose Mortgage Assets are
issued or guaranteed by the U.S. Government, its agencies, authorities or
instrumentalities. A common type of SMBS will have one class receiving some
of the interest and most of the principal from the Mortgage Assets, while the
other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the
interest (the interest-only or "IO" class) while the other class will receive
all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets, and a
rapid rate of
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principal payments may have a material adverse effect on such security's
yield to maturity. If the underlying Mortgage Assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities. The market value of the class
consisting primarily or entirely of principal payments generally is unusually
volatile in response to changes in interest rates. Because SMBS were only
recently introduced, established trading markets for these securities have
not yet developed, although the securities are traded among institutional
investors and investment banking firms.
Swaps and Related Transactions: The Fund may enter into interest rate swaps
and other types of available swap agreements. Swaps involve the exchange by
the Fund with another party of cash payments based upon different interest
rate indexes and other prices or rates, such as the value of mortgage
prepayment rates. For example, in the typical interest rate swap, the Fund
might exchange a sequence of cash payments based on a floating rate index for
cash payments based on a fixed rate. Payments made by both parties to a swap
transaction are based on a principal amount determined by the parties.
The Fund may also purchase and sell caps, floors and collars. In a typical
cap or floor agreement, one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the
counterparty. For example, the purchase of an interest rate cap entitles the
buyer, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal
amount from the counterparty selling such interest rate cap. The sale of an
interest rate floor obligates the seller to make payments to the extent that
a specified interest rate falls below an agreed-upon level. A collar
arrangement combines elements of buying a cap and selling a floor.
The Fund will maintain cash or appropriate liquid assets with its custodian
to cover its current obligations under swap transactions and cap, floor and
collar arrangements. If the Fund enters into a swap agreement on a net basis
(i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments), the
Fund will maintain cash or liquid assets with its Custodian with a daily
value at least equal to the excess, if any, of the Fund's accrued obligations
under the swap agreement over the accrued amount the Fund is entitled to
receive under the agreement. If the Fund enters into a swap agreement on
other than a net basis, it will maintain cash or liquid assets with a value
equal to the full amount of the Fund's accrued obligations under the
agreement.
The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate or other factor that
determines the amount of payments to be made under the arrangement. If the
Adviser is incorrect in its forecasts of such factors, the investment
performance of the Fund would be less than what it would have been if these
investment techniques had not been used. If the counterparty defaults, the
Fund's risk of loss consists of the net amount of payments that the Fund is
contractually entitled to receive. The Fund anticipates that it will be able
to eliminate or reduce its exposure under these arrangements by assignment or
other disposition or by entering into an offsetting agreement with the same
or another counterparty.
Options on Fixed Income Securities: The Fund may write (sell) covered call
and put options on fixed income securities and purchase call and put options.
An option provides the purchaser, or "holder," with the right, but not the
obligation, to purchase, in the case of a "call" option, or sell, in the case
of a "put" option, the fixed income security or securities in connection with
which the option was written, for a fixed exercise price up to a stated
expiration date or, in the case of certain options, on such date. The holder
pays a non-refundable purchase price for the option, known as the "premium."
The maximum amount of risk the purchaser of the option assumes is equal to
the premium plus related transaction costs, although this entire amount may
be lost. The risk of the seller, or "writer," however, is potentially
unlimited, unless the option is "covered." A call option written by the Fund
is "covered" if the Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund holds a call
on the same fixed income security and in the same principal amount as the
call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the
Fund in cash, short-term money market instruments or high quality government
securities in a segregated account with its custodian. A put option written
by the Fund is "covered" if the Fund maintains cash, short-term money market
instruments or high quality government securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds a
put on the same security and in the same principal amount as the put written
where the exercise price of the put held is (a) equal to or greater than the
exercise price of the put written or (b) is less than the exercise price of
the put written if the difference is maintained by the Fund in cash or
short-term money market instruments in a segregated account with its
custodian. Put and call options written by the Fund may also be covered in
such other manner as may be in accordance with the requirements of the
exchange on which, or the counterparty with which, the option is traded, and
applicable laws and regulations. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the
underlying security from the time the option is written until exercise.
The Fund may write options for hedging purposes. In particular, if the Fund
writes an option which expires unexercised or is closed out by the Fund at a
profit, the Fund retains the premium paid for the option less related
transaction costs, which increases its gross income and offsets in part the
reduced value of the portfolio security in connection with which the option
is written, or the increased cost of portfolio securities to be acquired. In
contrast, however, if the price of the security underlying the option moves
adversely to the Fund's position, the option may be exer-
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cised and the Fund will then be required to purchase or sell thesecurity at a
disadvantageous price, which might only partially be offset by the amount of
the premium.
The Fund may write options in connection with buy-and-write transactions;
that is, the Fund may purchase a security and then write a call option
against that security. The exercise price of the call option the Fund
determines to write depends upon the expected price movement of the
underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is written.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options may be used by the
Fund in the same market environments in which call options are used in
equivalent buy-and-write transactions.
In certain instances, the Fund may enter into Options on Treasury securities
which provide for periodic adjustment of the strike price and may also
provide for the periodic adjustment of the premium during the term of each
such Option. Like other types of Options, these transactions, which may be
referred to as "reset" Options or "adjustable strike" Options, grant the
purchaser the right to purchase (in the case of a "call") or sell (in the
case of a "put"), a specified type and series of U.S. Treasury security at
any time up to a stated expiration date (or, in certain instances, on such
date). In contrast to other types of Options, however, the price at which the
underlying security may be purchased or sold under a "reset" Option is
determined at various intervals during the term of the Option, and such price
fluctuates from interval to interval based on changes in the market value of
the underlying security. As a result, the strike price of a "reset" Option,
at the time of exercise, may be less advantageous to the Fund than if the
strike price had been fixed at the initiation of the Option. In addition, the
premium paid for the purchase of the Option may be determined at the
termination, rather than the initiation, of the Option. If the premium is
paid at termination, the Fund assumes the risk that (i) the premium may be
less than the premium which would otherwise have been received at the
initiation of the Option because of such factors as the volatility in yield
of the underlying Treasury security over the term of the Option and
adjustments made to the strike price of the Option, and (ii) the Option
purchaser may default on its obligation to pay the premium at the termination
of the Option.
The Fund may also write combinations of put and call options on the same
security, a practice known as a "straddle." By writing a straddle, the Fund
undertakes a simultaneous obligation to sell or purchase the same security in
the event that one of the options is exercised. If the price of the security
subsequently rises sufficiently above the exercise price to cover the amount
of the premium and transaction costs, the call will likely be exercised and
the Fund will be required to sell the underlying security at a below market
price. This loss may be offset, however, in whole or in part, by the premiums
received on the writing of the two options. Conversely, if the price of the
security declines by a sufficient amount, the put will likely be exercised.
The writing of straddles will likely be effective, therefore, only where the
price of a security remains stable and neither the call nor the put is
exercised. In an instance where one of the options is exercised, the loss on
the purchase or sale of the underlying security may exceed the amount of the
premiums received.
By writing a call option on a portfolio security, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a put option, the
Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price above its then current market value, resulting
in a loss unless the security subsequently appreciates in value. The writing
of options will not be undertaken by the Fund for speculative purposes, but
rather for hedging purposes. Where options are written for hedging purposes,
such transactions will constitute only a partial hedge against declines in
the value of portfolio securities or against increases in the value of
securities to be acquired, up to the amount of the premium.
The Fund may also purchase put and call options on securities. Put options
are purchased to hedge against a decline in the value of securities held in
the Fund's portfolio. If such a decline occurs, the put options will permit
the Fund to sell the securities underlying such options at the exercise
price, or to close out the options at a profit. The Fund will purchase call
options to hedge against an increase in the price of securities that the Fund
anticipates purchasing in the future. If such an increase occurs, the call
option will permit the Fund to purchase the securities underlying such option
at the exercise price or to close out the option at a profit. The premium
paid for a call or put option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and,
unless the price of the underlying security rises or declines sufficiently,
the option may expire worthless to the Fund. In addition, in the event that
the price of the security in connection with which an option was purchased
moves in a direction favorable to the Fund, the benefits realized by the Fund
as a result of such favorable movement will be reduced by the amount of the
premium paid for the option and related transaction costs.
The staff of the SEC has taken the position that purchased over- the-counter
options and assets used to cover written over-the- counter options are
illiquid and, therefore, together with other illiquid securities, cannot
exceed a certain percentage of the Fund's assets (the "SEC illiquidity
ceiling"). Although the Adviser disagrees with this position, the Adviser
intends to limit the Fund's writing of over-the-counter options in accordance
with the following procedure. Except as provided below, the Fund intends to
write over-the-counter options only with primary U.S. Government securities
dealers recognized by the Federal Reserve Bank of New York. Also, the
contracts the Fund has in place with such primary dealers will provide that
the Fund has the absolute right to repurchase an option it writes at any time
at a price which represents the fair market value, as determined in good
faith through negotiation between the parties, but which in no event will
exceed a price determined pursuant to a formula in the contract. Although the
specific formula may vary between contracts with different primary dealers,
the formula will generally be based on a multiple of the premium received by
the Fund for writing the option, plus the amount, if any, of the option's
intrinsic value (i.e.,
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the amount that the option is in-the-money). The formula may also include a
factor to account for the difference between the price of the security and
the strike price of the option if the option is written out-of-the-money. The
Fund will treat all or a portion of the formula as illiquid for purposes of
the SEC illiquidity ceiling. The Fund may also write over-the-counter options
with non- primary dealers and will treat the assets used to cover these
options as illiquid for purposes of such SEC illiquidity ceiling.
Yield Curve Options: The Fund may also enter into options on the "spread," or
yield differential, between two fixed income securities, in transactions
referred to as "yield curve" options. In contrast to other types of options,
a yield curve option is based on the difference between the yields of
designated securities, rather than the prices of the individual securities,
and is settled through cash payments. Accordingly, a yield curve option is
profitable to the holder if this differential widens (in the case of a call)
or narrows (in the case of a put), regardless of whether the yields of the
underlying securities increase or decrease.
Yield curve options may be used for the same purposes as other options on
securities. Specifically, the Fund may purchase or write such options for
hedging purposes. For example, the Fund may purchase a call option on the
yield spread between two securities, if it owns one of the securities and
anticipates purchasing the other security and wants to hedge against an
adverse change in the yield spread between the two securities. The trading of
yield curve options is subject to all of the risks associated with the
trading of other types of options. In addition, however, such options present
risk of loss even if the yield of one of the underlying securities remains
constant, if the spread moves in a direction or to an extent which was not
anticipated. Yield curve options written by the Fund will be "covered." A
call (or put) option is covered if the Fund holds another call (or put)
option on the spread between the same two securities and maintains in a
segregated account with its custodian cash or cash equivalents sufficient to
cover the Fund's net liability under the two options. Therefore, the Fund's
liability for such a covered option is generally limited to the difference
between the amount of the Fund's liability under the option written by the
Fund less the value of the option held by the Fund. Yield curve options may
also be covered in such other manner as may be in accordance with the
requirements of the counterparty with which the option is traded and
applicable laws and regulations. Yield curve options are traded over-the-
counter and because they have been only recently introduced, established
trading markets for these securities have not yet developed. Because these
securities are traded over-the-counter, the SEC has taken the position that
yield curve options are illiquid and, therefore, cannot exceed the SEC
illiquidity ceiling. See "Options on Fixed Income Securities" above for a
discussion of the policies the Adviser intends to follow to limit the Fund's
investment in these securities.
Indexed Securities: The Fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, commodities, or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined
by reference to a specific instrument or statistic.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes in the U.S. At the same
time, indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. government agencies.
Futures Contracts: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities ("Futures Contracts"). Such
transactions will be used to hedge (i.e., protect) against anticipated
changes in interest rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
long-term U.S. Government securities which the Fund intends to purchase at a
later date. The Fund may also enter into such transactions for non-hedging
purposes to the extent permitted by applicable law.
When a Futures Contract is sold, the Fund incurs a contractual obligation to
deliver the securities underlying the contract at a specified price on a
specified date during a specified future month or, in the case of Futures
Contracts on an index of securities, to make or receive a cash settlement. A
"purchase" of a Futures Contract means a contractual obligation by the Fund
to receive delivery of the securities called for by the contract at a
specified price during a specific future month or, in the case of Futures
Contracts on an index of securities, to make or receive cash settlements.
Futures Contracts have been designed by exchanges which have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC"), and
must be executed through a futures commission merchant, or brokerage firm,
which is a member of the relevant contract market. Futures Contracts trade on
these markets, and the exchanges, through their clearing organizations,
guarantee that the contracts will be performed as between the clearing
members of the exchange. The Fund will only enter into Futures Contracts
which are based on U.S. Government securities, including any index of U.S.
Government securities.
While Futures Contracts based on debt securities provide for the delivery of
securities, deliveries are very seldom made. Generally, a Futures Contract is
terminated by entering into an offsetting transaction. The Fund will incur
brokerage fees when it purchases and sells Futures Contracts. At the same
time such a purchase or sale is made, the Fund must provide cash or
securities as a deposit ("initial deposit") known as "margin." The initial
deposit varies but may be as low as 5% or less of the value of the contract.
Daily thereafter, the Futures Contract is valued on a marked-to- market basis
and the Fund may be required to pay or receive additional "variation margin",
based on the decline or increase in the value of the contract. At the time of
delivery of securities pursuant to such a contract, adjustments are made to
recognize differences in value arising from the delivery of securities with a
different interest rate than the specific security that provides the standard
for the contract. In some (but not many) cases, securities called for by a
Futures Contract may not have been issued when the contract was written. A
Futures Contract on an index of U.S. Government securities provides for the
payment and receipt of a cash
6
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settlement based on changes in the value of the index. The index underlying
such a Contract is comprised of a broad based portfolio of U.S. Government
securities designed to reflect movements in the market as a whole.
The purpose of the purchase or sale of a Futures Contract for hedging
purposes, in the case of a portfolio such as the Fund's portfolio, which
holds or intends to acquire long-term debt securities, is to protect the Fund
against the adverse effects of fluctuations in interest rates without
actually buying or selling long-term debt securities. For example, since the
Fund owns long-term bonds, if interest rates were expected to increase the
Fund might enter into Futures Contracts for the sale of debt securities. If
interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the Fund's Futures Contracts would
increase at approximately the same rate thereby keeping the net asset value
of the Fund from declining, or declining as much as it otherwise would have.
Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to hedge in anticipation of subsequent purchases
of long-term bonds at higher prices. Since the fluctuations in the value of
Futures Contracts should be similar to that of long-term bonds, the Fund
could protect itself against the effects of the anticipated rise in the value
of long-term bonds without actually buying them until the necessary cash
became available or the market had stabilized. At that time, the Futures
Contracts could be liquidated and the Fund could buy long-term bonds on the
cash market. Due to changing market conditions, however, and interest rate
forecasts, a futures position may be terminated without a corresponding
purchase of securities. To the extent the Fund purchases a Futures Contract,
it will maintain a segregated asset account consisting of cash, cash
equivalents or short-term money market instruments in an amount equal to the
difference between the fluctuating market value of such Futures Contracts and
the aggregate value of the initial deposit and variation margin payments made
by the Fund with respect to such Futures Contracts, thereby assuring that the
position is unleveraged.
The liquidity of a market in a futures contract may be adversely affected by
"daily price fluctuation limits" established by commodity exchanges, which
limit the amount of fluctuation in a futures contract price during a single
trading day. Once the daily limit has been reached in the contract, no trades
may be entered into at a price beyond the limit, thus preventing the
liquidation of open futures positions. Prices have in the past exceeded the
daily limit on a number of consecutive trading days. On any day or days when
the price fluctuation limits have been reached, the Fund may be unable to
liquidate existing futures positions or to implement a hedging strategy
through the purchase or sale of particular futures.
Further, the CFTC and the various contract markets have established limits
referred to as "speculative position limits" on the maximum net long or net
short position which any person may hold or control in a particular futures
or option contract. An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. The Adviser does not believe that these trading and position
limits will have any adverse impact on the strategies for hedging the
portfolio of the Fund. The trading of Futures Contracts is also subject to
the illiquidity risks described above with respect to options on securities.
Options on Futures Contracts: The Fund may write and purchase options to buy
or sell Futures Contracts ("Options on Futures Contracts"). The writing of a
call Option on a Futures Contract may constitute a partial hedge against
declining prices of the fixed income security underlying the Futures
Contract. If the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the option premium,
less related transaction costs, which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing
of a put Option on a Futures Contract may constitute a partial hedge against
increasing prices of the security underlying the Futures Contract. If the
futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium, less related
transaction costs, which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call
option the Fund has written is exercised, the Fund will incur a loss which
will be reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the Fund's
losses from existing Options on Futures Contracts may to some extent be
reduced or increased by changes in the value of portfolio securities. The
Fund may also enter into such transactions for non-hedging purposes, to the
extent permitted by applicable law, which involves greater risk.
The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of a projected market-wide decline or a rise in interest rates,
the Fund may, in lieu of selling Futures Contracts, purchase put options
thereon. In the event that such decrease in portfolio value occurs, it may be
offset, in whole or part, by a profit on the option. Conversely, where it is
projected that the value of securities to be acquired by the Fund will
increase prior to acquisition, due to a market advance or a decline in
interest rates, the Fund may purchase call Options on Futures Contracts,
rather than purchasing the underlying Futures Contracts. As in the case of
Options, the writing of Options on Futures Contracts may require the Fund to
forego all or a portion of the benefits of favorable movements in the price
of portfolio securities, and the purchase of Options on Futures Contracts may
require the Fund to forego all or a portion of such benefits up to the amount
of the premium paid and related transaction costs. The Fund may also enter
into transactions in Options on Futures Contracts for non-hedging purposes to
the extent permitted by applicable law.
The Fund may cover the writing of call Options on Futures Contracts (a)
through purchases of the underlying Futures Contract, (b) through ownership
of the instrument, or instruments included in the index, underlying the
Futures Contract, or (c) through the holding of a call on the same Futures
Contract and in the same principal amount as the call written where the
exercise price of the call held (i) is equal to or less than the exercise
price of the
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<PAGE>
call written or (ii) is greater than the exercise price of the call written
if the difference is maintained by the Fund in cash, short-term money market
instruments or high quality government securities in a segregated account
with its custodian. The Fund may cover the writing of put Options on Futures
Contracts (a) through sales of the underlying Futures Contract, (b) through
segregation of cash, short-term money market instruments or high quality
government securities in an amount equal to the value of the security or
index underlying the Futures Contract, or (c) through the holding of a put on
the same Futures Contract and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written, or is less than the exercise price of the
put written if the difference is maintained by the Fund in cash, short-term
money market instruments or high quality government securities in a
segregated account with its custodian. Put and call Options on Futures
Contracts may also be covered in such other manner as may be in accordance
with the rules of the exchange on which the option is traded and applicable
laws and regulations. Upon the exercise of a call Option on a Futures
Contract written by the Fund, the Fund will be required to sell the
underlying Futures Contract which, if the Fund has covered its obligation
through the purchase of such Contract, will serve to liquidate its futures
position. Similarly, where a put Option on a Futures Contract written by the
Fund is exercised, the Fund will be required to purchase the underlying
Futures Contract which, if the Fund has covered its obligation through the
sale of such Contract, will close out its futures position. An Option on a
Futures Contract is traded on the same contract market as the underlying
Futures Contract, subject to regulation by the CFTC and the performance
guarantee of the exchange clearing house.
Risk Factors: Imperfect Correlation of Hedging Instruments with the Fund's
Portfolio--The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options and Futures Contracts will depend
on the degree to which price movements in the underlying instruments
correlate with price movements in the relevant portion of the Fund's
portfolio. If the values of fixed income portfolio securities being hedged do
not move in the same amount or direction as the instruments underlying
options or Futures Contracts, the Fund's hedging strategy may not be
successful and the Fund could sustain losses on its hedging strategy which
would not be offset by gains on its portfolio. It is also possible that there
may be a negative correlation between the instrument underlying an option or
Futures Contract and the portfolio securities being hedged, which could
result in losses both on the hedging transaction and the portfolio
securities. In such instances, the Fund's overall return could be less than
if the hedging transaction had not been undertaken. In the case of Futures
and options on fixed income securities, the portfolio securities which are
being hedged may not be the same type of obligation underlying such contract.
As a result, the correlation probably will not be exact. Consequently, the
Fund bears the risk that the price of the fixed income portfolio securities
being hedged will not move in the same amount or direction as the underlying
index or obligation.
The correlation between prices of fixed income securities and prices of
options or Futures Contracts may be distorted due to differences in the
nature of the markets, such as differences in margin requirements, the
liquidity of such markets and the participation of speculators in the option
and Futures Contract markets. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still not result
in a successful transaction. The trading of Options on Futures Contracts also
entails the risk that changes in the value of the underlying Futures Contract
will not be fully reflected in the value of the option. The risk of imperfect
correlation, however, generally tends to diminish as the maturity or
termination date of the option or Futures Contract approaches.
The trading of options and Futures Contracts also entails the risk that, if
the Adviser's judgment as to the general direction of interest or exchange
rates is incorrect, the Fund's overall performance may be poorer than if it
had not entered into any such contract. For example, if the Fund has hedged
against the possibility of an increase in interest rates, and rates instead
decline, the Fund will lose part or all of the benefit of the increased value
of the fixed income securities being hedged, and may be required to meet
ongoing daily variation margin payments.
It should be noted that the Fund may purchase and write Options, Futures
Contracts and Options on Futures Contracts not only for hedging purposes, but
also for non-hedging purposes to the extent permitted by applicable law. As a
result, the Fund will incur the risk that losses on such transactions will
not be offset by corresponding increases in the value of fixed income
portfolio securities or decreases in the cost of fixed income securities to
be acquired.
Risk Factors: Potential Lack of a Liquid Secondary Market-- Prior to exercise
or expiration, a position in an exchange-traded option, Futures Contract or
Option on a Futures Contract can only be terminated by entering into a
closing purchase or sale transaction, which requires a secondary market for
such instruments on the exchange on which the initial transaction was
entered. If no such market exists, it may not be possible to close out a
position, and the Fund could be required to purchase or sell the underlying
instrument or meet ongoing variation margin requirements. The inability to
close out option or futures positions also could have an adverse effect on
the Fund's ability effectively to hedge its portfolio.
The liquidity of a secondary market in an option or Futures Contract may be
adversely affected by "daily price fluctuation limits," established by the
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. Such limits could prevent the Fund from liquidating open
positions, which could render its hedging strategy unsuccessful and result in
trading losses. The exchanges on which options and Futures Contracts are
traded have also established a number of limitations governing the maximum
number of positions which may be traded by a trader, whether acting alone or
in concert with others. Further, the purchase and sale of exchange-traded
options and Futures Contracts is subject to the risk of trading halts,
suspensions, exchange or clearing corporation equipment failures, government
intervention, insolvency of a brokerage firm, intervening broker or clearing
corporation or other disruptions of nor-
8
<PAGE>
mal trading activity, which could make it difficult or impossible to
liquidate existing positions or to recover excess variation margin payments.
Risk Factors: Options on Futures Contracts--In order to profit from the
purchase of an Option on a Futures Contract, it may be necessary to exercise
the option and liquidate the underlying Futures Contract, subject to all of
the risks of futures trading. The writer of an Option on a Futures Contract
is subject to the risks of futures trading, including the requirement of
initial and variation margin deposits.
Additional Policies on the Use of Options and Futures: In order to assure
that the Fund will not be deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the CFTC require that the Fund enter
into transactions in Futures Contracts and Options on Futures Contracts only
(i) for bona fide hedging purposes (as defined in CFTC regulations), or (ii)
for non-hedging purposes, provided that the aggregate initial margin and
premiums on such non-hedging positions does not exceed 5% of the liquidation
value of the Fund's assets. In addition, the Fund must comply with the
requirements of various state securities laws in connection with such
transactions.
The Fund has adopted the additional policy that it will not enter into a
Futures Contract if, immediately thereafter, the value of securities and
other obligations underlying all such Futures Contracts would exceed 50% of
the value of the Fund's total assets. Moreover, the Fund will not purchase
put and call Options if, as a result, more than 5% of its total assets would
be invested in such Options.
When the Fund purchases a Futures Contract, an amount of cash and cash
equivalents will be deposited in a segregated account with the Fund's
custodian so that the amount so segregated will at all times equal the value
of the Futures Contract, thereby insuring that the leveraging effect of such
Futures is minimized.
Lending of Portfolio Securities: The Fund may seek to increase its income by
lending portfolio securities. Such loans will usually be made to member banks
of the Federal Reserve System and to member firms of the Exchange (and
subsidiaries thereof), and would be required to be secured continuously by
collateral in cash, U.S. Government securities or an irrevocable letter of
credit maintained on a current basis at an amount at least equal to the
market value of the securities loaned. 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 cash 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 U.S. Government obligations, as well as holding selected
obligations to maturity, and by engaging in transactions involving related
options, futures and options on futures. In managing its portfolio the Fund
seeks to maximize the return on its portfolio by taking advantage of market
developments and yield disparities, which may include use of the following
strategies:
(1) selling one type of U.S. 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 U.S. Government obligation to an essentially
similar U.S. Government obligation when their respective yields are distorted
due to market factors.
The Fund will also use the techniques described above under "Repurchase
Agreements," "'When-Issued' Securities," "Options" and "Futures Contracts" 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 will help in attaining its investment objectives. See "Portfolio
Transactions and Brokerage Commissions."
The objectives and the policies described above and the policies with respect
to portfolio trading 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 SAI, means the lesser of (i) more than 50%
of the outstanding shares of the Fund or of a class, as applicable, or (ii)
67% or more of the outstanding shares of the Fund or of a class, as
applicable, present at a meeting at which holders of more than 50% of the
outstanding shares of the Fund or of a class, as applicable, are represented
at such meeting in person or by proxy):
The Fund may not:
(1) borrow money or pledge its assets except as a temporary measure for
extraordinary or emergency purposes (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
9
<PAGE>
considered a pledge of assets); for additional related restrictions, see
paragraphs (i) and (ii) under the caption "State and Federal Restrictions";
(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, without payment of
any further consideration, for 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 net 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 and
provided that not more than 10% of the Fund's assets will be invested in
repurchase agreements maturing in more than seven days (for these purposes
the purchase of all or a portion of an issue of debt securities in accordance
with the Fund's investment objectives and policies shall not be considered
the making of a loan);
(8) knowingly invest in securities which are restricted securities under
the Securities Act of 1933 if, as a result thereof, more than 10% of the
Fund's total assets (taken at market value) would be so invested;
(9) 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;
(10) 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
(11) issue any senior security (as that term is defined in 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
options, futures, options on futures and repurchase agreements.
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) borrow money for any purpose in excess of 10% of its assets
(taken at market value) moreover, the Fund will not purchase any securities
for its portfolio at any time at which borrowings exceed 5% of its assets
(taken at market value), (ii) pledge for any purpose in excess of 15% of its
assets (taken at market value) (for the purpose of this restriction,
collateral arrangements with respect to the writing of options, Futures
Contracts, Options on Futures Contracts and collateral arrangements with
respect to initial and variation margins are not considered a pledge of
assets), (iii) 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, (iv) 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
Trust, 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, (v) invest for the purpose of exercising control or
management, (vi) 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
net 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
invest-
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<PAGE>
ment company, or (vii) 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.
Percentage Restriction: 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 Trust's Board of Trustees provides broad supervision over the affairs of
the Fund. The Adviser is responsible for the 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
(prior to September 30, 1991); Cambridge Bancorp, Director; Cambridge Trust
Company, Director
PETER G. HARWOOD
Private Investor
Address: 211 Lindsay Pond Road, Concord, Massachusetts
J. ATWOOD IVES
Eastern Enterprises (diversified holding company), Chairman and Chief
Executive Officer (since December 1991); General Cinema Corporation, Vice
Chairman and Chief Financial Officer (prior to December 1991); The Neiman
Marcus Group, Inc., Vice Chairman and Chief Financial Officer (prior to
February 1992); United States Filter Corporation, Director
Address: 9 Riverside Road, Weston, Massachusetts
LAWRENCE T. PERERA
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts
WILLIAM J. POORVU
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (a real estate investment
trust), Director; The Baupost Fund (a registered investment company), Vice
Chairman (since November 1993), Chairman and Trustee (prior to November 1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge,
Massachusetts
CHARLES W. SCHMIDT
Private Investor; OHM Corporation, Director; The Boston Company, Director;
Boston Safe Deposit and Trust Company, Director; Mohawk Paper Company,
Director
Address: 30 Colpitts Road, Weston, Massachusetts
ARNOLD D. SCOTT*
Massachusetts Financial Services Company, Senior Executive Vice President,
Secretary and Director
JEFFREY L. SHAMES*
Massachusetts Financial Services Company, President and Director
ELAINE R. SMITH
Independent Consultant; Brigham and Women's Hospital, Execu tive Vice
President and Chief Operating Officer (prior to September 1992)
Address: Weston, Massachusetts
DAVID B. STONE
North American Management Corp. (investment adviser), Chairman and Director;
Eastern Enterprises, Director
Address: Ten Post Office Square, Suite 300, Boston, Massachusetts
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, Assistant
Secretary and General Counsel
JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate
General Counsel
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. Messrs. Brodkin, Scott and Cavan are
the Chairman, a Director and the Secretary, respectively, of MFD and 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 and Mr. Bailey (who
currently receive a fee of $3,250 per year plus $165 per meeting and $130 per
committee meeting attended, together with such Trustee's out-of-pocket
expenses) and has adopted a retirement plan for non-interested Trustees and
Mr. Bailey. Under this plan, a Trustee will retire upon reaching age 73 and
if the Trustee has completed at least 5 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 73 and receive reduced payments if he has completed at least 5
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
11
<PAGE>
annual compensation and length of service. There is no retirement plan
provided by the Fund for Messrs. Brodkin, Scott and Shames. The Fund will
accrue compensation expenses each year to cover current years service and
amortize past service cost.
Set forth in Appendix A hereto is certain information concerning the cash
compensation paid to the Trustees and benefits accrued, and estimated
benefits payable under the retirement plan.
As of October 31, 1995, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund. As of October 31, 1995, Merrill
Lynch, Pierce, Fenner & Smith, Inc., P.O. Box 45286, Jacksonville, FL., was
the record owner of approximately 7.62% of the outstanding Class A shares of
the Fund. Merrill Lynch, Pierce, Fenner & Smith, Inc., P.O. Box 45286,
Jacksonville, FL., was the record owner of approximately 11.42% 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 by a court
or other body approving the settlement or other disposition or by reasonable
determination by non-interested Trustees or in a written opinion of
independent counsel based upon a review of readily available facts, 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 is a wholly owned subsidiary of Sun Life Assurance Company of
Canada ("Sun Life").
The Adviser manages the Fund pursuant to an Investment Advisory Agreement,
dated December 19, 1985, 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,
computed and paid monthly, equal to, commencing January 1, 1996, 0.45% of the
Fund's average daily net asset value; through December 31, 1995, the Adviser
will be receiving a higher management fee equal to the lesser of (i) 0.65% of
the Fund's average daily net assets or (ii) 0.30% of the Fund's average daily
net assets and 6.1% of the Fund's gross income (i.e., income other than gains
from the sale of securities, short-term gains from options and futures
transactions and premium income from options written), in every case on an
annualized basis for the Fund's then-current fiscal year.
For the Fund's fiscal year ended November 30, 1993, MFS received management
fees of $7,174,766, equivalent, on an annualized basis, to 0.65% of the
Fund's average daily net assets. If MFS had not reduced its management fee
for the Fund's fiscal year ended November 30, 1993, MFS would have received
management fees under the Advisory Agreement of $7,932,214 (of which
$3,188,777 would have been based on average daily net assets and $4,743,437
on gross income), equivalent, on an annualized basis, to 0.72% of the Fund's
average daily net assets. For the eight months ended July 31, 1994, MFS
received management fees of $8,155,351, equivalent on an annualized basis, to
0.65% of the Fund's average daily net assets. If MFS had not reduced its
management fees for the eight months ended July 31, 1994, MFS would have
received management fees under the Advisory Agreement of $8,248,819 (of which
$2,351,580 was based on average daily net assets and $5,897,239 in gross
income), equivalent, or an annualized basis, to 0.66% of the Fund's average
daily net assets. For the Fund's fiscal year ended July 31, 1995, MFS
received management fees of $9,450,684, equivalent, on an annualized basis,
to 0.65% of the Fund's average daily net assets.
In order to comply with the expense limitations 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 rescission of the various state requirements.
Any such adjustment would not become effective until the beginning of the
Fund's next fiscal year following the date of such amendments or the date on
which such requirements become no longer applicable.
The Fund pays all of its expenses (other than those assumed by MFS or MFD),
including: Trustees fees discussed above; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable
to the Fund; fees and expenses of independent auditors, of legal counsel, and
of any transfer agent, registrar and dividend disbursing agent of the Fund;
expenses of repurchasing and redeeming shares and servicing shareholder
accounts; 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 the Fund's Distribution Agreement with MFD 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 the Adviser, during its fiscal year ended July 31, 1995, see
"Financial Statements--Statement of Operations" in the Annual Report to
shareholders incorporated by reference into this SAI. Payment by
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<PAGE>
the Fund of brokerage commissions 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, 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 outstanding voting securities 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 or by either party
on not more than 60 days' nor less than 30 days' written notice. The Advisory
Agreement provides that if MFS ceases to serve as the Adviser to the Fund,
the Fund will change its name so as to delete the initials "MFS". 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 and dividends 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 Agent Agreement, dated September 1, 1995 (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 is reimbursed by the Fund for
certain expenses incurred by the Shareholder Servicing Agent on behalf of the
Fund. 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 the distributor for the
continuous offering of shares of the Fund pursuant to a Distribution
Agreement, dated September 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 a Class A
share of the Fund is calculated by dividing the 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). 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"). The commission paid to the
underwriter is the difference between the total amount invested and the sum
of (a) the net proceeds to the Fund and (b) the dealer commission. Because
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of rounding in the computation of offering price, the portion of the sales
charge paid to the underwriter 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 4% and MFD retains approximately 3/4 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.
Class B Shares: MFD acts as agent in selling Class B shares of the Fund. The
public offering price of Class B shares is their net asset value next
computed after the sale (see "Purchases" in the Prospectus).
General: Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change. 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.
During the Fund's fiscal year ended July 31, 1995, MFD and certain other
financial institutions received net commissions of $28,014 and $135,524,
respectively (as their concession on gross commissions of $163,538). The Fund
received $21,705,476, representing the aggregate net asset value of such
shares. During the eight months ended July 31, 1994, MFD and certain other
financial institutions received net commissions of $23,519 and $115,433,
respectively (as their concession on gross commissions of $138,952). The Fund
received $14,129,666, representing the aggregate net asset value of such
shares. During the Fund's fiscal year ended November 30, 1993, MFD and
certain other financial institutions received net commissions of $58,847 and
$291,008, respectively (as their concession on gross commissions of
$349,855). The Fund received $29,744,427, representing the aggregate net
asset value of such shares.
The Distribution Agreement will remain in effect until September 1, 1997, 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 Restrictions") 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. U.S.
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. 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 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 by the Adviser 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 Fund's 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 $100,000 or more of Class A shares of the Fund
alone or in combination with the current offer-
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ing price value of all holdings of all classes of shares of other MFS Funds
or the 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 Fund's 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 will also 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 the shareholder's new
investment, together with the current offering price value of all holdings of
all classes of shares of that shareholder in the MFS Funds or the MFS Fixed
Fund (a bank collective investment fund) reaches a discount level. See
"Purchases" in the Prospectus for the sales charges on quantity discounts.
For example, if a shareholder owns shares valued at $75,000 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 4% (the rate applicable to single
transactions of $100,000). 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 invested in shares of
one of the other MFS Funds will be invested at net asset value (exclusive of
any sales charge) and will not be subject to any contingent deferred sales
charge. 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 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 are drawn from the proceeds of
the redemption of shares 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) any "Free Amount";
(ii) to the extent necessary, 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 $5,000 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 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
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<PAGE>
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 groups; 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 other
MFS Funds 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 from
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 for exchanges will be charged 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 transfers (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 such
shares of the money market funds 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 MFS Money Market Fund, MFS Government
Money Market Fund and 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 the
initial purchase in the case of Class B shares or 12 months of the initial
purchase in the case 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
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<PAGE>
of the other MFS Funds (if available for sale) at their 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 or all the shares in the account
(except that the minimum is $50 for accounts 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). 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 the shares 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 such shares were and the shares received in
the exchange are held in a tax-deferred retirement plan. If the Exchange
Request is received by the Shareholder Servicing Agent 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.
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. 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 all
types of tax-deferred retirement plans. MFD makes available through
investment dealers plans and/or custody agreements for the following:
Individual Retirement Accounts (IRA) (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.
6. TAX STATUS
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
all of its net investment income and net realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code,
it is not expected that the Fund will be required to pay any federal income
or excise taxes. 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, and
any state or local taxes, on the dividends and capital gain distributions
they receive from the Fund. Dividends from
17
<PAGE>
income and any distributions from net short-term capital gains, whether paid
in cash or in additional shares are taxable to the Fund's shareholders as
ordinary income for federal income tax purposes. Because the Fund expects to
earn primarily interest income, it is expected that no Fund dividends will
qualify for the dividends received deduction for corporations. 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 in additional shares,
are taxable to the Fund's shareholders as long-term capital gains for
federal income tax purposes regardless of how long they have owned shares in
the Fund. Fund dividends declared in October, November, or December of any
calendar year, that are payable to shareholders of record in such a month,
and that are paid the following January, will be taxable to shareholders as
if received on December 31 of the year in which they are declared.
Any dividend or distribution 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 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, and may, under
certain circumstances, make an economic return of capital taxable to
shareholders. Any Fund investment in zero coupon securities, certain stripped
securities and certain securities purchased at a market discount will cause
the Fund to realize income prior to the receipt of cash payments with respect
to those 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.
The Fund's transactions in options and Futures Contracts will be subject to
special tax rules that may affect the amount, timing and character of Fund
income and distributions to shareholders. For example, certain positions held
by the Fund on the last business day of each taxable year will be marked to
market (i.e., treated as if closed out) on such day, and any gain or loss
associated with the positions will be treated as 60% long-term and 40% short-
term capital gain or loss. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in
its portfolio may constitute "straddles," and may be subject to special tax
rules that would cause deferral of Fund losses, adjustments in the holding
periods of Fund securities, and conversion of short-term into long-term
capital losses. Certain tax elections exist for straddles that may alter the
effects of these rules. The Fund will limit its activities in options,
Futures Contracts, and swaps and related transactions to the extent necessary
to meet the requirements of Subchapter M of the Code.
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 a rate of 30%. The Fund intends
to withhold U.S. federal income at the rate of 30% on taxable dividends and
other payments 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 appropriate to
such claims.
The Fund is also required in certain circumstances to apply backup
withholding at a rate of 31% on taxable dividends and redemption proceeds
paid to any shareholder (including a Non-U.S. Person) who does not furnish
to the Fund certain information and certifications or who is otherwise
subject to backup withholding. Backup withholding will not, however, be
applied to payments that have been subject to 30% withholding. Distributions
received from the Fund by Non-U.S. Persons also may be subject to tax under
the laws of their own jurisdiction.
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.
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 extent, if any, to which its
distributions consist of such interest. Shareholders are urged to consult
their tax advisers regarding the possible exclusion of such portion of their
dividends for state and local income tax purposes, as well as regarding the
tax consequences of an investment in the Fund.
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, the Exchange is open
18
<PAGE>
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 the Exchange by deducting the amount of the liabilities
attributable to the class from the value of the Fund's 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. Positions in listed options, Future Contracts and Options on
Futures Contracts will normally be valued at the settlement price on the
exchange on which they are primarily traded. Positions in over-the-counter
options will be valued using dealer supplied valuations. 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, the Fund's principal
underwriter or its agent, the Shareholder Servicing Agent, prior to the close
of that business day.
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
purchased on and after January 1, 1993) and therefore may result in a higher
rate of return, (ii) with respect to Class A shares, 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 (4.75% 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. Effective March 1, 1993, the Fund revised its investment
policy of investing in securities issued or guaranteed by the U.S. Government
and its agencies, authorities and instrumentalities and engaging in
transactions involving related options, to its current policy of investing at
least 65% of its assets, under normal circumstances, in GNMA securities and
obligations fully collateralized by GNMAs. The average annual total rate of
return for Class A shares, reflecting the initial investment at the maximum
public offering price, for the one-year and five-year periods ended July 31,
1995 and for the period from January 9, 1986 (the Fund's commencement of
investment operations) to July 31, 1995 was 4.46%, 6.46%, and 6.53%,
respectively. The average annual total rate of return for Class A shares, not
giving effect to the initial sales charge, for the one-year and five-year
periods ended July 31, 1995 and for the period from January 9, 1986 (the
Fund's commencement of investment operations) to July 31, 1995 was 9.60%,
7.50% and 7.08%, respectively. The Fund's average annual total rate of return
for Class B shares, reflecting the CDSC, for the one-year period and for the
period from September 7, 1993 to July 31, 1995 was 4.81% and 1.36%,
respectively. The Fund's average annual total rate of return for Class B
shares, not giving effect to the CDSC, for the one-year period and for the
period September 7, 1993 to July 31, 1995 was 8.81% and 3.33%, respectively.
The total rates of return presented above for Class A shares, may not be
indicative of future performance.
Performance Results: The performance results for Class A shares below, based
on an assumed initial investment of $10,000, cover the period from January 9,
1986 to December 31, 1994. It has been assumed that capital gain
distributions and income dividends 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 the Fund's portfolio,
but also on changes in the current value of such securities and on changes in
the expenses of the Fund. These factors and possible differences in the
methods used to calculate yields and total rates of return should be
considered when comparing the yield and total rate of return of the Fund 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).
<PAGE>
MFS Government Mortgage Fund
<TABLE>
<CAPTION>
Value of
Value of Reinvested
Initial Capital Value of
Period ended $10,000 Gains Reinvested Total
December 31 Investment Distributions Dividends Value
- ------------- ----------- ------------ -------- --------
<S> <C> <C> <C> <C>
1986* $9,750 $0 $ 1,001 $10,751
1987 8,261 0 2,214 10,475
1988 7,762 0 3,499 11,261
1989 7,792 0 4,968 12,760
1990 7,052 0 6,159 13,211
1991 7,142 0 7,823 14,965
1992 6,873 0 8,992 15,865
1993 6,853 0 10,137 16,990
1994 6,233 0 10,386 16,619
</TABLE>
*For the period from the start of business, January 9, 1986, to December 31,
1986.
Explanatory notes: The results in the table assume that the initial
investment has been reduced by the current maximum sales
19
<PAGE>
charge (4.75%) and take into account the annual Rule 12b-1 fees. 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 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 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 the class during the period, minus accrued
expenses of such class for the period, by (ii) the average number of shares
of such class entitled to receive dividends during the period multiplied by
the maximum offering price per share of such class on the last day of the
period. The Fund's yield calculations assume a maximum sales charge of 4.75%
in the case of Class A shares and no payment of any CDSC in the case of Class
B shares. The yield calculation for Class A shares for the 30-day period
ended July 31, 1995 was 6.19%. The yield calculation for Class B shares for
the 30-day period ended July 31, 1995 was 5.77%.
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 twelve 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 during the past twelve 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 4.75%. The Fund's current distribution rate
calculation for Class B shares assumes no CDSC is paid. The current
distribution rate for Class A shares and the Class B shares of the Fund for
the twelve-month period ended July 31, 1995 was 6.50% and 5.79% respectively.
General: 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.
From time to time, the Fund may discuss or quote its current portfolio
manager as well as other investment personnel, including such persons' views
on: the economy; securities markets; portfolio securities and their issuers;
investment philosophies, strategies, techniques and criteria used in the
selection of securities to be purchased or sold for the Fund; the Fund's
portfolio holdings; the investment research and analysis process; the
formulation and evaluation of investment recommendations; and the assessment
and evaluation of credit, interest rate, market and economic risks.
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 in 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.
20
<PAGE>
- -- 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 solely 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 separate Distribution Plans for Class A and Class B
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 Fund's expense ratio to the extent that the Fund's
fixed costs are spread over a larger net asset base. Also, an increase in net
assets may lessen the adverse effect 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.
The Distribution Plans are described in the Prospectus under the caption
"Distribution Plans," which is incorporated herein by reference. The
following information supplements this Prospectus discussion.
Service Fees: With respect to the Class A Distribution Plan, no service fees
will be paid: (i) to any dealer who is the holder or dealer of record for
investors who own Class A 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 Class A 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.
With respect to the Class B Distribution Plan, except in the case of the
first year service fee, no service fees 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 by MFD from time to time. 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 shall be entitled to receive any service fee payable
under any 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.
Distribution Fees: The purpose of distribution payments to MFD under the
Distribution Plans 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 expense
and equipment.
Distribution and Service Fees Paid During the Fund's Last Fiscal Year: During
the fiscal year ended July 31, 1995, the Fund paid the following Distribution
Plan expenses:
<TABLE>
<CAPTION>
Amount of
Distribution Amount of
and Distribution Amount of
Service and Service Distribution
Fees Paid Fees and Service
By Retained Fees Received
Distribution Plans Fund by MFD by Dealers
- ------------------------ ---------- ----------- -------------
<S> <C> <C> <C>
Class A Distribution
Plan $ 1,435,563 $ 516,081 $ 919,482
Class B Distribution
Plan $10,437,906 $8,004,343 $2,433,563
</TABLE>
General: Each of the Distribution Plans 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 vote of both the Trustees and a
majority of the Trustees who are not "interested persons" or financially
interested parties of such Plan ("Distribution Plan Qualified Trustees").
Each of the Distribution Plans also requires that the Fund and MFD each shall
provide 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
21
<PAGE>
(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) of one or more separate series and to divide or combine the shares of
any series into a greater or lesser number of shares without thereby changing
the proportionate beneficial interests in that series. 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 two classes of shares of the Fund, Class A shares
and Class B 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, shareholders of each class are entitled to
share pro rata in the net assets of the Fund allocable to such class
available for distribution to shareholders. The Fund has reserved the right
to create and issue series and additional classes of shares, in which case
the shares of each class would participate equally in the earnings, dividends
and assets allocable to that class of the particular series.
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,
the Declaration of Trust provides that a Trustee may be removed from office
at a meeting of shareholders by a vote of two-thirds of the outstanding
shares of the Fund. A meeting of shareholders will be called upon the request
of shareholders of record holding in the aggregate not less than 10% of the
outstanding voting securities of the Fund. No material amendment may be made
to the Fund's Declaration of Trust without the affirmative vote of a majority
of the Fund's outstanding shares (as defined in "Investment Objectives,
Policies and Restrictions-- Investment Restrictions"). Shares have no pre-
emptive or conversion rights (except as described in "Purchases-- Conversion
of Class B Shares" in the Prospectus). Shares when issued are fully paid and
non-assessable. The Trust may enter into a merger or consolidation, or sell
all or substantially all of its assets (or all or substantially all of the
assets belonging to any series of the Trust), if approved by the vote of the
holders of two-thirds of the Trust's outstanding shares voting as a single
class, or of the affected series of the Trust, as the case may be, except
that if the Trustees of the Trust recommend such merger, consolidation or
sale, the approval by vote of the holders of a majority of the Trust's or the
affected series' outstanding shares (as defined in "Investment Restrictions")
will be sufficient. The Trust or any series of the Trust may also be
terminated (i) upon liquidation and distribution of its assets, if approved
by the vote of the holders of two-thirds of its outstanding shares, or (ii)
by the Trustees by written notice to the shareholders of the Trust or the
affected series. If not so terminated the Trust 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.
<PAGE>
10. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's independent certified public
accountants.
The Portfolio of Investments at July 31, 1995, the Statement of Assets and
Liabilities at July 31, 1995, the Statement of Operations for the year ended
July 31, 1995, the Statement of Changes in Net Assets for the year ended July
31, 1995, the eight months ended July 31, 1994 and the year ended November
30, 1993, the Notes to Financial Statements and the Independent Auditors'
Report, each of which is included in the Annual Report to shareholders of the
Fund, are incorporated by reference into this SAI and have been so
incorporated in reliance upon the report of Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing.
22
<PAGE>
Appendix A
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
Retirement
Benefit
Accrued as
part Estimated Total Trustee
Trustee Fees of Fund Credited Years Fees from Fund
Trustee from Fund (1) Expense (1) of Service (2) and Fund Complex (3)
-------------------------- -------------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Richard B. Bailey $6,280 $ 987 8 $226,221
A. Keith Brodkin 0 0 N/A 0
Peter G. Harwood 6,580 650 5 105,812
J. Atwood Ives 6,250 1,009 17 106,482
Lawrence T. Perera 5,950 2,592 22 96,592
William Poorvu 6,580 2,607 22 106,482
Charles W. Schmidt 6,280 2,477 15 98,397
Arnold D. Scott 0 0 N/A 0
Jeffrey L. Shames 0 0 N/A 0
Elaine R. Smith 6,280 964 27 98,397
David B. Stone 6,580 1,516 11 104,007
</TABLE>
(1)For fiscal year ended July 31, 1995.
[/R]
(2)Based on normal retirement age of 73.
(3)For calendar year 1994. All Trustees receiving compensation served as
Trustees of 20 funds within the MFS fund complex (having aggregate net assets
at December 31, 1994, of approximately $14 Billion) 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 Billion).
Estimated Annual Benefits Payable by Fund upon Retirement ((4))
<TABLE>
<CAPTION>
Years of Service
Average
Trustee Fees 3 5 7 10 or more
- ------------- ---- ----- ----- -----------
<S> <C> <C> <C> <C>
$5,350 $ 803 $1,338 $1,873 $2,675
5,726 859 1,432 2,004 2,863
6,102 915 1,526 2,136 3,051
6,478 972 1,620 2,267 3,239
6,854 1,028 1,714 2,399 3,427
7,230 1,085 1,808 2,531 3,615
</TABLE>
(4)Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
23
<PAGE>
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 Accountants
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
MFS(R)
Government
Mortgage Fund
500 Boylston Street
Boston, MA 02116
[MFS LOGO]
The First Name in Mutual Funds
<PAGE>
<PAGE>
ANNUAL REPORT FOR
[LOGO] M F S (SM) YEAR ENDED
THE FIRST NAME IN MUTUAL FUNDS JULY 31, 1995
- -------------------------------------------------------------------------------
MFS (R) GOVERNMENT MORTGAGE FUND
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED: A photo of a building with columns.]
<PAGE>
<TABLE>
MFS(R) GOVERNMENT MORTGAGE FUND
<C>
TRUSTEES <C>
A. Keith Brodkin* - Chairman and President CUSTODIAN
State Street Bank and Trust Company
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991), AUDITORS
Massachusetts Financial Services Company Deloitte & Touche LLP
Peter G. Harwood - Private Investor INVESTOR INFORMATION
For MFS stock and bond market outlooks,
J. Atwood Ives - Chairman and Chief Executive call toll free: 1-800-637-4458 anytime from
Officer, Eastern Enterprises a touch-tone telephone.
Lawrence T. Perera - Partner, For information on MFS mutual funds,
Hemenway & Barnes call your financial adviser or, for an
information kit, call toll free:
William J. Poorvu - Adjunct Professor, Harvard 1-800-637-2929 any business day from
University Graduate School of Business 9 a.m. to 5 p.m. Eastern time (or leave
Administration a message anytime).
Charles W. Schmidt - Private Investor; INVESTOR SERVICE
Former Senior Vice President and Group MFS Service Center, Inc.
Executive (until 1990), Raytheon Company P.O. Box 2281
Boston, MA 02107-9906
Arnold D. Scott* - Senior Executive Vice
President and Secretary, Massachusetts For general information, call toll free:
Financial Services Company 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
Jeffrey L. Shames* - President, Massachusetts
Financial Services Company For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
Elaine R. Smith - Independent Consultant day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be
David B. Stone - Chairman, North American equipped with a Telecommunications Device for
Management Corp. (Investment Advisers) the Deaf.)
INVESTMENT ADVISER For share prices, account balances and
Massachusetts Financial Services Company exchanges, call toll free: 1-800-MFS-TALK
500 Boylston Street (1-800-637-8255) anytime from a touch-tone
Boston, Massachusetts 02116-3741 telephone.
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, Massachusetts 02116-3741
-------------------------------------------
PORTFOLIO MANAGER TOP-RATED SERVICE
James J. Calmas* [SEAL] MFS was rated first when securities
firms evaluated the quality of
TREASURER service they receive from 40
W. Thomas London* mutual fund companies. MFS got
high marks for answering calls
ASSISTANT TREASURER quickly, processing transactions
James O. Yost* accurately and sending statements
out on time.
SECRETARY (Source: 1994 DALBAR Survey)
Stephen E. Cavan* -------------------------------------------
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
Following a difficult year of rising interest rates and declining prices in
1994, the bond markets have shown improvement in 1995, as signs of a weaker
U.S. economy have pointed to a more positive outlook for inflation and as
investors have anticipated the Federal Reserve Board's July 6 reduction in
short-term interest rates. As a result of these developments, interest rates
declined and bond prices rose in the first several months of 1995. The
mortgage market, which closely follows the Treasury market, has shown similar
improvement and the Fund ended its fiscal year with positive returns. For the
12 months ended July 31, 1995, Class A shares of the Fund provided a total
return of +9.60%, while Class B shares had a total return of +8.81%. Both of
these returns, which include the reinvestment of distributions but exclude the
effects of any sales charges, underperformed the Lehman Brothers Government
National Mortgage Association (GNMA) Index, an unmanaged index of GNMA issues
with more than $50 million outstanding, which returned +10.58% in the same
period. A discussion of the Fund's performance relative to the GNMA Index may
be found in the Portfolio Performance and Strategy section of this letter.
Performance information for the Fund is provided on pages four and five of
this report.
Economic Outlook
Moderate, but sustainable, growth appears to be the hallmark of the economic
expansion's fifth year. Consumer spending and homebuying showed only modest
gains through July 31, while businesses continued to work off excess inventories
and reduce factory output. Meanwhile, overseas economies, particularly those of
Germany and Japan, have not recovered as expected, limiting U.S. export growth.
However, we believe the Federal Reserve's consistent and, so far, successful
efforts to fight inflation seem to be giving consumers and businesses enough
confidence to help maintain 2 1/2% to 3% real (adjusted for inflation) growth in
gross domestic product through 1995.
Interest Rates
Although the Federal Reserve implemented a one-quarter percentage point
decrease in short-term interest rates in July, the effects of its seven rate
increases, which began in late 1993 and ended in February of this year, are
still being felt throughout the economy. While there have been some increases
in commodity prices, companies have not been able to pass along most of those
higher costs, partly because of the need to keep fighting for market share,
but also because wages and benefits of U.S. workers continue to grow at rates
that are near or perhaps below the inflation rate, limiting consumer buying
power. At the end of July, the nation's employment cost index had risen at a
rate of just 2.8% over the previous year, helping to contain cost pressures.
At the same time, however, the bond markets have perceived isolated signs of
more rapid economic growth as possible harbingers of increasing inflation, and
have slightly bid up longer-term interest rates. Although previous monetary
easing by the Federal Reserve has been followed by additional rate reductions,
prospects for further decreases in the current environment are uncertain.
Still, with long-term government bonds yielding approximately 7%, in an
environment of 2 1/2% to 3% inflation, we believe real rates of return in the
fixed-income markets could remain relatively attractive.
Portfolio Performance and Strategy
The slight underperformance of Class A and Class B shares of the Fund relative
to the GNMA Index during the year ended July 31, 1995 was partly the result of
a strategy designed to maintain a relatively short duration at the beginning
of 1995. This strategy was undertaken to help avoid potential losses that
might result from further increases in interest rates. As a result of this
conservative strategy, the Fund did not fully participate in the beginning of
the bond market rally, although Class A shares of the Fund did outperform the
average GNMA fund tracked by Lipper Analytical Services, Inc., an independent
firm that monitors mutual fund performance. (Refer to the table on page five
for performance results.) Although the Fund's duration was lengthened as
interest rates began to decline in anticipation of the Federal Reserve's
interest rate cut, duration has since been reduced again, making the Fund less
sensitive to additional changes in interest rates. Currently, the portfolio
has an interest rate sensitivity similar to that of a 6-year Treasury.
(Principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity.)
On the whole, the mortgage market has performed well during the bond market
rally as investors have been looking for additional yield in an environment
where the supply of higher-yielding mortgage-backed securities has been low.
This was a result of a slowdown in housing sales and mortgage refinancings, both
of which saw a great deal of activity in 1992 and 1993, largely satisfying the
pent-up demand that existed up to that point.
In coming months, we anticipate maintaining the Fund's fairly conservative
strategy with relatively short durations, while keeping approximately 80% of the
portfolio in mortgage securities. We believe these returns should compare
favorably with those of other fixed-income investments. At the same time, during
a period of relative uncertainty about the near-term outlook for the economy and
interest rates, we are holding fewer longer-term (greater than 20-year)
securities to reduce the portfolio's exposure to possible changes in shorter-
and longer-term interest rates.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
- ------------------------- ---------------------
[A photo of [A photo of
A. Keith Brodkin, James J. Calmas,
Chairman and President.] Portfolio Manager.]
- ------------------------- ---------------------
/s/ A. Keith Brodkin /s/ James J. Calmas
A. Keith Brodkin James J. Calmas
Chairman and President Portfolio Manager
August 10, 1995
PORTFOLIO MANAGER PROFILE
James Calmas joined the MFS Fixed Income Department in 1988. A graduate of
Dartmouth College and the Amos Tuck School of Business Administration of
Dartmouth College, he was named Assistant Vice President - Investments in
1991. In 1993, he was named Vice President - Investments and Portfolio Manager
of MFS Government Mortgage Fund.
OBJECTIVES AND POLICIES
The Fund's primary investment objective is to provide a high level of current
income. The Fund's secondary objective is to protect shareholders' capital.
Any investment involves risk and there can be no assurance that the Fund will
achieve its objectives.
The Fund seeks to achieve its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in obligations issued or
guaranteed by the Government National Mortgage Association (GNMA) and in
obligations fully collateralized or otherwise fully secured by obligations
issued or guaranteed by the GNMA. The Fund may also invest in other securities
that are issued or guaranteed by the U.S. government, its agencies,
authorities or instrumentalities. Depending on market conditions, the Fund may
temporarily invest a substantial portion of its assets in cash, short-term
government securities and related repurchase agreements.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS
For the year ended July 31, 1995, the distributions from ordinary income of
Class A and Class B shares were $27,183,924 and $63,697,419, respectively.
PERFORMANCE
The information on the following page illustrates the historical performance
of MFS Government Mortgage Fund Class A shares in comparison to various market
indicators. Class A share results reflect the deduction of the 4.75% 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.
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the Period from January 9, 1986 to July 31, 1995)
[GRAPHIC OMITTED:]
Line graph representing the growth of a $10,000 investment for the period from
January 1, 1986 to July 31, 1995. The graph is scaled from $5,000 to $30,000 in
$5,000 segments. The years are marked from 1986 to 1995. There are three lines
drawn to scale. One is a solid line representing MFS Government Mortgage Fund
(Class A), a second line of short dashes represents the Lehman Brothers GNMA
Index, and a third line of long dashes represents the Consumer Price Index.
MFS Government Mortgage Fund $18,309
Lehman Brothers GNMA Index $23,744
Consumer Price Index $13,953
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<CAPTION>
Life of Class
through
1 Year 3 Years 5 Years 7/31/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Government Mortgage Fund (Class A)
including 4.75% sales charge + 4.46% +4.09% +6.46% +6.53%<F1>
- -----------------------------------------------------------------------------------------------------------
MFS Government Mortgage Fund (Class A)
at net asset value + 9.60% +5.81% +7.50% +7.08%<F1>
- -----------------------------------------------------------------------------------------------------------
MFS Government Mortgage Fund (Class B)
with CDSC<F3> + 4.81% -- -- +1.36%<F2>
- -----------------------------------------------------------------------------------------------------------
MFS Government Mortgage Fund (Class B)
without CDSC + 8.81% -- -- +3.33%<F2>
- -----------------------------------------------------------------------------------------------------------
Average GNMA fund + 9.25% +5.46% +7.90% +8.19%<F4>
- -----------------------------------------------------------------------------------------------------------
Lehman Brothers GNMA Index +10.58% +6.37% +8.75% +9.44%<F4>
- -----------------------------------------------------------------------------------------------------------
Consumer Price Index<F5> + 2.76% +2.77% +3.18% +3.54%<F4>
- -----------------------------------------------------------------------------------------------------------
<FN>
<F1> For the period from the commencement of offering of Class A shares, January 9, 1986 to July 31, 1995.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to July 31, 1995.
<F3> These returns reflect the current maximum Class B contingent deferred sales charge (CDSC) of 4%.
<F4> Benchmark comparisons begin on January 1, 1986.
<F5> The Consumer Price Index is a popular measure of change in prices.
</FN>
</TABLE>
In the above table, we have included the average annual total returns of all
GNMA funds (including the Fund) tracked by Lipper Analytical Services, Inc. for
the applicable time periods (50, 36, 31 and 18 funds for the 1-, 3- and 5-year
periods ended July 31, 1995, and for the period from January 1, 1986 through
July 31, 1995, 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.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - July 31, 1995
Bonds - 97.3%
- -----------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corporation - 15 Year - 2.2%
FHLMC, 9s, 2001 - 2006 $ 28,249 $ 29,458,774
- -----------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation - 30 Year - 0.1%
FHLMC, 8.5s, 2009 - 2017 $ 63 $ 64,882
FHLMC, 9s, 2020 - 2021 861 889,044
FHLMC, 9.5s, 2015 - 2021 440 458,086
--------------
$ 1,412,012
- -----------------------------------------------------------------------------------------
Federal Housing Authority - 1.9%
FHA, Centennial, "A", 8.25s, 2028+ $ 23,895 $ 25,109,400
- -----------------------------------------------------------------------------------------
Federal National Mortgage Association - 15 Year - 2.1%
FNMA, 8.5s, 2004 - 2008 $ 517 $ 534,844
FNMA, 9s, 2002 - 2008 26,757 27,927,434
--------------
$ 28,462,278
- -----------------------------------------------------------------------------------------
Federal National Mortgage Association - 30 Year - 3.5%
FNMA, 6.695s, 2005 $ 10,000 $ 10,068,750
FNMA, Stripped Mortgage-Backed Security, "240", 7s, 2023 18,096 5,954,531
FNMA, 7.5s, 2022 48 48,165
FNMA, 7.95s, 2005 6,290 6,522,926
FNMA, 8s, 2017 - 2023 1,591 1,617,091
FNMA, 8.5s, 2022 2,332 2,403,129
FNMA, 9s, 2017 7 6,932
FNMA, 9.5s, 2022 - 2025 18,969 19,899,598
--------------
$ 46,521,122
- -----------------------------------------------------------------------------------------
Financing Corporation - 5.0%
FICO, 10.7s, 2017 $ 11,305 $ 15,526,739
FICO, 9.8s, 2018 5,285 6,731,769
FICO, 10.35s, 2018 33,965 45,391,166
--------------
$ 67,649,674
- -----------------------------------------------------------------------------------------
Government National Mortgage Association - 15 Year - 3.8%
GNMA, 7.5s, 2008 - 2009 $ 17,690 $ 17,971,884
GNMA, 8s, 2002 - 2009 15,149 15,608,407
GNMA, 9.5s, 2009 - 2010 16,420 17,240,771
--------------
$ 50,821,062
- -----------------------------------------------------------------------------------------
Government National Mortgage Association - 30 Year - 64.7%
GNMA, 6.5s, 2023 - 2024 $ 10,188 $ 9,678,548
GNMA, 7s, 2022 - 2024 245,719 239,804,910
GNMA, 7.5s, 2008 - 2024 179,491 179,377,680
GNMA, 8s, 2002 - 2025 71,192 72,659,576
GNMA, 8.5s, 2022 - 2024 27,622 28,631,431
GNMA, 9s, 2008 - 2024 147,937 155,875,822
GNMA, 9.5s, 2009 - 2022 106,731 113,234,228
GNMA, 10s, 2009 - 2019 29,598 32,206,560
GNMA, 10.5s, 2019 - 2021 7,341 8,102,682
GNMA, 11s, 2021 27,356 30,502,148
GNMA, 12.5s, 2011 632 716,799
--------------
$ 870,790,384
- -----------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - continued
Bonds - continued
- -----------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Small Business Administration - 4.8%
SBA, 8.75s, 2006 $ 176 $ 189,483
SBA, 10s, 2009 4,103 4,659,618
SBA, 10.1s, 2009 7,937 9,026,832
SBA, 9.3s, 2010 3,920 4,346,649
SBA, 9.45s, 2010 9,352 10,449,751
SBA, 9.55s, 2010 10,249 11,438,833
SBA, 9.7s, 2010 3,209 3,608,156
SBA, 8.8s, 2011 3,327 3,631,817
SBA, 8.85s, 2011 13,178 14,418,201
SBA, 8.05s, 2012 2,808 2,871,038
--------------
$ 64,640,378
- -----------------------------------------------------------------------------------------
U.S. Federal Agencies - 0.2%
Federal Agricultural Mortgage Corp., 8.07s, 2006 $ 3,000 $ 3,305,610
- -----------------------------------------------------------------------------------------
U.S. Treasury Obligations - 9.0%
Principal Stripped-Interest Payments, 0s, 2017 - 2021 $ 69,900 $ 12,569,339
U.S. Treasury Notes, 9.375s, 1996 3,000 3,074,070
U.S. Treasury Notes, 5.25s, 1998 29,000 28,401,730
U.S. Treasury Bonds, 13.125s, 2001* 25,000 33,293,000
U.S. Treasury Bonds, 10.75s, 2003 - 2005 27,085 35,091,789
U.S. Treasury Bonds, 8.75s, 2020 7,900 9,572,589
--------------
$ 122,002,517
- -----------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $1,307,801,045) $1,310,173,211
- -----------------------------------------------------------------------------------------
Repurchase Agreement - 3.4%
- -----------------------------------------------------------------------------------------
Lehman Brothers, dated 7/31/95, due 8/01/
95, total to be received $45,456,335
(secured by U.S. Treasury Note, 5.81s,
due 3/07/96, market value $47,960,000),
at Cost and Value $ 45,449 $ 45,449,000
- -----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,353,250,045) $1,355,622,211
Other Assets, Less Liabilities - (0.7)% (9,569,414)
- -----------------------------------------------------------------------------------------
Net Assets - 100.0% $1,346,052,797
- -----------------------------------------------------------------------------------------
+ Restricted security.
* Denotes all or a portion of a security segregated as collateral for open futures contracts.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
July 31, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,353,250,045) $1,355,622,211
Cash 157,067
Receivable for daily variation margin on open futures
contracts 37,500
Receivable for Fund shares sold 109,919
Interest receivable 13,494,789
Other assets 19,877
--------------
Total assets $1,369,441,363
--------------
Liabilities:
Payable for investments purchased $ 20,134,375
Payable for Fund shares reacquired 2,342,969
Payable to affiliates -
Management fee 71,293
Shareholder servicing agent fee 19,987
Distribution fee 352,910
Accrued expenses and other liabilities 467,032
--------------
Total liabilities $ 23,388,566
--------------
Net assets $1,346,052,797
==============
Net assets consist of:
Paid-in capital $1,471,569,421
Unrealized appreciation on investments 2,115,035
Accumulated net realized loss on investments (127,510,438)
Distributions in excess of net investment income (121,221)
--------------
Total $1,346,052,797
==============
Shares of beneficial interest outstanding 202,424,538
==============
Class A shares:
Net asset value and redemption price per share
(net assets of $533,986,698 / 80,276,379 shares of
beneficial interest outstanding) $6.65
=====
Offering price per share (100/95.25) $6.98
=====
Class B shares:
Net asset value and offering price per share
(net assets of $812,066,099 / 122,148,159 shares of
beneficial interest outstanding) $6.65
=====
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 July 31, 1995
- ------------------------------------------------------------------------------
Net investment income:
Interest income $120,116,845
------------
Expenses -
Management fee $ 9,450,684
Trustees' compensation 82,098
Shareholder servicing agent fee (Class A) 615,160
Shareholder servicing agent fee (Class B) 2,056,115
Distribution and service fee (Class A) 1,435,563
Distribution and service fee (Class B) 10,437,907
Postage 340,657
Printing 143,030
Auditing fees 78,719
Custodian fee 39,152
Legal fees 9,745
Miscellaneous 890,219
------------
Total expenses $ 25,579,049
------------
Net investment income $ 94,537,796
------------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $(41,522,420)
Futures contracts (2,714,208)
------------
Net realized loss on investments $(44,236,628)
------------
Change in unrealized appreciation -
Investments $ 66,859,957
Futures contracts 1,848,786
------------
Net unrealized gain on investments $ 68,708,743
------------
Net realized and unrealized gain on investments $ 24,472,115
------------
Increase in net assets from operations $119,009,911
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------
Eight Months Year Ended
Year Ended Ended November 30,
July 31, 1995 July 31, 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 94,537,796 $ 74,548,971 $ 61,921,749
Net realized gain (loss) on investments (44,236,628) (25,065,163) 3,896,696
Net unrealized gain (loss) on investments 68,708,743 (75,294,158) (29,750,350)
-------------- -------------- --------------
Increase (decrease) in net assets from operations $ 119,009,911 $ (25,810,350) $ 36,068,095
-------------- -------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (26,574,630) $ (14,372,080) $ (41,366,228)
From net investment income (Class B) (62,269,346) (38,804,832) (16,456,135)
In excess of net realized gain on investments
(Class A) -- -- (4,790,820)
From paid-in capital (Class A) -- (6,354,345) --
From paid-in capital (Class B) -- (17,156,825) --
Tax return of capital (2,036,802) -- --
-------------- -------------- --------------
Total distributions declared to shareholders $ (90,880,778) $ (76,688,082) $ (62,613,183)
-------------- -------------- --------------
Fund share (principal) transactions -
Net proceeds from sales of shares $ 207,482,564 $ 55,960,166 $ 29,918,411
Net asset value of shares issued to shareholders
in connection with merger of MFS Lifetime
Government Mortgage Fund -- -- 1,774,003,938
Net asset value of shares issued to shareholders in
reinvestment of distributions 40,173,434 31,831,973 24,936,586
Cost of shares reacquired (582,715,690) (482,278,453) (367,519,075)
-------------- -------------- --------------
Increase (decrease)in net assets from Fund
share transactions $ (335,059,692) $ (394,486,314) $1,461,339,860
-------------- -------------- --------------
Total increase (decrease) in net assets $ (306,930,559) $ (496,984,746) $1,434,794,772
Net assets:
At beginning of period 1,652,983,356 2,149,968,102 715,173,330
-------------- -------------- --------------
At end of period (including distributions in
excess of net investment income of $(121,221),
$(50,624) and $(11,856,473), respectively) $1,346,052,797 $ 1,652,983,356 $2,149,968,102
============== =============== ==============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS - continued
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------
Eight
Year Ended Months Ended Year Ended November 30,
July 31, July 31, -----------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 6.49 $ 6.85 $ 6.82 $ 6.95 $ 7.01
------ ------ ------ ------ ------
Income from investment operations<F2> -
Net investment income<F4> $ 0.45 $ 0.29 $ 0.34 $ 0.46 $ 0.48
Net realized and unrealized gain (loss)
on investments 0.14 (0.36) 0.20 0.09 0.25
------ ------ ------ ------ ------
Total from investment operations $ 0.59 (0.07) $ 0.54 $ 0.55 $ 0.73
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.42) (0.20) $(0.47) $(0.42) $(0.44)
In excess of net realized gain on
investments -- -- (0.04) -- --
From paid-in capital -- (0.09) -- (0.26) (0.35)
Tax return of capital (0.01) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.43) (0.29) $(0.51) $(0.68) $(0.79)
------ ------ ------ ------ ------
Net asset value - end of period $ 6.65 $ 6.49 $ 6.85 $ 6.82 $ 6.95
====== ====== ====== ====== ======
Total return<F3> 9.60% (1.51)%<F1> 8.11% 8.25% 11.00%
Ratios (to average net assets)/
Supplemental data<F4>:
Expenses 1.25% 1.27%<F1> 1.38% 1.42% 1.44%
Net investment income 6.99% 6.46%<F1> 6.30% 6.57% 6.91%
Portfolio turnover 87% 37% 167% 484% 731%
Net assets at end of period (000,000 omitted) $ 534 $ 424 $ 522 $ 715 $ 886
<FN>
<F1>Annualized.
<F2>Per share data for the periods subsequent to November 30, 1993 is based on average shares outstanding.
<F3>Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to
October 1, 1989). If the charge had been included, the results would have been lower.
<F4>The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income -- $ 0.29 $ 0.34 -- --
Ratios (to average net assets):
Expenses -- 1.28%<F1> 1.46% -- --
Net investment income -- 6.45%<F1> 6.22% -- --
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------
Year Ended November 30, 1990 1989 1988 1987 1986<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 $ 7.86 $ 7.82 $ 8.34 $ 9.82 $ 9.53
------ ------ ------ ------- ------
Income from investment operations -
Net investment income $ 0.53 $ 0.59 $ 0.64 $ 0.75 $ 0.72
Net realized and unrealized gain
(loss) on investments (0.40) 0.48 (0.06) (1.08) 0.43
------ ------ ------ ------- ------
Total from investment operations $ 0.13 $ 1.07 $ 0.58 $ (0.33) $ 1.15
------ ------ ------ ------- ------
Less distributions declared to shareholders -
From net investment income $(0.49) $(0.58) $(0.64) $ (0.82) $(0.65)
From net realized gain on investments -- -- -- (0.01) (0.21)
From paid-in capital (0.49) (0.45) (0.46) (0.32) --
------ ------ ------ ------- ------
Total distributions declared to
shareholders $(0.98) $(1.03) $(1.10) $ (1.15) $(0.86)
------ ------ ------ ------- ------
Net asset value - end of period $ 7.01 $ 7.86 $ 7.82 $ 8.34 $ 9.82
====== ====== ====== ======= ======
Total return<F3> 2.05% 14.72% 7.39% (3.37)% 13.75%<F2>
Ratios (to average net assets)/
Supplemental data:
Expenses 1.40% 1.37% 1.38% 1.34% 1.00%<F2>
Net investment income 7.29% 7.57% 7.88% 8.34% 9.54%<F2>
Portfolio turnover 507% 489% 285% 212% 169%
Net assets at end of period (000,000 omitted) $1,068 $1,380 $1,295 $1,129 $ 593
<FN>
<F1>For the period from the commencement of investment operations, January 9, 1986 to November 30, 1986.
<F2>Annualized.
<F3>Total returns for Class A shares do not include the applicable sales charge (except for reinvested dividends prior to
October 1, 1989). If the charge had been included, the results would have been lower.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------
Eight Months
Year Ended Ended Period Ended
July 31, July 31, November 30,
1995 1994 1993<F1>
- -------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C>
Net asset value - beginning of period $ 6.49 $ 6.84 $ 6.97
------- ------- ------
Income from investment operations<F3> -
Net investment income<F4> $ 0.41 $ 0.26 $ 0.38
Net realized and unrealized gain (loss)
on investments 0.14 (0.35) (0.44)
------- ------- ------
Total from investment operations $ 0.55 $ (0.09) $(0.06)
------- ------- ------
Less distributions declared to shareholders -
From net investment income $ (0.38) $ (0.18) $(0.07)
From paid-in capital -- (0.08) --
Tax return of capital (0.01) -- --
------ ------- ------
Total distributions declared to
shareholders $ (0.39) $ (0.26) $(0.07)
------- ------- ------
Net asset value - end of period $ 6.65 $ 6.49 $ 6.84
======= ======= ======
Total return 8.81% (1.97)%<F2> (3.91)%<F2>
Ratios (to average net assets)/
Supplemental data<F4>:
Expenses 1.96% 1.94%<F2> 1.87%<F2>
Net investment income 6.28% 5.80%<F2> 5.92%<F2>
Portfolio turnover 87% 37% 167%
Net assets at end of period
(000,000 omitted) $ 812 $1,229 $1,628
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to November 30, 1993.
<F2>Annualized.
<F3>Per share data for the periods subsequent to November 30, 1993 is based on average shares outstanding.
<F4>The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income -- $ 0.26 $ 0.38
Ratios (to average net assets):
Expenses -- 1.94%<F2> 1.94%<F2>
Net investment income -- 5.80%<F2> 5.85%<F2>
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Government Mortgage Fund (the Fund) is a diversified series of MFS Series
Trust X (the Trust). The Trust is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end, diversified 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. Futures
contracts listed on commodities exchanges are valued at closing settlement
prices. 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.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities at a fixed price on a future date. In entering such
contracts, the Fund is required to deposit either in cash or securities an
amount equal to a certain percentage of the contract amount. Subsequent payments
are made or received by the Fund each day, depending on the daily fluctuations
in the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. The Fund's
investment in futures contracts is designed to hedge against anticipated changes
in interest rates or securities prices. Investments in interest rate futures for
purposes other than hedging may be made to modify the duration of the portfolio
without incurring the additional transaction costs involved in buying and
selling the underlying securities. Should interest rates or securities prices
move unexpectedly, the Fund may not achieve the anticipated benefits of the
futures contracts and may realize a loss.
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 financial statement and
tax reporting purposes as required by federal income tax regulations.
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 July 31, 1995, $5,764,417 was reclassified from
accumulated undistributed net investment income and $48,392 and $5,716,025 were
reclassified to paid-in capital and accumulated net realized gain on
investments, respectively, due to differences between book and tax accounting
for mortgage-backed securities and tax-basis return of capital. This change had
no effect on the net assets or net asset value per share.
At July 31, 1995, the Fund, for federal income tax purposes, had a capital loss
carry- forward of $(95,700,480) which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on July 31, 1996 ($3,630,686), July 31, 1998 ($81,836,532), July 31,
2002 ($5,628,534) and July 31, 2003 ($4,604,728).
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A and
Class B shares. The two classes of shares differ in their respective shareholder
servicing agent, distribution and service fees. All shareholders bear the common
expenses of the Fund pro rata, based on 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.
(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. The
management fee is computed daily and paid monthly at an annual rate equal to the
lesser of (i) 0.65% of the Fund's average daily net assets or (ii) 0.30% of the
Fund's average daily net assets and 6.1% of the Fund's gross income.
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 Fund Distributors, Inc. (MFD) 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 $31,318 for the year ended July 31, 1995.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$19,176 for the year ended July 31, 1995, as its portion of the sales charge on
sales of Class A shares of the Fund.
The Trustees have adopted separate distribution plans for Class A and Class B
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%
per annum of its average daily net assets attributable to Class A shares 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 retains the service fee for accounts
not attributable to a securities dealer, which amounted to $105,920 for the year
ended July 31, 1995. Fees incurred under the distribution plan during the year
ended July 31, 1995 were 0.35% of average daily net assets attributable to Class
A shares on an annualized basis.
The Class B distribution plan provides that the Fund will pay MFD a monthly
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per annum,
of the Fund's average daily net assets attributable to Class B 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 shares. The service fee is
intended to be additional consideration for services rendered by the dealer with
respect to Class B shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $175,913 for Class B
shares for the year ended July 31, 1995. Fees incurred under the distribution
plan during the year ended July 31, 1995 were 1.00% of average daily net assets
attributable to Class B shares on an annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 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 July 31, 1995 were $0 and $1,386,715 for
Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee 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% and up to 0.22% attributable to Class A and
Class B shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- -------------------------------------------------------------------------------
U.S. government securities $1,230,194,850 $1,547,019,438
============== ==============
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $1,353,408,420
==============
Gross unrealized appreciation $ 24,851,994
Gross unrealized depreciation (22,638,203)
--------------
Net unrealized appreciation $ 2,213,791
==============
(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>
Class A Shares
Eight Months Ended
Year Ended July 31, 1995 July 31, 1994
--------------------------- ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 27,491,721 $181,805,681 4,203,202 $ 27,515,113
Shares issued to shareholders in
reinvestment of distributions 1,875,858 12,007,470 1,321,312 8,740,816
Shares reacquired (14,375,598) (92,201,944) (16,516,662) (109,058,350)
----------- ------------ ----------- -------------
Net increase (decrease) 14,991,981 $101,611,207 (10,992,148) $ (72,802,421)
=========== ============ =========== =============
<CAPTION>
Year Ended November 30, 1993
----------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 2,146,686 $ 19,558,553
Shares issued to shareholders in reinvestment of distributions 2,663,943 18,391,733
Shares reacquired (33,340,955) (235,950,665)
----------- -------------
Net decrease (28,530,326) $(198,000,379)
=========== =============
<PAGE>
<CAPTION>
Class B Shares
Eight Months Ended
Year Ended July 31, 1995 July 31, 1994
--------------------------- ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,039,025 $ 25,676,883 4,217,881 $ 28,445,053
Shares issued to shareholders in
reinvestment of distributions 4,409,939 28,165,964 3,488,783 23,091,157
Shares reacquired (75,797,892) (490,513,746) (56,121,433) (373,220,103)
----------- ------------- ------------ -------------
Net decrease (67,348,928) $(436,670,899) (48,414,769) $(321,683,893)
=========== ============= =========== =============
<CAPTION>
Period Ended November 30, 1993*
-------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,496,862 $ 10,359,858
Shares issued in connection with merger with Lifetime
Government Mortgage Fund 254,500,711 1,774,003,938
Shares issued to shareholders in reinvestment of distributions 949,148 6,544,853
Shares reacquired (19,034,865) (131,568,410)
----------- ---------------
Net increase 237,911,856 $ 1,659,340,239
=========== ===============
*For the period from the commencement of offering of Class B shares, September 7, 1993 to
November 30, 1993.
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 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 July 31,
1995 was $20,751.
(7) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates. These financial instruments include futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at July 31, 1995, is as follows:
Unrealized
Futures Contracts Expiration Contracts Position Depreciation
- ------------------------------------------------------------------------------
U.S. Treasury Notes September 1995 100 Long $257,131
========
At July 31, 1995, the Fund had sufficient cash and/or securities to cover margin
requirements on open futures contracts.
<PAGE>
(8) Restricted Securities
The Fund may invest not more than 10% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At July 31, 1995,
the Fund owned the following restricted security (constituting 1.83% of total
assets) which may not be publicly sold without registration under the Securities
Act of 1933. The Fund does not have the right to demand that such security be
registered. The value of this security is determined by valuations supplied by a
pricing service or brokers.
<TABLE>
<CAPTION>
Description Date of Acquisition Par Amount Cost Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FHA, Centennial, "A", 8.25s, 2028 3/23/93 $23,895,281 $24,612,139 $25,109,400
===========
</TABLE>
(9) Acquisitions
At close of business on September 6, 1993, the Fund acquired all of the assets
and liabilities of MFS Lifetime Government Mortgage Fund. The acquisition was
accomplished by a tax-free exchange of 254,500,711 Class B shares of the Fund
(valued at $1,774,003,938) for all of the assets, subject to all of the
liabilities of MFS Lifetime Government Mortgage Fund. MFS Lifetime Government
Mortgage Fund then converted all of its outstanding shares for the Class B
shares of the Fund and distributed the Class B shares to its shareholders. MFS
Lifetime Government Mortgage Fund's net assets on that date ($1,774,003,938),
including $45,387,402 of unrealized appreciation, were combined with those of
the Fund. The aggregate net assets of the Fund after the acquisition were
$2,336,607,120.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Series Trust X and Shareholders of MFS Government
Mortgage Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Government Mortgage Fund as of July 31,
1995, the related statement of operations for the year then ended, the statement
of changes in net assets for the year ended July 31, 1995, the eight months
ended July 31, 1994 and the year ended November 30, 1993, and the financial
highlights for the year ended July 31, 1995, the eight months ended July 31,
1994, and for each of the years in the eight-year period ended November 30,
1993. 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 audits.
We conducted our audits 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 the securities owned at July
31, 1995, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. 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 audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Government
Mortgage Fund at July 31, 1995, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 8, 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>
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 MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or, leave a message any
time). This material should be read carefully before investing or sending money.
<TABLE>
<S> <C>
STOCK LIMITED MATURITY BOND
- ----------------------------------------- ----------------------------------------
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
- -----------------------------------------
MFS(R) Gold & Natural Resources Fund WORLD
- ----------------------------------------- ----------------------------------------
MFS(R) Growth Opportunities Fund MFS(R) World Asset Allocation Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Managed Sectors Fund MFS(R) World Equity Fund
- ----------------------------------------- ----------------------------------------
MFS(R) OTC Fund MFS(R) World Governments Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Research Fund MFS(R) World Growth Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Value Fund MFS(R) World Total Return Fund
- ----------------------------------------- ----------------------------------------
STOCK AND BOND NATIONAL TAX-FREE BOND
- ----------------------------------------- ----------------------------------------
MFS(R) Total Return Fund MFS(R) Municipal Bond Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Utilities Fund MFS(R) Municipal High Income Fund
- ----------------------------------------- (closed to new investors)
----------------------------------------
BOND MFS(R) Municipal Income Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Bond Fund
- -----------------------------------------
MFS(R) Government Mortgage Fund STATE TAX-FREE BOND
- ----------------------------------------- ----------------------------------------
MFS(R) Government Securities Fund Alabama, Arkansas, California, Florida,
- ----------------------------------------- Georgia, Louisiana, Maryland, Massachusetts,
MFS(R) High Income Fund Mississippi, New York, North Carolina,
- ----------------------------------------- Pennsylvania, South Carolina, Tennessee,
MFS(R) Intermediate Income Fund Texas, Virginia, Washington, West Virginia
- ----------------------------------------- ----------------------------------------
MFS(R) Strategic Income Fund
(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) [SEAL] BULK RATE
GOVERNMENT NUMBER U.S. POSTAGE
MORTGAGE 1 P A I D
FUND DALBAR PERMIT #55638
TOP-RATED SERVICE BOSTON, MA
-------------
500 Boylston Street
Boston, MA 02116
[LOGO] M F S (SM)
THE FIRST NAME IN MUTUAL FUNDS
MGM-2 9/95 109M 31/231
<PAGE>
PART C
Item 24 Financial Statements and Exhibits
(a) Financial Statements Included in Part A:
MFS Government Mortgage Fund
For the period from the start of business, January 9, 1986, to
November 30, 1993, for the period from November 30, 1993 to
July 31, 1994 and for the year ended July 31, 1995:
Financial Highlights
Financial Statements Included in Part B:
MFS Government Mortgage Fund
At July 31, 1995:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended July 31, 1995:
Statement of Operations*
For the year ended November 30, 1993, the eight months ended
July 31, 1994 and the year ended July 31, 1995:
Statement of Changes in Net Assets*
- -----------------------------------
* Incorporated herein by reference to the Fund's Annual Report to Shareholders
dated July 31, 1995 filed with the SEC via EDGAR on September 27, 1995.
(b) Exhibits
1 (a) Amended and Restated Declaration of Trust, dated January 19,
1995. (3)
(b) Amendment to the Declaration of Trust dated June 2, 1995 to
change the name of the Trust and for the establishment
and designation of series and classes. (4)
2 Amended and Restated By-Laws, dated December 21, 1994. (3)
3 Not Applicable.
4 Form of Share Certificate for Class A and Class B shares of
the Fund. (5)
<PAGE>
5 (a) Investment Advisory Agreement for MFS Government Mortgage
Fund, dated December 19, 1985; filed herewith.
(b) Amendment to Investment Advisory Agreement for MFS Government
Mortgage Fund, dated January 1, 1996; filed herewith.
(c) Investment Advisory Agreement for MFS Series Trust X (the
"Trust") on behalf of MFS/Foreign & Colonial International
Growth Fund, dated September 1, 1995; filed herewith.
(d) Investment Advisory Agreement for the Trust on behalf of
MFS/Foreign & Colonial International Growth and Income Fund,
dated September 1, 1995; filed herewith.
(e) Investment Advisory Agreement for the Trust on behalf of
MFS/Foreign & Colonial Emerging Markets Equity Fund, dated
September 1, 1995; filed herewith.
(f) Sub-Advisory Agreement between Massachusetts Financial
Services Company (the "Adviser" or "MFS") and Foreign &
Colonial Management Ltd. (the "Sub-Adviser") with respect to
MFS/Foreign & Colonial International Growth Fund, dated
September 1, 1995; filed herewith.
(g) Sub-Advisory Agreement between the Adviser and the
Sub-Adviser with respect to MFS/Foreign & Colonial
International Growth and Income Fund, dated September 1,
1995; filed herewith.
(h) Sub-Advisory Agreement between the Adviser and the
Sub-Adviser with respect to MFS/Foreign & Colonial Emerging
Markets Equity Fund, dated September 1, 1995; filed herewith.
(i) Sub-Advisory Agreement between the Sub-Adviser and Foreign &
Colonial Emerging Markets Limited ("FCEM") with respect to
the MFS/Foreign & Colonial International Growth Fund, dated
September 1, 1995; filed herewith.
(j) Sub-Advisory Agreement between the Sub-Adviser and FCEM with
respect to the MFS/Foreign & Colonial International Growth
and Income Fund, dated September 1, 1995; filed herewith.
(k) Sub-Advisory Agreement between the Sub-Adviser and FCEM with
respect to the MFS/Foreign & Colonial Emerging Markets
Equity Fund, dated September 1, 1995; filed herewith.
6 (a) Distribution Agreement between MFS Series Trust X and
MFS Fund Distributors, Inc., dated September 1, 1995; filed
herewith.
<PAGE>
(b) Dealer Agreement between MFS Funds Distributors, Inc. and a
dealer, dated December 28, 1994 and the Mutual Funds
Agreement between MFD and a bank or NASD affiliate, dated
December 28, 1994. (1)
7 Retirement Plan for Non-Interested Person Trustees, dated
January 1, 1991; filed herewith.
8 (a) Custodian Agreement, dated February 19, 1988; filed herewith.
(b) Amendment No. 1 to Custodian Agreement, dated February 29,
1988; filed herewith.
(c) Amendment No. 2 to Custodian Agreement, dated October 1,
1989; filed herewith.
(d) Amendment No. 3 to Custodian Agreement, dated September 17,
1991; filed herewith.
9 (a) Shareholder Servicing Agent Agreement, dated September 1,
1995; filed herewith.
(b) Exchange Privilege Agreement, dated September 1, 1995; filed
herewith.
(c) 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. (2)
(d) Dividend Disbursing Agency Agreement, dated February 1, 1986.
(5)
10 24e-2 Consent and Opinion of Counsel; filed herewith.
11 Consent of Deloitte & Touche LLP; filed herewith.
12 Not Applicable.
13 Investment Representation Letter for MFS Government Mortgage
Fund; filed herewith.
14 (a) Forms for Individual Retirement Account Disclosure Statement
as currently in effect. (6)
(b) Forms for MFS 403(b) Custodial Account Agreement as
currently in effect. (6)
(c) Forms for MFS Prototype Paired Defined Contribution Plans
and Funds Agreement as currently in effect. (6)
<PAGE>
15 (a) Amended and Restated Distribution Plan for Class A shares of
MFS Government Mortgage Fund dated December 21, 1994. (3)
(b) Distribution Plan for Class B shares of MFS Government
Mortgage Fund dated December 21, 1994. (3)
(c) Distribution Plan for Class A shares of MFS/Foreign &
Colonial International Growth Fund dated September 1, 1995;
filed herewith.
(d) Distribution Plan for Class A shares of MFS/Foreign &
Colonial International Growth and Income Fund dated
September 1, 1995; filed herewith.
(e) Distribution Plan for Class A shares of MFS/Foreign &
Colonial Emerging Markets Equity Fund dated September 1,
1995; filed herewith.
(f) Distribution Plan for Class B shares of MFS/Foreign &
Colonial International Growth Fund dated September 1, 1995;
filed herewith.
(g) Distribution Plan for Class B shares of MFS/Foreign &
Colonial International Growth and Income Fund dated
September 1, 1995; filed herewith.
(h) Distribution Plan for Class B shares of MFS/Foreign &
Colonial Emerging Markets Equity Fund dated September 1,
1995; filed herewith.
16 Schedule for Computation of Performance Quotations - Average
Annual Total Rate of Return and Standardized Yield. (3)
18 Not Applicable.
27 Financial Data Schedules for each class of MFS Government
Mortgage Fund; filed herewith.
Power of Attorney, dated September 21, 1994. (3)
- -----------------------------
(1) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the SEC
via EDGAR on February 22, 1995.
(2) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS
Municipal Income Trust (File No. 811-4841) filed with the SEC via EDGAR
on February 28, 1995.
(3) Incorporated by reference to Post-Effective Amendment No. 11 filed with
the SEC via EDGAR on March 30, 1995.
(4) Incorporated by reference to Post-Effective Amendment No. 12 filed with
the SEC via EDGAR on June 16, 1995.
(5) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 28 filed with the SEC
via EDGAR on July 28, 1995.
(6) Incorporated by reference to MFS Series Trust IX (File Nos. 2-50409 and
811-2464) Post-Effective Amendment No. 32 filed with the SEC via EDGAR on
August 28, 1995.
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
Not Applicable.
Item 26. Number of Holders of Securities
MFS Government Mortgage Fund
(1) (2)
Title of Class Number of Record Holders
Class A Shares
Shares of Beneficial Interest 39,310
(without par value) (as of October 31, 1995)
Class B Shares
Shares of Beneficial Interest 40,805
(without par value) (as of October 31, 1995)
MFS/Foreign & Colonial International Growth Fund
(1) (2)
Title of Class Number of Record Holders
Class A Shares
Shares of Beneficial Interest 846
(without par value) (as of October 31, 1995)
Class B Shares
Shares of Beneficial Interest 466
(without par value) (as of October 31, 1995)
MFS/Foreign & Colonial International Growth and Income Fund
(1) (2)
Title of Class Number of Record Holders
Class A Shares
Shares of Beneficial Interest 196
(without par value) (as of October 31, 1995)
<PAGE>
Class B Shares
Shares of Beneficial Interest 209
(without par value) (as of October 31, 1995)
MFS/Foreign & Colonial Emerging Markets Equity Fund
(1) (2)
Title of Class Number of Record Holders
Class A Shares
Shares of Beneficial Interest 423
(without par value) (as of October 31, 1995)
Class B Shares
Shares of Beneficial Interest 231
(without par value) (as of October 31, 1995)
Item 27. Indemnification
Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, incorporated by reference to the Registrant's
Post-Effective Amendment No. 11, filed with the SEC on March 30, 1995; and (b)
Section 9 of the Shareholder Servicing Agent Agreement, filed herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also insured
under the fidelity bond required by Rule 17g-1 under the Investment Company Act
of 1940, as amended.
Item 28. Business and Other Connections of Investment Adviser
MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds: Massachusetts Investors Trust, Massachusetts
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Government
Securities Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has 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 Series Trust IX (which has
three series: MFS Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited
Maturity Fund), MFS Series Trust X (which has four series: MFS Government
Mortgage Fund, MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign
<PAGE>
and Colonial International Growth Fund and MFS/Foreign and Colonial
International Growth & Income Fund), and 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) (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 seven 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 Funds, 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 Fund
(which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Government Fund and MFS International Funds-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, MFS Meridian World Total
Return 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.
<PAGE>
MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.
MFS 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, MFSIT, MVI and UST.
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, Bruce C. Avery, William S. Harris, William W. Scott, Jr., and
Patricia A. Zlotin are Executive Vice Presidents, 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, Joseph W. Dello Russo is a Senior
Vice President and Chief Financial Officer, Robert T. Burns is a Vice
President and an Assistant Secretary of MFS, and Mary Kay Doherty is a Vice
President and Assistant Treasurer.
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS Growth Opportunities Fund
MFS Government Securities Fund
MFS Series Trust I
MFS Series Trust V
MFS Series Trust VI
MFS Series Trust X
MFS Government Limited Maturity Fund
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 the Assistant Treasurer, James R. Bordewick, Jr., Vice
President and Associate General Counsel of MFS, is the Assistant Secretary.
<PAGE>
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 the Assistant
Treasurer, and James R. Bordewick, Jr., is the 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 the 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 the Assistant Treasurer, and James R.
Bordewick, Jr., is the 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 the Assistant Treasurer and James R. Bordewick, Jr., is the 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
the Assistant Treasurer and James R. Bordewick, Jr., is the 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 the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
<PAGE>
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
the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS Variable Insurance Trust
MFS Union Standard 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 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 the Assistant Treasurer and
James R. Bordewick, Jr., is the 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 the Assistant Treasurer and James R. Bordewick, Jr., is
the 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 the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott and
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is
the President, Thomas J. Cashman, Jr., a Senior Vice President of MFS, is a
Senior Vice President, Stephen E. Cavan is a Director, Senior Vice President
and the Clerk, James R. Bordewick, Jr. is a Director, Vice President and an
Assistant Clerk, Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo
is the Treasurer and James E. Russell is the Assistant Treasurer.
<PAGE>
MIL-UK
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E.
Cavan is a Director and the Secretary, Ziad Malek is the President, Joseph W.
Dello Russo is the Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL Fund
A. Keith Brodkin is the Chairman, President and a Director, Richard
B. Bailey, John A. Brindle and Richard W. S. Baker 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 Fund
A. Keith Brodkin is the Chairman, President and a Director, Richard
B. Bailey, John A. Brindle, Richard W. S. Baker, 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, James
O. Yost is the Assistant Treasurer, and Ziad Malek is a Senior Vice President.
MFD
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, William W. Scott, Jr., an Executive Vice
President of MFS, is the President, Stephen E. Cavan is the Secretary, Robert
T. Burns is the Assistant Secretary, Joseph W. Dello Russo is the Treasurer,
and James E. Russell is the Assistant Treasurer.
CIAI
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery
is the Vice President, Joseph W. Dello Russo is the Treasurer, James E.
Russell is the Assistant Treasurer, Stephen E. Cavan is the Secretary, and
Robert T. Burns is the Assistant Secretary.
MFSC
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Joseph A. Recomendes, a Senior Vice President
of MFS, is Vice Chairman and a Director, Janet A. Clifford is the Executive
Vice President, Joseph W. Dello Russo is the Treasurer, James E. Russell is
the Assistant 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,
and Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President
and a Director, Leslie J. Nanberg is a Senior Vice President, a Managing
Director and a Director, George F. Bennett, Carol A. Corley, John A. Gee,
Brianne Grady and Kevin R. Parke are Senior Vice Presidents and Managing
Directors, Joseph W. Dello Russo is the Treasurer, James E. Russell is the
Assistant 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 and a Director, Douglas C. Grip, a
Senior Vice President of MFS, is the President, Joseph W. Dello Russo is the
Treasurer, James E. Russell is the Assistant Treasurer, Stephen E. Cavan is
the Secretary, Robert T. Burns is the Assistant Secretary and Sharon A.
Brovelli is a Senior 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 subsidiaries and affiliates of Sun
Life)
John D. McNeil Chairman, Sun Life Assurance Company of Canada,
Sun Life Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. McNeil is also an
officer and/or Director of various subsidiaries
and affiliates of Sun Life)
Joseph W. Dello Russo Director of Mutual Fund Operations, The
Boston Company, Exchange Place, Boston,
Massachusetts (until August, 1994)
Item 29. Distributors
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal business
address of each of these persons is 500 Boylston Street, Boston, Massachusetts
02116.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office
<PAGE>
of the Registrant at the following locations:
NAME ADDRESS
Massachusetts Financial Services 500 Boylston Street
Company (investment adviser) Boston, MA 02116
MFS Funds Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116
State Street Bank and Trust Company State Street South
(custodian) 5 - West
North Quincy, MA 02171
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment, in
order to file financial statements for the MFS/Foreign & Colonial International
Growth Fund, MFS/Foreign & Colonial International Growth and Income Fund and
MFS/Foreign & Colonial Emerging Markets Equity Fund, which need not be
certified, within four to six months from the later of the effective date
(August 30, 1995) of Post-Effective Amendment No. 12 which was filed with the
SEC on June 16, 1995 or the initial public offering of shares of each Fund.
(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.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being Registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 28th day of November, 1995.
MFS SERIES TRUST X
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 November 28, 1995.
SIGNATURE TITLE
A. KEITH BRODKIN* Chairman, President (Principal Executive
A. Keith Brodkin Officer) and Trustee
W. THOMAS LONDON* Treasurer (Principal Financial Officer
W. Thomas London and Principal Accounting Officer)
RICHARD B. BAILEY* Trustee
Richard B. Bailey
PETER G. HARWOOD* Trustee
Peter G. Harwood
J. ATWOOD IVES* Trustee
J. Atwood Ives
<PAGE>
LAWRENCE T. PERERA* Trustee
Lawrence T. Perera
WILLIAM J. POORVU* Trustee
William J. Poorvu
CHARLES W. SCHMIDT* Trustee
Charles W. Schmidt
ARNOLD D. SCOTT* Trustee
Arnold D. Scott
JEFFREY L. SHAMES* Trustee
Jeffrey L. Shames
ELAINE R. SMITH* Trustee
Elaine R. Smith
DAVID B. STONE* Trustee
David B. Stone
*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 September 21,
1994, incorporated by reference to the
Registrant's Post-Effective Amendment
No. 11 filed with the Securities and
Exchange Commission on
March 30, 1995.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
5 (a) Investment Advisory Agreement, dated December 19, 1985.
(b) Amendment to Investment Advisory Agreement for MFS Government
Mortgage Fund, dated January 1, 1996.
(c) Investment Advisory Agreement for MFS Series Trust X (the
"Trust") on behalf of MFS/Foreign & Colonial International
Growth Fund, dated September 1, 1995.
(d) Investment Advisory Agreement for the Trust on behalf of
MFS/Foreign & Colonial International Growth and Income Fund,
dated September 1, 1995.
(e) Investment Advisory Agreement for the Trust on behalf of
MFS/Foreign & Colonial Emerging Markets Equity Fund, dated
September 1, 1995.
(f) Sub-Advisory Agreement between Massachusetts Financial Services
Company (the "Adviser" or "MFS") and Foreign & Colonial
Management Ltd. (the "Sub-Adviser") with respect
to MFS/Foreign & Colonial International Growth
Fund, dated September 1, 1995.
(g) Sub-Advisory Agreement between the Adviser and the Sub-Adviser
with respect to MFS/Foreign & Colonial International Growth
and Income Fund, dated September 1, 1995.
(h) Sub-Advisory Agreement between the Adviser and the Sub-Adviser
with respect to MFS/Foreign & Colonial Emerging Markets
Equity Fund, dated September 1, 1995.
(i) Sub-Advisory Agreement between the Sub-Adviser and Foreign &
Colonial Emerging Markets Limited ("FCEM") with respect to
the MFS/Foreign & Colonial International Growth Fund,
dated September 1, 1995.
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(j) Sub-Advisory Agreement between the Sub-Adviser and FCEM
with respect to the MFS/Foreign & Colonial International
Growth and Income Fund, dated September 1, 1995.
(k) Sub-Advisory Agreement between the Sub-Adviser and FCEM
with respect to the MFS/Foreign & Colonial Emerging
Markets Equity Fund, dated September 1, 1995.
6 (a) Distribution Agreement between MFS Series Trust X and MFS Fund
Distributors, Inc., dated September 1, 1995.
7 Retirement Plan for Non-Interested Person Trustees, dated
January 1, 1991.
8 (a) Custodian Agreement, dated February 19, 1988.
(b) Amendment No. 1 to Custodian Agreement, dated February 29, 1988.
(c) Amendment No. 2 to Custodian Agreement, dated October 1, 1989.
(d) Amendment No. 3 to Custodian Agreement, dated September 17, 1991.
9 (a) Shareholder Servicing Agent Agreement, dated September 1, 1995.
(b) Exchange Privilege Agreement, dated September 1, 1995.
10 24e-2 Consent and Opinion of Counsel.
11 Consent of Deloitte & Touche LLP.
13 Investment Representation Letter for MFS Government Mortgage
Fund.
15 (c) Distribution Plan for Class A shares of MFS/Foreign & Colonial
International Growth Fund dated September 1, 1995.
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(d) Distribution Plan for Class A shares of MFS/Foreign & Colonial
International Growth and Income Fund dated September 1, 1995.
(e) Distribution Plan for Class A shares of MFS/Foreign & Colonial
Emerging Markets Equity Fund dated September 1, 1995.
(f) Distribution Plan for Class B shares of MFS/Foreign & Colonial
International Growth Fund dated September 1, 1995.
(g) Distribution Plan for Class B shares of MFS/Foreign & Colonial
International Growth and Income Fund dated September 1, 1995.
(h) Distribution Plan for Class B shares of MFS/Foreign & Colonial
Emerging Markets Equity Fund dated September 1, 1995.
27 Financial Data Schedules for each class of MFS Government
Mortgage Fund.
<PAGE>
EXHIBIT NO. 99.5(a)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made this 19th day of December, 1985, by and between MGH
GOVERNMENT SECURITIES HIGH YIELD TRUST, a Massachusetts business trust (the
"Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation
(the "Adviser").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940;
WHEREAS, the Adviser is willing to provide business management services to the
Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenant and agree as follows:
ARTICLE 1: Duties of the Adviser. The Adviser shall provide the Fund with such
investment advice and supervision as the latter may from time to time consider
necessary for the proper management of its funds. The Adviser shall act as
Adviser to the Fund and as such shall furnish continuously an investment program
and shall determine from time to time what securities shall be purchased, sold
or exchanged and what portion of the assets of the Fund shall be held
uninvested, subject always to the restrictions of its Declaration of Trust,
dated August 29, 1985, and By-Laws, each as amended from time to time
(respectively, the "Declaration" and "By-Laws"), and to the provisions of the
Investment Company Act of 1940. The Adviser shall also make recommendations as
to the manner in which voting rights, rights to consent to corporate action and
any other rights pertaining to the Fund's portfolio securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to investment policy and notify the Adviser thereof in writing,
the Adviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Adviser shall take, on behalf of the Fund, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers or dealers and the placing of such orders, the Adviser is
directed to seek for the Fund the most favorable execution and price. After
fulfilling this primary requirement of seeking for the Fund the most favorable
execution and price, the Adviser is hereby expressly authorized to consider,
subject to
<PAGE>
any applicable laws, rules and regulation, statistical, research and other
information or services furnished to the Adviser or the Fund.
ARTICLE 2: Allocation of Charges and Expenses. The Adviser shall furnish at its
own expense investment advisory and administrative services, office space,
equipment and clerical personnel necessary for servicing the investments of the
Trust and maintaining its organization, and investment advisory facilities and
executive and supervisory personnel for managing the investments and effecting
the portfolio transactions of the Trust. The Adviser shall arrange, if desired
by the Trust, for Directors, officers and employees of the Adviser to serve as
Trustees, officers or agents of the Trust if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law. It is understood that the Trust will pay all of its own expenses
including, without limitation, compensation of Trustees not "affiliated" with
the Adviser, governmental fees, interest charges, taxes, membership dues in the
Investment Company Institute allocable to the Trust, fees and expenses of
independent auditors, of legal counsel and of any transfer agent, registrar and
dividend disbursing agent of the Trust, expenses of repurchasing and redeeming
shares and servicing shareholder accounts, expenses of preparing, printing and
mailing share certificates, shareholders' reports, notices, proxy statements and
reports to governmental officers and commissions, brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions, insurance premiums, fees and expenses of the custodian for all
services to the Trust, including safekeeping of funds and securities and
maintaining required books and accounts, expenses of calculating the net asset
value of shares of the Trust, expenses of shareholders' meetings, and expenses
relating to the issuance, registration and qualification of shares of the Trust
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent of any Distribution Agreement to which the Trust is a
party provides that another party is to pay some or all of such expenses).
ARTICLE 3: Compensation of the Adviser. For the services to be rendered and the
facilities to be provided, the Trust shall pay to the Adviser an investment
advisory fee computed and paid monthly in an amount equal to the sum of .3% of
the Trust's average daily net assets plus 6.1% of the Trust'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 Trust's then-current fiscal year.
Payment of the foregoing fee is subject to the provision that within 30 days
following the close of any fiscal year of the Trust, the Adviser will pay to the
Trust a sum equal to the amount by which the aggregate expenses of the Trust,
but excluding interest, taxes, brokerage commissions and extraordinary expenses,
incurred during such fiscal year exceed 1 1\2% of the Trust's average daily net
assets during such fiscal year. The obligation of the Adviser to reimburse the
Trust for expenses incurred during any year may be terminated or revised at any
time by the Adviser without the consent of the Trust by notice in writing from
the Adviser to the Trust. If the Adviser shall serve for less than the whole of
any period specified in this Article 3, the compensation to the Adviser shall be
prorated.
ARTICLE 4: Covenants of the Adviser. The Adviser agrees that it will not deal
with itself, or with the Trustees of the Trust or the Trust's principal
underwriter, if any, as principals in making purchases or sales of securities or
other property for the account of the Trust, except as permitted by the
Investment Company Act of 1940 and the Rules, Regulations or orders thereunder,
will
<PAGE>
not take a long or short position in the shares of the Trust except as permitted
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current Prospectus of the Trust relative to the Adviser
and its Directors and officers.
ARTICLE 5: Limitation of Liability of the Adviser. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management of
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its duties and
obligations hereunder. As used in this Article 5, the term "Adviser" shall
include Directors, officers and employees of the Adviser as well as that
corporation itself.
ARTICLE 6: Activities of the Adviser. The services of the Adviser to the Trust
are not to be deemed to be exclusive, the Adviser being free to render
investment advisory and\or other services to others. The Adviser may permit
other fund clients to use the initials "MFS" in their names. The Trust agrees
that if the Adviser shall for any reason no longer serve as the Adviser to the
Trust, the Trust will change its name so as to delete the initials "MFS." It is
understood that Trustees, officers, and shareholders of the Trust are or may be
or become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
be or become similarly interested in the Trust, and that the Adviser may be or
become interested in the Trust as a shareholder or otherwise.
ARTICLE 7: Duration, Termination and Amendments of this Agreement. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until August 1, 1987 on which date it will terminate unless its
continuance after August 1, 1987 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Trust.
This Agreement may be terminated at any time without the payment of any penalty
by the Trustees or by "vote of a majority of the outstanding voting securities"
of the Trust, or by the Adviser, in each case on not more than sixty days' nor
less than thirty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment."
This Agreement may be amended only if such amendment is approved by "vote of a
majority of the outstanding voting securities" of the Trust.
The terms "specifically approved at least annually," "vote of a majority of the
outstanding voting securities," "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, in the
Investment Company Act of 1940 and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, and their respective seals to be hereto affixed, all as of the
day and year first above written. The undersigned Trustee of the Trust has
executed this Agreement not individually, but as Trustee under the Declaration
and the obligations of this Agreement are not binding upon any of the Trustees
or shareholders of the Trust, individually, but bind only the trust estate.
MFS GOVERNMENT SECURITIES HIGH
YIELD TRUST
By: RICHARD B. BAILEY
Richard B. Bailey
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: H. ALDEN JOHNSON, JR.
H. Alden Johnson, Jr.
President
<PAGE>
EXHIBIT NO. 99.5(b)
AMENDMENT TO INVESTMENT
ADVISORY AGREEMENT
AMENDMENT dated as of January 1, 1996 to the Investment Advisory Agreement dated
December 19, 1985 by and between MFS Series Trust X (formerly, MFS Government
Securities High Yield Trust) (the "Trust") on behalf of MFS Government Mortgage
Fund (the "Fund"), a series of the Trust, and Massachusetts Financial Services
Company, a Delaware corporation (the "Adviser") (the "Agreement").
WITNESSETH
WHEREAS, the Trust on behalf of the Fund has entered into the Agreement with
the Adviser; and
WHEREAS, MFS has agreed to amend the Agreement as provided below;
NOW THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenant and agree as follows:
1. Amendment of the Agreement: The first sentence of Article 3 of the
Agreement is deleted and replaced in its entirety as follows:
"For the services to be rendered and the facilities
to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly in
an amount equal to 0.45% of the Fund's average daily
net assets on an annualized basis for the Fund's
then-current fiscal year."
2. Miscellaneous: Except as set forth in this Amendment, the Agreement
shall remain in full force and effect, without amendment or modification.
3. Prior Amendments. This Amendment supercedes any and all previous
amendments to the Agreement.
4. Limitation of Liability of the Trustees and Shareholders: A copy of the
Trust's Declaration of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising
<PAGE>
out of this instrument are binding solely upon the assets or property of the
series on whose behalf the Trust has executed this instrument. If the Trust has
executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
IN WITNESS WHEREOF, the parties have caused this Amendment to the Agreement to
be executed and delivered in the names and on their behalf by the undersigned,
therewith duly authorized, all as of the day and year first above written.
MFS SERIES TRUST X, on behalf of
MFS GOVERNMENT MORTGAGE FUND
By: A. KEITH BRODKIN
A. Keith Brodkin, Chairman
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: ARNOLD D. SCOTT
Arnold D. Scott, Senior
Executive Vice President
<PAGE>
EXHIBIT NO. 99.5(c)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of September, 1995, by
and between MFS SERIES TRUST X, a Massachusetts business trust (the "Trust"), on
behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated January 18, 1995 and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the 1940 Act and the rules and regulations thereunder and
to the Fund's then-current Prospectus and Statement of Additional Information.
Should the Trustees at any time, however, make any determination as to the
investment policy and notify the Adviser thereof in writing, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination shall be revoked. The
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers, dealers or other entities selected by it,
and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers, dealers or other entities and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable price
by responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or
<PAGE>
other entity an amount of commission for effecting a securities transaction in
excess of the amount of commission another broker, dealer or other entity would
have charged for effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services ( within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934, as amended) provided by such broker, dealer
or other entity, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund and to other clients
of the Adviser as to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Fund. The Adviser
shall arrange, if desired by the Trust, for Directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of Trustees
of the Trust who are not affiliated persons of the Trust or the Adviser;
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Trust; fees and expenses of independent
auditors, of legal counsel, and of any transfer agent, registrar or dividend
disbursing agent of the Trust; expenses of repurchasing and redeeming shares and
servicing shareholder accounts; expenses of preparing, printing and mailing
stock certificates, prospectuses, periodic reports, notices, proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of the custodian
for all services to the Trust, including safekeeping of funds and securities,
keeping books and accounts and calculation of the net asset value of shares of
the Fund; expenses of shareholder meetings; and expenses relating to the
issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes (except to
the extent that any Distribution Agreement to which the Trust is a party on
behalf of the Fund provides that another party is to pay some or all of such
expenses).
<PAGE>
ARTICLE 3. Compensation of the Adviser. For the services to be
rendered and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at a rate equal to 0.975% of
the first $500 million of the Fund's average daily net assets on an annualized
basis and 0.925% thereafter. If the Adviser shall serve for less than the whole
of any period specified in this Article 3, the compensation payable to the
Adviser with respect to the Fund will be prorated.
ARTICLE 4. Special Services. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5. Covenants of the Adviser. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the 1940 Act, will
not take a long or short position in the shares of the Fund, except as provided
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6. Limitation of Liability of the Adviser. The Adviser and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7. Activities of the Adviser. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that the Trustees, officers and shareholders of the
Trust are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until August 1, 1997 and each year thereafter but only so long as its
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii)
<PAGE>
by the Trustees of the Trust, or by vote of a majority of the outstanding voting
securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less than thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by
vote of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: Certain Terms. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemption as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: Record Keeping. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: Limitation of Liability of the Trustees and Shareholders. A
copy of the Declaration of the Trust is on file with Secretary of State of The
Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties here
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of one or more series of the Trust, the parties hereto also
agree that the obligations of each series hereunder shall be several and not
joint, in accordance with its proportionate interest hereunder, and the parties
hereto agree not to proceed against any series for the obligations of another
series.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MFS SERIES TRUST X on behalf of the
MFS/FOREIGN & COLONIAL INTERNATIONAL
GROWTH FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(d)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of September, 1995, by
and between MFS SERIES TRUST X, a Massachusetts business trust (the "Trust"), on
behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND (the
"Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation
(the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated January 18, 1995 and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the 1940 Act and the rules and regulations thereunder and
to the Fund's then-current Prospectus and Statement of Additional Information.
Should the Trustees at any time, however, make any determination as to the
investment policy and notify the Adviser thereof in writing, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination shall be revoked. The
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers, dealers or other entities selected by it,
and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers, dealers or other entities and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable price
by responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or
<PAGE>
other entity an amount of commission for effecting a securities transaction in
excess of the amount of commission another broker, dealer or other entity would
have charged for effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services ( within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934, as amended) provided by such broker, dealer
or other entity, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund and to other clients
of the Adviser as to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Fund. The Adviser
shall arrange, if desired by the Trust, for Directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of Trustees
of the Trust who are not affiliated persons of the Trust or the Adviser;
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Trust; fees and expenses of independent
auditors, of legal counsel, and of any transfer agent, registrar or dividend
disbursing agent of the Trust; expenses of repurchasing and redeeming shares and
servicing shareholder accounts; expenses of preparing, printing and mailing
stock certificates, prospectuses, periodic reports, notices, proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of the custodian
for all services to the Trust, including safekeeping of funds and securities,
keeping books and accounts and calculation of the net asset value of shares of
the Fund; expenses of shareholder meetings; and expenses relating to the
issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes (except to
the extent that any Distribution Agreement to which the Trust is a party on
behalf of the Fund provides that another party is to pay some or all of such
expenses).
<PAGE>
ARTICLE 3. Compensation of the Adviser. For the services to be
rendered and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at a rate equal to 0.975% of
the first $500 million of the Fund's average daily net assets on an annualized
basis and 0.925% thereafter. If the Adviser shall serve for less than the whole
of any period specified in this Article 3, the compensation payable to the
Adviser with respect to the Fund will be prorated.
ARTICLE 4. Special Services. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5. Covenants of the Adviser. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the 1940 Act, will
not take a long or short position in the shares of the Fund, except as provided
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6. Limitation of Liability of the Adviser. The Adviser and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7. Activities of the Adviser. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that the Trustees, officers and shareholders of the
Trust are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until August 1, 1997 and each year thereafter but only so long as its
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii)
<PAGE>
by the Trustees of the Trust, or by vote of a majority of the outstanding voting
securities of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less than thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by
vote of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: Certain Terms. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemption as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: Record Keeping. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: Limitation of Liability of the Trustees and Shareholders. A
copy of the Declaration of the Trust is on file with Secretary of State of The
Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of one or more series of the Trust, the parties hereto also
agree that the obligations of each series hereunder shall be several and not
joint, in accordance with its proportionate interest hereunder, and the parties
hereto agree not to proceed against any series for the obligations of another
series.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MFS SERIES TRUST X on behalf of the
MFS/FOREIGN & COLONIAL INTERNATIONAL
GROWTH AND INCOME FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(e)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of September, 1995, by
and between MFS SERIES TRUST X, a Massachusetts business trust (the "Trust"), on
behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Adviser is willing to provide business management services
to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Amended and
Restated Declaration of Trust, dated January 18, 1995 and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the 1940 Act and the rules and regulations thereunder and
to the Fund's then-current Prospectus and Statement of Additional Information.
Should the Trustees at any time, however, make any determination as to the
investment policy and notify the Adviser thereof in writing, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination shall be revoked. The
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers, dealers or other entities selected by it,
and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers, dealers or other entities and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable price
by responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or
<PAGE>
other entity an amount of commission for effecting a securities transaction in
excess of the amount of commission another broker, dealer or other entity would
have charged for effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services ( within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934, as amended) provided by such broker, dealer
or other entity, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund and to other clients
of the Adviser as to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Fund. The Adviser
shall arrange, if desired by the Trust, for Directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of Trustees
of the Trust who are not affiliated persons of the Trust or the Adviser;
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute allocable to the Trust; fees and expenses of independent
auditors, of legal counsel, and of any transfer agent, registrar or dividend
disbursing agent of the Trust; expenses of repurchasing and redeeming shares and
servicing shareholder accounts; expenses of preparing, printing and mailing
stock certificates, prospectuses, periodic reports, notices, proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of the custodian
for all services to the Trust, including safekeeping of funds and securities,
keeping books and accounts and calculation of the net asset value of shares of
the Fund; expenses of shareholder meetings; and expenses relating to the
issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes (except to
the extent that any Distribution Agreement to which the Trust is a party on
behalf of the Fund provides that another party is to pay some or all of such
expenses).
<PAGE>
ARTICLE 3. Compensation of the Adviser. For the services to be
rendered and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at a rate equal to 1.25% of
the Fund's average daily net assets on an annualized basis. If the Adviser shall
serve for less than the whole of any period specified in this Article 3, the
compensation payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Special Services. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5. Covenants of the Adviser. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the 1940 Act, will
not take a long or short position in the shares of the Fund, except as provided
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6. Limitation of Liability of the Adviser. The Adviser and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7. Activities of the Adviser. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that the Trustees, officers and shareholders of the
Trust are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8. Duration, Termination and Amendment of this Agreement. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until August 1, 1997 and each year thereafter but only so long as its
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust, or by vote of a
majority of the outstanding voting securities of the Fund.
<PAGE>
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less than thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by
vote of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: Certain Terms. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemption as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: Record Keeping. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: Limitation of Liability of the Trustees and Shareholders. A
copy of the Declaration of the Trust is on file with Secretary of State of The
Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of one or more series of the Trust, the parties hereto also
agree that the obligations of each series hereunder shall be several and not
joint, in accordance with its proportionate interest hereunder, and the parties
hereto agree not to proceed against any series for the obligations of another
series.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MFS SERIES TRUST X on behalf of the
MFS/FOREIGN & COLONIAL EMERGING
MARKETS EQUITY FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman and Trustee
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(f)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser") and FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under
the laws of England and Wales (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides MFS/Foreign & Colonial International
Growth Fund (the "Fund"), a series of MFS Series Trust X (the "Trust"), an
open-end investment company registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), business services pursuant to the terms and
conditions of an investment advisory agreement dated September 1, 1995 (the
"Advisory Agreement") between the Adviser and the Trust, on behalf of the Fund;
and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the
Trustees of the Trust and the Adviser, the Sub-Adviser will: (a) manage such
Fund's assets on behalf of the Fund in accordance with the Fund's investment
objective, policies and limitations as stated in the Fund's then current
Prospectus (the "Prospectus") and Statement of Additional Information (the
"Statement"), and the Trust's Amended and Restated Declaration of Trust dated
January 18, 1995 and Amended and Restated By-Laws, each as from time to time in
effect (respectively, the "Declaration" and the "By-Laws") and in compliance
with the 1940 Act and the rules, regulations and orders thereunder; (b) make
investment decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; (d) manage otherwise uninvested cash assets
of the Fund; (e) as the agent of the Fund, give instructions (including trade
tickets) to the custodian and any sub-custodian of the Fund as to deliveries of
securities, transfers of currencies and payments of cash for the account of the
Fund (the Sub-Adviser shall promptly notify the Adviser of such instructions);
(f) employ professional portfolio managers to provide research services to the
Fund; (g) attend periodic meetings of the Board of Trustees of the Trust and (h)
obtain all the registrations, qualifications and consents, on behalf of the
Fund, which are necessary for the Fund to purchase and sell assets in each
jurisdiction (other than the United States) in which the Fund's assets are to be
invested (the Sub-Adviser shall promptly provide the Adviser with copies of any
such registrations, qualifications and consents). In providing these services,
the Sub-Adviser will furnish continuously an investment program with respect to
the Fund's assets. The Sub-Adviser shall be responsible for monitoring the
Fund's compliance with
<PAGE>
the Prospectus, the Statement, the Declaration, the By-Laws and the 1940 Act and
the rules, regulations and orders thereunder and in monitoring such compliance
the Sub-Adviser shall do so in the functional currency of the Fund. The Adviser
agrees to provide the Sub-Adviser with such assistance as may be reasonably
requested by the Sub-Adviser in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund, its
funds available, or to become available, for investment and generally as to the
conditions of the Fund's affairs. From time to time the Adviser will notify the
Sub-Adviser of the aggregate U.S. Dollar amount of the Fund's assets. The
Adviser will have responsibility for exercising proxy, consent and other rights
pertaining to the Fund's portfolio securities; provided, however, that the
Sub-Adviser will, as requested, make recommendations to the Adviser as to the
manner in which such proxy, consent and other rights shall be exercised.
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspension or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus,
the Statement, the Declaration and the By-Laws have been delivered to the
Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change in the
investment policies of the Fund and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the Prospectus, the
Statement, the Declaration and the By-Laws. In addition, the Adviser will
promptly provide the Sub-Adviser with any procedures applicable to the
Sub-Adviser adopted from time to time by the Trustees of the Trust and agrees to
provide promptly to the Sub-Adviser copies of all amendments thereto.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the assets of the Fund.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust
or the Adviser, or both, as may be appropriate, quarterly reports of its
activities on behalf of the Fund, as required by applicable law or as otherwise
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may request from time to
time.
<PAGE>
5. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund, the Sub-Adviser is directed to seek for the Fund
execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to allocate
similarly opportunities to sell or otherwise dispose of securities among the
Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter
into investment sub-advisory agreements with one or more investment advisers,
(an "Other Sub-Adviser"), to the Fund to perform some or all of the services for
which the Sub-Adviser is responsible pursuant to this Agreement upon such terms
and conditions as the Adviser and the Sub-Adviser may determine; provided,
however, that such investment sub-advisory agreements have been approved by a
majority of the Trustees of the Trust who are not interested persons of the
Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote of a majority of
the outstanding voting securities of the Fund; and, provided, further, that the
Sub-Adviser shall own a majority of the voting securities of any Other
Sub-Adviser. The Sub-Adviser may terminate the services of any Other Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Other Sub-Adviser unless and until a successor Other
Sub-Adviser is selected. The Sub-Adviser shall be liable for any error of
judgment or mistake of law by any Other Sub-Adviser and for any act or omission
in the execution and management of the Fund by any Other Sub-Adviser.
8. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser
compensation, computed and paid monthly in arrears in U.S. dollars, at a rate of
0.80% of the average daily net asset value of the Fund's assets on an annualized
basis. If the Sub-Adviser shall serve for less than the whole of any month, the
compensation payable to the Sub-Adviser with respect to the
<PAGE>
Fund will be prorated. The Sub-Adviser will pay its expenses incurred in
performing its duties under this Agreement. Neither the Trust nor the Fund shall
be liable to the Sub-Adviser for the compensation of the Sub-Adviser. For the
purpose of determining fees payable to the Sub-Adviser, the value of the Fund's
net assets shall be computed at the times and in the manner specified in the
Prospectus and/or Statement. In the event that the Adviser reduces its
management fee payable under the Advisory Agreement in order to comply with the
expense limitations of a State securities commission or otherwise (but not a
voluntary reduction), the Sub-Adviser agrees to reduce its fee payable under
this Agreement by a pro rata amount.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties and obligations hereunder. The
Trust, on behalf of the Fund, may enforce any obligations of the Sub-Adviser
under this Agreement and may recover directly from the Sub-Adviser for any
liability it may have to the Fund.
10. Activities of the Sub-Adviser. The services of the Sub-Adviser to
the Fund are not deemed to be exclusive, the Sub-Adviser being free to render
investment advisory and/or other services to others. The Sub-Adviser may permit
other fund clients to use the words "Foreign & Colonial" in their names. The
Adviser and the Trust agree that if the Sub-Adviser shall for any reason no
longer serve as the Sub-Adviser to the Fund, the Fund will change its name so as
to delete the words "Foreign & Colonial". It is understood that the Trustees,
officers and shareholders of the Trust, the Fund or the Adviser are or may be or
become interested in the Sub-Adviser or any person controlling, controlled by or
under common control with the Sub-Adviser, as trustees, officers, employees or
otherwise and that trustees, officers and employees of the Sub-Adviser or any
person controlling, controlled by or under common control with the Sub-Adviser
may become similarly interested in the Trust, the Fund or the Adviser and that
the Sub-Adviser may be or become interested in the Fund as a shareholder or
otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a)
will not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees
of the Trust or the Fund's distributor, as principals, agents, brokers or
dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized to undertake
investment business in the United Kingdom by virtue of its membership in the
Investment Management Regulatory Organisation ("IMRO") and is registered under
the laws of any jurisdiction in which the Sub-Adviser is required to be
registered as an investment adviser in order to perform its obligations under
this Agreement, and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any other applicable Federal or State requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; (v) will immediately notify the Adviser in writing of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing of any change
of control of the Sub-Adviser or any parent of the Sub-Adviser resulting in an
"assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the
Fund, in the manner and for the periods of time required or permitted by the
1940 Act and the rules, regulations and orders thereunder and the Advisers Act
and the rules, regulations and orders thereunder, records relating to investment
transactions made by the Sub-Adviser for the Fund as may be reasonably requested
by the Adviser or the Fund from time to time. The Sub-Adviser agrees that such
records are the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided however, that the Sub-Adviser may retain copies
of such records for archival purposes as required by IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Trust with a copy of such code
of ethics, and upon any amendment to such code of ethics, promptly provide such
amendment. At least annually the Sub-Adviser will provide the Trust and the
Adviser with a certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its
Form ADV as most recently filed with the Securities and Exchange Commission (the
"SEC") and will, promptly after filing any amendment to its Form ADV with the
SEC, furnish a copy of such amendment to the Adviser and the Trust.
<PAGE>
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until August 1,
1997 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Adviser or of the Sub-Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund. This
Agreement may be terminated at any time without the payment of any penalty by
the Trustees of the Trust, by "vote of a majority of the outstanding voting
securities" of the Fund or by the Adviser, on not more than sixty days nor less
than thirty days written notice, or by the Sub-Adviser on not more than ninety
days nor less than sixty days written notice. This Agreement shall automatically
terminate in the event of its "assignment" or in the event that the Advisory
Agreement shall have terminated for any reason.
14. Amendments to this Agreement. This Agreement may be amended
only if such amendment is approved by "vote of a majority of the outstanding
voting securities" of the Fund, by the Adviser and by the Sub-Adviser.
15. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated persons" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
16. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser pursuant
to Section 12 hereof shall survive for the duration of this Agreement and the
Sub-Adviser shall immediately notify, but in no event later than five (5)
business days, the Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
FOREIGN & COLONIAL MANAGEMENT LTD.
By: JAMES OGILVY
James Ogilvy
By: JONATHAN LUBRAN
Jonathan Lubran
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X,
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman
<PAGE>
EXHIBIT NO. 99.5(g)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser") and FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under
the laws of England and Wales (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides MFS/Foreign & Colonial International
Growth and Income Fund (the "Fund"), a series of MFS Series Trust X (the
"Trust"), an open-end investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), business services pursuant to the
terms and conditions of an investment advisory agreement dated September 1, 1995
(the "Advisory Agreement") between the Adviser and the Trust, on behalf of the
Fund; and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the
Trustees of the Trust and the Adviser, the Sub-Adviser will: (a) manage such
portion of the Fund's assets as the Adviser and the Sub-Adviser shall from time
to time mutually designate (the "Designated Assets") on behalf of the Fund in
accordance with the Fund's investment objective, policies and limitations as
stated in the Fund's then current Prospectus (the "Prospectus") and Statement of
Additional Information (the "Statement"), and the Trust's Amended and Restated
Declaration of Trust dated January 18, 1995 and Amended and Restated By-Laws,
each as from time to time in effect (respectively, the"Declaration" and the
"By-Laws") and in compliance with the 1940 Act and the rules, regulations and
orders thereunder; (b) make investment decisions for the Fund with respect to
the Designated Assets; (c) place purchase and sale orders for portfolio
transactions for the Fund with respect to the Designated Assets; (d) manage
otherwise uninvested cash assets of the Fund with respect to the Designated
Assets ; (e) as the agent of the Fund, give instructions (including trade
tickets) to the custodian and any sub-custodian of the Fund as to deliveries of
securities, transfers of currencies and payments of cash for the account of the
Fund with respect to the Designated Assets (the Sub-Adviser shall promptly
notify the Adviser of such instructions); (f) employ professional portfolio
managers to provide research services to the Fund; (g) attend periodic meetings
of the Board of Trustees of the Trust and (h) obtain all the registrations,
qualifications and consents, on behalf of the Fund, which are necessary for the
Fund to purchase and sell assets in each jurisdiction (other than the United
States) in which the Designated Assets are to be invested (the Sub-Adviser shall
promptly provide the Adviser with
<PAGE>
copies of any such registrations, qualifications and consents). In providing
these services, the Sub-Adviser will furnish continuously an investment program
with respect to the Designated Assets. The Sub-Adviser shall be responsible for
monitoring the Fund's compliance with the Prospectus, the Statement, the
Declaration, the By-Laws and the 1940 Act and the rules, regulations and orders
thereunder and in monitoring such compliance the Sub-Adviser shall do so in the
functional currency of the Fund. The Sub-Adviser shall only be responsible for
compliance with the above-mentioned restrictions in regards to the Designated
Assets. The Adviser agrees to provide the Sub-Adviser with such assistance as
may be reasonably requested by the Sub-Adviser in connection with its activities
under this Agreement, including, without limitation, information concerning the
Fund, its funds available, or to become available, for investment and generally
as to the conditions of the Fund's affairs. From time to time the Adviser will
notify the Sub-Adviser of the aggregate U.S. Dollar amount of the Designated
Assets. The Adviser will have responsibility for exercising proxy, consent and
other rights pertaining to the Fund's portfolio securities; provided, however,
that the Sub-Adviser will, as requested, make recommendations to the Adviser as
to the manner in which such proxy, consent and other rights shall be exercised.
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspensions or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus,
the Statement, the Declaration and the By-Laws have been delivered to the
Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change in the
investment policies of the Fund and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the Prospectus, the
Statement, the Declaration and the By-Laws. In addition, the Adviser will
promptly provide the Sub-Adviser with any procedures applicable to the
Sub-Adviser adopted from time to time by the Trustees of the Trust and agrees to
provide promptly to the Sub-Adviser copies of all amendments thereto.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the Designated Assets.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust
or the Adviser, or both, as may be appropriate, quarterly reports of its
activities on behalf of the Fund,
<PAGE>
as required by applicable law or as otherwise requested from time to time by the
Trustees of the Trust or the Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust or the Adviser,
as appropriate, may request from time to time.
5. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, the Sub-Adviser
is directed to seek for the Fund execution at the most favorable price by
responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or other
entity an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker, dealer or other entity would have
charged for effecting that transaction, if the Sub-Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by such broker, dealer or
other entity, viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to other
clients of the Sub-Adviser as to which the Sub-Adviser exercises investment
discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to allocate
similarly opportunities to sell or otherwise dispose of securities among the
Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter
into investment sub-advisory agreements with one or more investment advisers (an
"Other Sub-Adviser") to the Fund to perform some or all of the services for
which the Sub-Adviser is responsible pursuant to this Agreement upon such terms
and conditions as the Adviser and the Sub-Adviser may determine; provided,
however, that such investment sub-advisory agreements have been approved by a
majority of the Trustees of the Trust who are not interested persons of the
Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote of a majority of
the outstanding voting securities of the Fund; and, provided, further, that the
Sub-Adviser shall own a majority of the voting securities of any Other
Sub-Adviser. The Sub-Adviser may terminate the services of any Other Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Other Sub-Adviser unless and until a successor Other
Sub-Adviser is selected. The Sub-Adviser shall be liable for any error of
judgment or mistake of law by any Other Sub-Adviser and for any act or omission
in the execution and management of the Fund by any Other Sub-Adviser.
<PAGE>
8. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser
compensation, computed and paid monthly in arrears in U.S. dollars, at a rate of
0.75% of the average daily net asset value of the Designated Assets on an
annualized basis. If the Sub-Adviser shall serve for less than the whole of any
month, the compensation payable to the Sub-Adviser with respect to the Fund will
be prorated. The Sub-Adviser will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust nor the Fund shall be liable to
the Sub-Adviser for the compensation of the Sub-Adviser. For the purpose of
determining fees payable to the Sub-Adviser, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Prospectus
and/or Statement. In the event that the Adviser reduces its management fee
payable under the Advisory Agreement in order to comply with the expense
limitations of a State securities commission or otherwise (but not a voluntary
reduction), the Sub-Adviser agrees to reduce its fee payable under this
Agreement by a pro rata amount.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties and obligations hereunder. The
Trust, on behalf of the Fund, may enforce any obligations of the Sub-Adviser
under this Agreement and may recover directly from the Sub-Adviser for any
liability it may have to the Fund.
10. Activities of the Sub-Adviser. The services of the Sub-Adviser to
the Fund are not deemed to be exclusive, the Sub-Adviser being free to render
investment advisory and/or other services to others. The Sub-Adviser may permit
other fund clients to use the words "Foreign & Colonial" in their names. The
Adviser and the Trust agree that if the Sub-Adviser shall for any reason no
longer serve as the Sub-Adviser to the Fund, the Fund will change its name so as
to delete the words "Foreign & Colonial". It is understood that the Trustees,
officers and shareholders of the Trust, the Fund or the Adviser are or may be or
become interested in the Sub-Adviser or any person controlling, controlled by or
under common control with the Sub-Adviser, as trustees, officers, employees or
otherwise and that trustees, officers and employees of the Sub-Adviser or any
person controlling, controlled by or under common control with the Sub-Adviser
may become similarly interested in the Trust, the Fund or the Adviser and that
the Sub-Adviser may be or become interested in the Fund as a shareholder or
otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a)
will not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees
of the Trust or the Fund's distributor, as principals, agents, brokers or
dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
<PAGE>
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized to undertake
investment business in the United Kingdom by virtue of its membership in the
Investment Management Regulatory Organisation ("IMRO") and is registered under
the laws of any jurisdiction in which the Sub-Adviser is required to be
registered as an investment adviser in order to perform its obligations under
this Agreement, and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement; (iii)
has met, and will continue to meet for so long as this Agreement remains in
effect, any other applicable Federal or State requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; (v) will immediately notify the Adviser in writing of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing of any change
of control of the Sub-Adviser or any parent of the Sub-Adviser resulting in an
"assignment" of this Agreement.
(b) It will maintain, keep current and preserve on behalf of the
Fund, in the manner and for the periods of time required or permitted by the
1940 Act and the rules, regulations and orders thereunder and the Advisers Act
and the rules, regulations and orders thereunder, records relating to investment
transactions made by the Sub-Adviser for the Fund as may be reasonably requested
by the Adviser or the Fund from time to time. The Sub-Adviser agrees that such
records are the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided, however, that the Sub-Adviser may retain copies
of such records for archival purposes as required by IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Trust with a copy of such code
of ethics, and upon any amendment to such code of ethics, promptly provide such
amendment. At least annually the Sub-Adviser will provide the Trust and the
Adviser with a certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
<PAGE>
(d) It has provided the Adviser and the Trust with a copy of its
Form ADV as most recently filed with the Securities and Exchange Commission (the
"SEC") and will, promptly after filing any amendment to its Form ADV with the
SEC, furnish a copy of such amendment to the Adviser and the Trust.
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until August 1,
1997 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Adviser or of the Sub-Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund. This
Agreement may be terminated at any time without the payment of any penalty by
the Trustees of the Trust, by "vote of a majority of the outstanding voting
securities" of the Fund or by the Adviser, on not more than sixty days nor less
than thirty days written notice, or by the Sub-Adviser on not more than ninety
days nor less than sixty days written notice. This Agreement shall automatically
terminate in the event of its "assignment" or in the event that the Advisory
Agreement shall have terminated for any reason.
14. Amendments to this Agreement. This Agreement may be amended only
if such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser and by the Sub-Adviser.
15. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated persons" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
16. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser pursuant
to Section 12 hereof shall survive for the duration of this Agreement and the
Sub-Adviser shall immediately notify, but in no event later than five (5)
business days, the Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
FOREIGN & COLONIAL MANAGEMENT LTD.
By: JAMES OGILVY
James Ogilvy
By: JONATHAN LUBRAN
Jonathan Lubran
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X,
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman
<PAGE>
EXHIBIT NO. 99.5(h)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser") and FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under
the laws of England and Wales (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides MFS/Foreign & Colonial Emerging Markets
Equity Fund (the "Fund"), a series of MFS Series Trust X (the "Trust"), an
open-end investment company registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), business services pursuant to the terms and
conditions of an investment advisory agreement dated September 1, 1995 (the
"Advisory Agreement") between the Adviser and the Trust, on behalf of the Fund;
and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the
Trustees of the Trust and the Adviser, the Sub-Adviser will: (a) manage such
Fund's assets on behalf of the Fund in accordance with the Fund's investment
objective, policies and limitations as stated in the Fund's then current
Prospectus (the "Prospectus") and Statement of Additional Information (the
"Statement"), and the Trust's Amended and Restated Declaration of Trust dated
January 18, 1995 and Amended and Restated By-Laws, each as from time to time in
effect (respectively, the "Declaration" and the "By-Laws") and in compliance
with the 1940 Act and the rules, regulations and orders thereunder; (b) make
investment decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; (d) manage otherwise uninvested cash assets
of the Fund; (e) as the agent of the Fund, give instructions (including trade
tickets) to the custodian and any sub-custodian of the Fund as to deliveries of
securities, transfers of currencies and payments of cash for the account of the
Fund (the Sub-Adviser shall promptly notify the Adviser of such instructions);
(f) employ professional portfolio managers to provide research services to the
Fund; (g) attend periodic meetings of the Board of Trustees of the Trust and (h)
obtain all the registrations, qualifications and consents, on behalf of the
Fund, which are necessary for the Fund to purchase and sell assets in each
jurisdiction (other than the United States) in which the Fund's assets are to be
invested (the Sub-Adviser shall promptly provide the Adviser with copies of any
such registrations, qualifications and consents). In providing these services,
the Sub-Adviser will furnish continuously an investment program with respect to
the Fund's assets. The Sub-Adviser shall be responsible for monitoring the
Fund's compliance with
<PAGE>
the Prospectus, the Statement, the Declaration, the By-Laws and the 1940 Act and
the rules, regulations and orders thereunder and in monitoring such compliance
the Sub-Adviser shall do so in the functional currency of the Fund. The Adviser
agrees to provide the Sub-Adviser with such assistance as may be reasonably
requested by the Sub-Adviser in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund, its
funds available, or to become available, for investment and generally as to the
conditions of the Fund's affairs. From time to time the Adviser will notify the
Sub-Adviser of the aggregate U.S. Dollar amount of the Fund's assets. The
Adviser will have responsibility for exercising proxy, consent and other rights
pertaining to the Fund's portfolio securities; provided, however, that the
Sub-Adviser will, as requested, make recommendations to the Adviser as to the
manner in which such proxy, consent and other rights shall be exercised.
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspension or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus,
the Statement, the Declaration and the By-Laws have been delivered to the
Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change in the
investment policies of the Fund and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the Prospectus, the
Statement, the Declaration and the By-Laws. In addition, the Adviser will
promptly provide the Sub-Adviser with any procedures applicable to the
Sub-Adviser adopted from time to time by the Trustees of the Trust and agrees to
provide promptly to the Sub-Adviser copies of all amendments thereto.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the assets of the Fund.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust
or the Adviser, or both, as may be appropriate, quarterly reports of its
activities on behalf of the Fund, as required by applicable law or as otherwise
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may request from time to
time.
<PAGE>
5. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund, the Sub-Adviser is directed to seek for the Fund
execution at the most favorable price by responsible brokerage firms at
reasonably competitive commission rates. In fulfilling this requirement, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty, created by this Agreement or otherwise, solely by reason of its having
caused the Fund to pay a broker, dealer or other entity an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker, dealer or other entity would have charged for effecting that
transaction, if the Sub-Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to allocate
similarly opportunities to sell or otherwise dispose of securities among the
Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter
into investment sub-advisory agreements with one or more investment advisers,
(an "Other Sub-Adviser"), to the Fund to perform some or all of the services for
which the Sub-Adviser is responsible pursuant to this Agreement upon such terms
and conditions as the Adviser and the Sub-Adviser may determine; provided,
however, that such investment sub-advisory agreements have been approved by a
majority of the Trustees of the Trust who are not interested persons of the
Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote of a majority of
the outstanding voting securities of the Fund; and, provided, further, that the
Sub-Adviser shall own a majority of the voting securities of any Other
Sub-Adviser. The Sub-Adviser may terminate the services of any Other Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Other Sub-Adviser unless and until a successor Other
Sub-Adviser is selected. The Sub-Adviser shall be liable for any error of
judgment or mistake of law by any Other Sub-Adviser and for any act or omission
in the execution and management of the Fund by any Other Sub-Adviser.
8. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser
compensation, computed and paid monthly in arrears in U.S. dollars, at a rate of
1.00% of the average daily net asset value of the Fund's assets on an annualized
basis. If the Sub-Adviser shall serve for less than the whole of any month, the
compensation payable to the Sub-Adviser with respect to the
<PAGE>
Fund will be prorated. The Sub-Adviser will pay its expenses incurred in
performing its duties under this Agreement. Neither the Trust nor the Fund shall
be liable to the Sub-Adviser for the compensation of the Sub-Adviser. For the
purpose of determining fees payable to the Sub-Adviser, the value of the Fund's
net assets shall be computed at the times and in the manner specified in the
Prospectus and/or Statement. In the event that the Adviser reduces its
management fee payable under the Advisory Agreement in order to comply with the
expense limitations of a State securities commission or otherwise (but not a
voluntary reduction), the Sub-Adviser agrees to reduce its fee payable under
this Agreement by a pro rata amount.
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties and obligations hereunder. The
Trust, on behalf of the Fund, may enforce any obligations of the Sub-Adviser
under this Agreement and may recover directly from the Sub-Adviser for any
liability it may have to the Fund.
10. Activities of the Sub-Adviser. The services of the Sub-Adviser to
the Fund are not deemed to be exclusive, the Sub-Adviser being free to render
investment advisory and/or other services to others. The Sub-Adviser may permit
other fund clients to use the words "Foreign & Colonial" in their names. The
Adviser and the Trust agree that if the Sub-Adviser shall for any reason no
longer serve as the Sub-Adviser to the Fund, the Fund will change its name so as
to delete the words "Foreign & Colonial". It is understood that the Trustees,
officers and shareholders of the Trust, the Fund or the Adviser are or may be or
become interested in the Sub-Adviser or any person controlling, controlled by or
under common control with the Sub-Adviser, as trustees, officers, employees or
otherwise and that trustees, officers and employees of the Sub-Adviser or any
person controlling, controlled by or under common control with the Sub-Adviser
may become similarly interested in the Trust, the Fund or the Adviser and that
the Sub-Adviser may be or become interested in the Fund as a shareholder or
otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a)
will not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees
of the Trust or the Fund's distributor, as principals, agents, brokers or
dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized to undertake
investment business in the
<PAGE>
United Kingdom by virtue of its membership in the Investment Management
Regulatory Organisation ("IMRO") and is registered under the laws of any
jurisdiction in which the Sub-Adviser is required to be registered as an
investment adviser in order to perform its obligations under this Agreement, and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any other
applicable Federal or State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement; (v) will
immediately notify the Adviser in writing of the occurrence of any event that
would disqualify the Sub-Adviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise; and
(vi) will immediately notify the Adviser in writing of any change of control of
the Sub-Adviser or any parent of the Sub-Adviser resulting in an "assignment" of
this Agreement.
(b) It will maintain, keep current and preserve on behalf of the
Fund, in the manner and for the periods of time required or permitted by the
1940 Act and the rules, regulations and orders thereunder and the Advisers Act
and the rules, regulations and orders thereunder, records relating to investment
transactions made by the Sub-Adviser for the Fund as may be reasonably requested
by the Adviser or the Fund from time to time. The Sub-Adviser agrees that such
records are the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided, however, that the Sub-Adviser may retain copies
of such records for archival purposes as required by IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Trust with a copy of such code
of ethics, and upon any amendment to such code of ethics, promptly provide such
amendment. At least annually the Sub-Adviser will provide the Trust and the
Adviser with a certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its
Form ADV as most recently filed with the Securities and Exchange Commission (the
"SEC") and will, promptly after filing any amendment to its Form ADV with the
SEC, furnish a copy of such amendment to the Adviser and the Trust.
<PAGE>
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until August 1,
1997 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Adviser or of the Sub-Adviser at a meeting specifically called for the purpose
of voting on such approval, and (b) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund. This
Agreement may be terminated at any time without the payment of any penalty by
the Trustees of the Trust, by "vote of a majority of the outstanding voting
securities" of the Fund or by the Adviser, on not more than sixty days nor less
than thirty days written notice, or by the Sub-Adviser on not more than ninety
days nor less than sixty days written notice. This Agreement shall automatically
terminate in the event of its "assignment" or in the event that the Advisory
Agreement shall have terminated for any reason.
14. Amendments to this Agreement. This Agreement may be amended
only if such amendment is approved by "vote of a majority of the outstanding
voting securities" of the Fund, by the Adviser and by the Sub-Adviser.
15. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated persons" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
16. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Sub-Adviser pursuant
to Section 12 hereof shall survive for the duration of this Agreement and the
Sub-Adviser shall immediately notify, but in no event later than five (5)
business days, the Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
FOREIGN & COLONIAL MANAGEMENT LTD.
By: JAMES OGILVY
James Ogilvy
By: JONATHAN LUBRAN
Jonathan Lubran
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X,
on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman
<PAGE>
EXHIBIT NO. 99.5(i)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the
laws of England and Wales (the "Sub-Adviser"), and FOREIGN & COLONIAL EMERGING
MARKETS LIMITED, a company incorporated under the laws of England and Wales
("FCEM").
WITNESSETH:
WHEREAS, Massachusetts Financial Services Company (the "Adviser")
provides MFS/Foreign & Colonial International Growth Fund (the "Fund"), a series
of MFS Series Trust X (the "Trust"), an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), business
services pursuant to the terms and conditions of an investment advisory
agreement dated September 1, 1995 (the "Advisory Agreement") between the Adviser
and the Trust, on behalf of the Fund;
WHEREAS, the Sub-Adviser provides services to the Adviser pursuant to
the terms and conditions of a sub-advisory agreement dated September 1, 1995
(the "FCM Sub-Advisory Agreement") between the Adviser and the Sub-Adviser; and
WHEREAS, FCEM is willing to provide services to the Sub-Adviser on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of FCEM. Subject to the supervision of the Trustees of the
Trust, the Adviser and the Sub-Adviser, FCEM will: (a) manage such portion of
the Fund's assets as the Adviser, Sub-Adviser and FCEM shall from time to time
mutually designate (the "Designated Assets") on behalf of the Fund in accordance
with the Fund's investment objective, policies and limitations as stated in the
Fund's then current Prospectus (the "Prospectus") and Statement of Additional
Information (the "Statement"), and the Trust's Amended and Restated Declaration
of Trust dated January 18, 1995 and Amended and Restated By-Laws, each as from
time to time in effect (respectively, the"Declaration" and the "By-Laws") and in
compliance with the 1940 Act and the rules, regulations and orders thereunder;
(b) make investment decisions for the Fund with respect to the Designated
Assets; (c) place purchase and sale orders for portfolio transactions for the
Fund with respect to the Designated Assets; (d) manage otherwise uninvested cash
assets of the Fund with respect to the Designated Assets ; (e) as the agent of
the Fund, give instructions (including trade tickets) to the custodian and any
sub-custodian of the Fund as to deliveries of securities, transfers of
currencies and payments of cash for the account of the Fund with respect to the
Designated Assets (FCEM shall promptly notify the Adviser and the Sub-Adviser of
such
<PAGE>
instructions); (f) employ professional portfolio managers to provide research
services to the Fund; (g) attend periodic meetings of the Board of Trustees of
the Trust and (h) obtain all the registrations, qualifications and consents, on
behalf of the Fund, which are necessary for the Fund to purchase and sell assets
in each jurisdiction (other than the United States) in which the Designated
Assets are to be invested (FCEM shall promptly provide the Adviser and the
Sub-Adviser with copies of any such registrations, qualifications and consents).
In providing these services, FCEM will furnish continuously an investment
program with respect to the Designated Assets. FCEM shall be responsible for
monitoring the Fund's compliance with the Prospectus, the Statement, the
Declaration, the By-Laws and the 1940 Act and the rules, regulations and orders
thereunder and in monitoring such compliance FCEM shall do so in the functional
currency of the Fund. FCEM shall only be responsible for compliance with the
above-mentioned restrictions in regards to the Designated Assets. The
Sub-Adviser agrees to provide FCEM with such assistance as may be reasonably
requested by FCEM in connection with its activities under this Agreement,
including, without limitation, information concerning the Fund, its funds
available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets of the Fund shall be purchased or
sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as
<PAGE>
amended) provided by such broker, dealer or other entity, viewed in terms of
either that particular transaction or FCEM's overall responsibilities with
respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the
Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM
deems the purchase or sale of a security to be in the best interest of the Fund
as well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of 1.00% of the average daily net asset value
of the Designated Assets on an annualized basis. If FCEM shall serve for less
than the whole of any month, the compensation payable to FCEM with respect to
the Fund will be prorated. FCEM will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust, the Adviser nor the Fund shall
be liable to FCEM for the compensation of FCEM. For the purpose of determining
fees payable to FCEM, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or Statement. In the
event that the Sub-Adviser reduces its management fee payable under the FCM
Sub-Advisory Agreement in order to comply with the expense limitations of a
State securities commission or otherwise (but not a voluntary reduction), FCEM
agrees to reduce its fee payable under this Agreement by a pro rata amount.
7. Limitation of Liability of FCEM. FCEM shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. The Trust, on behalf of the
Fund, may enforce any obligations of FCEM under this Agreement and may recover
directly from FCEM for any liability it may have to the Fund.
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the
<PAGE>
Sub-Adviser are or may become interested in FCEM or any person controlling,
controlled by or under common control with FCEM, as trustees, officers,
employees or otherwise and that trustees, officers and employees of FCEM or any
person controlling, controlled by or under common control with FCEM may become
similarly interested in the Trust, the Fund, the Adviser or the Sub-Adviser and
that FCEM may be or become interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with
itself, "affiliated persons" of FCEM, the Sub-Adviser, the Trustees of the Trust
or the Fund's distributor, as principals, agents, brokers or dealers in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the 1940 Act and the rules, regulations and orders
thereunder and subject to the prior written approval of the Adviser, (b) will
not take a long or short position in the shares of the Fund except as permitted
by the Declaration and (c) will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement
relative to FCEM and its trustees, officers, employees and affiliates.
10. Representations, Warranties and Additional Agreements of FCEM.
FCEM represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized to undertake
investment business in the United Kingdom by virtue of its membership in the
Investment Management Regulatory Organisation ("IMRO") and is registered under
the laws of any jurisdiction in which FCEM is required to be registered as an
investment adviser in order to perform its obligations under this Agreement, and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any other
applicable Federal or State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement; (v) will
immediately notify the Adviser and the Sub-Adviser in writing of the occurrence
of any event that would disqualify FCEM from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or otherwise; and
(vi) will immediately notify the Adviser and the Sub-Adviser in writing of any
change of control of FCEM or any parent of FCEM resulting in an "assignment" of
this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by the 1940 Act
and the rules, regulations and orders thereunder and the Advisers Act and the
rules, regulations and orders thereunder, records relating to investment
transactions made by FCEM for the Fund as may be reasonably requested by the
Adviser or the Fund from time to time. FCEM agrees that such records are the
property of the Fund, and will be
<PAGE>
surrendered to the Fund promptly upon request; provided, however, that FCEM may
retain copies of such records for archival purposes as required by IMRO.
(c) FCEM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not already done
so, will provide the Adviser, the Sub-Adviser and the Trust with a copy of such
code of ethics, and upon any amendment to such code of ethics, promptly provide
such amendment. At least annually FCEM will provide the Trust, the Sub-Adviser
and the Adviser with a certificate signed by the chief compliance officer (or
the person performing such function) of FCEM certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser, the Sub-Adviser and the Trust with a
copy of its Form ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any amendment to its Form
ADV with the SEC, furnish a copy of such amendment to the Adviser, the
Sub-Adviser and the Trust.
11. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until August 1,
1997 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust, the
Adviser, the Sub-Adviser or FCEM at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust, or by "vote of a majority of the outstanding voting securities" of the
Fund. This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust, by "vote of a majority of the outstanding
voting securities" of the Fund or by the Adviser or the Sub-Adviser, on not more
than sixty days nor less than thirty days written notice, or by FCEM on not more
than ninety days nor less than sixty days written notice. This Agreement shall
automatically terminate in the event of its "assignment" or in the event that
the FCM Sub-Advisory Agreement or the Advisory Agreement shall have terminated
for any reason.
12. Amendments to this Agreement. This Agreement may be amended only
if such amendment is approved by "vote of a majority of the outstanding
voting securities" of the Fund, by the Adviser, by the Sub-Adviser and by FCEM.
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
<PAGE>
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
9 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, by the Adviser's General Counsel in the case of
the Adviser, by FCEM's Secretary in the case of FCEM and by the Trust's
Secretary in the case of the Fund, or such other person as a party shall
designate by notice to the other parties. This Agreement constitutes the entire
agreement among the parties hereto and supersedes any prior agreement among the
parties relating to the subject matter hereof. The section headings of this
Agreement are for convenience of reference and do not constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL MANAGEMENT LTD.
By: JAMES OGILVY
James Ogilvy
By: JONATHAN LUBRAN
Jonathan Lubran
FOREIGN & COLONIAL EMERGING MARKETS
LIMITED
By: AUDLEY TWISTON DAVIES
Audley Twiston Davies
By: KAREN CLARKE
Karen Clarke
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman
<PAGE>
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(j)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the
laws of England and Wales (the "Sub-Adviser"), and FOREIGN & COLONIAL EMERGING
MARKETS LIMITED, a company incorporated under the laws of England and Wales
("FCEM").
WITNESSETH:
WHEREAS, Massachusetts Financial Services Company (the "Adviser")
provides MFS/Foreign & Colonial International Growth and Income Fund (the
"Fund"), a series of MFS Series Trust X (the "Trust"), an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), business services pursuant to the terms and conditions of an
investment advisory agreement dated September 1, 1995 (the "Advisory Agreement")
between the Adviser and the Trust, on behalf of the Fund;
WHEREAS, the Sub-Adviser provides services to the Adviser pursuant to
the terms and conditions of a sub-advisory agreement dated September 1, 1995
(the "FCM Sub-Advisory Agreement") between the Adviser and the Sub-Adviser; and
WHEREAS, FCEM is willing to provide services to the Sub-Adviser on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of FCEM. Subject to the supervision of the Trustees of the
Trust, the Adviser and the Sub-Adviser, FCEM will: (a) manage such portion of
the Fund's assets as the Adviser, Sub-Adviser and FCEM shall from time to time
mutually designate (the "Designated Assets") on behalf of the Fund in accordance
with the Fund's investment objective, policies and limitations as stated in the
Fund's then current Prospectus (the "Prospectus") and Statement of Additional
Information (the "Statement"), and the Trust's Amended and Restated Declaration
of Trust dated January 18, 1995 and Amended and Restated By-Laws, each as from
time to time in effect (respectively, the "Declaration" and the "By-Laws") and
in compliance with the 1940 Act and the rules, regulations and orders
thereunder; (b) make investment decisions for the Fund with respect to the
Designated Assets; (c) place purchase and sale orders for portfolio transactions
for the Fund with respect to the Designated Assets; (d) manage otherwise
uninvested cash assets of the Fund with respect to the Designated Assets; (e) as
the agent of the Fund, give instructions (including trade tickets) to the
custodian and any sub-custodian of the Fund as to deliveries of securities,
transfers of currencies and payments of cash for the account of the Fund with
respect to the Designated Assets (FCEM shall promptly notify the Adviser and the
Sub-Adviser of such
<PAGE>
instructions); (f) employ professional portfolio managers to provide research
services to the Fund; (g) attend periodic meetings of the Board of Trustees of
the Trust and (h) obtain all the registrations, qualifications and consents, on
behalf of the Fund, which are necessary for the Fund to purchase and sell assets
in each jurisdiction (other than the United States) in which the Designated
Assets are to be invested (FCEM shall promptly provide the Adviser and the
Sub-Adviser with copies of any such registrations, qualifications and consents).
In providing these services, FCEM will furnish continuously an investment
program with respect to the Designated Assets. FCEM shall be responsible for
monitoring the Fund's compliance with the Prospectus, the Statement, the
Declaration, the By-Laws and the 1940 Act and the rules, regulations and orders
thereunder and in monitoring such compliance FCEM shall do so in the functional
currency of the Fund. FCEM shall only be responsible for compliance with the
above-mentioned restrictions in regards to the Designated Assets. The
Sub-Adviser agrees to provide FCEM with such assistance as may be reasonably
requested by FCEM in connection with its activities under this Agreement,
including, without limitation, information concerning the Fund, its funds
available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets of the Fund shall be purchased or
sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as
<PAGE>
amended) provided by such broker, dealer or other entity, viewed in terms of
either that particular transaction or FCEM's overall responsibilities with
respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the
Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM
deems the purchase or sale of a security to be in the best interest of the Fund
as well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of 1.00% of the average daily net asset value
of the Designated Assets on an annualized basis. If FCEM shall serve for less
than the whole of any month, the compensation payable to FCEM with respect to
the Fund will be prorated. FCEM will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust, the Adviser nor the Fund shall
be liable to FCEM for the compensation of FCEM. For the purpose of determining
fees payable to FCEM, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or Statement. In the
event that the Sub-Adviser reduces its management fee payable under the FCM
Sub-Advisory Agreement in order to comply with the expense limitations of a
State securities commission or otherwise (but not a voluntary reduction), FCEM
agrees to reduce its fee payable under this Agreement by a pro rata amount.
7. Limitation of Liability of FCEM. FCEM shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. The Trust, on behalf of the
Fund, may enforce any obligations of FCEM under this Agreement and may recover
directly from FCEM for any liability it may have to the Fund.
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or
<PAGE>
under common control with FCEM, as trustees, officers, employees or otherwise
and that trustees, officers and employees of FCEM or any person controlling,
controlled by or under common control with FCEM may become similarly interested
in the Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or
become interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with
itself, "affiliated persons" of FCEM, the Sub-Adviser, the Trustees of the Trust
or the Fund's distributor, as principals, agents, brokers or dealers in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the 1940 Act and the rules, regulations and orders
thereunder and subject to the prior written approval of the Adviser, (b) will
not take a long or short position in the shares of the Fund except as permitted
by the Declaration and (c) will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement
relative to FCEM and its trustees, officers, employees and affiliates.
10. Representations, Warranties and Additional Agreements of FCEM.
FCEM represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized to undertake
investment business in the United Kingdom by virtue of its membership in the
Investment Management Regulatory Organisation ("IMRO") and is registered under
the laws of any jurisdiction in which FCEM is required to be registered as an
investment adviser in order to perform its obligations under this Agreement, and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any other
applicable Federal or State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement; (v) will
immediately notify the Adviser and the Sub-Adviser in writing of the occurrence
of any event that would disqualify FCEM from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or otherwise; and
(vi) will immediately notify the Adviser and the Sub-Adviser in writing of any
change of control of FCEM or any parent of FCEM resulting in an "assignment" of
this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by the 1940 Act
and the rules, regulations and orders thereunder and the Advisers Act and the
rules, regulations and orders thereunder, records relating to investment
transactions made by FCEM for the Fund as may be reasonably requested by the
Adviser or the Fund from time to time. FCEM agrees that such records are the
property of the Fund, and will be
<PAGE>
surrendered to the Fund promptly upon request; provided, however, that FCEM may
retain copies of such records for archival purposes as required by IMRO.
(c) FCEM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not already done
so, will provide the Adviser, the Sub-Adviser and the Trust with a copy of such
code of ethics, and upon any amendment to such code of ethics, promptly provide
such amendment. At least annually FCEM will provide the Trust, the Sub-Adviser
and the Adviser with a certificate signed by the chief compliance officer (or
the person performing such function) of FCEM certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser, the Sub-Adviser and the Trust with a
copy of its Form ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any amendment to its Form
ADV with the SEC, furnish a copy of such amendment to the Adviser, the
Sub-Adviser and the Trust.
11. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until August 1,
1997 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust, the
Adviser, the Sub-Adviser or FCEM at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust, or by "vote of a majority of the outstanding voting securities" of the
Fund. This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust, by "vote of a majority of the outstanding
voting securities" of the Fund or by the Adviser or the Sub-Adviser, on not more
than sixty days nor less than thirty days written notice, or by FCEM on not more
than ninety days nor less than sixty days written notice. This Agreement shall
automatically terminate in the event of its "assignment" or in the event that
the FCM Sub-Advisory Agreement or the Advisory Agreement shall have terminated
for any reason.
12. Amendments to this Agreement. This Agreement may be amended only
if such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser, by the Sub-Adviser and by FCEM.
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
<PAGE>
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
9 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, by the Adviser's General Counsel in the case of
the Adviser, by FCEM's Secretary in the case of FCEM and by the Trust's
Secretary in the case of the Fund, or such other person as a party shall
designate by notice to the other parties. This Agreement constitutes the entire
agreement among the parties hereto and supersedes any prior agreement among the
parties relating to the subject matter hereof. The section headings of this
Agreement are for convenience of reference and do not constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL MANAGEMENT LTD.
By: JAMES OGILVY
James Ogilvy
By: JONATHAN LUBRAN
Jonathan Lubran
FOREIGN & COLONIAL EMERGING MARKETS
LIMITED
By: AUDLEY TWISTON DAVIES
Audley Twiston Davies
By: KAREN CLARKE
Karen Clarke
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman
<PAGE>
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.5(k)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of September, 1995, by and
between FOREIGN & COLONIAL MANAGEMENT LTD., a company incorporated under the
laws of England and Wales (the "Sub-Adviser"), and FOREIGN & COLONIAL EMERGING
MARKETS LIMITED, a company incorporated under the laws of England and Wales
("FCEM").
WITNESSETH:
WHEREAS, Massachusetts Financial Services Company (the "Adviser")
provides MFS/Foreign & Colonial Emerging Markets Equity Fund (the "Fund"), a
series of MFS Series Trust X (the "Trust"), an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), business services pursuant to the terms and conditions of an investment
advisory agreement dated September 1, 1995 (the "Advisory Agreement") between
the Adviser and the Trust, on behalf of the Fund;
WHEREAS, the Sub-Adviser provides services to the Adviser pursuant to
the terms and conditions of a sub-advisory agreement dated September 1, 1995
(the "FCM Sub-Advisory Agreement") between the Adviser and the Sub-Adviser; and
WHEREAS, FCEM is willing to provide services to the Sub-Adviser on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of FCEM. Subject to the supervision of the Trustees of the
Trust, the Adviser and the Sub-Adviser, FCEM will: (a) manage such portion of
the Fund's assets as the Adviser, Sub-Adviser and FCEM shall from time to time
mutually designate (the "Designated Assets") on behalf of the Fund in accordance
with the Fund's investment objective, policies and limitations as stated in the
Fund's then current Prospectus (the "Prospectus") and Statement of Additional
Information (the "Statement"), and the Trust's Amended and Restated Declaration
of Trust dated January 18, 1995 and Amended and Restated By-Laws, each as from
time to time in effect (respectively, the "Declaration" and the "By-Laws") and
in compliance with the 1940 Act and the rules, regulations and orders
thereunder; (b) make investment decisions for the Fund with respect to the
Designated Assets; (c) place purchase and sale orders for portfolio transactions
for the Fund with respect to the Designated Assets; (d) manage otherwise
uninvested cash assets of the Fund with respect to the Designated Assets; (e) as
the agent of the Fund, give instructions (including trade tickets) to the
custodian and any sub-custodian of the Fund as to deliveries of securities,
transfers of currencies and payments of cash for the account of the Fund with
respect to the Designated Assets (FCEM shall promptly notify the Adviser and the
Sub-Adviser of such
<PAGE>
instructions); (f) employ professional portfolio managers to provide research
services to the Fund; (g) attend periodic meetings of the Board of Trustees of
the Trust and (h) obtain all the registrations, qualifications and consents, on
behalf of the Fund, which are necessary for the Fund to purchase and sell assets
in each jurisdiction (other than the United States) in which the Designated
Assets are to be invested (FCEM shall promptly provide the Adviser and the
Sub-Adviser with copies of any such registrations, qualifications and consents).
In providing these services, FCEM will furnish continuously an investment
program with respect to the Designated Assets. FCEM shall be responsible for
monitoring the Fund's compliance with the Prospectus, the Statement, the
Declaration, the By-Laws and the 1940 Act and the rules, regulations and orders
thereunder and in monitoring such compliance FCEM shall do so in the functional
currency of the Fund. FCEM shall only be responsible for compliance with the
above-mentioned restrictions in regards to the Designated Assets. The
Sub-Adviser agrees to provide FCEM with such assistance as may be reasonably
requested by FCEM in connection with its activities under this Agreement,
including, without limitation, information concerning the Fund, its funds
available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets of the Fund shall be purchased or
sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as
<PAGE>
amended) provided by such broker, dealer or other entity, viewed in terms of
either that particular transaction or FCEM's overall responsibilities with
respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the
Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM
deems the purchase or sale of a security to be in the best interest of the Fund
as well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of 1.00% of the average daily net asset value
of the Designated Assets on an annualized basis. If FCEM shall serve for less
than the whole of any month, the compensation payable to FCEM with respect to
the Fund will be prorated. FCEM will pay its expenses incurred in performing its
duties under this Agreement. Neither the Trust, the Adviser nor the Fund shall
be liable to FCEM for the compensation of FCEM. For the purpose of determining
fees payable to FCEM, the value of the Fund's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or Statement. In the
event that the Sub-Adviser reduces its management fee payable under the FCM
Sub-Advisory Agreement in order to comply with the expense limitations of a
State securities commission or otherwise (but not a voluntary reduction), FCEM
agrees to reduce its fee payable under this Agreement by a pro rata amount.
7. Limitation of Liability of FCEM. FCEM shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. The Trust, on behalf of the
Fund, may enforce any obligations of FCEM under this Agreement and may recover
directly from FCEM for any liability it may have to the Fund.
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or
<PAGE>
under common control with FCEM, as trustees, officers, employees or otherwise
and that trustees, officers and employees of FCEM or any person controlling,
controlled by or under common control with FCEM may become similarly interested
in the Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or
become interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with
itself, "affiliated persons" of FCEM, the Sub-Adviser, the Trustees of the Trust
or the Fund's distributor, as principals, agents, brokers or dealers in making
purchases or sales of securities or other property for the account of the Fund,
except as permitted by the 1940 Act and the rules, regulations and orders
thereunder and subject to the prior written approval of the Adviser, (b) will
not take a long or short position in the shares of the Fund except as permitted
by the Declaration and (c) will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement
relative to FCEM and its trustees, officers, employees and affiliates.
10. Representations, Warranties and Additional Agreements of FCEM.
FCEM represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is authorized to undertake
investment business in the United Kingdom by virtue of its membership in the
Investment Management Regulatory Organisation ("IMRO") and is registered under
the laws of any jurisdiction in which FCEM is required to be registered as an
investment adviser in order to perform its obligations under this Agreement, and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any other
applicable Federal or State requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement; (v) will
immediately notify the Adviser and the Sub-Adviser in writing of the occurrence
of any event that would disqualify FCEM from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or otherwise; and
(vi) will immediately notify the Adviser and the Sub-Adviser in writing of any
change of control of FCEM or any parent of FCEM resulting in an "assignment" of
this Agreement.
(b) It will maintain, keep current and preserve on behalf of the Fund,
in the manner and for the periods of time required or permitted by the 1940 Act
and the rules, regulations and orders thereunder and the Advisers Act and the
rules, regulations and orders thereunder, records relating to investment
transactions made by FCEM for the Fund as may be reasonably requested by the
Adviser or the Fund from time to time. FCEM agrees that such records are the
property of the Fund, and will be
<PAGE>
surrendered to the Fund promptly upon request; provided, however, that FCEM may
retain copies of such records for archival purposes as required by IMRO.
(c) FCEM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not already done
so, will provide the Adviser, the Sub-Adviser and the Trust with a copy of such
code of ethics, and upon any amendment to such code of ethics, promptly provide
such amendment. At least annually FCEM will provide the Trust, the Sub-Adviser
and the Adviser with a certificate signed by the chief compliance officer (or
the person performing such function) of FCEM certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser, the Sub-Adviser and the Trust with a
copy of its Form ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any amendment to its Form
ADV with the SEC, furnish a copy of such amendment to the Adviser, the
Sub-Adviser and the Trust.
11. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until August 1,
1997 and each year thereafter but only so long as its continuance is
"specifically approved at least annually" (a) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust, the
Adviser, the Sub-Adviser or FCEM at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust, or by "vote of a majority of the outstanding voting securities" of the
Fund. This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust, by "vote of a majority of the outstanding
voting securities" of the Fund or by the Adviser or the Sub-Adviser, on not more
than sixty days nor less than thirty days written notice, or by FCEM on not more
than ninety days nor less than sixty days written notice. This Agreement shall
automatically terminate in the event of its "assignment" or in the event that
the FCM Sub-Advisory Agreement or the Advisory Agreement shall have terminated
for any reason.
12. Amendments to this Agreement. This Agreement may be amended only
if such amendment is approved by "vote of a majority of the outstanding voting
securities" of the Fund, by the Adviser, by the Sub-Adviser and by FCEM.
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
<PAGE>
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
9 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, by the Adviser's General Counsel in the case of
the Adviser, by FCEM's Secretary in the case of FCEM and by the Trust's
Secretary in the case of the Fund, or such other person as a party shall
designate by notice to the other parties. This Agreement constitutes the entire
agreement among the parties hereto and supersedes any prior agreement among the
parties relating to the subject matter hereof. The section headings of this
Agreement are for convenience of reference and do not constitute a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL MANAGEMENT LTD.
By: JAMES OGILVY
James Ogilvy
By: JONATHAN LUBRAN
Jonathan Lubran
FOREIGN & COLONIAL EMERGING MARKETS
LIMITED
By: AUDLEY TWISTON DAVIES
Audley Twiston Davies
By: KAREN CLARKE
Karen Clarke
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X
on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
By: A.KEITH BRODKIN
A. Keith Brodkin
Chairman
<PAGE>
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
Jeffrey L. Shames
President
<PAGE>
EXHIBIT NO. 99.6(a)
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this 1st day of September, 1995, by and
between MFS SERIES TRUST X, a Massachusetts business trust (the "Trust"), on
behalf of each series from time to time of the Trust (referred to individually
as a "Fund" and collectively as the "Funds") 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 Funds
(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
<PAGE>
company) is merged or consolidated with the Trust (or a Fund) or in the event
that the Trust (or a Fund) 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 (or a Fund) 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 Rules 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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 or any Fund to the Distributor pursuant to any
<PAGE>
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,
however, that 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.
<PAGE>
(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 charges 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 to 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, or 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 September 1, 1995 and
shall continue in force until September 1, 1997 and each year thereafter but
only so long as its continuance is
<PAGE>
"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.
10. 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", "assignment" and "specifically approved at
least annually" 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. This Agreement supersedes and terminates, as of the date hereof,
the Distribution Agreement dated January 1, 1995 between MFS Government Mortgage
Fund and the Distributor.
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
<PAGE>
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 SERIES TRUST X
On behalf of:
MFS Government Mortgage Fund
MFS/Foreign & Colonial Emerging Markets
Equity Fund
MFS/Foreign & Colonial International
Growth and Income Fund
MFS/Foreign & Colonial International
Growth Fund
By: A. KEITH BRODKIN
A. Keith Brodkin, as President
and not individually
MFS FUND DISTRIBUTORS, INC.
By: WILLIAM W. SCOTT, JR.
William W. Scott, Jr.
President
<PAGE>
EXHIBIT NO. 99.7
MFS GOVERNMENT INCOME PLUS TRUST
RETIREMENT PLAN FOR NON-INTERESTED PERSON TRUSTEES
MFS Government Income Plus Fund (the "Fund") has adopted this
Retirement Plan for Non-Interested Person Trustees (the "Plan"). The Plan has
been established for the purpose of providing certain benefits to eligible
Independent Trustees of the Fund, or their beneficiaries, after termination of
the Independent Trustees' services as such.
1. DEFINITIONS
The following terms shall have the following meanings:
Accrued Benefit: A benefit which is equal to the Normal
Retirement Benefit calculated using an Independent Trustee's Years of Service
and Annual Compensation as of the determination date.
Actuarial Equivalent: A benefit equal in value, based on (a)
an interest rate equal to the immediate annuity rate published by the Pension
Guaranty Corporation for the January of the Plan Year of calculation and (b) the
1983 Individual Annuity Mortality Tables for Males.
Annual Compensation: The average of the total compensation
(retainer and meeting fees) received by an Independent Trustee during each of
the last three Plan Years preceding his termination of services as such for
which he served either as an Independent Trustee or a Nonaffiliated Trustee for
the entire year; provided, that if an Independent Trustee served as an
Independent Trustee and/or a Nonaffiliated Trustee for fewer than three full
Plan Years prior to his termination of services, there shall be taken into
account his annualized compensation for the one or more most recent partial Plan
Years (if any) for which he served as an Independent Trustee or a Nonaffiliated
Trustee that, when aggregated with his full Plan Years, does not exceed three
Plan Years.
Disability: Disability as defined in ss.22(e)(3) of the
Internal Revenue Code of 1986, as amended.
Independent Trustee: A Trustee of the Fund who is not an
"interested person" (as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended) of the Fund, Lifetime Advisers, Inc.
("Lifetime"), Massachusetts Financial Services Company ("MFS") or MFS
Financial Services, Inc. ("FSI").
<PAGE>
Nonaffiliated Trustee: A Trustee of the Fund who has no
material business or professional relationship with the Fund, Lifetime, MFS or
FSI and who is subject to being declared an "interested person" solely by reason
of his relationship with the Fund, Lifetime, MFS or FSI during the two most
recently completed fiscal years of the Fund.
Normal Retirement Benefit: An annual benefit at Normal
Retirement Date equal to 5% of an Independent Trustee's Annual Compensation
multiplied by the Independent Trustee's whole Years of Service, up to a maximum
of ten Years of Service, payable in the Normal Form of Benefit, as defined in
ss.3(g).
Normal Retirement Date: December 31 of the Plan Year in
which an Independent Trustee attains age 73.
Plan Year: January 1 through December 31.
Retirement: Termination of service of an Independent Trustee
after having completed at least Five Years of Service and having attained age
62, other than: (1) any termination by reason of death; (ii) any termination by
reason of Disability, provided that any Independent Trustee who suffers a
Disability and who has otherwise satisfied the requirements for Retirement shall
have the right to elect whether his termination is by reason of Retirement or by
reason of Disability; or (iii) any termination resulting from the Independent
Trustee's willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Independent Trustee
("Misconduct").
Year of Service: A Plan Year during which an Independent
Trustee completed at least six months of service as either a Nonaffiliated
Trustee or an Independent Trustee.
2. ELIGIBILITY
No Trustee of the Fund shall be eligible to participate in the
Plan or be entitled to any rights or benefits hereunder until the Trustee
becomes an Independent Trustee. Each individual who completes any service as an
Independent Trustee on or after the Effective Date of this Plan, and who so
elects in such manner as the Committee determines from time to time, will be
eligible to participate in the Plan.
3. RETIREMENT DATE; AMOUNT OF BENEFIT
(a) Retirement. Each Independent Trustee shall retire on that
Independent Trustee's Normal Retirement Date, if he has not previously ceased to
perform services as an Independent Trustee. Each retired Independent Trustee is
referred to as a "Retired Trustee".
<PAGE>
(b) Normal Retirement Benefit. Upon an Independent Trustee's
Retirement on his Normal Retirement Date, the Independent Trustee shall receive,
commencing on his Normal Retirement Date, his Normal Retirement Benefit.
(c) Early Retirement Benefit. Upon an Independent Trustee's
Retirement prior to his Normal Retirement Date, the Independent Trustee shall
receive an Early Retirement Benefit commencing on the Independent Trustee's date
of Retirement. The benefit payable on an Independent Trustee's early Retirement
shall be his Accrued Benefit reduced by 5% for every year that payment of an
Early Retirement Benefit precedes that Trustee's Normal Retirement Date.
(d) Deferred Termination Benefit. If an Independent Trustee's
service as such terminates, other than (i) termination as a result of his
Misconduct or (ii) termination that constitutes termination by reason of his
Retirement, Disability or death, after he has completed at least five Years of
Service, he shall receive, commencing on the date he attains age 62, his Accrued
Benefit reduced by 55%.
(e) Disability Benefit. If an Independent Trustee's service as
such terminates by reason of his Disability and, if the Independent Trustee is
eligible for Retirement, he elects that his termination be treated as being by
reason of Disability, he shall receive his Accrued Benefit paid for the one
hundred twenty (120) months immediately following the month in which his service
so terminates. In the event the Independent Trustee dies before he has received
one hundred twenty (120) payments, monthly payments in the same amount shall be
paid to his beneficiary until the number of payments to the Independent Trustee
plus the number of payments to the beneficiary equal one hundred twenty (120)
payments.
(f) Death Benefit. Each Independent Trustee who elects to
participate in this Plan shall designate a beneficiary in such form as the
Committee approves from time to time to receive any benefits payable under this
Plan in the event of his death. In the event there is no validly designated
beneficiary in existence on the date of an Independent Trustee's death, his
beneficiary shall be his surviving spouse, if any, or if none, his estate. The
beneficiary of an Independent Trustee who dies during service, and with respect
to whom benefit payments have not commenced, shall be entitled to that
Independent Trustee's Accrued Benefit paid for the one hundred twenty (120)
months immediately following death.
(g) Form of Benefit. Except as otherwise provided in this
ss.3, benefits payable under this ss.3 shall be payable in the form of a monthly
annuity for the life of the Independent Trustee, and, if the Independent Trustee
dies before he has received one hundred twenty (120) payments, monthly payments
in the same amount shall be payable to his beneficiary until the number of
payments to the
<PAGE>
Independent Trustee plus the number of payments to the beneficiary equal one
hundred twenty (120) payments (the "Normal Form of Benefit"). However,
notwithstanding any other provision of this Section 3 to the contrary, if an
Independent Trustee's beneficiary is entitled to payments under this Plan upon
the Independent Trustee's death, then (i) if the Independent Trustee's
beneficiary is his estate, the lump sum Actuarial Equivalent present value of
those payments shall be paid to the estate in a single lump sum as soon as
administratively reasonable following the Independent Trustee's death, and (ii)
if the Independent Trustee's beneficiary is other than his estate, the Committee
in its sole discretion may direct that the Actuarial Equivalent value of those
payments be paid in such form other than the Normal Form of Benefit (including
without limitation a lump sum) as it determines.
4. PAYMENT OF BENEFIT; ALLOCATION OF COSTS
The Fund is responsible for the payment of the benefits, as
well as all expenses of administration of the Plan, including without limitation
all accounting, legal and actuarial fees and expenses. The obligations of the
Fund to pay such benefits and expenses will not be secured or funded in any
manner, and the obligations will not have any preference over the lawful claims
of the Fund's creditors and shareholders. The Fund shall be under no obligation
to segregate any assets for the purpose of providing retirement benefits
pursuant to this Plan, and to the extent that any Independent Trustee or
beneficiary acquires a right to receive a benefit under the Plan, such right
shall be limited to that of a recipient of an unfunded, unsecured promise to pay
amounts in the future and such person's position with respect to such amounts
shall be that of a general unsecured creditor of the Fund. To the extent that
the Fund consists of one or more separate portfolios, costs and expenses will be
allocated among the portfolios by the Board of Trustees of the Fund (the
"Board") in a manner that is determined by the Board to be fair and equitable
under the circumstances.
5. ADMINISTRATION
(a) The Committee. Any question involving entitlement to
payments under or the interpretation or administration of the Plan will be
referred to a committee (the "Committee") of Independent Trustees designated by
the Board. Except as otherwise provided herein, the Committee will make all
interpretations and determinations necessary or desirable for the Plan's
administration, and such interpretations and determinations will be final and
conclusive.
(b) Powers of the Committee. The Committee will represent and
act on behalf of the Fund in respect of the Plan and, subject to the other
provisions of the Plan, the Committee may adopt, amend or repeal by-laws or
other regulations, relating to the administration of the Plan, the conduct of
the Committee's affairs, its rights or powers or the rights or powers of its
members or of the
<PAGE>
Board. The Committee will report to the Board from time to time on its
activities in respect of the Plan. The Committee or persons designated by it
will cause such records to be kept as may be necessary for the administration of
the Plan.
6. MISCELLANEOUS PROVISIONS
(a) Rights Not Assignable. The right to receive any payment
under the Plan may not be transferred, assigned, pledged or otherwise alienated.
(b) Amendment, etc. The Committee, with the concurrence of the
Board, may at any time amend or terminate the Plan or waive any provision of the
Plan, provided that no amendment, termination or waiver will impair the rights
of an Independent Trustee to receive upon Retirement the payments which would
have been made to that Independent Trustee had there been no such amendment,
termination or waiver (based upon that Independent Trustee's Years of Service to
the date of such amendment, termination or waiver) or the rights of a former
Independent Trustee or Retired Trustee to receive any benefit due under the
Plan, without the consent of such present or former Independent Trustee or
Retired Trustee, as the case may be. A present or former Independent Trustee or
Retired Trustee may elect to waive receipt of his benefit by so advising the
Committee.
Notwithstanding any provision of this Plan to the
contrary, however, in the event of the sale of all or substantially all of the
assets of the Fund, the liquidation or dissolution of the Fund, or any merger or
other similar reorganization of the Fund that the Fund does not survive:
(i) if although the Fund does not survive
there is a surviving entity, all rights and benefits (including without
limitation those of Retired Trustees) under the Plan shall cease upon
consummation of such transaction, unless, and only to the extent that, the board
of trustees (or other similar governing body) of the surviving entity agrees to
assume the Plan and/or to provide any such rights or benefits; and
(ii) if there is no surviving entity, the
Board shall have the right to take specific action to terminate the Plan and/or
to cause any or all rights and benefits (including without limitation those of
Retired Trustees) under the Plan to cease as of the date of such event but, in
the absence of any such specific action, the lump sum Actuarial Equivalent
present value of the Accrued Benefit of each present or former Independent
Trustee or Retired Trustee (or beneficiary thereof) who on the date of
liquidation is receiving or entitled to receive a benefit under the Plan or
would be entitled to receive a benefit under the Plan based on his actual or
deemed
<PAGE>
termination of service as of the date of such liquidation shall be paid to such
person.
(c) No Right to Re-election. Nothing in the Plan will create
any obligation on the part of the Board to nominate any Independent Trustee for
re-election.
(d) Vacancies. Although the Board will retain the right to
increase or decrease its size, it shall be the general policy of the Board to
replace each person who ceases to serve as an Independent Trustee by selecting a
new Independent Trustee from candidates duly proposed.
(e) Consulting. Each Retired Trustee may render such services
for the Fund, for such compensation, as may be agreed upon from time to time by
such Trustee and the Board of the Fund.
(f) Construction. Whenever any masculine terminology is used
in this Plan, it shall be taken to include the feminine, unless the context
otherwise indicates. The titles and headings included herein are for convenience
only and shall not be construed as in any way affecting or modifying the text of
this Plan, which text shall control. This Plan shall be construed and regulated
in accordance with the laws of The Commonwealth of Massachusetts, except to the
extent such state law is preempted by federal law.
(g) Effective Date. This Plan will become effective on
January 1, 1991 (the "Effective Date").
<PAGE>
EXHIBIT NO. 99.8(a)
CUSTODIAN CONTRACT
BETWEEN
MFS GOVERNMENT SECURITIES HIGH YIELD TRUST
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held By It.............. 1
2. Duties of the Custodian with Respect to Property of the Trust
Held by the Custodian.............................................. 1
2.1 Holding Securities....................................... 1
2.2 Delivery of Securities................................... 2
2.3 Registration of Securities............................... 5
2.4 Bank Accounts............................................ 5
2.5 Payments for Shares...................................... 5
2.6 Investment and Availability of Federal Funds............. 6
2.7 Collection of Income..................................... 6
2.8 Payment of Trust Monies.................................. 7
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased..................................... 8
2.10 Payments for Repurchases or Redemptions of Shares of
the Trust................................................ 8
2.11 Appointment of Agents.................................... 9
2.12 Deposit of Trust Assets in Securities System............. 9
2.13 Segregated Account....................................... 11
2.14 Ownership Certificates for Tax Purposes.................. 12
2.15 Proxies.................................................. 12
2.16 Communications Relating to Trust Portfolio Securities.... 12
2.17 Proper Instructions...................................... 13
2.18 Actions Permitted Without Express Authority.............. 13
2.19 Evidence of Authority.................................... 13
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income...................... 14
4. Records............................................................ 14
5. Opinion of Trust's Independent Accountants ........................ 15
6. Reports to Trust by Independent Public Accountants................. 15
7. Compensation of Custodian.......................................... 15
8. Responsibility of Custodian........................................ 15
9. Effective Period, Termination and Amendment........................ 16
10. Successor Custodian................................................ 17
11. Interpretive and Additional Provisions............................. 18
12. Massachusetts Law to Apply......................................... 19
13. Prior Contracts.................................................... 19
<PAGE>
CUSTODIAN CONTRACT
This Contract between MFS Government Securities High Yield Trust, a
business trust organized and existing under the laws of The Commonwealth of
Massachusetts, having its principal place of business at 200 Berkeley Street,
Boston, Massachusetts hereinafter called the "Trust", and State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian,"
WITNESSETH, that in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Declaration of Trust. The Trust agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income, payments of principal or capital distributions received by it with
respect to all securities owned by the Trust from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest ("Shares") of the Trust as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Trust held or
received by the Trust and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more subcustodians,
but only in accordance with an applicable vote by the Board of Trustees of the
Trust, and provided that the Custodian shall have no more or less responsibility
or liability to the Trust on account of any actions or omissions of any
subcustodian so employed than any such subcustodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Trust Held By
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Trust all non-cash property, including all securities
owned by the Trust, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts
<PAGE>
as a securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as a "Securities
System."
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Trust held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Trust and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Trust;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Trust or into the name of any nominee or nominees of the Custodian or into
the name or nominee name of any agent appointed pursuant to Section 2.11 or into
the name or nominee name of any subcustodian appointed pursuant to Article l; or
for exchange for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units; provided that,
in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Trust, to
the broker or its clearing agent, against a receipt, for examination in
accordance with
<PAGE>
"street delivery" custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from the delivery of
such securities prior to receiving payment for such securities except as may
arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Trust, but only against receipt of adequate collateral as agreed upon from time
to time by the Custodian and the Trust, which may be in the form of cash or
obligations issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for which collateral
is to be credited to the Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the Trust prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Trust requiring a pledge of assets by the Trust, but only against receipt of
amounts borrowed;
<PAGE>
12) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Trust;
13) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Trust;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Trust, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described from time
to time in the Trust's currently effective prospectus and statement of
additional information ("prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer of the
Trust and certified by the Secretary or an Assistant Secretary, setting forth
the purpose for which such delivery is to be made, declaring such purpose to be
a proper corporate purpose, and naming the person or persons to whom delivery of
such securities shall be made.
<PAGE>
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Trust or in the
name of any nominee of the Trust or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Trust, unless the Trust has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment adviser as the
Trust, or in the name or nominee name of any agent appointed pursuant to Section
2.11 or in the name or nominee name of any subcustodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the Trust under
the terms of this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts (the "Trust's Account or Accounts") in the name of the
Trust, subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such Account or Accounts, subject to
the provisions hereof, all cash received by it from or for the account of the
Trust, other than cash maintained by the Trust in a bank Account established and
used in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for the Trust may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such other banks
or trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940 and that each such
bank or trust company and the funds to be deposited with each such bank or trust
company shall be approved by vote of majority of the Board of Trustees of the
Trust. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Trust's Shares or from the Transfer Agent of the Trust and deposit into
the Trust's Account such payments as are received for Shares of the Trust issued
or sold from time to time by the
<PAGE>
Trust. The Custodian will provide timely notification to the Trust and the
Transfer Agent of any receipt by it of payments for Shares of the Trust.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions,
1) invest in such instruments as may be set forth in such
instruments as may be set forth in such instructions on the same day as
received all federal funds received after a time agreed upon between the
Custodian and the Trust; and
2) make federal funds available to the Trust as of specified
times agreed upon from time to time by the Trust and the Custodian in the amount
of any checks received in payment for Shares of the Trust which are deposited
into the Trust's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which the Trust shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent thereof and shall
credit such income, as collected, to the Trust's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due the Trust on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith, other than to provide
the Trust with such information or data as may be necessary to assist the Trust
in arranging for the timely delivery to the Custodian of the income to which the
Trust is properly entitled.
<PAGE>
2.8 Payment of Trust Monies. Upon receipt of Proper Instructions, which may
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of the Trust in the following cases only:
1) Upon the purchase of securities, for the account of the Trust but
only (a) against the delivery of such securities to the Custodian (or any bank,
banking firm or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as amended, to act
as a custodian and has been designated by the Custodian as its agent for this
purpose) registered in the name of the Trust or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b)
in the case of a purchase effected through a Securities System, in accordance
with the conditions set forth in Section 2.12 hereof; or (c) in the case of
repurchase agreements entered into between the Trust and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Trust of securities
owned by the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Trust;
2) In connection with conversion, exchange or surrender of securities
owned by the Trust as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Trust as
set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account of the
Trust: interest, taxes, management, accounting, transfer agent and legal fees,
and operating
<PAGE>
expenses of the Trust whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the governing
documents of the Trust;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Trust signed by an officer of the
Trust and certified by its Secretary or an Assistant Secretary, setting forth
the purpose for which such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such payment is to be
made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the account
of the Trust is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Trust to so
pay in advance, the Custodian shall be absolutely liable to the Trust for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by the
Trust with a bank which is a member of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreements have been
transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston or of the
safekeeping receipt, provided that such securities have in fact been so
transferred by book-entry.
2.10 Payments for Repurchases or Redemptions of Shares of the Trust. From
such funds as may be available for the purpose but subject to the limitations of
the Declaration of Trust and any applicable votes of the Board of Trustees of
the Trust pursuant thereto, the
<PAGE>
Custodian shall, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the Trust, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares of the
Trust, the Custodian shall honor checks drawn on the Custodian by a holder of
Shares, which checks have been furnished by the Trust to the holder of Shares,
when presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time between the Trust and the
Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Trust Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Trust in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "Securities System"
in accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Trust in a Securities
System provided that such securities are represented in an account ("Custodian's
Account") of the
<PAGE>
Custodian in the Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Trust which are maintained in a Securities System shall identify by book-entry
those securities belonging to the Trust;
3) The Custodian shall pay for securities purchased for the account of
the Trust upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Custodian's Account, and (ii) the making
of an entry on the records of the Custodian to reflect such payment and transfer
for the account of the Trust. The Custodian shall transfer securities sold for
the account of the Trust upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the Custodian's
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Trust. Copies of all
advices from the Securities System of transfers of securities for the account of
the Trust shall identify the Trust, be maintained for the Trust by the Custodian
and be provided to the Trust at its request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to or from the account of the
Trust in the form of a written advice or notice and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Trust.
4) The Custodian shall provide the Trust with any report obtained by
the Custodian on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the Securities
System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
<PAGE>
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the Trust
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any of its
or their employees or from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities System; at the
election of the Trust, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Trust has not been made whole for any such
loss or damage.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Trust, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.12 hereof, (i) in accordance with the provisions
of any agreement among the Trust, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Trust, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Trust or commodity
futures contracts or options thereon purchased or sold by the Trust, (iii) for
the purpose of compliance by the Trust with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
<PAGE>
other proper corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by an officer of
the Trust and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Trust held by it and in connection with transfers of
securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Trust or a nominee of the Trust, all proxies, without indication of the manner
in which such proxies are to be voted, and shall promptly deliver to the Trust
such proxies, all proxy soliciting materials and all notices relating to such
securities.
2.16 Communications Relating to Trust Portfolio Securities. The Custodian
shall transmit promptly to the Trust all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Trust and the maturity of futures contracts purchased or sold by
the Trust) received by the Custodian from issuers of the securities being held
for the Trust. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If the Trust desires
to take action with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such action.
<PAGE>
2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person or persons
as the Board of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Trust accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Trust's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Trust:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Trust;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Trust, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Trust except as otherwise directed by
the Board of Trustees of the Trust.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument or
paper believed by it to be
<PAGE>
genuine and to have been properly executed by or on behalf of the Trust. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Trust as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Trust to keep
the books of account of the Trust and/or compute the net asset value per share
of the outstanding shares of the Trust or, if directed in writing to do so by
the Trust, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Trust as described in the Trust's currently effective
prospectus and shall advise the Trust and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Trust to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of the Trust shall be made at the time or
times described from time to time in the Trust's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Trust under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Trust. All such records shall be
the property of the Trust and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and
<PAGE>
agents of the Securities and Exchange Commission. The Custodian shall, at the
Trust's request, supply the Trust with a tabulation of securities owned by the
Trust and held by the Custodian and shall, when requested to do so by the Trust
and for such compensation as shall be agreed upon between the Trust and the
Custodian, include certificate numbers in such tabulations.
5. Opinion of Trust's Independent Accountant
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions from the
Trust's independent accountants with respect to its activities hereunder in
connection with the preparation of the Trust's Form N-lA, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, which
shall be of sufficient scope and in sufficient detail, as may reasonably be
required by the Trust to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, shall so state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Trust and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it
<PAGE>
to be genuine and to be signed by the proper party or parties. The Custodian
shall be held to the exercise of reasonable care in carrying out the provisions
of this Contract, but shall be kept indemnified by the Trust transaction taken
or omitted by it in the proper execution of instructions from the Trust. It
shall be entitled to rely on and may act upon advice of counsel for the Trust on
all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Trust.
The Trust agrees to indemnify and hold harmless the Custodian and its
nominee from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or its
nominee in connection with the performance of this Contract, except such as may
arise from it or its nominee's own negligent action, negligent failure to act or
willful misconduct. The Custodian is authorized to charge any account of the
Trust for such items and its fees. To secure any such authorized charges and any
advances of cash or securities made by the Custodian to or for the benefit of
the Trust for any purpose which results in the Trust incurring an overdraft at
the end of any business day or for extraordinary or emergency purposes during
any business day, the Trust hereby grants to the Custodian a security interest
in and pledges to the Custodian securities held for it by the Custodian, in an
amount not to exceed five percent of the Trust's gross assets, the specific
securities to be designated in writing from time to time by the Trust or its
investment adviser (the "Pledged Securities"). Should the Trust fail to repay
promptly any advances of cash or securities, the Custodian shall be entitled to
use available cash and to dispose of the Pledged Securities as is necessary to
repay any such advances.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered
<PAGE>
or mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not act under Section 2.12 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Trust has approved the
initial use of a particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has reviewed the use by the Trust of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended; provided further, however, that the Trust shall not amend or terminate
this Contract in contravention of any applicable federal or state regulations,
or any provision of the Declaration of Trust, and (b) that the Trust may at any
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of Trustees of
the Trust, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Trust's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
<PAGE>
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor custodian all of
the Trust's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Trust. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
<PAGE>
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, the
existing custodian contract between the Trust and the Custodian. Any reference
to the custodian contract between the Trust and the Custodian in documents
executed prior to the date hereof shall be deemed to refer to this Contract.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 19th day of February, 1988.
ATTEST MFS GOVERNMENT SECURITIES HIGH YIELD
TRUST
ARNOLD D. SCOTT By: RICHARD B. BAILEY
Arnold D. Scott Richard B. Bailey
ATTEST STATE STREET BANK & TRUST COMPANY
J. FARRELL By: ILLEGIBLE
J. Farrell [Illegible]
Assistant Secretary Vice President
<PAGE>
EXHIBIT NO. 99.8(b)
AMENDMENT TO
CUSTODIAN CONTRACT
Amendment to Custodian Contract between MFS Government Securities High
Yield Trust, a business trust organized and existing under the laws of
Massachusetts, having a principal place of business at 200 Berkeley Street,
Boston, Massachusetts 02116 (hereinafter called the "Fund"), and State Street
Bank and Trust Company, a Massachusetts trust company, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts 02110
(hereinafter called the "Custodian").
WHEREAS: The Fund and the Custodian are parties to a Custodian
Contract dated February 19, l988 (the "Custodian Contract") ;
WHEREAS: The Fund desires that the Custodian issue a letter of credit
(the "Letter of Credit") on behalf of the Fund for the benefit of ICI Mutual
Insurance Company (the "Company") in accordance with the Continuing Letter of
Credit and Security Agreement and that the Fund's obligations to the Custodian
with respect to the Letter of Credit shall be fully collateralized at all times
while the Letter of Credit is outstanding by, among other things, segregated
assets of the Fund equal to 125% of the face amount to the amount of the Letter
of Credit;
WHEREAS: The Custodian Contract provides for the establishment of
segregated accounts for proper Fund purposes upon Proper Instructions (as
defined in the Custodian Contract); and
WHEREAS: The Fund and the Custodian desire to establish a segregated
account to hold the collateral for the Fund's obligations to the Custodian
with respect to the Letter of Credit and to amend the Custodian Contract to
provide for the establishment and maintenance thereof;
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto hereby amend the
Custodian Contract as follows:
1. Capitalized terms used herein without definition shall have
the meanings ascribed to them in the Custodian Contract.
2. The Fund hereby instructs the Custodian to establish and maintain a
segregated account (the "Letter of Credit Custody Account") for and in behalf of
the Fund as contemplated by Section 2.13(iv) for the purpose of collateralizing
the Fund's obligations under this Amendment to the Custodian Contract.
3. The Fund shall deposit with the Custodian and the Custodian shall
hold in the Letter of Credit Custody Account cash, U.S. government securities
and other high-grade debt securities owned by the Fund acceptable to the
Custodian (collectively
<PAGE>
"Collateral Securities") equal to 125% of the face amount to the amount which
the Company may draw under the Letter of Credit. Upon receipt of such Collateral
Securities in the Letter of Credit Custody Account, the Custodian shall issue
the Letter of Credit to the Company.
4. The fund hereby grants to the Custodian a security interest in the
Collateral Securities from time to time in the Letter of Credit Custody Account
(the "Collateral") to secure the performance of the Fund's obligations to the
Custodian with respect to the Letter of Credit, including, without limitation,
under Section 5-114(3) of the Uniform Commercial Code. The Fund shall register
the pledge of Collateral and execute and deliver to the Custodian such powers
and instruments of assignment as may be requested by the Custodian to evidence
and perfect the limited interest in the Collateral granted hereby.
5. The Collateral Securities in the Letter of Credit Custody Account
may be substituted or exchanged (including substitutions or exchanges which
increase or decrease the aggregate value of the Collateral) only pursuant to
Proper Instructions from the Fund after the Fund notifies the Custodian of the
contemplated substitution or exchange and the Custodian agrees that such
substitution or exchange is acceptable to the Custodian.
6. Upon any payment made pursuant to the Letter of Credit by the
Custodian to the Company, after notice to the company, the Custodian may
withdraw from the Letter of Credit Custody Account Collateral Securities in an
amount equal in value to the amount actually so paid. The Custodian shall have
with respect to the Collateral so withdrawn all of the rights of a secured
creditor under the Uniform Commercial Code as adopted in the Commonwealth of
Massachusetts at the time of such withdrawal and all other rights granted or
permitted to it under law.
7. The Custodian will transfer upon receipt all income earned on the
Collateral to the Fund custody account unless the Custodian receives Proper
Instructions from the Fund to the contrary.
8. Upon the drawing by the Company of all amounts which may become
payable to it under the Letter of Credit and the withdrawal of all Collateral
Securities with respect thereto by the Custodian pursuant to Section 6 hereof,
or upon the termination of the Letter of Credit by the Fund with the written
consent of the Company, the Custodian shall transfer any Collateral Securities
then remaining in the Letter of Credit Custody Account to another fund custody
account.
9. Collateral held in the Letter of Credit Custody Account shall be
released only in accordance with the provisions of this Amendment to Custodian
Contract. The Collateral shall at all times until withdrawn pursuant to Section
6 hereof remain the property of the Fund, subject only to the extent of the
interest granted herein to the Custodian.
<PAGE>
10. Notwithstanding any other termination of the Custodian Contract,
the Custodian Contract shall remain in full force and effect with respect to the
Letter of Credit Custody Account until transfer of all Collateral Securities
pursuant to Section 8 hereof.
11. The Custodian shall be entitled to reasonable compensation for its
issuance of the Letter of Credit and for its services in connection with the
Letter of Credit Custody Account as agreed upon from time to time between the
Fund and the Custodian.
12. The Custodian Contract as amended hereby, shall be governed
by, and construed and interpreted under, the laws of the Commonwealth of
Massachusetts.
13. The parties agree to execute and deliver all such further documents
and instruments and to take such further action as may be required to carry out
the purposes of the Custodian Contract, as amended hereby.
14. Except as provided in this Amendment to Custody Contract, the
Custodian Contract shall remain in full force and effect, without amendment or
modification, and all applicable provisions of the Custodian Contract, as
amended hereby, including, without limitation, Section 8 thereof, shall govern
the Letter of Credit Custody Account and the rights and obligations of the Fund
and the Custodian under this Amendment to Custodian Contract. No provision of
this Amendment to Custodian Contract shall be deemed to constitute a waiver of
any rights of the Custodian under the Custodian Contract or under law.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
Custodian Contract to be executed in its name and behalf by its duly authorized
representatives and its seal to be hereunder affixed as of the 29th day of
February, 1988.
ATTEST:
By: D. M. JAFFE By: W. T. LONDON
D. M. Jaffe W. T. London
Treasurer
ATTEST: STATE STREET BANK & TRUST COMPANY
By: K. M. KNEELAND By: PHYLLIS A. SCHRODER
K. M. Kneeland Phyllis A. Schroder
Assistant Secretary Vice President
<PAGE>
EXHIBIT NO. 99.8(c)
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made as of this 1st day of October, 1989 by and between State
Street Bank and Trust Company (the "Custodian") and MFS Government Income Plus
Trust (the "Trust").
WHEREAS, the Custodian and the Trust are parties to a Custodian
Contract dated February 19, 1988 (the "Custodian Contract) which governs the
terms and conditions under which the Custodian maintains custody of the
securities and other assets of the Trust;
WHEREAS, the Custodian may delegate to Massachusetts Financial Services
Company ("MFS") the performance of certain duties the Custodian would otherwise
be obligated to perform pursuant to the Custodian Agreement;
WHEREAS, the Trust agrees to any such delegation of certain Custodian
duties;
NOW THEREFORE, the Custodian and the Trust hereby amend the terms of
the Custodian Contract and mutually agree to the following:
1) Add new Section 14 which shall read as follows:
14 Delegation of Certain Custodian Duties to MFS.
The Custodian may delegate to MFS the performance of any or all of
its duties hereunder relating to (i) accounting for investments in currency and
for financial instruments (including, without limitation, options, contracts,
futures contracts, options on futures contracts, options on foreign currency and
forward foreign currency exchange contracts) and (ii) federal and state
regulatory compliance. The Custodian shall compensate MFS for the performance of
such duties at such fee or fees as MFS shall determine to be equal to MFS's cost
for performing such duties (the "MFS Fees"). Following its payment of the MFS
Fees to MFS, the Custodian shall recover the amount of the MFS Fees and from the
Trust on such terms as the Custodian and the Trust shall agree. MFS assumes
responsibility for all duties delegated to it by the Custodian pursuant to this
Section 14, and the Custodian may rely on MFS for the accuracy and correctness
of the accounting information provided by MFS to the Custodian pursuant to this
Section 14.
IN WITNESS WHEREOF, each of the parties hereto have caused this
instrument to be executed in its name and on its behalf by a duly authorized
representative as of the aforementioned day and year.
ATTEST MFS GOVERNMENT INCOME PLUS TRUST
LINDA J. HOARD By: A. KEITH BRODKIN
Linda J. Hoard A. Keith Brodkin
ATTEST STATE STREET BANK & TRUST COMPANY
MARK MORGAN By: PHYLLIS A. SCHRODER
Mark Morgan Phyllis A. Schroder
Assistant Secretary Vice President
<PAGE>
EXHIBIT NO. 99.8(d)
AMENDMENT
The Custodian Contract dated February 19, 1988 between MFS Government
Income Plus Trust (referred to herein as the "Trust") and State Street Bank and
Trust Company (the "Custodian") is hereby amended as follows:
I. Section 2.1 is amended to read as follows:
"Holding Securities. The Custodian shall hold and physically
segregate for the account of the Trust all non-cash property, including all
securities owned by the Trust, other than (a) securities which are maintained
pursuant to Section 2.12 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust Company acts
as issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian pursuant to Section
2.12A.
II. Section 2.2 is amended to read, in relevant part as follows:
"Delivery of Securities. The Custodian shall release and
deliver securities owned by the Trust held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, and only in following cases:
1) . . . .
.
.
.
15) . . . ."
III. Section 2.8(1) is amended to read in relevant part as follows:
"Payment of Trust Monies. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Trust in the following cases only:
<PAGE>
1) Upon the purchase of securities, options, futures contracts
or options on futures contracts for the account of the Trust but only (a)
against the delivery of such securities or evidence of title to such options,
futures contracts or options on futures contracts, to the Custodian (or any
bank, banking firm or trust company doing business in the United States or
abroad which is qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian as its agent for
this purpose) registered in the name of the Trust or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof (c) in the case
of a purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; or (d) in the case of repurchase
agreements entered into between the Trust and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Trust of securities
owned by the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Trust or (e) for transfer to a
time deposit account of the Trust in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper Instructions from the Trust as defined in
Section 2.17;"
IV. Following Section 2.12 there is inserted a new Section
2.12.A to read as follows:
2.12.A "Trust Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain securities owned by the
Trust in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Trust in the Direct
Paper System only if such securities are represented in an account ("Account")
of the Custodian in the Direct Paper System which shall not include any assets
of the Custodian other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of
the Trust which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Trust;
<PAGE>
4) The Custodian shall pay for securities purchased for the
account of the Trust upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of securities to the account of the Trust.
The Custodian shall transfer securities sold for the account of the Trust upon
the making of an entry on the records of the Custodian to reflect such transfer
and receipt of payment for the account of the Trust:
5) The Custodian shall furnish the Trust confirmation of each
transfer to or from the account of the Trust, in the form of a written advice or
notice, of Direct Paper on the next business day following such transfer and
shall furnish to the Trust copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of the Trust;
6) The Custodian shall provide the Trust with any report on its
system of internal accounting control as the Trust may reasonably request from
time to time."
V. Section 9 is hereby amended to read as follows:
"Effective Period, Termination and Amendment. This Contract
shall become effective as of its execution, shall continue in full force and
effect until terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by either party by
an instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days after
the date of such delivery or mailing; provided, however that the Custodian shall
not act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Trust has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has reviewed the use by the Trust of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not act under
Section 2.12.A hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Board of Trustees has
reviewed the use by the Trust of the Direct Paper System; provided further,
however, that the Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Trust may at any
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
<PAGE>
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements."
Except as otherwise expressly amended and modified herein, the
provisions of the Custodian Contract shall remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed in its name and on its behalf by its duly authorized
representatives and its Seal to be hereto affixed as of the 17th day of
September, 1991.
ATTEST: MFS GOVERNMENT INCOME PLUS TRUST
LINDA J. HOARD By: W. T. LONDON
Linda J. Hoard W. T. London
Assistant Secretary Treasurer
ATTEST: STATE STREET BANK & TRUST COMPANY
JOE KENNALLY By: JOHN HENRICH
Joe Kennally John Henrich
Assistant Secretary Vice President
<PAGE>
EXHIBIT NO. 99.9(a)
MFS SERIES TRUST X
500 Boylston Street
Boston, Massachusetts 02116
September 1, 1995
MFS Service Center, Inc.
500 Boylston Street
Boston, Massachusetts 02116
Shareholder Servicing Agent Agreement
Dear Sir:
MFS Series Trust X which is a Massachusetts business trust (referred to
as the "Fund"), is an open-end registered investment company. The Fund has
selected you to act as its Shareholder Servicing Agent and you hereby agree to
act as such Agent and to perform the duties and functions thereof in the manner
and on the conditions hereinafter set forth. Accordingly, the Fund hereby agrees
with you as follows:
1. The Facility. You represent that you have the necessary computer
equipment, software and other office equipment ("Facility") adequate to perform
the services contemplated hereby for the Fund as well as for other investment
companies (such investment companies, together with the Fund, are herein
collectively referred to as the "MFS Funds") for which Massachusetts Financial
Services Company ("MFS") acts as investment adviser. The Facility is presently
located at 500 Boylston Street, Boston, Massachusetts, and is to be dedicated
solely to the performance of services for the MFS Funds, provided that the
Facility may be utilized to perform services for others with the permission of
the MFS Funds.
2. Name. Unless otherwise directed in writing by MFS, you shall
perform the services contemplated hereby under the name "MFS Service Center,
Inc.", which name and any similar names and any logos of which shall remain the
property and under the control of MFS. Upon termination of this Agreement, you
shall cease to use such name or any similar name within a reasonable period of
time.
3. Services to be Performed. As Shareholder Servicing Agent ("Agent"),
you shall be responsible for administering and performing transfer and dividend
and distribution disbursing
<PAGE>
functions in connection with the issuance, transfer and redemption of shares of
beneficial interest ("Shares"). The details of the operating standards and
procedures to be followed by you shall be determined from time to time by
agreement between you and the Fund.
4. Standard of Service. As Agent for the Fund, you agree to provide
service equal to or better than that provided by you or others furnishing
shareholder services to other open-end investment companies ("Standard") at a
fee comparable to the fee paid you for your services hereunder. The Standard
shall include at least the following:
(a) Prompt reconciliation of any differences as to the number of
outstanding shares between various Facility records or between Facility
records and records of the Fund's custodian;
(b) Prompt processing of shareholder correspondence and of other
matters requiring action by you;
(c) Prompt clearance of any daily volume backlog;
(d) Providing innovative services and technological improvements;
(e) Meeting the requirements of any governmental authority having
jurisdiction over you or the Fund; and
(f) Prompt reconciliation of all bank accounts under your control
belonging to the Fund or MFS.
If any MFS Fund serviced by you is reasonably of the view that the
service provided by you does not meet the Standard, it shall give you written
notice specifying the particulars, and you then shall have 120 days in which to
restore the service so that it meets the Standard, except that such period shall
be 180 days with respect to meeting that portion of the Standard described above
in item (d) of this paragraph 4. If at the end of such period the Fund remains
reasonably of the view that the service provided by you, in the particulars
specified, does not meet the Standard, then the MFS Fund or Funds having a
majority of the accounts for which you are then Agent may, by appropriate action
(including the concurrence of a majority of the Trustees of such MFS Fund or
Funds, who are not interested persons of MFS), elect to terminate this Agreement
for cause as to all such Funds upon 90 days notice to you. Upon termination
hereof, the Fund shall pay you such compensation as may be due to you as of the
date of such termination, and shall likewise reimburse you for any costs,
expenses, and disbursements reasonably incurred by you to such date in the
performance of your duties hereunder.
5. Purchase of Facility. In the event that you have given notice of
termination of this Agreement pursuant to the provisions of paragraph 14 hereof,
or for cause as provided in paragraph 4 hereof, the MFS Funds shall have the
right, but shall not be required (a) to purchase the Facility and assume the
unexpired portion of any leases of equipment or real estate relating to the
Facility from you at a price equal to your estimated unrecovered acquisition
value (as
<PAGE>
supported by the schedules and records used in determining monthly billings) of
the machinery, equipment, software, furniture, fixtures and leasehold
improvements included in the Facility, and (b) to negotiate with persons then
employed by you in the operation of the Facility and to hire all of them in
connection with the purchase of the Facility from you by the MFS Funds. You
agree to release each such employee from any contractual obligations such
persons may have to you that may interfere with such person's being hired at
such time by the MFS Funds and agree not to interfere with the negotiation and
hiring of any such persons at any such time. In the event that the MFS Funds
have given notice of termination of this Agreement pursuant to the provisions of
paragraph 14 hereof, for reasons other than cause as defined in paragraph 4
hereof, the MFS Funds shall purchase the Facility under the terms and conditions
set forth in subsections (a) and (b) of this paragraph 5.
You shall effect the transfer of the Facility pursuant to this
paragraph 5 upon the termination date specified in the notice, or at such other
time as shall be agreed upon by the parties hereto.
6. Rights in Data and Confidentiality. You agree that all records,
data, files, input materials, reports, forms and other data received, computed
or stored in the performance of this Agreement are the exclusive property of the
Fund and that all such records and other data shall be furnished without
additional charge, except for actual processing costs, to the Fund in machine
readable as well as printed form immediately upon termination of this Agreement
or at the Fund's request. You shall safeguard and maintain the confidentiality
of the Fund's data and information supplied to you by the Fund and you shall not
transfer or disclose the Fund's data to any third party without the Fund's prior
written consent unless compelled to do so by order of a court or regulatory
authority.
7. Fees. The fee per Fund shareholder account for your services
hereunder shall not be in excess of such amount as shall be agreed in writing
between us. Such fee shall be calculated daily and paid monthly based upon the
average daily net assets of the Fund or any series thereof, as set forth in
Exhibit A hereto. Such fee shall be subject to review at least annually and
fixed by the parties in good faith negotiation on the basis of a statement of
the expenses of the Facility prepared by you, which either you or the Fund may
require to be certified by a major accounting firm acceptable to the parties.
The party or parties requesting such certification shall bear all expenses
thereof. In addition to the foregoing fee, you will be reimbursed by the Fund
for out-of-pocket expenses reasonably incurred by you on behalf of the Fund,
including but not limited to expenses for stationery (including business forms
and checks), postage, telephone and telegraph line and toll charges, and
premiums for negotiable instrument insurance and similar items.
8. Record Keeping. You will maintain records in a form acceptable to
the Fund and in compliance with the rules and regulations of the Securities and
Exchange Commission, including but not limited to records required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder, which at all times will be the property of the Fund and will be
available for inspection and use by the Fund.
<PAGE>
9. Duty of Care and Indemnification. You will at all times act in good
faith in performing your duties hereunder. You will not be liable or responsible
for delays or errors by reason of circumstances beyond your control, including
acts of civil or military authority, national emergencies, labor difficulties,
fire, mechanical breakdown beyond your control, flood or catastrophe, acts of
God, insurrection, war, riots or failure beyond your control of transportation,
communication or power supply. The Fund will indemnify you against and hold you
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit not resulting from your bad faith or negligence, and
arising out of, or in connection with, your duties on behalf of the Fund
hereunder. In addition, the Fund will indemnify you against and hold you
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit as a result of your acting in accordance with any
instructions reasonably believed by you to have been executed or orally
communicated by any person duly authorized by the Fund or its Principal
Underwriter, or as a result of acting in accordance with written or oral advice
reasonably believed by you to have been given by counsel for the Fund, or as a
result of acting in accordance with any instrument or share certificate
reasonably believed by you to have been genuine and signed, countersigned or
executed by any person or persons authorized to sign, countersign or execute the
same (unless contributed to by your gross negligence or bad faith). In any case
in which the Fund may be asked to indemnify you or hold you harmless, the Fund
shall be advised of all pertinent facts concerning the situation in question and
you will use reasonable care to identify and notify the Fund promptly concerning
any situation which presents or appears likely to present a claim for
indemnification against the Fund. The Fund shall have the option to defend you
against any claim which may be the subject of this indemnification, and in the
event that the Fund so elects such defense shall be conducted by counsel chosen
by the Fund and satisfactory to you and it will so notify you, and thereupon the
Fund shall take over complete defense of the claim and you shall sustain no
further legal or other expenses in such situation for which you seek
indemnification under this paragraph, except the expense of any additional
counsel retained by you. You will in no case confess any claim or make any
compromise in any case in which the Fund will be asked to indemnify you except
with the Fund's prior written consent. The obligations of the parties hereto
under this paragraph shall survive the termination of this Agreement.
If any officer of the Fund shall no longer be vested with authority to
sign for the Fund, written notice thereof shall forthwith be given to you by the
Fund and until receipt of such notice by it, you shall be fully indemnified and
held harmless by the Fund in recognizing and acting upon certificates or other
instruments bearing the signatures or facsimile signatures of such officer.
10. Insurance. You will notify the Fund should any of your insurance
coverage be changed for any reason, such notification to include the date of
change and reason or reasons therefor.
<PAGE>
11. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed sufficient if mailed to either party at the
addresses set forth in this Agreement, or at such other addresses as the parties
hereto may designate by notice to each other.
12. Further Assurances. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
13. Use of a Sub- or Co-Transfer Agent. Notwithstanding any other
provision of this Agreement, it is expressly understood and agreed that you are
authorized in the performance of your duties hereunder to employ, from time to
time, one or more Sub-Transfer Agents and/or Co-Transfer Agents.
14. Termination. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing, which, except in the case of termination, shall be signed by the party
against which enforcement of such change, waiver or discharge is sought. Except
as otherwise provided in paragraph 4 hereof, this Agreement shall continue
indefinitely until terminated by 90 days' written notice given by the Fund to
you or by you to the Fund. Upon termination hereof, the Fund shall pay you such
compensation as may be due to you as of the date of such termination, and shall
likewise reimburse you for any costs, expenses, and disbursements reasonably
incurred by you to such date in the performance of your duties hereunder. You
agree to cooperate with the Fund and provide all necessary assistance in
effectuating an orderly transition upon termination of this Agreement.
15. Successor. In the event that in connection with termination a
successor to any of your duties or responsibilities hereunder is designated by
the Fund by written notice to you, you will, promptly upon such termination and
at the expense of the Fund, transfer to such successor a certified list of the
shareholders of the Fund (with name, address and tax identification or Social
Security number), an historical record of the account of each shareholder and
the status thereof, and all other relevant books, records, correspondence, and
other data established or maintained by you under this Agreement in form
reasonably acceptable to the Fund (if such form differs from the form in which
you have maintained the same, the Fund shall pay any expenses associated with
transferring the same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance from your
cognizant personnel in the establishment of books, records and other data by
such successor.
16. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of The Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same. A copy of the Fund's
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts. The obligations of or arising out of this instrument are not
binding upon any of the Fund's trustees, officers, employees, agents or
shareholders individually, but are binding
<PAGE>
solely upon the assets and property of the Fund in accordance with its
proportionate interest hereunder. If this Agreement is executed by the Fund on
behalf of one or more series of the Fund, you further acknowledge that the
assets and liabilities of each series of the Fund are separate and distinct and
that the obligations of or arising out of this Agreement are binding solely upon
the assets and property of the series on whose behalf the Fund has executed this
Agreement. If the Fund has executed this Agreement on behalf of more than one
series of the Fund, you also agree that the obligations of each series hereunder
shall be several and not joint, in accordance with its proportionate interest
hereunder, and you agree not to proceed against any series for the obligations
of another series. This Agreement supersedes and terminates, as of the date
hereof, the Shareholder Servicing Agent Agreement dated December 19, 1985, as
modified, among you, MFS and MFS Government Mortgage Fund.
Very truly yours,
MFS SERIES TRUST X
A. KEITH BRODKIN
A. Keith Brodkin
Chairman
The foregoing is hereby accepted as of the date thereof.
MASSACHUSETTS FINANCIAL SERVICES COMPANY
JEFFREY L. SHAMES
Jeffrey L. Shames
President
MFS SERVICE CENTER, INC.
JANET A. CLIFFORD
Janet A. Clifford
Executive Vice President
<PAGE>
ATTACHMENT 1
September 1, 1995
EXHIBIT A
1. The fees to be paid by the Fund on behalf of its series with respect to Class
A shares of each series of the Fund to MFSC, for MFSC's services as shareholder
servicing agent, shall be:
0.15% of the first $500 million of the assets of the series attributable to
such class;
0.12% of the second $500 million of the assets of the series attributable to
such class; and
0.09% of the assets of the series attributable to such class over $1 billion.
2. The fees to be paid by the Fund on behalf of its series with respect to Class
B shares of each series of the Fund to MFSC, for MFSC's services as shareholder
servicing agent, shall be:
0.22% of the first $500 million of the assets of the series attributable to
such class;
0.18% of the second $500 million of the assets of the series attributable to
such class; and
0.13% of the assets of the series attributable to such class over $1 billion
<PAGE>
EXHIBIT NO. 99.9(b)
EXCHANGE PRIVILEGE AGREEMENT
AGREEMENT, dated as of September 1, 1993 and as amended and restated as
of September 1, 1995, by and among each of the trusts (on behalf of each Series
thereof from time to time) listed below (collectively, the "Funds") and MFS Fund
Distributors, Inc. ("MFD").
WITNESSETH THAT:
WHEREAS, pursuant to the terms of a distribution agreement by and
between each Trust and MFD, MFD has the exclusive right to arrange for the sale
of shares of each class of each Fund at the net asset value used in determining
the public offering price on which orders for shares were based, but subject to
the exceptions therein set forth or referred to;
WHEREAS, the Funds have differing investment objectives as set out in
their offering prospectuses and consider it appropriate to make available to
existing and future shareholders of the Funds the opportunity to implement
changes in their investment objective through the acquisition, without sales
charge or reinitiating the time period used in calculating the amount of
contingent deferred sales charge assessable upon redemption, of the shares of a
class of any one or more of the Funds by use of the proceeds of redemption of
shares of the same class of any other Fund (herein referred to in various
grammatical forms of the word "exchange"), subject to reasonable conditions
designed to limit expense and administrative inconvenience or imposed in the
best interest of the other shareholders of any of the Funds;
WHEREAS, while MFS Money Market Fund, MFS Government Money Market Fund
and MFS Cash Reserve Fund (the "Money Market Funds") offer their respective
shares (Class A shares only in the case of MFS Cash Reserve Fund), to the public
without a sales charge, each recognizes the utility of permitting its shares
acquired through an exchange from Class A shares of another Fund to be
reexchanged for Class A shares of any other Fund, subject to the restrictions
hereinafter set forth;
WHEREAS, while certain Funds offer their respective Class A shares at a
sales charge less than that of the other Funds, each recognizes the utility of
permitting its Class A shares acquired through an exchange from Class A shares
of another Fund (except the Money Market Funds) or otherwise to be reexchanged
for Class A shares of any other Fund, subject to the restrictions hereinafter
set forth; and
<PAGE>
WHEREAS, MFD currently acts as the distributor of each of the Funds;
NOW, THEREFORE, the parties hereto agree as follows:
1(a). During the term of this Agreement, shares of each class of a Fund
may, subject to the restrictions hereinafter set forth, be offered by MFD as
agent at net asset value to shareholders of the same class (e.g., Class A for
Class A, Class B for Class B, etc.) of each of the other Funds, who wish to
apply the proceeds of redemption of shares of the same class of any such Fund,
provided that either the net asset value of the shares to be redeemed in the
exchange is at least $1,000 ($50 in the case of accounts of retirement plan
participants whose sponsoring organizations subscribe to the MFS Fundamental
401(k) Plan or another similar 401(k) recordkeeping system made available by MFS
Service Center, Inc.) or such other amount or amounts as from time to time
described in the current Prospectuses of the Funds or all the shares owned by
the shareholder in a particular class are to be redeemed. MFD may specify the
manner in which such shareholders may accept its offer to arrange for the sale
of such shares at net asset value (each such acceptance is hereinafter referred
to as an "Exchange Request").
1(b). For the purpose of calculating any applicable contingent deferred
sales charge upon redemption of shares acquired in an exchange, the purchase of
shares acquired in one or more exchanges will be deemed to have occurred at the
time of the original purchase of the exchanged shares (prior to their exchange).
1(c). Shares of the Money Market Funds (Class A shares only in the case
of MFS Cash Reserve Fund) may be exchanged for Class A shares of any other Fund
in accordance with paragraph 1(a) hereof, but only if they have been acquired by
an exchange effected in accordance with paragraph 1(a) hereof from Class A
shares of another Fund (except the Money Market Funds) or in the form of
dividends on Money Market Fund shares (Class A shares only in the case of MFS
Cash Reserve Fund) reinvested on and after June 1, 1992. Shares of the Money
Market Funds (Class A shares only in the case of MFS Cash Reserve Fund) acquired
through direct purchase or in the form of dividends on such shares reinvested
prior to June 1, 1992 may not be exchanged for shares of another Fund.
2. MFD shall process all exchanges in the usual manner as though they
were unrelated purchases and sales. MFD may charge the shareholder a reasonable
amount for its services in effecting the exchange. MFD shall report daily to the
Funds concerning all exchanges made pursuant to this Agreement. MFD will not
seek reimbursement from the Funds for any expenses incurred by it in connection
with any such purchases.
<PAGE>
3. Each of the Funds may, by written notice to each of the other Funds
and MFD, terminate its exchange offer provided by this Agreement and require MFD
and the other Funds to terminate the exchange offer in respect of the shares of
the Fund so giving notice. MFD may by written notice to any Fund terminate its
services in effecting such exchanges on behalf of such Fund. The exchange offers
with respect to shares of a Fund made by MFD to the shareholders of the other
Funds pursuant to this Agreement shall in any event be terminated effective upon
the termination of the services of MFD as distributor of the shares of such
Fund.
4. Nothing in this Agreement shall modify or reduce the obligations of
a Fund or MFD contained in the distribution agreement, if any, between MFD and
such Fund as the same may from time to time be modified or amended.
5. To the extent that a Fund's current Prospectus contains provisions
that are inconsistent with the terms of this Agreement, the terms of the
Prospectus shall be controlling.
6. This Agreement hereby supersedes all prior or contemporaneous
agreements between the parties hereto relating to the subject matter hereof.
7. The terms of this Agreement shall become effective as of the date
first above written.
8. A copy of the Declaration of Trust of each Fund is on file with the
Secretary of State of The Commonwealth of Massachusetts. MFD acknowledges that
the obligations of or arising out of this instrument are not binding upon any of
the Funds' trustees, officers, employees, agents or shareholders individually,
but are binding solely upon the assets and property of the Fund. If this
instrument is executed by a Fund on behalf of one or more series of the Fund,
MFD further acknowledges that the assets and liabilities of each series of the
Fund 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 Fund has executed this instrument. If a Fund has executed this
instrument on behalf of more than one series of the Fund, MFD also agrees that
the obligations of each series hereunder shall be several and not joint, in
accordance with its proportionate interest hereunder, and MFD 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 date first above written and caused their seals to be affixed by their
representatives thereunto duly authorized.
MFS SERIES TRUST I
MFS SERIES TRUST II
MFS SERIES TRUST III
MFS SERIES TRUST IV
MFS SERIES TRUST V
MFS SERIES TRUST VI
MFS SERIES TRUST VII
MFS SERIES TRUST VIII
MFS SERIES TRUST IX
MFS SERIES TRUST X
MFS MUNICIPAL SERIES TRUST
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GOVERNMENT LIMITED MATURITY FUND
MASSACHUSETTS INVESTORS TRUST
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman
MFS FUND DISTRIBUTORS, INC.
By: WILLIAM W. SCOTT, JR.
William W. Scott, Jr.,
President
<PAGE>
November 28, 1995
MFS Series Trust X
500 Boylston Street
Boston, MA 02116
Re: Post-Effective Amendment No. 13 to Registration Statement on Form N-1A
(File No. 33-1657) (the "Registration Statement") for MFS Series Trust X
(the "Trust") on Behalf of MFS Government Mortgage Fund
Gentlemen:
I am Senior Counsel of Massachusetts Financial Services Company, which
serves as investment adviser to the Trust, and the Assistant Secretary Pro
Tempore of the Trust. I am admitted to practice law in The Commonwealth of
Massachusetts. The Trust was created under a written Declaration of Trust
dated November 18, 1985, and executed and delivered in Boston, Massachusetts,
as amended and restated January 19, 1995 and amended June 2, 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 Trust, 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 Trust 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 (without par value) ("Shares") authorized to be issued under the
Declaration of Trust is unlimited.
By vote adopted on January 18, 1995, the Trustees of the Trust determined to
sell to the public the authorized but unissued shares of beneficial interest of
the Trust for cash at a price which will net the Trust (before taxes) not less
than the net asset value thereof, as defined in the Trust's By-Laws, determined
next after the sale is made or at some later time after such sale.
<PAGE>
The Trust is about to register under the Securities Act of 1933, as amended,
58,685,834 shares of beneficial interest by Post-Effective Amendment No. 13 to
the Trust's Registration Statement. W. Thomas London, Treasurer of the Trust,
has certified that the Trust received cash consideration for the issuance of
each of the Shares of the Trust sold during the Trust's fiscal year ended July
31, 1995, including the 58,642,744 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 Trust (before taxes) not less than
the net asset value per share, as defined in the Trust's Declaration of Trust,
determined next after the sale was made.
I am of the opinion that all necessary Trust action precedent to the issue
of the Shares of the Trust, comprising the shares covered by Post-Effective
Amendment No. 13 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 by the Trust upon receipt by the Trust or its agent
of consideration thereof in accordance with the terms described in the
Registration Statement, subject to compliance with the Securities Act of 1933,
the Investment Company Act of 1940 and applicable state laws regulating the sale
of securities.
I consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to Post-Effective Amendment No. 13 to the Registration
Statement.
Very truly yours,
JAMES F. DESMARAIS
James F. DesMarais
Assistant Secretary Pro Tempore
JFD/bjn
<PAGE>
EXHIBIT NO. 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 13 to Registration Statement No. 33-1657 of MFS Series Trust X on
behalf of MFS Government Mortgage Fund of our report dated September 8, 1995
appearing in the annual report to shareholders for the year ended July 31, 1995
of MFS Government Mortgage Fund, and to the references to us under the headings
"Condensed Financial Information" in the Prospectus and "Independent Accountants
and Financial Statements" in the Statement of Additional Information, which are
part of such Registration Statement.
/s/DELOITTE & TOUCHE, LLP
Boston, Massachusetts
November 27, 1995
<PAGE>
EXHIBIT NO. 99.13
MASSACHUSETTS FINANCIAL SERVICES COMPANY
200 BERKELEY STREET, BOSTON, MASSACHUSETTS
617 423-3500
December 13, 1986
MFS Goverment Securities High Yield Trust
200 Berkeley Street
Boston, Massachusetts 02116
Gentlemen:
In connection with our purchase of 10,499 Shares of Beneficial Interest
(without par value) of MFS Government Securities High Yield Trust, we hereby
represent and warrant to you that we are purchasing said shares as an investment
with no intention of redeeming or reselling said shares until a date at least
two years hereafter.
Very truly yours,
By: RICHARD B. BAILEY
Richard B. Bailey
Chairman
<PAGE>
EXHIBIT NO. 99.15(c)
MFS SERIES TRUST X
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
DISTRIBUTION PLAN
DISTRIBUTION PLAN with respect to the shares of beneficial interest to be
designated "Class A" of the MFS/Foreign & Colonial International Growth Fund
(the "Fund"), a series of MFS Series Trust X (the "Trust"), a Massachusetts
business trust, dated the 1st of September, 1995.
WITNESSETH:
WHEREAS, the Trust 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, the Trust intends 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 Distribution Plan (the "Plan") as a plan of distribution pursuant to such
Rule; and
WHEREAS, the Trust 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 Trust 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
the sale of Shares; and
<PAGE>
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 any
ongoing maintenance commissions to Dealers (excluding service fees described in
paragraph 4), 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
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 as specified in
the Distribution Agreement 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 0.25% per annum of the
average daily net assets of the Fund attributable to the Shares. Such payments
shall commence following shareholder approval of the Plan but only upon
notification by the Distributor to the Fund of the commencement of the Plan (the
"Commencement Date"). All or a portion of the distribution fee paid by the Fund
to the Distributor may be paid by the Distributor to Dealers in consideration of
the Dealer's services as a dealer of the Shares. The Distributor may from time
to time establish minimum amount requirements and additional or different dealer
qualification standards or other criteria to be met by dealers for payment of
any fee under this paragraph 3. It is understood that the Distributor may, but
is not required to, pay reduced fees or no fees under this paragraph 3 to
Dealers with respect to assets represented by Shares that have converted
from shares of beneficial interest of the Fund designated "Class B."
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 on or after the
Commencement Date 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 with respect to Shares
sold prior to a 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 on or after
the Commencement Date 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 0.50% 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 Trust on behalf of 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.
<PAGE>
6. 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.
7. 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 vote of a majority of the
Trustees who are not "interested persons" of the Trust 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, however, 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 Trust.
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 a 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 Trust 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 1940 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.
<PAGE>
EXHIBIT NO. 99.15(d)
MFS SERIES TRUST X
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
DISTRIBUTION PLAN
DISTRIBUTION PLAN with respect to the shares of beneficial interest to be
designated "Class A" of the MFS/Foreign & Colonial International Growth and
Income Fund (the "Fund"), a series of MFS Series Trust X (the "Trust"), a
Massachusetts business trust, dated the 1st day of September, 1995.
WITNESSETH:
WHEREAS, the Trust 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, the Trust intends 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 Distribution Plan (the "Plan") as a plan of distribution pursuant to such
Rule; and
WHEREAS, the Trust 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 Trust 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
<PAGE>
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
the 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 any
ongoing maintenance commissions to Dealers (excluding service fees described in
paragraph 4), 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
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 as specified in
the Distribution Agreement 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 0.25% per annum of the
average daily net assets of the Fund attributable to the Shares. Such payments
shall commence following shareholder approval of the Plan but only upon
notification by the Distributor to the Fund of the commencement of the Plan (the
"Commencement Date"). All or a portion of the distribution fee paid by the Fund
to the Distributor may be paid by the Distributor to Dealers in consideration of
the Dealer's services as a dealer of the Shares. The Distributor may from time
to time establish minimum amount
<PAGE>
requirements and additional or different dealer qualification standards or other
criteria to be met by dealers for payment of any fee under this paragraph 3. It
is understood that the Distributor may, but is not required to, pay reduced fees
or no fees under this paragraph 3 to Dealers with respect to assets represented
by Shares that have converted from shares of beneficial interest of the Fund
designated "Class B."
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 on or after the
Commencement Date 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 with respect to Shares
sold prior to a 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 on or after
the Commencement Date 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 0.50% 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 Trust on behalf of 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.
<PAGE>
6. 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.
7. 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 vote of a majority of the
Trustees who are not "interested persons" of the Trust 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, however, 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 Trust.
<PAGE>
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 a 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 Trust 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 1940 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.
<PAGE>
EXHIBIT NO. 99.15(e)
MFS SERIES TRUST X
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
DISTRIBUTION PLAN
DISTRIBUTION PLAN with respect to the shares of beneficial interest to be
designated "Class A" of the MFS/Foreign & Colonial Emerging Markets Equity Fund
(the "Fund"), a series of MFS Series Trust X (the "Trust"), a Massachusetts
business trust, dated the 1st of September, 1995.
WITNESSETH:
WHEREAS, the Trust 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, the Trust intends 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 Distribution Plan (the "Plan") as a plan of distribution pursuant to such
Rule; and
WHEREAS, the Trust 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 Trust 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
<PAGE>
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
the 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 any
ongoing maintenance commissions to Dealers (excluding service fees described in
paragraph 4), 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
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 as specified in
the Distribution Agreement 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 0.25% per annum of the
average daily net assets of the Fund attributable to the Shares. Such payments
shall commence following shareholder approval of the Plan but only upon
notification by the Distributor to the Fund of the commencement of the Plan (the
"Commencement Date"). All or a portion of the distribution fee paid by the Fund
to the Distributor may be paid by the Distributor to Dealers in consideration of
the Dealer's services as a dealer of the Shares. The Distributor may from time
to time establish minimum amount
<PAGE>
requirements and additional or different dealer qualification standards or other
criteria to be met by dealers for payment of any fee under this paragraph 3. It
is understood that the Distributor may, but is not required to, pay reduced fees
or no fees under this paragraph 3 to Dealers with respect to assets represented
by Shares that have converted from shares of beneficial interest of the Fund
designated "Class B."
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 on or after the
Commencement Date 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 with respect to Shares
sold prior to a 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 on or after
the Commencement Date 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 0.50% 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 Trust on behalf of 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.
<PAGE>
6. 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.
7. 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 vote of a majority of the
Trustees who are not "interested persons" of the Trust 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, however, 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 Trust.
<PAGE>
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 a 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 Trust 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 1940 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.
<PAGE>
EXHIBIT NO. 99.15(f)
MFS SERIES TRUST X
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to be
designated "Class B" of the MFS/Foreign & Colonial International Growth Fund
(the "Fund"), a series of MFS Series Trust X (the "Trust"), a Massachusetts
business trust, dated the 1st day of September, 1995.
WITNESSETH:
WHEREAS, the Trust 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 Trust 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 Trust desires for MFS Fund Distributors, Inc., a Delaware
corporation, to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Trust has entered into a distribution agreement (the "Distribution
Agreement") (in a form approved by the Board of Trustees of the Trust 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 Trust 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
<PAGE>
WHEREAS, the Trust 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 Trust, 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 Trust 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
<PAGE>
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 a
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
<PAGE>
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 Trust 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, however, that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Trust 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,
however, 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.
<PAGE>
14. The Trust 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.
<PAGE>
EXHIBIT NO. 15(g)
MFS SERIES TRUST X
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to be
designated "Class B" of the MFS/Foreign & Colonial International Growth and
Income Fund (the "Fund"), a series of MFS Series Trust X (the "Trust"), a
Massachusetts business trust, dated the 1st day of September, 1995.
WITNESSETH:
WHEREAS, the Trust 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 Trust 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 Trust desires for MFS Fund Distributors, Inc., a Delaware
corporation, to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Trust has entered into a distribution agreement (the "Distribution
Agreement") (in a form approved by the Board of Trustees of the Trust 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 Trust 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
<PAGE>
WHEREAS, the Trust 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 Trust, 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 Trust 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
<PAGE>
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 a
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
<PAGE>
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 Trust 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, however, that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Trust 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,
however, 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.
<PAGE>
14. The Trust 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.
<PAGE>
EXHIBIT NO. 99.15(h)
MFS SERIES TRUST X
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to be
designated "Class B" of the MFS/Foreign & Colonial Emerging Markets Equity Fund
(the "Fund"), a series of MFS Series Trust X (the "Trust"), a Massachusetts
business trust, dated the 1st day of September, 1995.
WITNESSETH:
WHEREAS, the Trust 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 Trust 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 Trust desires for MFS Fund Distributors, Inc., a Delaware
corporation, to provide certain distribution services for the Fund (the
"Distributor"); and
WHEREAS, the Trust has entered into a distribution agreement (the "Distribution
Agreement") (in a form approved by the Board of Trustees of the Trust 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 Trust 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
<PAGE>
WHEREAS, the Trust 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 Trust, 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 Trust 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
<PAGE>
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 a
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
<PAGE>
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 Trust 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, however, that such
continuance is "specifically approved at least annually" by a vote of both a
majority of the Trustees of the Trust 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,
however, 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.
<PAGE>
14. The Trust 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.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS GOVERNMENT
MORTGAGE FUND CLASS A AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>001
<NAME> MFS GOVERNMENT MORTGAGE FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 1,353,250,045
<INVESTMENTS-AT-VALUE> 1,355,622,211
<RECEIVABLES> 13,642,208
<ASSETS-OTHER> 19,877
<OTHER-ITEMS-ASSETS> 157,067
<TOTAL-ASSETS> 1,369,441,363
<PAYABLE-FOR-SECURITIES> 20,134,375
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,254,191
<TOTAL-LIABILITIES> 23,388,566
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,471,569,421
<SHARES-COMMON-STOCK> 80,276,379
<SHARES-COMMON-PRIOR> 65,284,398
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 121,221
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 127,510,438
<ACCUM-APPREC-OR-DEPREC> 2,115,035
<NET-ASSETS> (1,346,052,797)
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 120,116,845
<OTHER-INCOME> 0
<EXPENSES-NET> 25,579,049
<NET-INVESTMENT-INCOME> (94,537,796)
<REALIZED-GAINS-CURRENT> (44,236,628)
<APPREC-INCREASE-CURRENT> 68,708,743
<NET-CHANGE-FROM-OPS> 119,009,911
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26,574,630)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (2,036,802)
<NUMBER-OF-SHARES-SOLD> 27,491,721
<NUMBER-OF-SHARES-REDEEMED> 14,375,598
<SHARES-REINVESTED> 1,875,858
<NET-CHANGE-IN-ASSETS> (306,930,559)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 50,624
<OVERDIST-NET-GAINS-PRIOR> 88,989,835
<GROSS-ADVISORY-FEES> 9,450,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,579,049
<AVERAGE-NET-ASSETS> 1,454,041,604
<PER-SHARE-NAV-BEGIN> 6.49
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> (0.42)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> (0.01)
<PER-SHARE-NAV-END> 6.65
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS GOVERNMENT
MORTGAGE FUND CLASS B AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>002
<NAME> MFS GOVERNMENT MORTGAGE FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 1,353,250,045
<INVESTMENTS-AT-VALUE> 1,355,622,211
<RECEIVABLES> 13,642,208
<ASSETS-OTHER> 19,877
<OTHER-ITEMS-ASSETS> 157,067
<TOTAL-ASSETS> 1,369,441,363
<PAYABLE-FOR-SECURITIES> 20,134,375
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,254,191
<TOTAL-LIABILITIES> 23,388,566
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,471,569,421
<SHARES-COMMON-STOCK> 122,148,159
<SHARES-COMMON-PRIOR> 189,497,087
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 121,221
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 127,510,438
<ACCUM-APPREC-OR-DEPREC> 2,115,035
<NET-ASSETS> (1,346,052,797)
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 120,116,845
<OTHER-INCOME> 0
<EXPENSES-NET> 25,579,049
<NET-INVESTMENT-INCOME> (94,537,796)
<REALIZED-GAINS-CURRENT> (44,236,628)
<APPREC-INCREASE-CURRENT> 68,708,743
<NET-CHANGE-FROM-OPS> 119,009,911
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (62,269,346)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,039,025
<NUMBER-OF-SHARES-REDEEMED> 75,797,892
<SHARES-REINVESTED> 4,409,939
<NET-CHANGE-IN-ASSETS> (306,930,559)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 50,624
<OVERDIST-NET-GAINS-PRIOR> 88,989,835
<GROSS-ADVISORY-FEES> 9,450,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,579,049
<AVERAGE-NET-ASSETS> 1,454,041,604
<PER-SHARE-NAV-BEGIN> 6.49
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> (0.38)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> (0.01)
<PER-SHARE-NAV-END> 6.65
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
