<PAGE> 1
As filed with the Securities and Exchange Commission on June 16, 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. 12
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 13
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, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on [date] pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on [date] pursuant to paragraph (a)(i)
/x/ 75 days after filing pursuant to paragraph (a)(ii)
/ / on [date] pursuant to paragraph (a)(ii) of rule 485.If
appropriate, check the following box:
/ / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
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, 1994 on September 29, 1994 and with respect to its fiscal year
ended July 31, 1995, will file a Rule 24f-2 Notice on or before October 2,
1995.
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<PAGE> 2
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY 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)
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
----------------- ------------------ -----------
<S> <C> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) * *
(b) * *
(c) Information Concerning Shares *
of the Funds - Performance Information
(d) * *
4 (a) The Funds; Investment Objective *
and Policies;
(b), (c) Investment Objective and Policies; *
5 (a) The Funds; Management of the Funds *
- Investment Adviser; Management of the
Funds - Sub-Adviser; Management of the
Funds - Foreign & Colonial Emerging
Markets Limited
(b) Front Cover Page; - Management of the Funds- *
Investment Adviser; Management of the
Funds - Sub-Adviser; Management of the
Funds - Foreign & Colonial Emerging Markets
Limited; Back Cover Page
(c), (d) Management of the Funds- Investment *
Adviser; Management of the Funds-Sub-Adviser;
Management of the Funds-Foreign &
Colonial Emerging Markets Limited
(e) Management of the Funds - *
Shareholder Servicing Agent; Back Cover Page
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
----------------- ------------------ -----------
<S> <C> <C>
(f) Expense Summary; Information Concerning Shares *
of the Funds - Expenses
(g) Investment Techniques - Portfolio Trading *
5A (a), (b), (c) * *
6 (a) Information Concerning Shares *
of the Funds - Description of Shares,
Voting Rights and Liabilities;
Information Concerning Shares
of the Funds - Redemptions and
Repurchases; Information
Concerning Shares of the Funds -
Purchases; Information Concerning
Shares of the Funds - Exchanges
(b) * *
(c), (d) Information Concerning Shares *
of the Funds - Description of Shares,
Voting Rights and Liabilities;
(e) Shareholder Services *
(f) Information Concerning Shares *
of the Funds - Distributions; Shareholder
Services - Distribution
Options
(g) Information Concerning Shares *
of the Funds - Tax Status; Information
Concerning Shares of the Funds -
Distributions
7 (a) Front Cover Page; Management *
of the Funds - Distributor; Back
Cover Page
(b) Information Concerning Shares *
of the Funds - Purchases; Information
Concerning Shares of the Funds -
Net Asset Value
(c) Information Concerning Shares *
of the Funds - Purchases; Information
Concerning Shares of the Funds -
Exchanges; Shareholder Services
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
----------------- ------------------ -----------
<S> <C> <C>
(d) Front Cover Page; Information *
Concerning Shares of the Funds -
Purchases
(e) Expense Summary; Information *
Concerning Shares of the
Funds - Distribution Plans;
Information Concerning Shares
of the Funds - Expenses
(f) Information Concerning Shares *
of the Funds - Distribution Plans
8 (a) Information Concerning Shares *
of the Funds - Purchases; Information
Concerning Shares of the Funds -
Redemptions and Repurchases
(b), (c), (d) Information Concerning Shares *
of the Funds - Redemptions and
Repurchases
9 * *
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
----------------- ------------------ -----------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * *
13 (a), (b), (c) * Investment Policies and
Restrictions
(d) * *
14 (a), (b) * Management of the Funds
(c) * Management of the Funds;
Appendix A
15 (a) * *
(b), (c) * Management of the Funds
16 (a) Management of the Funds Management of the Funds
(b) Management of the Funds Management of the Funds
(c) Expenses Management of the Funds;
Portfolio Transactions and
Brokerage Commissions
(d) * Management of the Funds
(e) * Portfolio Transactions
and Brokerage Commissions
(f) Information Concerning Shares Distribution Plans
of the Funds - Distribution Plans
(g) * *
(h) * Management of the Funds -
Custodian; Independent
Accountants; Back Cover
Page
(i) * Management of the Funds -
Shareholder Servicing Agent
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
----------------- ------------------ -----------
<S> <C> <C>
17 (a) * Portfolio Transactions and
Brokerage Commissions
(b) * *
(c), (d), (e) Portfolio Transactions and
Brokerage Commissions
18 (a) Information Concerning Shares Description of Shares, Voting
of the Funds - Description of Rights and Liabilities
Shares, Voting Rights and
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Services
of the Funds - Purchases; Shareholder
Services
(b) Information Concerning Shares Management of the Funds -
of the Funds - Net Asset Value; Distributor; Net Asset Value
Information Concerning Shares and Performance - Net Asset
of the Funds - Purchases Value
(c) * *
20 * Tax Status
21 (a) * Management of the Funds -
Distributor; Distribution
Plans
(b) * *
(c) * *
22 (a) * *
22 (b) * Determination of Net Asset
Value and Performance
23 * Independent Accountants
<FN>
- --------------------------------------
* Not Applicable
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
MFS(R)/FOREIGN & COLONIAL
INTERNATIONAL GROWTH FUND
MFS(R)/FOREIGN & COLONIAL
INTERNATIONAL GROWTH
AND INCOME FUND
MFS(R)/FOREIGN & COLONIAL PROSPECTUS
EMERGING MARKETS September 1, 1995
EQUITY FUND Class A Shares of Beneficial Interest
(Members of the MFS Family of Funds(R)) Class B Shares of Beneficial Interest
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Expense Summary......................................................................... 2
2. The Funds............................................................................... 3
3. Investment Objective and Policies....................................................... 4
International Growth Fund........................................................... 4
International Growth and Income Fund................................................ 4
Emerging Markets Equity Fund........................................................ 5
4. Investment Techniques................................................................... 5
5. Risk Factors............................................................................ 12
6. Management of the Funds................................................................. 15
7. Information Concerning Shares of the Funds.............................................. 17
Purchases........................................................................... 17
Exchanges........................................................................... 23
Redemptions and Repurchases......................................................... 23
Distribution Plans.................................................................. 25
Distributions....................................................................... 26
Tax Status.......................................................................... 26
Net Asset Value..................................................................... 27
Description of Shares, Voting Rights and Liabilities................................ 27
Performance Information............................................................. 28
Expenses............................................................................ 28
8. Shareholder Services.................................................................... 29
Appendix A -- Description of Bond Ratings............................................... 32
</TABLE>
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND (the "International Growth
Fund") -- The investment objective of the International Growth Fund is capital
appreciation. The Fund seeks to achieve its investment objective by investing,
under normal market conditions, at least 65% of its total assets in equity
securities of companies whose principal activities are outside the U.S. growing
at rates expected to be well above the growth rate of the overall U.S. economy.
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND (the "International
Growth and Income Fund") -- The investment objective of the International Growth
and Income Fund is capital appreciation and current income. The Fund seeks to
achieve its investment objective by investing primarily in equity and fixed
income securities of issuers whose principal activities are outside the U.S.
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND (the "Emerging Markets
Equity Fund") -- The investment objective of the Emerging Markets Equity Fund is
capital appreciation. The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 65% of its total assets in
equity securities of issuers located, or primarily conducting their business, in
emerging market countries.
No assurance can be given that the investment objective of the International
Growth Fund, the International Growth and Income Fund or the Emerging Markets
Equity Fund (individually or collectively hereinafter referred to as the "Fund"
or the "Funds") will be achieved.
<PAGE> 8
Each Fund is a diversified series of MFS Series Trust X (the "Trust"), an
open-end management investment company. The minimum initial investment generally
is $1,000 per account (see "Purchases").
THE FUNDS ARE INTENDED FOR INVESTORS WHO UNDERSTAND AND ARE WILLING TO ACCEPT
THE RISKS ENTAILED IN SEEKING CAPITAL APPRECIATION AND IN INVESTING IN FOREIGN
SECURITIES.
The Funds' 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. Each Fund also has retained as its sub-advisers Foreign &
Colonial Management Ltd. and Foreign & Colonial Emerging Markets Limited
(collectively, the "Sub-Adviser"), both of which are located at Exchange House,
Primrose Street, London EC2A 2NY, United Kingdom.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information concerning each Fund and
the Trust that a prospective investor ought to know before investing. The Trust,
on behalf of the Funds, has filed with the Securities and Exchange Commission
(the "SEC") a Statement of Additional Information, dated September 1, 1995,
which contains more detailed information about the Trust and each Fund and is
incorporated into this Prospectus by reference. See page 30 for a further
description of the information set forth in the Statement of Additional
Information. A copy of the Statement of Additional Information may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover for
address and phone number).
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE> 9
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
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%
</TABLE>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS):(2)
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------
INTERNATIONAL GROWTH INTERNATIONAL GROWTH EMERGING MARKETS
FUND AND INCOME FUND EQUITY FUND
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Management Fees.......................... 1.00% 1.00% 1.25%
Rule 12b-1 Fees(3)....................... 0.50% 0.50% 0.50%
Other Expenses (after expense
reimbursement)......................... 0.53% 0.58% 0.75%(4)
----- ----- -----
Total Operating Expenses (after expense
reimbursement)......................... 2.03% 2.08% 2.50%(4)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
--------------------------------------------------------------
INTERNATIONAL GROWTH INTERNATIONAL GROWTH EMERGING MARKETS
FUND AND INCOME FUND EQUITY FUND
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Management Fees.......................... 1.00% 1.00% 1.25%
Rule 12b-1 Fees(5)....................... 1.00% 1.00% 1.00%
Other Expenses (after expense
reimbursement)......................... 0.60% 0.65% 0.82%(4)
----- ----- -----
Total Operating Expenses (after expense
reimbursement)......................... 2.60% 2.65% 3.07%(4)
</TABLE>
- ---------------
(1) Purchases of $1 million or more are not subject to an initial sales charge;
however, a contingent deferred sales charge ("CDSC") of 1% will be imposed
on such purchases in the event of certain redemption transactions within 12
months following such purchases. See "Purchases" below.
(2) "Other Expenses" and "Total Operating Expenses" are based on estimates for
each Fund's fiscal year ending July 31, 1996.
(3) Each 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) 0.50% per annum
of the average daily net assets attributable to each Fund's Class A shares.
See "Distribution Plans" below. After a substantial period of time,
distribution expenses paid under these Plans, together with the initial
sales charge, may total more than the maximum sales charge that would have
been permissible if imposed entirely as an initial sales charge.
(4) MFS has agreed to bear, subject to reimbursement by the Emerging Markets
Equity Fund, until December 31, 2005, expenses of each class of shares of
the Fund such that the aggregate expenses of the Emerging Markets Equity
Fund's Class A shares and Class B shares do not exceed 2.50% and 3.07%,
respectively, of the Fund's average daily net assets on an annualized basis.
This arrangement may be terminated or revised by MFS at any time. See
"Information Concerning Shares of the Funds -- Expenses" below. Absent this
expense arrangement, estimated "Other Expenses" and "Total Operating
Expenses" for the Emerging Markets Equity Fund's Class A shares would be
0.86% and 2.61%, respectively, and estimated "Operating Expenses" and "Total
Operating Expenses" for the Emerging Markets Equity Fund's Class B shares
would be 0.93% and 3.18%, respectively.
(5) Each 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 (but not necessarily all of)
1.00% per annum of the average daily net assets attributable to each Fund's
Class B shares. See "Distribution Plans" below. After a substantial period
of time, distribution expenses paid under these Plans, together with any
CDSC
2
<PAGE> 10
payable upon redemption of Class B shares, may total more than the maximum
sales charge that would have been permissible if imposed entirely as an
initial sales charge.
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in each Fund, assuming (a) 5% annual return and, unless otherwise
noted, (b) redemption at the end of each of the time periods indicated:
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND
---------------------------------
PERIOD CLASS A CLASS B
--------------------------------------------------- ------- -------------------
<S> <C> <C> <C>
(1)
1 year............................................ $ 67 $ 66 $26
3 years........................................... 108 111 81
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH AND INCOME
FUND
---------------------------------
PERIOD CLASS A CLASS B
--------------------------------------------------- ------- -------------------
<S> <C> <C> <C>
(1)
1 year............................................ $ 68 $ 67 $ 27
3 years........................................... 110 112 82
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
---------------------------------
PERIOD CLASS A CLASS B
--------------------------------------------------- ------- -------------------
<S> <C> <C> <C>
(1)
1 year............................................ $ 72 $ 71 $ 31
3 years........................................... 122 125 95
</TABLE>
- ---------------
(1) Assumes no redemption.
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of each Fund
will bear directly or indirectly. More complete descriptions of the following
Fund expenses are set forth in the following sections: (i) varying sales charges
on share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases";
(iii) management fees -- "Management of the Funds"; 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 ANY FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
2. THE FUNDS
Each 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 policies.
This Prospectus relates to the International Growth Fund, the International
Growth and Income Fund and the Emerging Markets Equity Fund. Shares of the other
series of the Trust, MFS Government Mortgage Fund, are offered and sold pursuant
to a separate prospectus and statement of additional information. It is
anticipated that each Fund will commence offering its shares to the public on or
about September , 1995. Shares of each Fund are sold continuously to the
public. It is anticipated, however, that on or about November 3, 1995 each Fund
will cease offering its shares to new investors (except for existing
shareholders of the relevant Fund and participants contributing to retirement
plans qualified under Section 401(a) or 403(b) of the Internal Revenue Code of
1986, as amended) for a period of time. Two classes of shares of each 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 an
3
<PAGE> 11
annual distribution fee and a service fee. Class B shares are offered at net
asset value without an initial sales charge but subject to a CDSC and
Distribution Plan providing for an annual distribution fee and service fee which
are greater than the Class A distribution fee and service fee; Class B shares
will convert to Class A shares approximately eight years after purchase.
The Trust's Board of Trustees provides broad supervision over the affairs of the
Funds. The Adviser is responsible for the management of each Fund's assets
(including supervision of the Sub-Adviser) and the officers of the Trust are
responsible for the operations of each Fund. The Adviser manages each portfolio
from day to day in accordance with each Fund's investment objective and
policies. A majority of the Trustees are not affiliated with the Adviser or the
Sub-Adviser. The Trust also offers to buy back (redeem) shares of each Fund from
shareholders at any time at net asset value, less any applicable CDSC.
3. INVESTMENT OBJECTIVE AND POLICIES
Each Fund has a different investment objective which it pursues through separate
investment policies, as described below. The differences in objectives and
policies among the Funds can be expected to affect the market and financial risk
to which each Fund is subject and the performance of each Fund. The investment
objective and policies of each Fund may, unless otherwise specifically stated,
be changed by the Trustees of the Trust without a vote of the shareholders. A
change in a Fund's objective may result in the Fund having an investment
objective different from the objective which the shareholder considered
appropriate at the time of investment in the Fund. Any investment involves risk
and there is no assurance that the investment objective of any Fund will be
achieved.
INTERNATIONAL GROWTH FUND -- The International Growth Fund's investment
objective is to seek capital appreciation. The Fund seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of companies whose principal activities are
outside the U.S. growing at rates expected to be well above the growth rate of
the overall U.S. economy. The foreign growth securities in which the Fund may
invest include securities of more established companies which represent
opportunities for long-term growth. See "Investment Techniques -- Foreign Growth
Securities" below. The selection of securities is made solely on the basis of
potential for capital appreciation. Dividend and interest income from portfolio
securities, if any, is incidental to the Fund's investment objective of capital
appreciation.
The Fund may invest up to 25% of its total assets in securities of issuers
located, or primarily conducting their business, in emerging market countries.
See "Investment Techniques -- Emerging Market Securities" below.
While the Fund intends to invest primarily in equity securities, the Fund may
also invest up to 35% of its total assets (and generally expects to invest not
more than 20% of its total assets) in fixed income securities of government,
government-related, supranational and corporate issuers whose principal
activities are outside the U.S., including up to 10% of its total assets in
fixed income securities rated Ba or lower by Moody's Investors Service, Inc.
("Moody's") or BB or lower by Standard & Poor's Rating Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch") and comparable unrated securities. See "Risk
Factors -- Lower Rated Fixed Income Securities" below. The Adviser and
Sub-Adviser consider a variety of factors in selecting fixed income securities
to achieve capital appreciation, including the creditworthiness of issuers,
interest rates and currency exchange rates.
It is anticipated that initially approximately 75% of the Fund's assets will be
invested in foreign growth securities (including 30% in securities of
established companies) and approximately 25% of its assets will be invested in
emerging market securities. Such allocation will change from time to time.
INTERNATIONAL GROWTH AND INCOME FUND -- The International Growth and Income
Fund's investment objective is to seek capital appreciation and current income.
The Fund seeks to achieve its objective by investing primarily in equity and
fixed income securities of issuers whose principal activities are outside the
U.S.
The Fund will invest, under normal market conditions, at least 65% of its total
assets (and generally expects to invest a substantial portion of its total
assets) in a combination of the following:
(a) equity securities of foreign "blue chip" companies and foreign growth
companies. See "Investment Techniques -- Foreign Growth Securities" below.
The Fund considers a security to be "blue chip" if the total equity market
capitalization of the issuer is at least U.S. $1 billion; and
4
<PAGE> 12
(b) fixed income securities of government, government-related, supranational
and corporate issuers whose principal activities are outside the U.S. The
Fund may invest up to 50% (and generally expects to invest between 25% and
30%) of its total assets in fixed income securities, including up to 25%
of its total assets in fixed income securities rated below Ba or lower by
Moody's or BB or lower by S&P or Fitch and comparable unrated securities.
See "Risk Factors -- Lower Rated Fixed Income Securities" below.
The Fund may invest up to 10% of its total assets in securities of issuers
located, or primarily conducting their business, in emerging market countries.
See "Investment Techniques -- Emerging Market Securities" below.
EMERGING MARKETS EQUITY FUND -- The Emerging Markets Equity Fund's investment
objective is to seek capital appreciation. The Fund seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of issuers located, or primarily conducting
their business, in emerging market countries. The Adviser and the Sub-Adviser
expect to take a global approach to portfolio management by weighting the Fund's
investments towards countries in Latin America, Asia, Africa, the Middle East
and the developing countries of Europe, primarily in Eastern Europe. See
"Investment Techniques -- Emerging Market Securities" below. The selection of
securities is made solely on the basis of potential for capital appreciation.
Dividend and interest income from portfolio securities, if any, is incidental to
the Fund's investment objective of capital appreciation.
While the Fund intends to invest primarily in equity securities, the Fund may
also invest up to 35% of its total assets in fixed income securities of
government, government-related, supranational and corporate issuers whose
principal activities are outside the U.S., rated Ba or lower by Moody's or BB or
lower by S&P or Fitch and comparable unrated securities. See "Risk Factors --
Lower Rated Fixed Income Securities" below. The Adviser and the Sub-Adviser
consider a variety of factors in selecting fixed income securities to achieve
capital appreciation, including the creditworthiness of issuers, interest rates
and currency exchange rates.
------------------------------
The Funds do not intend to emphasize any particular country or region in making
their investments, but under normal market conditions, each Fund will be
invested in at least three countries (outside the U.S.). Each Fund will seek to
reduce risk by investing its assets in a number of markets and issuers,
performing credit analyses of potential investments and monitoring current
developments and trends in both the international economy and financial markets.
Each Fund may invest in all types of equity securities, including the following:
common stocks, preferred stocks and preference stocks; securities such as bonds,
warrants or rights that are convertible into stocks; and depositary receipts for
those securities. These securities may be listed on securities exchanges, traded
in various over-the-counter markets or have no organized market.
For defensive reasons or during times of international political or economic
uncertainty or turmoil, most or all of each Fund's investments may be in cash
(U.S. dollars, foreign currencies or multinational currency units) and/or
securities that are denominated in U.S. dollars or whose issuers are domiciled
in the U.S. Each Fund is not restricted as to the portions of its assets which
may be invested in securities denominated in a particular currency and up to
100% of each Fund's total assets may be invested in securities denominated in
foreign currencies and multinational currency units.
4. INVESTMENT TECHNIQUES
Consistent with each Fund's investment objective and policies, each Fund may
engage in the following investment techniques, many of which are described more
fully in the Statement of Additional Information. See "Investment Policies and
Restrictions" in the Statement of Additional Information.
5
<PAGE> 13
FOREIGN GROWTH SECURITIES
Each Fund may invest in securities of foreign growth companies, including
established foreign companies, whose rates of earnings growth are expected to
accelerate because of special factors, such as rejuvenated management, new
products, changes in consumer demand, or basic changes in the economic
environment or which otherwise represent opportunities for long-term growth. See
"Risk Factors" below. It is anticipated that these companies will primarily be
in nations with more developed securities markets, such as Japan, Australia,
Canada, New Zealand and most Western European countries, including Great
Britain.
EMERGING MARKET SECURITIES
Each Fund may invest in securities of issuers located in countries or regions
with relatively low gross national product per capita compared to the world's
major economies, and in countries or regions with the potential for rapid
economic growth (emerging markets). Emerging markets will include any country:
(i) having an "emerging stock market" as defined by the International Finance
Corporation; (ii) with low- to middle-income economies according to the
International Bank for Reconstruction and Development (the World Bank); (iii)
listed in World Bank publications as developing; or (iv) determined by the
Adviser or the Sub-Adviser to be an emerging market as defined above. Each Fund
may invest in securities of: (i) companies the principal securities trading
market for which is an emerging market country; (ii) companies organized under
the laws of, and with a principal office in, an emerging market country; (iii)
companies whose principal activities are located in emerging market countries;
or (iv) companies traded in any market that derive 50% or more of their total
revenue from either goods or services produced in an emerging market or sold in
an emerging market. See "Risk Factors -- Emerging Markets" below.
FIXED INCOME SECURITIES: Fixed income securities in which each Fund may invest
include all types of long- or short-term debt obligations, such as bonds, notes,
bills, debentures, loans, loan assignments and commercial paper. Each Fund may
invest in emerging market fixed income securities, which, in addition to the
securities identified above, may take the form of interests issued by entities
organized and operated for the purpose of restructuring the investment
characteristics of instruments issued by emerging market country issuers. Fixed
income securities in which each Fund may invest include securities in the lower
rating categories of recognized rating agencies and comparable unrated
securities. See "Risk Factors" below. The International Growth Fund will not
invest more than 10% of its total assets, the International Growth and Income
Fund will not invest more than 25% of its total assets and the Emerging Markets
Equity Fund will not invest more than 35% of its total assets, in fixed income
securities rated Ba or lower by Moody's or BB or lower by S&P or Fitch and
comparable unrated securities. See "Risk Factors -- Lower Rated Fixed Income
Securities" below. However, because most foreign fixed income securities are not
rated, a Fund will invest in foreign fixed income securities primarily based on
the Adviser's or the Sub-Adviser's credit analysis without relying on published
ratings.
INVESTMENT IN OTHER INVESTMENT COMPANIES: Each Fund may invest in other
investment companies to the extent permitted by the 1940 Act (i) as a means by
which the Fund may invest in securities of certain countries which do not
otherwise permit investment, (ii) as a means to purchase thinly traded
securities of emerging market companies, or (iii) when the Adviser or the
Sub-Adviser believes such investments may be more advantageous to the Fund than
a direct market purchase of securities. If a Fund invests in such investment
companies, the Fund's shareholders will bear not only their proportionate share
of the expenses of the Fund (including operating expenses and the fees of the
Adviser) but also will indirectly bear similar expenses of the underlying
investment companies.
PRIVATIZATIONS: The governments in some countries, including emerging market
countries, have been engaged in programs of selling part or all of their stakes
in government owned or controlled enterprises ("privatizations"). Each Fund may
invest in privatizations. In certain countries, the ability of foreign entities
to participate in privatizations may be limited by local law and the terms on
which the foreign entities may be permitted to participate may be less
advantageous than those afforded local investors.
DEPOSITARY RECEIPTS: Each Fund may invest in American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs") and other types of depositary
receipts. ADRs are certificates issued by a U.S. depositary (usually a bank) and
represent a specified quantity of shares of an underlying non-U.S. stock on
deposit with a custodian bank as collateral. GDRs and other types of depositary
receipts are typically issued by foreign banks or trust companies and evidence
ownership of underlying securities issued by either a foreign or a U.S. company.
Generally, ADRs are in registered form and are designed for use in
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U.S. securities markets and GDRs are in bearer form and are designed for use in
foreign securities markets. For the purposes of a Fund's policy to invest a
certain percentage of its assets in foreign securities, the investments of a
Fund in ADRs, GDRs and other types of depositary receipts are deemed to be
investments in the underlying securities.
BRADY BONDS: Each Fund may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented to date in Argentina, Brazil, Bulgaria,
Costa Rica, Ecuador, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay
and Venezuela. Brady Bonds have been issued only recently, and for that reason
do not have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets. U.S.
dollar-denominated, collateralized Brady Bonds, which may be fixed rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the bonds. Brady
Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and the history of defaults of countries issuing Brady Bonds with respect
to commercial bank loans by public and private entities, investments in Brady
bonds may be viewed as speculative.
STRUCTURED SECURITIES: Each Fund may invest a portion of its assets in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type of restructuring
involves the deposit with, or purchase by, an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans or Brady Bonds)
and the issuance by that entity of one or more classes of securities
("Structured Securities") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Securities to create securities
with different investment characteristics, such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Securities is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Securities of the type in
which each Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments. Each Fund is permitted to invest in a class of
Structured Securities that is either subordinated or unsubordinated to the right
of payment of another class. Subordinated Structured Securities typically have
higher yields and present greater risks than unsubordinated Structured
Securities. Structured Securities are typically sold in private placement
transactions, and there currently is no active trading market for Structured
Securities.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements in order
to earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, a Fund acquires securities subject to the seller's
agreement to repurchase at a specified time and price. If the seller becomes
subject to a proceeding under the bankruptcy laws or its assets are otherwise
subject to a stay order, the Fund's right to liquidate the securities may be
restricted (during which time the value of the securities could decline). As
discussed in the Statement of Additional Information, each Fund has adopted
certain procedures intended to minimize any such risk. Foreign repurchase
agreements may be less well secured than U.S. repurchase agreements, and may be
denominated in foreign currencies. They may also involve greater risk of loss if
the counterparty defaults. Some counterparties in these transactions may be less
creditworthy than those in U.S. markets.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: Fixed income
securities in which each Fund may invest also include zero coupon bonds,
deferred interest bonds and bonds on which the interest is payable in kind ("PIK
bonds"). Zero coupon and deferred interest bonds are debt obligations which are
issued or purchased at a significant discount from face value. The discount
approximates the total amount of interest the bonds will accrue and compound
over the period until maturity or the first interest payment date at a rate of
interest reflecting the market rate of the security at the time of issuance.
While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds provide for a period of delay before the regular payment
of interest begins. PIK bonds are debt obligations which provide that the issuer
thereof may, at its option, pay interest on
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<PAGE> 15
such bonds in cash or in the form of additional debt obligations. Such
investments benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments may experience greater
volatility in market value due to changes in interest rates and other factors
than debt obligations which make regular payments of interest. Each 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
under disadvantageous circumstances to satisfy the Fund's distribution
obligations.
INDEXED SECURITIES: Each Fund may invest in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indices or other
financial indicators. Most indexed securities are short to intermediate term
fixed income securities whose values at maturity or interest rates rise or fall
according to the change in one or more specified underlying instruments. Indexed
securities may be positively or negatively indexed (i.e., their 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.
LOANS AND OTHER DIRECT INDEBTEDNESS: Each Fund may invest a portion of its
assets in loans. By purchasing a loan, a Fund acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate,
government or other borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower. These loans are made
generally to finance internal growth, mergers, acquisitions, stock repurchases,
leveraged buy-outs and other corporate activities. Such loans may be in default
at the time of purchase. Each Fund may also purchase trade or other claims
against companies, which generally represent money owed by the company to a
supplier of goods and services. These claims may also be purchased at a time
when the company is in default. Certain of the loans acquired by a Fund may
involve revolving credit facilities or other standby financing commitments which
obligate the Fund to pay additional cash on a certain date or on demand.
The highly leveraged nature of many such loans may make such loans especially
vulnerable to adverse changes in economic or market conditions. Loans and other
direct investments may not be in the form of securities or may be subject to
restrictions on transfer, and only limited opportunities may exist to resell
such instruments. As a result, a Fund may be unable to sell such investments at
an opportune time or may have to resell them at less than fair market value. For
a further discussion of loans and the risks related to transactions therein, see
the Statement of Additional Information.
RESTRICTED SECURITIES: Each Fund may purchase securities that are not registered
under the Securities Act of 1933 (the "1933 Act") ("restricted securities"),
including those that can be offered and sold to "qualified institutional buyers"
under Rule 144A under the 1933 Act ("Rule 144A securities"). The Trust's Board
of Trustees determines, based upon a continuing review of the trading markets
for a specific Rule 144A security, whether such security is liquid and thus not
subject to a Fund's limitations on investing not more than 15% of its net assets
is illiquid investments. The Board of Trustees has adopted guidelines and
delegated to the Adviser the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain oversight
and is ultimately responsible for the determinations. The Board will carefully
monitor each Fund's investments in Rule 144A securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of decreasing the
level of liquidity in a Fund's portfolio to the extent that qualified
institutional buyers become for a time uninterested in purchasing Rule 144A
securities held in the Fund's portfolio. Subject to each Fund's 15% limitation
on investments in illiquid investments, a Fund may also invest in restricted
securities that may not be sold under Rule 144A, which presents certain risks.
As a result, a Fund might not be able to sell these securities when the Adviser
or Sub-Adviser wishes to do so, or might have to sell them at less than fair
value. In addition, market quotations are less readily available. Therefore,
judgment may at times play a greater role in valuing these securities than in
the case of unrestricted securities.
LENDING OF PORTFOLIO SECURITIES: Each Fund may seek to increase its income by
lending portfolio securities under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the SEC. Such loans
will usually be made only to member banks of the Federal Reserve System and
member firms (and subsidiaries thereof) of the New York
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<PAGE> 16
Stock Exchange, and would be required to be secured continuously by collateral,
including cash, letters of credit, U.S. Government securities or other liquid,
high grade debt securities maintained on a current basis at an amount at least
equal to the market value of the securities loaned. 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 entities deemed by the Adviser or the Sub-Adviser to
be of good standing, and when, in the judgment of the Adviser or the
Sub-Adviser, the consideration which can be earned currently from securities
loans of this type justifies the attendant risk. If the Adviser or the
Sub-Adviser determines to make securities loans, it is intended that the value
of the securities loaned would not exceed 30% of the value of the relevant
Fund's total assets.
WHEN-ISSUED OR FORWARD DELIVERY SECURITIES: Securities may be purchased on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
will be delivered to a 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 a Fund is not limited to
the amount of securities for which it may have commitments to purchase on such
basis, it is expected that under normal circumstances, a Fund will not commit
more than 10% of its assets to such purchases. A Fund does not pay for the
securities until received or start earning interest on them until the
contractual settlement date. In order to invest its assets immediately, while
awaiting delivery of securities purchased on such basis, a Fund will hold cash,
short-term money market instruments, U.S. Government securities or other liquid,
high grade debt securities in a segregated account to pay for the commitment.
Although the Funds do not intend to make such purchases for speculative
purposes, purchases of securities on such bases may involve more risk than other
types of purchases. For additional information concerning these securities, see
the Statement of Additional Information.
OPTIONS ON SECURITIES: Each Fund may write (sell) covered put and call options
on securities ("Options") and purchase put and call Options on securities that
are traded on foreign and U.S. securities exchanges and over the counter. A Fund
will write such Options for the purpose of increasing its return and/or
protecting the value of its portfolio. Each Fund may also write combinations of
put and call Options on the same security, known as "straddles." Such
transactions can generate additional premium income but also present increased
risk. Each Fund may purchase put or call Options in anticipation of declines in
the value of portfolio securities or increases in the value of securities to be
acquired.
Each Fund may purchase and sell options that are traded on foreign and 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. Each 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. Each Fund may also write over-the-counter options with
non-primary dealers, including foreign dealers, and will treat the assets used
to cover these options as illiquid.
Each Fund may also enter into options on the yield "spread," or yield
differential between two securities, a transaction referred to as a "yield
curve" option, for hedging and non-hedging purposes. 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. Yield curve options written by a Fund will be "covered" but could
involve additional risks, as discussed in the Statement of Additional
Information.
OPTIONS ON STOCK INDICES: Each Fund may write (sell) covered call and put
Options and purchase call and put Options on foreign and domestic stock indices
("Options on Stock Indices"). A Fund may write such options for the purpose of
increasing its current income and/or to protect its portfolio against declines
in the value of securities it owns or increases in the value of securities to be
acquired. When a Fund writes an option on a stock index, and the value of the
index moves adversely to the holder's position, the option will not be
exercised, and the Fund will either close out the option at a profit or allow it
to expire unexercised. The Fund will thereby retain the amount of the premium,
less related transaction costs, which will increase its gross
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income and offset part of the reduced value of portfolio securities or the
increased cost of securities to be acquired. Such transactions, however, will
constitute only partial hedges against adverse price fluctuations, since any
such fluctuations will be offset only to the extent of the premium received by
the Fund for the writing of the option, less related transaction costs. In
addition, if the value of an underlying index moves adversely to the Fund's
option position, the option may be exercised, and the Fund will experience a
loss which may only be partially offset by the amount of the premium received.
Each Fund may also purchase put or call options on stock indices in order,
respectively, to hedge its investments against a decline in value or to attempt
to reduce the risk of missing a market or industry segment advance. A Fund's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.
FUTURES CONTRACTS: Each Fund may enter into contracts for the purchase or sale
for future delivery of contracts based on indices of securities as such
instruments become available for trading or fixed income securities or foreign
currencies ("Futures Contracts"). Such transactions will be entered into for
hedging purposes, in order to protect a Fund's current or intended investments
from the effects of changes in interest or exchange rates, or for non-hedging
purposes to the extent permitted by applicable law. For example, in the event
that an anticipated decrease in the value of portfolio securities occurs as a
result of a decline in the dollar value of foreign currencies in which portfolio
securities are denominated or a general increase in interest rates, the adverse
effects of such changes may be offset, in whole or in part, by gains on Futures
Contracts sold by a Fund. Conversely, the adverse effects of an increase in the
cost of portfolio securities to be acquired, occurring as a result of a rise in
the dollar value of securities denominated in foreign currencies or a decline in
interest rates, may be offset, in whole or in part, by gains on Futures
Contracts purchased by a Fund. Each Fund will incur brokerage fees when it
purchases and sells Futures Contracts, and will be required to maintain margin
deposits. In addition, Futures Contracts entail risks. Although each Fund
believes that use of such contracts will benefit the Fund, if its investment
judgment about 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 and the Fund may realize a loss. Transactions entered into for
non-hedging purposes involve greater risk including the risk of losses which are
not offset by gains on other portfolio assets. Each Fund will not enter into any
Futures Contract if immediately thereafter the value of all securities and
obligations underlying such Futures Contracts would exceed 50% of the value of
its total assets.
OPTIONS ON FUTURES CONTRACTS: Each Fund may purchase and write options on
futures contracts ("Options on Futures Contracts") in order to protect against
declines in the values of portfolio securities or against increases in the cost
of securities to be acquired. Purchases of Options on Futures Contracts may
present less risk in hedging a Fund's portfolio than the purchase or sale of the
underlying Futures Contracts since the potential loss is limited to the amount
of the premium plus related transaction costs, although it may be necessary to
exercise the option to realize any profit, which results in the establishment of
a futures position. The writing of Options on Futures Contracts, however, does
not present less risk than the trading of Futures Contracts and will constitute
only a partial hedge, up to the amount of the premium received. In addition, if
an option is exercised, a Fund may suffer a loss on the transaction. Options on
Futures Contracts may also be entered into for non-hedging purposes, to the
extent permitted under applicable law, which involves greater risks and could
result in losses which are not offset by gains on other portfolio assets.
OPTIONS ON FOREIGN CURRENCIES: Each Fund may also purchase and write options on
foreign currencies ("Options on Foreign Currencies") for the purpose of
protecting against declines in the dollar value of foreign portfolio securities
and against increases in the dollar cost of foreign securities to be acquired.
As in the case of other types of options, however, the writing of an Option on
Foreign Currency will constitute only a partial hedge, up to the amount of the
premium received, and a Fund may be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an Option on Foreign Currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to a Fund's position, it may forfeit the entire amount of the premium
paid for the Option plus related transaction costs. Options on Foreign
Currencies to be written or purchased by a Fund will be traded on foreign and
U.S. exchanges or over-the-counter.
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FORWARD CONTRACTS: Each Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a fixed quantity of a foreign currency at
a future date at a price set at the time of the contract ("Forward Contracts").
Each Fund may enter into Forward Contracts for hedging purposes as well as for
the non-hedging purpose of increasing the Fund's current income. By entering
into transactions in Forward Contracts, however, a Fund may be required to
forego the benefits of advantageous changes in exchange rates and, in the case
of Forward Contracts entered into for non-hedging purposes, the Fund may sustain
losses which will reduce its gross income. Such transactions, therefore, could
be considered speculative. Forward Contracts are traded over-the-counter, and
not on organized commodities or securities exchanges. As a result, such
contracts operate in a manner distinct from exchange-traded instruments, and
their use involves certain risks beyond those associated with transactions in
Futures Contracts or options traded on exchanges. A Fund may also enter into a
Forward Contract on one currency in order to hedge against risk of loss arising
from fluctuations in the value of a second currency (referred to as a "cross
hedge") if, in the judgment of the Adviser or the Sub-Adviser, a reasonable
degree of correlation can be expected between movements in the values of the two
currencies. Each Fund has established procedures consistent with statements of
the SEC and its staff regarding the use of Forward Contracts by registered
investment companies, which requires use of segregated assets or "cover" in
connection with the purchase and sale of such contracts.
SWAPS AND RELATED TRANSACTIONS: As one way of managing its exposure to
different types of investments, each Fund may enter into interest rate swaps,
currency swaps and other types of available swap agreements, such as caps,
collars and floors. Swaps involve the exchange by a Fund with another party of
cash payments based upon different interest rate indices, currencies and other
prices or rates, such as the value of mortgage prepayment rates. For example, in
the typical interest rate swap, a 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.
Each 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.
Swap agreements will tend to shift a Fund's investment exposure from one type of
investment to another. For example, if a Fund agreed to exchange payments in
dollars for payments in foreign currency, in each case based on a fixed rate,
the swap agreement would tend to decrease the Fund's exposure to U.S. interest
rates and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions.
Swaps, caps, floors and collars are highly specialized activities which involve
certain risks. See the Statement of Additional Information for more information
on, and the risks involved in, these activities.
PORTFOLIO TRADING: While it is not generally each Fund's policy to invest or
trade for short-term profits, each Fund may dispose of a portfolio security
whenever the Adviser or the Sub-Adviser is of the opinion that such security no
longer has an appropriate appreciation potential or when another security
appears to offer relatively greater appreciation potential. Portfolio changes
are made without regard to the length of time a security has been held, or
whether a sale would result in a profit or loss. Therefore, the rate of
portfolio turnover is not a limiting factor when a change in the portfolio is
otherwise appropriate. It is anticipated that each Fund's portfolio turnover
rate will not exceed 300% during the Fund's first fiscal year. Transaction costs
incurred by each Fund and realized capital gains and losses of each Fund may be
greater than that of a fund with a lesser portfolio turnover rate.
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The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. Consistent with the foregoing primary
consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and such other policies as the Trustees
may determine, the Adviser may consider sales of shares of the Funds and of the
other investment company clients of MFD, the Funds' distributor, as a factor in
the selection of broker-dealers to execute the Funds' portfolio transactions.
From time to time, the Adviser and the Sub-Adviser may direct certain portfolio
transactions to broker-dealer firms which, in turn, have agreed to pay a portion
of a Fund's operating expenses (e.g., fee charged by the custodian of the Fund's
assets). For a further discussion of portfolio trading, see the Statement of
Additional Information.
5. RISK FACTORS
FOREIGN SECURITIES: Transactions involving foreign equity or debt securities or
foreign currencies, and transactions entered into in foreign countries, involve
considerations and risks not typically associated with investing in U.S.
markets. These include changes in currency rates, exchange control regulations,
governmental administration or economic or monetary policy (in the U.S. or
abroad) or circumstances in dealings between nations. Costs may be incurred in
connection with conversions between various currencies. Each Fund may invest up
to 100% of its assets in foreign securities which are not traded on a U.S.
exchange. Special considerations may also include more limited information about
foreign issuers, higher brokerage and custody costs, different or less stringent
accounting standards and thinner trading markets. Foreign securities markets may
also be less liquid, more volatile and less subject to government supervision
than in the U.S. Investments in foreign countries could be affected by other
factors including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations and could be subject to
extended settlement periods.
EMERGING MARKETS: The risks of investing in foreign securities may be
intensified in the case of investments in emerging markets. Securities of many
issuers in emerging markets may be less liquid and more volatile than securities
of comparable domestic issuers. Emerging markets also have different clearance
and settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets of a
Fund is uninvested and no return is earned thereon. The inability of a Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, in possible liability to the
purchaser. Certain markets may require payment for securities before delivery.
Securities prices in emerging markets can be significantly more volatile than in
the more developed nations of the world, reflecting the greater uncertainties of
investing in less established markets and economies. In particular, countries
with emerging markets may have relatively unstable governments, present the risk
of nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging
markets may be predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Securities of issuers
located in countries with emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. A Fund could be adversely affected
by a delay in obtaining a grant of, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.
Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the
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expenses of a Fund. See the Statement of Additional Information for a further
discussion of emerging markets securities as well as the associated risks.
ALLOCATION AMONG EMERGING MARKETS: Each Fund may allocate all or a portion of
its investments in emerging market securities among the emerging markets of
Latin America, Asia, Africa, the Middle East and the developing countries of
Europe, primarily in Eastern Europe. Each Fund will allocate its investments
among these emerging markets in accordance with the Adviser's and the
Sub-Adviser's determination as to the allocation most appropriate with respect
to the Fund's investment objective and policies. Each Fund may invest its assets
allocated to investment in emerging markets without limitation in any particular
region, and, in accordance with the Adviser's and the Sub-Adviser's investment
discretion, at times may invest all of its assets allocated to investment in
emerging markets in securities of emerging market issuers located in a single
region (e.g., Latin America). To the extent that a Fund's investments are
concentrated in one or a few emerging market regions, the Fund's investment
performance correspondingly will be more dependent upon the economic, political
and social conditions and changes in those regions. The ability of a Fund to
allocate its investments among emerging market regions without restriction may
have the effect of increasing the volatility of the Fund, as compared to a fund
which limits such allocations.
EMERGING GROWTH COMPANIES: Each Fund may invest in securities of emerging
growth companies, including established companies. Investing in emerging growth
companies involves greater risk than is customarily associated with investing in
more established companies. Emerging growth companies often have limited product
lines, markets or financial resources, and they may be dependent on one-person
management. The securities of emerging growth companies may have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. Similarly, many of the securities offering the capital appreciation
sought by the Funds will involve a higher degree of risk than would established
growth stocks.
FOREIGN CURRENCIES: Because each Fund may invest up to 100% of its asset in
securities denominated in currencies other than the U.S. dollar, and because
each Fund may hold foreign currencies, the value of a Fund's investments, and
the value of dividends and interest earned by a Fund, may be significantly
affected by changes in currency exchange rates. Some foreign currency values may
be volatile, and there is the possibility of governmental controls on currency
exchange or governmental intervention in currency markets, which could adversely
affect the Funds. Although the Adviser and Sub-Adviser may attempt to manage
currency exchange rate risks, there is no assurance that the Adviser and
Sub-Adviser will do so at an appropriate time or that the Adviser and
Sub-Adviser will be able to predict exchange rates accurately. For example, if
the Adviser and Sub-Adviser hedge a Fund's exposure to a foreign currency, and
that currency's value rises, the Fund will lose the opportunity to participate
in the currency's appreciation. Each Fund may hold foreign currency received in
connection with investments in foreign securities, and enter into Forward
Contracts, Futures Contracts and Options on Foreign Currencies when, in the
judgment of the Adviser or Sub-Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rates. While the holding of foreign currencies will permit a
Fund to take advantage of favorable movements in the applicable exchange rate,
it also exposes the Fund to risk of loss if such rates move in a direction
adverse to the Fund's position. Such losses could also adversely affect the
Fund's hedging strategies. See the Statement of Additional Information for
further discussion of the holding of foreign currencies as well as the
associated risks.
FIXED INCOME SECURITIES: To the extent a Fund invests in fixed income
securities, the net asset value of the Fund may change as the general levels of
interest rates fluctuate. When interest rates decline, the value of fixed income
securities can be expected to rise. Conversely, when interest rates rise, the
value of fixed income securities can be expected to decline. Each Fund is
subject to no restrictions on the maturities of the fixed income securities it
holds. A Fund's investments in fixed income securities with longer terms to
maturity are subject to greater volatility than the Fund's shorter-term
obligations.
LOWER RATED FIXED INCOME SECURITIES: Fixed income securities in which each Fund
may invest may be rated Baa by Moody's or BBB by S&P or Fitch (and comparable
unrated securities). For a description of these and other rating categories, see
Appendix A. These securities, while normally exhibiting adequate protection
parameters, have speculative characteristics and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher grade fixed income
securities.
13
<PAGE> 21
Each Fund may also invest in fixed income securities rated Ba or lower by
Moody's or BB or lower by S&P or Fitch (and comparable unrated securities). No
minimum rating standard is required by any Fund. These securities are considered
speculative and, while generally providing greater yield than investments in
higher rated securities, will involve greater risk of principal and income
(including the possibility of default or bankruptcy of the issuers of such
securities) and may involve greater volatility of price (especially during
periods of economic uncertainty or change) than securities in the higher rating
categories and because yields vary over time, no specific level of income can
ever be assured. These lower rated high yielding fixed income securities
generally tend to be affected by economic changes (and the outlook for economic
growth), short-term corporate and industry developments and the market's
perception of their credit quality (especially during times of adverse
publicity) to a greater extent than higher rated securities, which react
primarily to fluctuations in the general level of interest rates (although these
lower rated securities are also affected by changes in interest rates as
described below). In the past, economic downturns or an increase in interest
rates have, under certain circumstances, caused a higher incidence of default by
the issuers of these securities and may do so in the future, especially in the
case of highly leveraged issuers. During certain periods, the higher yields on a
Fund's lower rated high yielding fixed income securities are paid primarily
because of the increased risk of loss of principal and income, arising from such
factors as the heightened possibility of default or bankruptcy of the issuers of
such securities. Due to the fixed income payments of these securities, a Fund
may continue to earn the same level of interest income while its net asset value
declines due to portfolio losses, which could result in an increase in the
Fund's yield despite the actual loss of principal. The prices for these
securities may be affected by legislative and regulatory developments. The
market for these lower rated fixed income securities may be less liquid than the
market for investment grade fixed income securities. Furthermore, the liquidity
of these lower rated securities may be affected by the market's perception of
their credit quality. Therefore, the Adviser's and the Sub-Adviser's judgment
may at times play a greater role in valuing these securities than in the case of
investment grade fixed income securities, and it also may be more difficult
during times of certain adverse market conditions to sell these lower rated
securities to meet redemption requests or to respond to changes in the market.
While the Adviser and the Sub-Adviser may refer to ratings issued by established
credit rating agencies, it is not any Fund's policy to rely exclusively on
ratings issued by these rating agencies, but rather to supplement such ratings
with the Adviser's and the Sub-Adviser's own independent and ongoing review of
credit quality. A Fund's achievement of its investment objective may be more
dependent on the Adviser's and the Sub-Adviser's own credit analysis than in the
case of an investment company primarily investing in higher quality fixed income
securities.
Since shares of each Fund represent an investment in securities with fluctuating
market prices, shareholders should understand that the value of shares of the
Fund will vary as the aggregate value of the portfolio securities of the Fund
increases or decreases. However, changes in the value of securities subsequent
to their acquisition will not affect cash or yield to maturity to a Fund.
TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS: Although each
Fund may enter into transactions in Options, Options on Stock Indices, Forward
Contracts, Futures Contracts, Options on Futures Contracts and Options on
Foreign Currencies for hedging purposes, such transactions nevertheless involve
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 a Fund's hedging strategy
unsuccessful and could result in losses. Each Fund also may enter into
transactions in Options, Options on Stock Indices, Forward Contracts, Futures
Contracts and Options on Futures Contracts for other than hedging purposes, to
the extent permitted by applicable law, which involves greater risk. In
particular, such transactions may result in losses for a 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 a Fund may be required to maintain a position
until exercise or expiration, which could result in losses. The Statement of
Additional Information contains a description of the nature and trading
mechanics of Options, Options on Stock Indices, Futures Contracts, Options on
Futures Contracts, Forward Contracts and Options on Foreign Currencies, and
includes a discussion of the risks related to transactions therein.
Transactions in Forward Contracts may be entered into only in the
over-the-counter market. Futures Contracts and Options on Futures Contracts may
be entered into on U.S. exchanges regulated by the Commodity Futures Trading
Commission and on
14
<PAGE> 22
foreign exchanges. In addition, the securities underlying Options and Futures
Contracts traded by a Fund will include U.S. Government securities as well as
foreign securities.
------------------------------
The Statement of Additional Information includes a discussion of investment
policies and a listing of specific investment restrictions which govern each
Fund's investment policies. The specific investment restrictions listed in the
Statement of Additional Information may be changed without shareholder approval
unless otherwise indicated. See "Investment Policies and Restrictions" in the
Statement of Additional Information.
Each Fund's investment limitations, policies and rating standards are adhered to
at the time of purchase or utilization of assets; a subsequent change in
circumstances will not be considered to result in a violation of policy.
6. MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER -- The Adviser manages each Fund pursuant to separate
Investment Advisory Agreements, each dated September , 1995 (the "Advisory
Agreements"). The Adviser provides each 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 each Fund. For its services and facilities, the Adviser receives
an annual management fee computed and paid monthly, in an amount equal to the
following annual rates of the average daily net assets of each Fund:
<TABLE>
<CAPTION>
PERCENTAGE OF THE AVERAGE
DAILY NET ASSETS
FUND OF EACH FUND
--------------------------------------------------------------- -------------------------
<S> <C>
International Growth Fund...................................... 1.00%
International Growth and Income Fund........................... 1.00%
Emerging Markets Equity Fund................................... 1.25%
</TABLE>
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), currently funds, and to MFS(R)
Municipal Income Trust, MFS Multimarket Income Trust, MFS Government Markets
Income Trust, MFS Intermediate Income Trust, MFS Charter Income Trust, MFS
Special Value Trust, MFS Union Standard Trust, MFS Institutional Trust, MFS
Variable Insurance Trust, MFS/Sun Life Series Trust, Sun Growth Variable Annuity
Trust, 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., 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 U.S., Massachusetts Investors Trust.
Net assets under the management of the MFS organization were approximately
$ billion on behalf of approximately million investor accounts as of
, 1995. As of such date, the MFS organization managed approximately
$ billion of assets in equity securities, approximately $ billion of
assets invested in fixed income funds and fixed income portfolios and
approximately $ billion of assets in foreign securities. MFS is a
subsidiary of Sun Life of Canada (U.S.), which in turn is a subsidiary of Sun
Life Assurance Company of Canada ("Sun Life"). The Directors of MFS are A. Keith
Brodkin, Jeffrey L. Shames, Arnold D. Scott, John D. McNeil and John R. Gardner.
Mr. Brodkin is the Chairman, Mr. Shames is the President and Mr. Scott is the
Secretary and a Senior Executive Vice President of MFS. Messrs. McNeil and
Gardner are the Chairman and President, respectively, of Sun Life. Sun Life, a
mutual life insurance company, is one of the largest international life
insurance companies and has been operating in the 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 of MFS, is also the Chairman and President of the
Trust. W. Thomas London, Stephen E. Cavan, James O. Yost and James R. Bordewick,
Jr., all of whom are officers of MFS, are officers of the Trust.
15
<PAGE> 23
FCM -- Each Advisory Agreement permits the Adviser from time to time to engage
one or more sub-advisers to assist in the performance of its services. Pursuant
to each Advisory Agreement, the Adviser has engaged Foreign & Colonial
Management Ltd., a company incorporated under the laws of England and Wales
("FCM"), located at Exchange House, Primrose Street, London EC2A 2NY, United
Kingdom, as sub-adviser to render advisory services to the Funds. FCM is a
wholly owned subsidiary of Hypo Foreign & Colonial Management (Holdings) Ltd.
("Hypo F&C"). Fifty percent of the outstanding voting securities of Hypo F&C is
owned by each of (i) Pountney Hill Holdings Ltd, which is wholly owned by five
closed-end, publicly listed investment trusts managed by FCM, including Foreign
& Colonial Investment Trust PLC, and (ii) Hypo (U.K.) Holdings Ltd., which is a
wholly owned subsidiary of HYPO-BANK (Bayerische Hypotheken-und Wechsel-Bank
AG), the oldest publicly listed, and fifth largest, commercial bank in Germany,
founded in 1835. FCM has a history of money management dating from 1868 and the
establishment of the world's oldest closed-end fund, Foreign & Colonial
Investment Trust PLC. As of , 1995, FCM managed approximately
U.S.$ billion of assets, including approximately U.S.$ billion of assets
in equity securities and approximately U.S.$ billion of assets in fixed
income securities.
Under separate Sub-Advisory Agreements between the Adviser and FCM, each dated
September , 1995 (the "Sub-Advisory Agreements"), the Adviser may delegate to
FCM the authority to make investment decisions for each Fund. It is presently
intended that FCM will provide portfolio management services for all of the
assets of the International Growth Fund and the Emerging Markets Equity Fund and
for the equity portion of the assets of the International Growth and Income
Fund. For its services, the Adviser pays FCM a management fee, computed and paid
monthly, in an amount equal to 0.80% and 1.00% of the average daily net assets
of the International Growth Fund and the Emerging Markets Equity Fund,
respectively, on an annualized basis and % of the average daily net assets
managed by FCM of the International Growth and Income Fund on an annualized
basis. In addition, the Adviser and FCM expect to enter into an arrangement
whereby certain expenses and revenues relating to their joint activities are
shared.
FCEM -- Each Sub-Advisory Agreement permits FCM from time to time to engage one
or more sub-advisers to assist in the performance of its services. Pursuant to
each Sub-Advisory Agreement, FCM has engaged Foreign & Colonial Emerging Markets
Limited, a company incorporated under the laws of England and Wales ("FCEM"),
located at Exchange House, Primrose Street, London EC2A 2NY, United Kingdom, as
sub-adviser to render advisory services to the Funds. FCEM is an affiliate of
FCM. FCEM serves as the investment adviser to public closed-end and open-end
funds and segregated accounts specializing in emerging markets. As of ,
1995, FCEM managed approximately U.S.$ billion of assets invested in emerging
markets.
Under separate Sub-Advisory Agreements between FCM and FCEM, each dated
September , 1995, FCM may delegate to FCEM the authority to make investment
decisions for each Fund. It is presently intended that FCEM will provide
portfolio management services for the portion of the assets of the Funds
invested in emerging markets securities. For its services, FCM pays FCEM a
management fee, computed and paid monthly, in an amount equal to % of the
average daily net assets managed by FCEM of each Fund on an annualized basis.
PORTFOLIO MANAGERS -- The identity and background of the portfolio managers for
each Fund is set forth below. Each of the following portfolio managers has acted
in that capacity since the commencement of investment operations of each Fund:
International Growth Fund -- R. Stewart Edgar, Director of the European Desk
of FCM, and Jonathan Sharpe, an Assistant Director and an Investment Manager
of FCM, are the Fund's portfolio managers. Mr. Edgar has been employed by
FCM since 1993 before which he served as a Director of the European Desk at
HD International Ltd. since 1990. Mr. Sharpe has been employed by FCM since
1990.
International Growth and Income Fund -- Chilton Thomson, Chief Investment
Officer of FCM, Atul Patel, Assistant Director and Global Funds Manager of
FCM, and Richard O. Hawkins, a Senior Vice President of the Adviser, are the
Fund's portfolio managers. Mr. Thomson has been employed by FCM since 1994
before which he was employed by Bankers Trust Investment Management as Chief
International Investment Officer since 1992 and by Gartmore Investment
Management as International Director since 1989. Mr. Patel has been employed
by FCM since 1994 before which he was employed by
16
<PAGE> 24
Bankers Trust Investment Management as Investment Manager since 1992 and by
Gartmore Investment Management as Global Fund Manager since 1990. Mr.
Hawkins has been employed by the Adviser since 1988.
Emerging Markets Equity Fund -- Dr. Arnab Kumar Banerji, Chief Investment
Officer of FCEM, is the Fund's portfolio manager. Dr. Banerji has been
employed by FCEM since 1993 before which he served as Joint Head of Emerging
Markets for Citibank Global Asset Management since 1989.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of each Fund and also serves as distributor of 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
and certain other services for each Fund.
7. INFORMATION CONCERNING SHARES OF THE FUNDS
PURCHASES
It is anticipated that each Fund will commence offering its shares to the public
on or about September , 1995. Shares of each Fund are sold continuously to the
public. It is anticipated, however, that on or about November 3, 1995 each Fund
will cease offering its shares to new investors (except for existing
shareholders of the relevant Fund and participants contributing to retirement
plans qualified under Section 401(a) or 403(b) of the Internal Revenue Code of
1986, as amended) for a period of time.
Shares of the Funds may be purchased at the public offering price through any
securities dealer, bank and other financial institution having selling
agreements with MFD. Non-securities dealer financial institutions will receive
transaction fees that are the same as commission fees to dealers. Securities
dealers and other financial institutions may also charge their customers fees
relating to investments in the Funds.
Each Fund currently offers two classes of shares, Class A and Class B shares,
which bear sales charges and distribution fees in different forms and amounts:
CLASS A SHARES: Class A shares are offered at net asset value plus an initial
sales charge (or a CDSC in the case of certain purchases of $1 million or more)
as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE* AS
PERCENTAGE OF: DEALER ALLOWANCE
---------------------------- AS A PERCENTAGE
NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE INVESTED 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 than those calculated using the percentages above
(see the Statement of Additional Information).
** A CDSC may apply in certain circumstances. MFD will pay a commission on
purchases of $1 million or more (see 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 a 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 a 36-month period for purchases of $1 million or more) or
special purchase programs. A description of the persons and entities eligible to
purchase Class A shares at net asset value is set forth below. A description of
the Right of Accumulation, Letter of
17
<PAGE> 25
Intent and Group Purchases privileges by which the sales charge may be reduced
is set forth in the Statement of Additional Information. In addition, MFD pays a
commission to dealers who initiate and are responsible for purchases of Class A
shares of $1 million or more as follows: 1.00% on sales up to $5 million; plus
0.25% on the amount in excess of $5 million; provided, however, that MFD may pay
a commission, on sales in excess of $5 million to certain retirement plans, of
1.00% to certain dealers which, at MFD's invitation, enter into an agreement
with MFD in which the dealer agrees to return any commission paid to it on the
sale (or on a pro rata portion thereof) if the shareholder redeems his or her
shares within a period of time after purchase as specified by MFD. Purchases of
$1 million or more for each shareholder account will be aggregated over a
12-month period (commencing from the date of the first such purchase) for
purposes of determining the level of commissions to be paid during that period
with respect to such account.
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC may be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% on the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.
In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment occurred, will age one month on the last day of the month and
each subsequent month. Except as noted below, the CDSC on Class A shares will be
waived in the case of: (i) exchanges (except that if the shares acquired by
exchange were then redeemed within 12 months of the initial purchase (other than
in connection with subsequent exchanges to other MFS Funds), the charge would
not be waived); (ii) distributions to participants from a retirement plan
qualified under Section 401(a) of the Code (a "Retirement Plan"), due to: (a) a
loan from the plan (repayments of loans, however, will constitute new sales for
purposes of assessing the CDSC); (b) "financial hardship" of the participant in
the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time; or (c) the death of a
participant, (iii) distributions from a 403(b) plan or an Individual Retirement
Account ("IRA"), due to death, disability or attainment of age 59 1/2; (iv)
tax-free returns of excess contributions to an IRA; (v) distributions by other
employee benefit plans to pay benefits; and (vi) certain involuntary redemptions
and redemptions in connection with certain automatic withdrawals from a
qualified retirement plan. The CDSC on Class A shares will not be waived,
however, if the Retirement Plan withdraws from a Fund except if the Retirement
Plan has invested its assets in Class A shares of one or more of the MFS Funds
for more than 10 years from the later to occur of (i) January 1, 1993 or (ii)
the date such Retirement Plan first invests its assets in Class A shares of one
or more of the MFS Funds, the CDSC on Class A shares will be waived in the case
of a redemption of all of the Retirement Plan's shares (including shares of any
other class) in all MFS Funds (i.e., all the assets of the Retirement Plan
invested in the MFS Funds are withdrawn), unless, immediately prior to the
redemption, the aggregate amount invested by the Retirement Plan in Class A
shares of the MFS Funds (excluding the reinvestment of distributions) during the
prior four year period equals 50% or more of the total value of the Retirement
Plan's assets in the MFS Funds, in which case the CDSC will not be waived. The
CDSC on Class A shares will be waived upon redemption by a Retirement Plan where
the redemption proceeds are used to pay expenses of the Retirement Plan or
certain expenses of participants under the Retirement Plan (e.g., participant
account fees), provided that the Retirement Plan's sponsor subscribes to the MFS
Fundamental 401(k) Plan(sm) or another similar recordkeeping system made
available by the Shareholder Servicing Agent. The CDSC on Class A shares will be
waived upon the transfer of registration from shares held by a Retirement Plan
through a single account maintained by the Shareholder Servicing Agent to
multiple Class A share accounts maintained by the Shareholder Servicing Agent on
behalf of individual participants in the Retirement Plan, provided that the
Retirement Plan's sponsor subscribes to the MFS Fundamental 401(k) Plan(sm) or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. Any applicable CDSC will be deferred upon an exchange of Class A shares
of the Fund for units of participation of the MFS Fixed Fund (a bank collective
investment fund) (the "Units"), and the CDSC will be deducted from the
redemption proceeds when such Units are subsequently redeemed (assuming the CDSC
is then payable). No CDSC will be assessed upon an exchange of Units for Class A
shares of a Fund. For purposes of calculating the CDSC payable upon redemption
of Class A shares of a Fund or Units acquired
18
<PAGE> 26
pursuant to one or more exchanges, the period during which the Units are held
will be aggregated with the period during which the Class A shares are held. MFD
will receive all CDSCs which it intends to apply for the benefit of a Fund.
ELIGIBILITY TO PURCHASE SHARES AT NET ASSET VALUE. Class A shares of each
Fund may be sold at their net asset value to the officers of the Trust, to any
of the subsidiary companies of Sun Life, to eligible Directors, officers,
employees (including retired employees) and agents of MFS, Sun Life or any of
their subsidiary companies, to any trust, pension, profit-sharing or any other
benefit plan for such persons, to any trustees and retired trustees of any
investment company for which MFD serves as distributor or principal underwriter,
and to certain family members of such individuals and their spouses, provided
such shares will not be resold except to the Fund. Class A shares of each Fund
may be sold at net asset value to any employee, partner, officer or trustee of
any sub-adviser to any MFS Fund and to certain family members of such
individuals and their spouses, or to any trust, pension, profit-sharing or other
Retirement Plan for the sole benefit of such employee or representative,
provided such shares will not be resold except to the Fund. Class A shares of
each Fund may also be sold at their net asset value to any employee or
registered representative of any dealer or other financial institution which has
a sales agreement with MFD or its affiliates, to certain family members of such
employee or representative and their spouses, or to any trust, pension,
profit-sharing or other Retirement Plan for the sole benefit of such employee or
representative, as well as clients of MFS Asset Management, Inc. Class A shares
of each Fund may be sold at net asset value, subject to appropriate
documentation, through a dealer where the amount invested represents redemption
proceeds from a registered open-end management investment company not
distributed or managed by MFD or its affiliates if: (i) the redeemed shares were
subject to an initial sales charge or a deferred sales charge (whether or not
actually imposed); (ii) such redemption has occurred no more than 90 days prior
to the purchase of Class A shares of the Fund; and (iii) the Fund, MFD or its
affiliates have not agreed with such company or its affiliates, formally or
informally, to sell Class A shares at net asset value or provide any other
incentive with respect to such redemption and sale. Class A shares of each Fund
may also be sold at net asset value where the amount invested represents
redemption proceeds from the MFS Fixed Fund. In addition, Class A shares may
also be sold at their net asset value in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies. Insurance company separate accounts may also purchase Class A shares
of each Fund at their net asset value. Class A shares of each Fund may be
purchased at net asset value by Retirement Plans whose third party
administrators have entered into an administrative services agreement with MFD
or one or more of its affiliates to perform certain administrative services,
subject to certain operational requirements specified from time to time by MFD
or one or more of its affiliates. Class A shares of each Fund may be purchased
at net asset value through certain broker-dealers and other financial
institutions which have entered into an agreement with MFD, which includes a
requirement that such shares be sold for the benefit of clients participating in
a "wrap account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares of each Fund may be purchased at net asset value by Retirement
Plans qualified under Section 401(k) of the Code through certain broker-dealers
and other financial institutions which have entered into an agreement with MFD
which includes certain minimum size qualifications for such Retirement Plans and
provides that the broker-dealer or other financial institution will perform
certain administrative services with respect to the plan's account.
Class A shares of each Fund may be purchased at net asset value by certain
retirement plans subject to the Employee Retirement Income Security Act of 1974,
as amended, subject to the following:
(i) the sponsoring organization must demonstrate to the satisfaction of MFD
that either (a) the employer has at least 25 employees or (b) the aggregate
purchases by the Retirement Plan of Class A shares of the MFS Funds will be
in an amount of at least $250,000 within a reasonable period of time, as
determined by MFD in its sole discretion; and
(ii) a CDSC of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.
Class A shares of each Fund may also be sold at net asset value through the
automatic reinvestment of Class A and Class B periodic distributions which
constitute required withdrawals from qualified retirement plans. Furthermore,
Class A shares of each Fund may be sold at net asset value through the automatic
reinvestment of distributions of dividends and capital gains of Class A
19
<PAGE> 27
shares of other MFS Funds pursuant to the Distribution Investment Program. See
"Shareholder Services" in the Statement of Additional Information.
CLASS B SHARES: Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC as a percentage of the lesser of the
original purchase price or redemption proceeds as follows:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- --------------- --------------
<S> <C> <C>
First................................................. 4%
Second................................................ 4%
Third................................................. 3%
Fourth................................................ 3%
Fifth................................................. 2%
Sixth................................................. 1%
Seventh and following................................. 0%
</TABLE>
For Class B shares of MFS Funds purchased prior to January 1, 1993, each Fund
imposes a CDSC as a percentage of the lesser of the original purchase price or
redemption proceeds as follows:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- --------------- --------------
<S> <C> <C>
First................................................. 6%
Second................................................ 5%
Third................................................. 4%
Fourth................................................ 3%
Fifth................................................. 2%
Sixth................................................. 1%
Seventh and following................................. 0%
</TABLE>
No CDSC is paid upon an exchange of shares. For purposes of calculating the CDSC
upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. See "Redemptions and Repurchases --
Contingent Deferred Sales Charge" for further discussion of the CDSC.
WAIVER OF CDSC. The CDSC on Class B shares will be waived upon the death or
disability (as defined in section 72(m)(7) of the Code) of any investor,
provided the account is registered (i) in the case of a deceased individual,
solely in the deceased individual's name, (ii) in the case of a disabled
individual, solely or jointly in the disabled individual's name or (iii) in the
name of a living trust for the benefit of the deceased or disabled individual.
The CDSC on Class B shares will also be waived in the case of redemptions of
shares of a Fund pursuant to a systematic withdrawal plan. In addition, the CDSC
on Class B shares will be waived in the case of distributions from an IRA,
SAR-SEP or any other retirement plan qualified under Section 401(a) or 403(b) of
the Code due to death or disability, or in the case of required minimum
distributions from any such retirement plan due to attainment of age 70 1/2. The
CDSC on Class B shares will be waived in the case of distributions from a
retirement plan qualified under Section 401(a) of the Code due to (i) returns of
excess contribution to the plan, (ii) retirement of a participant in the plan,
(iii) a loan from the plan (repayments of loans, however, will constitute new
sales for purposes of assessing the CDSC), (iv) "financial hardship" of the
participant in the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time, and (v) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the plan). The CDSC on Class B shares will be waived in the
case of distributions from SAR-SEP due to (i) returns of excess contribution to
the plan, (ii) retirement of a participant in the plan and (iii) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the plan). The CDSC on Class B shares will also be waived
upon redemption by (i) officers of the Trust, (ii) any of the subsidiary
companies of Sun Life, (iii) eligible Directors,
20
<PAGE> 28
officers, employees (including retired employees) and agents of MFS, Sun Life or
any of their subsidiary companies, (iv) any trust, pension, profit-sharing or
any other benefit plan for such persons, (v) any trustees and retired trustees
of any investment company for which MFD serves as distributor or principal
underwriter, and (vi) certain family members of such individuals and their
spouses, provided in each case that the shares will not be resold except to a
Fund. The CDSC on Class B shares will also be waived in the case of redemptions
by any employee or registered representative of any dealer or other financial
institution which has a sales agreement with MFD, by certain family members of
such employee or representative and their spouses, by any trust, pension,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative and by clients of the MFS Asset Management, Inc. A Retirement
Plan that has invested its assets in Class B shares of one or more of the funds
in the MFS Funds for more than 10 years from the later to occur of (i) January
1, 1993 or (ii) the date the Retirement Plan first invests its assets in Class B
shares of one or more of the funds in the MFS Funds will have the CDSC on Class
B shares waived in the case of a redemption of all the Retirement Plan's shares
(including any shares of any other class) in all MFS Funds (i.e., all the assets
of the Retirement Plan invested in the MFS Funds are withdrawn), except that if,
immediately prior to the redemption, the aggregate amount invested by the
Retirement Plan in Class B shares of the MFS Funds (excluding the reinvestment
of distributions) during the prior four year period equals 50% or more of the
total value of the Retirement Plan's assets in the MFS Funds, then the CDSC will
not be waived. The CDSC on Class B shares will be waived upon redemption by a
Retirement Plan where the redemption proceeds are used to pay expenses of the
Retirement Plan or certain expenses of participants under the Retirement Plan
(e.g., participant account fees), provided that the Retirement Plan's sponsor
subscribes to the MFS Fundamental 401(k)(sm) or another similar recordkeeping
system made available by the Shareholder Servicing Agent. The CDSC on Class B
shares will be waived upon the transfer of registration from shares held by a
Retirement Plan through a single account maintained by the Shareholder Servicing
Agent to multiple Class B share accounts maintained by the Shareholder Servicing
Agent on behalf of individual participants in the Retirement Plan, provided that
the Retirement Plan's sponsor subscribes to the MFS Fundamental 40(k)(sm) or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. The CDSC on Class B shares may also be waived in connection with the
acquisition or liquidation of the assets of other investment companies or
personal holding companies.
CONVERSION OF CLASS B SHARES. Class B shares of each Fund will convert to
Class A shares of the same Fund approximately eight years after the purchase
date. Shares purchased through the reinvestment of distributions paid in respect
of Class B shares will be treated as Class B shares for purposes of the payment
of the distribution and service fees under the Distribution Plan applicable to
Class B shares. However, for purposes of conversion to Class A shares, all
shares in a shareholder's account that were purchased through the reinvestment
of dividends and distributions paid in respect of Class B shares (and which have
not converted to Class A shares as provided in the following sentence) will be
held in a separate sub-account. Each time any Class B shares in the
shareholder's account (other than those in the sub-account) convert to Class A
shares, a portion of the Class B shares then in the sub-account will also
convert to Class A shares. The portion will be determined by the ratio that the
shareholder's Class B shares not acquired through reinvestment of dividends and
distributions that are converting to Class A shares bear to the shareholder's
total Class B shares not acquired through such reinvestment. The conversion of
Class B shares to Class A shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel that such
conversion will not constitute a taxable event for Federal tax purposes. There
can be no assurance that such ruling or opinion will be available, and the
conversion of Class B shares to Class A shares will not occur if such ruling or
opinion is not available. In such event, Class B shares would continue to be
subject to higher expenses than Class A shares for an indefinite period.
GENERAL: Except as described below, the minimum initial investment is $1,000
per account and the minimum additional investment is $50 per account. Accounts
being established for monthly automatic investments and under payroll savings
programs and tax-deferred retirement programs (other than IRAs) involving the
submission of investments by means of group remittal statements are subject to a
$50 minimum on initial and additional investments per account. The minimum
initial investment for IRAs is $250 per account and the minimum additional
investment is $50 per account. Accounts being established for participation in
the Automatic Exchange Plan are subject to a $50 minimum on initial and
additional investments per account.
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<PAGE> 29
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. Each Fund reserves the right to cease offering its shares at
any time.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares. In some
instances, promotional incentives to dealers may be offered only to certain
dealers who have sold or may sell significant amounts of a Fund's shares. From
time to time, MFD may pay dealers 100% of the applicable sales charge on sales
of Class A shares of certain specified MFS Funds sold by such dealer during a
specified sales period. In addition, MFD or its affiliates may, from time to
time, pay dealers an additional commission equal to 0.50% of the net asset value
of all of the Class B shares of certain specified MFS Funds sold by such dealer
during a specified sales period. In addition, from time to time, MFD, at its
expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell shares of a Fund. The staff of
the SEC has indicated that dealers who receive more than 90% of the sales charge
may be considered underwriters. Such concessions provided by MFD may include
financial assistance to dealers in connection with preapproved conferences or
seminars, sales or training programs for invited registered representatives,
payment for travel expenses, including lodging, incurred by registered
representatives and members of their families or other invited guests to various
locations for such seminars or training programs, seminars for the public,
advertising and sales campaigns regarding one or more MFS Funds, and/or other
dealer-sponsored events. In some instances, these concessions may be offered to
dealers or only to certain dealers who have sold or may sell, during specified
periods, certain minimum amounts of shares of a Fund. From time to time, MFD may
make expense reimbursements for special training of a dealer's registered
representatives in group meetings or to help pay the expenses of sales contests.
Other concessions may be offered to the extent not prohibited by the laws of any
state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. (the "NASD").
For shareholders who elect to participate in certain investment programs (e.g.,
the Automatic Investment Plan) or other shareholder services, MFD or its
affiliates may either (i) give a gift of nominal value, such as a hand-held
calculator, or (ii) make a nominal charitable contribution on their behalf.
A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from a
Fund (such as Right of Accumulation, Letter of Intent and certain recordkeeping
services) that the Fund ordinarily provides.
Purchases and exchanges should be made for investment purposes only. Each Fund
and MFD reserve the right to reject any specific purchase order or to restrict
purchases by a particular purchaser (or group of related purchasers). Each Fund
or MFD may reject or restrict any purchases by a particular purchaser or group,
for example, when such purpose is contrary to the best interests of a Fund's
other shareholders or otherwise would disrupt the management of a Fund.
MFD may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by MFD) which follow a
timing pattern, and with individuals or entities acting on such shareholders'
behalf (collectively, "market timers"), setting forth the terms, procedures and
restrictions with respect to such exchanges. In the absence of such an
agreement, it is the policy of each 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 a Fund's net assets or (y) specified dollar amounts in the case of
certain MFS Funds, which may include a Fund and which may change from time to
time. Each Fund and MFD 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.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with a Fund for which payment has been received by the Fund (i.e. an
established account) may be exchanged for shares of the same class of any of the
other MFS Funds (if available for sale) at net asset value. Shares of one class
may not be exchanged at net asset value for shares of any other class. Exchanges
will be made only after instructions in writing or by telephone (an "Exchange
Request") are received for
22
<PAGE> 30
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 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 the Exchange
Request is received by the Shareholder Servicing Agent on any business day prior
to the close of regular trading on the New York Stock Exchange (the "Exchange"),
the exchange usually will occur on that day if all the requirements set forth
above have been complied with at that time. No more than five exchanges may be
made in any one Exchange Request by telephone. Additional information concerning
this exchange privilege and prospectuses for any of the other MFS Funds may be
obtained from investment dealers or the Shareholder Servicing Agent. A
shareholder should read the prospectus of the other MFS Fund and consider the
differences in objectives and policies before making any exchange. For federal
and (generally) state income tax purposes, an exchange is treated as a sale of
the shares exchanged and, therefore, an exchange could result in a gain or loss
to the shareholder making the exchange. Exchanges by telephone are automatically
available to most non-retirement plan accounts and certain retirement plan
accounts. For further information regarding exchanges by telephone see
"Redemptions By Telephone". The exchange privilege (or any aspect of it) may be
changed or discontinued and is subject to certain limitations, including certain
restrictions on purchases by market timers. Special procedures, privileges and
restrictions with respect to exchanges may apply to market timers who enter into
an agreement with MFD, as set forth in such agreement. See "Purchases."
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which a 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). 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 during any period in which the
right of redemption is suspended or date of payment is postponed because the
Exchange is closed or trading on the Exchange is restricted, or, to the extent
otherwise permitted by the 1940 Act, if an emergency exists. For shares
purchased, or received in exchange for shares purchased, by check (including
certified checks or cashier's checks) payment of redemption proceeds may be
delayed for up to 15 days from the purchase date in an effort to assure that
such check has cleared. Payment of redemption proceeds may be delayed for up to
seven days from the redemption date if a Fund determines that such a delay would
be in the best interest of all its remaining shareholders.
A. REDEMPTION BY MAIL -- Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption, or letter of instruction, together with his share
certificates (if any were issued) all in "good order" for transfer. "Good order"
generally means that the stock power, written request for redemption, letter of
instruction or certificate must be endorsed by the record owner(s) exactly as
the shares are registered and the signature(s) must be guaranteed in the manner
set forth below under the caption "Signature Guarantee." In addition, in some
cases, "good order" may require the furnishing of additional documents. The
Shareholder Servicing Agent may make certain de minimis exceptions to the above
requirements for redemption. Within seven days after receipt of a redemption
request by the Shareholder Servicing Agent in "good order," a 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.
B. 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
commercial bank and account number to receive the proceeds of such redemption,
and sign the Account Application Form with the signature(s) guaranteed in the
manner set forth below under the caption "Signature Guarantee." The proceeds of
such a redemption, reduced by the amount of any applicable CDSC described
23
<PAGE> 31
above and the amount of any income tax required to be withheld, are mailed by
check to the designated account, without charge. As a special service, investors
may arrange to have proceeds in excess of $1,000 wired in federal funds to the
designated account. If a telephone redemption request is received by the
Shareholder Servicing Agent by the close of regular trading on the Exchange on
any business day, shares of a Fund will be redeemed at the closing net asset
value of the Fund on that day. Subject to the conditions described in this
section, proceeds of a redemption are normally mailed or wired on the next
business day following the date of receipt of the order for redemption. The
Shareholder Servicing Agent will not be responsible for any losses resulting
from unauthorized telephone transactions if it follows reasonable procedures
designed to verify the identity of the caller. The Shareholder Servicing Agent
will request personal or other information from the caller, and will normally
also record calls. Shareholders should verify the accuracy of confirmation
statements immediately after their receipt.
C. REPURCHASE THROUGH A DEALER -- If a shareholder desires to sell his shares at
their net asset value through his securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. IF THE DEALER RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE
CLOSE OF REGULAR TRADING ON THE EXCHANGE AND COMMUNICATES IT TO MFD ON THE SAME
DAY BEFORE MFD CLOSES FOR BUSINESS, THE SHAREHOLDER WILL RECEIVE THE NET ASSET
VALUE CALCULATED ON THAT DAY, REDUCED BY THE AMOUNT OF ANY APPLICABLE CDSC AND
THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD.
GENERAL: Shareholders of a 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 MFS 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 for certain Class A share purchases, a
CDSC will be imposed upon redemption. Such purchases under the Reinstatement
Privilege are subject to all limitations in the Statement of Additional
Information regarding this privilege.
Subject to each Fund's compliance with applicable regulations, each Fund has
reserved the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur transaction, tax or other charges when converting the
securities to cash.
Due to the relatively high cost of maintaining small accounts, each Fund
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the shareholder) if at any time the total
investment in such account drops below $500 because of redemptions, except in
the case of accounts established for monthly automatic investments and certain
payroll savings programs, Automatic Exchange Plan accounts and tax-deferred
retirement plans, for which there is a lower minimum investment requirement. See
"Purchases." Shareholders will be notified that the value of their account is
less than the minimum investment requirement and allowed 60 days to make an
additional investment before the redemption is processed. No CDSC will be
imposed with respect to such involuntary redemptions.
SIGNATURE GUARANTEE: In order to protect shareholders against fraud, each Fund
requires in certain instances as indicated above that the shareholder's
signature be guaranteed. In these cases the shareholder's signature must be
guaranteed by an eligible bank, broker, dealer, credit union, national
securities exchange, registered securities association, clearing agency or
savings association. Signature guarantees shall be accepted in accordance with
policies established by the Shareholder Servicing Agent.
CONTINGENT DEFERRED SALES CHARGE -- Investments in Class A or Class 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 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 of any MFS Fund purchased on or after January 1, 1993 will be
aggregated on a calendar month basis -- all transactions made during a calendar
month, regardless of when during the month they have occurred, will age one year
at the close of business on the last day of such month in the following calendar
year and each subsequent year. For the Class B shares of any MFS Fund purchased
prior to January 1, 1993, transactions will be aggregated on a calendar year
basis -- all transactions made during a calendar year,
24
<PAGE> 32
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
represented by Direct Purchases exceeds the sum of the six calendar year
aggregations (12 months in the case of purchases of $1 million or more of Class
A shares) of Direct Purchases may be redeemed without charge ("Free Amount").
Moreover, no CDSC is ever assessed on additional shares acquired through the
automatic reinvestment of dividends or capital gain distributions ("Reinvested
Shares").
Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC, and (ii) the amount of the 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 that, with respect to transfers of registration to an IRA
rollover account, the CDSC will be waived if the shares being reregistered would
have been eligible for a CDSC waiver had they been redeemed.
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A and Class B
shares of each Fund pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (the "Rule"), after having concluded that there is a reasonable
likelihood that the plans would benefit the Fund and its shareholders.
CLASS A DISTRIBUTION PLAN. Each Class A Distribution Plan provides that the
Fund will pay MFD a distribution/service fee aggregating up to (but not
necessarily all of) 0.50% per annum of the 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 Class A shares. The expenses to be
paid by MFD on behalf of each Fund include a service fee to securities dealers
which enter into a sales agreement with MFD of up to 0.25% per annum of the
Fund's average daily net assets attributable to Class A shares that are owned by
investors for whom such securities dealer is the holder or dealer of record.
This fee is intended to be partial consideration for all personal services
and/or account maintenance services rendered by the dealer with respect to Class
A shares. MFD may from time to time reduce the amount of the service fee paid
for shares sold prior to a certain date. MFD may also retain a distribution fee
of 0.25% per annum of each Fund's average daily net assets attributable to Class
A shares. The purpose of the distribution payments to MFD under each Class A
Distribution Plan is to compensate MFD for its distribution services to a Fund.
Distribution fee payments under the Plans may be used by MFD to pay securities
dealers a distribution fee in an amount equal on an annual basis to 0.25% per
annum of each Fund's average daily net assets attributable to Class A shares
(other than Class A shares that have converted from Class B shares) owned by
investors for whom that securities dealer is the holder or dealer of record. In
addition, to the extent that the aggregate of the foregoing fees does not exceed
0.50% per annum of the average daily net assets of a Fund attributable to Class
A shares, the Fund is permitted to pay other distribution-related expenses,
including commissions to dealers and payments to wholesalers employed by MFD for
sales at or above a certain dollar level. Fees payable under each Class A
Distribution Plan are charged to, and therefore reduce, income allocated to
Class A shares. Service fees may be reduced for a securities dealer that is the
holder or dealer of record for an investor who owns shares of a 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 Class A Distribution Plan for which there is no dealer of record or
for which qualification standards have not been met as partial consideration for
personal services and/or account maintenance services performed by MFD or its
affiliates to shareholder accounts. Certain banks and other financial
institutions that have agency agreements with MFD will receive service fees that
are the same as service fees to dealers.
CLASS B DISTRIBUTION PLAN. Each Class B Distribution Plan provides that the
Fund will pay MFD a daily distribution fee payable monthly and equal on an
annual basis to 0.75% of the Fund's average daily net assets attributable to
Class B shares and will pay MFD a service fee of up to 0.25% per annum of the
Fund's average daily net assets attributable to Class B shares (which
25
<PAGE> 33
MFD will in turn pay to securities dealers which enter into a sales agreement
with MFD at a rate of up to 0.25% per annum of the Fund's average daily net
assets attributable to Class B shares owned by investors for whom that
securities dealer is the holder or dealer of record). This service fee is
intended to be additional consideration for all personal services and/or account
maintenance services rendered by the dealer with respect to Class B shares. Fees
payable under each Class B Distribution Plan are charged to, and therefore
reduce, income allocated to Class B shares. Each Class B Distribution Plan also
provides that MFD will receive all CDSCs attributable to Class B shares (see
"Redemptions and Repurchases" above), which do not reduce the distribution fee.
MFD will pay commissions to dealers of 3.75% of the purchase price of Class B
shares purchased through dealers. MFD will also advance to dealers the first
year service fee at a rate equal to 0.25% of the purchase price of such shares
and, as compensation therefor, MFD may retain the service fee paid by a Fund
with respect to such shares for the first year after purchase. Therefore, the
total amount paid to a dealer upon the sale of shares is 4.00% of the purchase
price of the shares (commission rate of 3.75% plus service fee equal to 0.25% of
the purchase price). Dealers will become eligible for additional service fees
with respect to such shares commencing in the thirteenth month following
purchase. Dealers may from time to time be required to meet certain criteria in
order to receive service fees. MFD or its affiliates are entitled to retain all
service fees payable under each Class B Distribution Plan with respect to
accounts for which there is no dealer of record or for which qualification
standards have not been met as partial consideration for personal services
and/or account maintenance services performed by MFD or its affiliates to
shareholder accounts. The purpose of the distribution payments to MFD under each
Class B Distribution Plan is to compensate MFD for its distribution services to
a Fund. Since MFD's compensation is not directly tied to its expenses, the
amount of compensation received by MFD during any year may be more or less than
its actual expenses. For this reason, this type of distribution fee arrangement
is characterized by the staff of the SEC as being of the "compensation" variety.
However, a Fund is not liable for any expenses incurred by MFD in excess of the
amount of compensation it receives. The expenses incurred by MFD, including
commissions to dealers, are likely to be greater than the distribution fees for
the next several years, but thereafter such expenses may be less than the amount
of the distribution fees. Certain banks and other financial institutions that
have agency agreements with MFD will receive agency transaction and service fees
that are the same as commissions and service fees to dealers.
DISTRIBUTIONS
Each Fund intends to pay substantially all of its net investment income as
dividends on an annual basis. In determining the net investment income available
for distributions, each 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 a 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. Each Fund may make one or more distributions
during the calendar year to its shareholders from any long-term capital gains,
and may also make one or more distributions during the calendar year to its
shareholders from short-term capital gains. Shareholders may elect to receive
dividends and capital gain distributions in either cash or additional shares of
the same class with respect to which a distribution is made. See "Tax Status"
and "Shareholder Services -- Distribution Options" below. Distributions paid by
each 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
Each 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 each Fund would
otherwise be required to pay, each 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 none of the Funds will be required to
pay entity level federal income or excise taxes, although foreign-source income
received by a Fund may be subject to foreign withholding taxes.
Shareholders of each 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. A portion of
the dividends received from each Fund (but none of the Fund's capital gains
distributions) may qualify for the dividends-received deduction for
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<PAGE> 34
corporations. Shortly after the end of each calendar year, each shareholder of a
Fund will be sent a statement setting forth the federal income tax status of all
of the Fund's dividends and distributions for that year, including the portion
taxable as ordinary income, any portion taxable as long-term capital gain, 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. In certain circumstances, a Fund may also elect to "pass
through" to shareholders foreign income taxes paid by the Fund. Under those
circumstances, the Fund will notify shareholders of their pro rata portion of
the foreign income taxes paid by the Fund; shareholders may be eligible for
foreign tax credits or deductions with respect to those taxes, but will be
required to treat the amount of the taxes as an amount distributed to them and
thus includible in their gross income for federal income tax purposes.
Each Fund's distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before a 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.
Each Fund intends to withhold U.S. federal income tax at a rate of 30% on
dividends and certain other payments that are subject to such withholding and
that are made to persons who are neither citizens nor residents of the U.S.,
regardless of whether a lower rate may be permitted under an applicable treaty.
Each Fund is also required in certain circumstances to apply backup withholding
at a rate of 31% on dividends and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. Backup withholding will not,
however, be applied to payments which have been subject to 30% withholding.
Prospective Shareholders 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 a Fund.
NET ASSET VALUE
The net asset value per share of each class of each Fund is determined each day
during which the Exchange is open for trading. This determination is made once
each day as of the close of regular trading on the Exchange by deducting the
amount of the liabilities attributable to the class from the value of the assets
attributable to the class and dividing the difference by the number of shares of
the class outstanding. Assets in each Fund's portfolio are valued on the basis
of their market values or otherwise at their fair values, as described in the
Statement of Additional Information. All investments and assets are expressed in
U.S. dollars based upon current currency exchange rates. The net asset value per
share of each class of shares is effective for orders received by the dealer
prior to its calculation and received by MFD prior to the close of that business
day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Each Fund has two classes of shares, entitled Class A and Class B shares of
Beneficial Interest (without par value). The Trust has reserved the right to
create and issue additional classes and series of shares, in which case each
class of shares of a series would participate equally in the earnings, dividends
and assets attributable to that class of that particular series. Shareholders
are entitled to one vote for each share held and shares of each series are
entitled to vote separately to approve investment advisory agreements or changes
in investment restrictions, but shares of all series 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 Trust does not intend to hold
annual shareholder meetings. The Trust's Declaration of Trust provides that a
Trustee may be removed from office in certain instances. See "Description of
Shares, Voting Rights and Liabilities" in the Statement of Additional
Information.
Each share of a class of each Fund represents an equal proportionate interest in
the Fund with each other class share, subject to the liabilities of the
particular class. Shares have no pre-emptive or conversion rights (except as set
forth in "Purchases -- Conversion of Class B shares"). Shares are fully paid and
non-assessable. Should a Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
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<PAGE> 35
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability would be limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, each Fund will provide total rate of return quotations for
each class of shares and may also quote fund rankings in the relevant fund
category from various sources, such as the Lipper Analytical Services, Inc. and
Wiesenberger Investment Companies Service. The International Growth and Income
Fund may also provide its yield and current distribution rate. 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 a Fund made at the maximum
public offering price of the shares of that class with all distributions
reinvested and which, if quoted for periods of six years or less, will give
effect to the imposition of the CDSC assessed upon redemptions of the Fund's
Class B shares. Such total rate of return quotations may be accompanied by
quotations which do not reflect the reduction in value of the initial investment
due to the sales charge or the deduction of a CDSC, and which will thus be
higher. Yield quotations will be based on the annualized net investment income
per share of a class of the International Growth and Income 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 International Growth and Income 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. All performance quotations are based on historical performance and are
not intended to indicate future performance. Yield reflects only net portfolio
income as stated and current distribution rate reflects only the rate of
distributions paid by the International Growth and Income Fund over a stated
period of time. Each 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 a Fund will calculate its total rate of
return, yield and current distribution rate see the Statement of Additional
Information. In addition to information provided in shareholder reports, each
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.
EXPENSES
The Trust pays the compensation of the Trustees who are not officers of MFS and
all expenses of each Fund (other than those assumed by MFS) including but not
limited to: governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to a Fund, fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of a Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing prospectus, periodic reports, notices and proxy statements to
shareholders and to governmental officers and commissions; brokerage and other
expenses connected with the execution, recording and settlement of portfolio
security transactions; insurance premiums; fees and expenses of State Street
Bank and Trust Company, the Trust's Custodian, for all services to each Fund,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of a Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of a Fund and the preparation, printing
and mailing of prospectuses are borne by the Fund except that the Distribution
Agreement with MFD requires MFD to pay for prospectuses that are to be used for
sales purposes. Expenses of the Trust which are not attributable to a specific
series of the Trust are allocated among the series in a manner believed by
management of the Trust to be fair and equitable.
MFS has agreed to pay until December 31, 2005 the expenses of the Emerging
Markets Equity Fund such that the aggregate operating expenses of the Emerging
Markets Equity Fund's Class A and Class B shares do not exceed 2.50% and 3.07%,
28
<PAGE> 36
respectively, of net assets; provided, however, that this obligation may be
terminated or revised at any time by MFS without the consent of the Trust or the
Emerging Markets Equity Fund by notice in writing from MFS to the Trust on
behalf of the Fund. Such payments by MFS are subject to reimbursement by the
Emerging Markets Equity Fund which will be accomplished by the payment by the
Fund of an expense reimbursement fee to MFS computed and paid monthly as a
percentage of its average daily net assets for its then current fiscal year,
with a limitation that immediately after such payment the aggregate operating
expenses of the Fund would not exceed the amounts set forth in the preceding
sentence. The expense reimbursement agreement terminates on the earlier of the
date on which payments made thereunder by the Emerging Markets Equity Fund equal
the prior payment of such reimbursable expenses by MFS or December 31, 2005.
8. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of a 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 information regarding
the tax status of reportable dividends and distributions for that year (see "Tax
Status").
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts described below) and may be changed
as often as desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified.
-- Dividends in cash; capital gain distributions reinvested in additional
shares.
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gain
distributions in amounts less than $10 will automatically be reinvested in
additional shares of a Fund. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividends and other distributions reinvested in additional shares. Any request
to change a distribution option must be received by the Shareholder Servicing
Agent by the record date for a dividend or distribution in order to be effective
for that dividend or distribution. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, each
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with each 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 a Fund:
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the Statement of Additional Information) anticipates purchasing
$100,000 or more of Class A shares of a Fund alone or in combination with Class
B shares of the Fund or any of the classes of other MFS Funds or MFS Fixed Fund
(a bank collective investment fund) within a 13-month period (or 36-month period
for purchases of $1 million or more), the shareholder may obtain such shares at
the same reduced sales charge as though the total quantity were invested in one
lump sum, subject to escrow agreements and the appointment of an attorney for
redemptions from the escrow amount if the intended purchases are not completed,
by completing the Letter of Intent section of the Account Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of any class of shares of that
shareholder in the MFS Funds or MFS Fixed Fund (a bank collective investment
fund) reaches a discount level.
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<PAGE> 37
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of a Fund may
be sold at net asset value (and not subject to any CDSC) through the automatic
reinvestment of dividend and capital gain distributions from the same class of
another MFS Fund. Furthermore, distributions made by a Fund may be automatically
invested at net asset value (and not subject to any CDSC) in shares of the same
class of another MFS Fund, if shares of such MFS Fund are available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send to him (or any one he designates) regular periodic
payments, as designated on the account application, and based upon the value of
his account. Each payment under a Systematic Withdrawal Plan (a "SWP") must be
at least $100, except in certain limited circumstances. The aggregate
withdrawals of Class B shares in any year pursuant to a SWP will not be subject
to a CDSC and are generally limited to 10% of the value of the account at the
time of the establishment of the SWP. The CDSC will not be waived in the case of
SWP redemptions of Class A shares which are subject to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may participate in the Automatic Exchange Plan, a dollar
cost averaging program. The Automatic Exchange Plan provides for automatic
monthly or quarterly exchanges of funds from the shareholder's account in an MFS
Fund for investment in the same class of shares of other MFS Funds selected by
the shareholder (if available for sale). 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 or Class A
shares of MFS Cash Reserve Fund will be subject to any applicable sales charge.
For federal and (generally) state income tax purposes, an exchange is treated as
a sale of the shares exchanged and, therefore, could result in a capital gain or
loss to the shareholder making the exchange. See the Statement of Additional
Information for further information concerning the Automatic Exchange Plan.
Investors should consult their tax advisers for information regarding the
potential capital gain and loss consequences of transactions under the Automatic
Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of shares
regardless of fluctuating share offering prices, a shareholder should consider
his financial ability to continue his purchases through periods of low price
levels. Maintaining an investment program concurrently with a withdrawal program
would 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 share redemption (if applicable) in the case of Class A shares.
TAX-DEFERRED RETIREMENT PLANS -- Shares of each Fund may be purchased by all
types of tax-deferred retirement plans, including IRAs, SEP-IRA plans, 401(k)
plans, 403(b) plans and other corporate pension and profit-sharing plans.
Investors should consult with their tax adviser before establishing any of the
tax-deferred retirement plans described above.
------------------------------
The Funds' Statement of Additional Information, dated September 1, 1995,
contains more detailed information about each Fund, including information
related to (i) each Fund's investment policies and restrictions, including the
purchase and sale of Options, Options on Stock Indices, Futures Contracts,
Options on Futures Contracts, Forward Contracts and Options on Foreign
Currencies; (ii) the Trustees, officers, Investment Adviser and Sub-Adviser;
(iii) portfolio trading; (iv) the shares, including rights and liabilities of
shareholders; (v) tax status of dividends and distributions; (vi) the
Distribution Plans; and (vii) various services and privileges provided by each
Fund for the benefit of its shareholders, including additional information with
respect to the exchange privilege.
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APPENDIX A
DESCRIPTION OF BOND RATINGS
MOODY'S
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
BAA: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Some bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
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NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S & P
AAA: Debt rated AAA has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB -
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B - rating.
CC: The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC - debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
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<PAGE> 40
FITCH
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds rated in the
'AAA' and 'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
'F-1 +'.
A: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protect. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
PLUS (+) MINUS (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the 'AAA' category.
NR Indicates that Fitch does not rate the specific issue.
CONDITIONAL A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FITCHALERT Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for potential downgrade, or "Evolving", where ratings may
be lowered, FitchAlert is relatively short-term, and should be resolved within
12 months.
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[MFS LOGO]
Investment Adviser
Massachusetts Financial Services Company MFS(R)/FOREIGN & COLONIAL
500 Boylston Street INTERNATIONAL GROWTH FUND
Boston, MA 02116
(617) 954-5000 MFS(R)/FOREIGN & COLONIAL
INTERNATIONAL GROWTH AND
Sub-Adviser INCOME FUND
Foreign & Colonial Management Ltd.
Exchange House MFS(R)/FOREIGN & COLONIAL
Primrose Street EMERGING MARKETS EQUITY FUND
London EC2A 2NY
United Kingdom
Distributor Prospectus
MFS Fund Distributors, Inc. September 1, 1995
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Custodian and Dividend Disbursing Agent
State Street Bank & 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
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
[MFS LOGO]
MFS(R)/Foreign & Colonial International
Growth Fund
MFS(R)/Foreign & Colonial International
Growth and Income Fund
MFS(R)/Foreign & Colonial Emerging
Markets Equity Fund
500 Boylston Street
Boston, MA 02116
MWF-1-3/95/280M 9/209/309
<PAGE> 42
MFS(R)/FOREIGN & COLONIAL
STATEMENT OF
INTERNATIONAL GROWTH FUND
ADDITIONAL INFORMATION
MFS(R)/FOREIGN & COLONIAL
INTERNATIONAL GROWTH
September 1, 1995
AND INCOME FUND
MFS(R)/FOREIGN & COLONIAL
EMERGING MARKETS EQUITY FUND
(Members of the MFS Family of Funds(R))
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. Definitions........................................................................... 2
2. Investment Policies and Restrictions.................................................. 2
3. Management of the Funds............................................................... 14
Trustees.............................................................................. 14
Officers.............................................................................. 15
Investment Adviser.................................................................... 15
FCM................................................................................... 16
FCEM.................................................................................. 16
Custodian............................................................................. 16
Shareholder Servicing Agent........................................................... 17
Distributor........................................................................... 17
4. Portfolio Transactions and Brokerage Commissions...................................... 17
5. Shareholder Services.................................................................. 18
Investment and Withdrawal Programs.................................................... 18
Exchange Privilege.................................................................... 21
Tax-Deferred Retirement Plans......................................................... 21
6. Tax Status............................................................................ 22
7. Distribution Plans.................................................................... 23
8. Determination of Net Asset Value and Performance...................................... 25
9. Description of Shares, Voting Rights and Liabilities.................................. 27
10. Independent Accountants............................................................... 27
Appendix A -- Trustee Compensation Table.............................................. 28
</TABLE>
MFS(R)/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
MFS(R)/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
MFS(R)/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
Each a series of MFS Series Trust X
500 Boylston Street, Boston, MA 02116
(617) 954-5000
This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Funds'
Prospectus dated September 1, 1995. This Statement of Additional Information
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 STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE> 43
1. DEFINITIONS
<TABLE>
<S> <C> <C>
"Emerging Markets -- MFS/Foreign & Colonial
Equity Fund" Emerging Markets Equity
Fund, a diversified series
of the Trust.
"International Growth -- MFS/Foreign & Colonial
Fund" International Growth Fund,
a diversified series of
the Trust.
"International Growth -- MFS/Foreign & Colonial
and Income Fund" International Growth and
Income Fund, a diversified
series of the Trust.
"Funds" -- International Growth Fund,
International Growth and
Income Fund and Emerging
Markets Equity Fund.
"MFS" or the "Adviser" -- Massachusetts Financial
Services Company, a
Delaware corporation.
"Sub-Adviser" -- Foreign & Colonial
Management Ltd., a company
incorporated under the
laws of England and Wales
("FCM") and Foreign &
Colonial Emerging Markets
Limited, a company
incorporated under the
laws of England and Wales
("FCEM").
"MFD" -- MFS Fund Distributors,
Inc., a Delaware
corporation.
"Prospectus" -- The Prospectus, dated
September 1, 1995, of the
Funds.
"Trust" -- MFS Series Trust X, a
Massachusetts business
Trust. The Trust has
changed its name several
times during the past five
years. The Trust was
previously known as MFS
Government Mortgage Fund
(until June 2, 1995), MFS
Government Income Plus
Fund (until March 1,
1993), MFS Government
Income Plus Trust (until
August 3, 1992) and MFS
Government Securities High
Yield Trust prior to
August 3, 1992.
</TABLE>
2. INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES. The investment policies of each Fund are described in the
Prospectus and below. The following discussion of the Funds' investment policies
and restrictions supplements and should be read in conjunction with the
information set forth in the "Investment Objective and Policies" section of the
Prospectus.
FOREIGN SECURITIES: Each Fund may invest up to 100% of its assets in foreign
securities as discussed in the Prospectus. Investments in foreign issues involve
considerations and possible risks not typically associated with investments in
securities issued by domestic companies or with debt securities issued by
foreign governments. There may be less publicly available information about a
foreign company than about a domestic company, and many foreign companies are
not subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. companies are subject. Foreign
securities markets, while growing in volume, have substantially less volume than
U.S. markets, and securities of many foreign companies are less liquid and their
prices more volatile than securities of comparable domestic companies. Fixed
brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the U.S. There is also less government
supervision and regulation of exchanges, brokers and issuers in foreign
countries than there is in the U.S.
EMERGING MARKETS: Each of the Funds may invest in securities of government,
government-related, supranational and corporate issuers located in emerging
markets. Such investments entail significant risks as described in the
Prospectus under the caption "Risk Factors" and as more fully described below.
COMPANY DEBT -- Governments of many emerging market countries have
exercised and continue to exercise substantial influence over many aspects of
the private sector through the ownership or control of many companies, including
some of the largest in any given country. As a result, government actions in the
future could have a significant effect on economic conditions in emerging
markets, which in turn, may adversely affect companies in the private sector,
general market conditions and prices and yields of certain of the securities in
a Fund's portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar developments have
occurred frequently over the history of certain emerging markets and could
adversely affect a Fund's assets should these conditions recur.
SOVEREIGN DEBT -- Investment in sovereign debt can involve a high degree of
risk. The governmental entity that controls the repayment of sovereign debt may
not be able or willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt service burden to the economy as a whole,
the governmental entity's policy towards the International Monetary Fund and the
political constraints to which a governmental entity may be subject.
Governmental entities may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to reduce principal
and interest on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend
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<PAGE> 44
funds to the governmental entity, which may further impair such debtor's ability
or willingness to service its debts in a timely manner. Consequently,
governmental entities may default on their sovereign debt. Holders of sovereign
debt (including a Fund) may be requested to participate in the rescheduling of
such debt and to extend further loans to governmental entities. There is no
bankruptcy proceeding by which sovereign debt on which governmental entities
have defaulted may be collected in whole or in part.
Emerging market governmental issuers are among the largest debtors to commercial
banks, foreign governments, international financial organizations and other
financial institutions. Certain emerging market governmental issuers have not
been able to make payments of interest on or principal of debt obligations as
those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.
The ability of emerging market governmental issuers to make timely payments on
their obligations is likely to be influenced strongly by the issuer's balance of
payments, including export performance, and its access to international credits
and investments. An emerging market whose exports are concentrated in a few
commodities could be vulnerable to a decline in the international prices of one
or more of those commodities. Increased protectionism on the part of an emerging
market's trading partners could also adversely affect the country's exports and
tarnish its trade account surplus, if any. To the extent that emerging markets
receive payment for their exports in currencies other than dollars or
non-emerging market currencies, its ability to make debt payments denominated in
dollars or non-emerging market currencies could be affected.
To the extent that an emerging market country cannot generate a trade surplus,
it must depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign governments
and on inflows of foreign investment. The access of emerging markets to these
forms of external funding may not be certain, and a withdrawal of external
funding could adversely affect the capacity of emerging market country
governmental issuers to make payments on their obligations. In addition, the
cost of servicing emerging market debt obligations can be affected by a change
in international interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon international rates.
Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country. Fluctuations
in the level of these reserves affect the amount of foreign exchange readily
available for external debt payments and thus could have a bearing on the
capacity of emerging market countries to make payments on these debt
obligations.
LIQUIDITY; TRADING VOLUME; REGULATORY OVERSIGHT -- The securities markets
of emerging market countries are substantially smaller, less developed, less
liquid and more volatile than the major securities markets in the U.S.
Disclosure and regulatory standards are in many respects less stringent than
U.S. standards. Furthermore, there is a lower level of monitoring and regulation
of the markets and the activities of investors in such markets.
The limited size of many emerging market securities markets and limited trading
volume in the securities of emerging market issuers compared to volume of
trading in the securities of U.S. issuers could cause prices to be erratic for
reasons apart from factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause prices to be
unduly influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.
The risk also exists that an emergency situation may arise in one or more
emerging markets, as a result of which trading of securities may cease or may be
substantially curtailed and prices for a Fund's securities in such markets may
not be readily available. The Trust may suspend redemption of its shares for any
period during which an emergency exists, as determined by the Securities and
Exchange Commission (the "SEC"). Accordingly, if a Fund believes that
appropriate circumstances exist, it will promptly apply to the SEC for a
determination that an emergency is present. During the period commencing from
the Fund's identification of such condition until the date of the SEC action,
the Fund's securities in the affected markets will be valued at fair value
determined in good faith by or under the direction of the Board of Trustees.
DEFAULT; LEGAL RECOURSE -- A Fund may have limited legal recourse in the
event of a default with respect to certain debt obligations it may hold. If the
issuer of a fixed-income security owned by a Fund defaults, the Fund may incur
additional expenses to seek recovery. Debt obligations issued by emerging market
governments differ from debt obligations of private entities; remedies from
defaults on debt obligations issued by emerging market governments, unlike those
on private debt, must be pursued in the courts of the defaulting party itself. A
Fund's ability to enforce its rights against private issuers may be limited. The
ability to attach assets to enforce a judgment may be limited. Legal recourse is
therefore somewhat diminished. Bankruptcy, moratorium and other similar laws
applicable to private issuers of debt obligations may be substantially different
from those of other countries. The political context, expressed as an emerging
market governmental issuer's willingness to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt may not contest
payments to the holders of debt obligations in the event of default under
commercial bank loan agreements.
INFLATION -- Many emerging markets have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain
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<PAGE> 45
emerging market countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these countries, some, in
recent years, have begun to control inflation through prudent economic policies.
WITHHOLDING -- Income from securities held by a Fund could be reduced by a
withholding tax on the source or other taxes imposed by the emerging market
countries in which the Fund makes its investments. A Fund's net asset value may
also be affected by changes in the rates or methods of taxation applicable to
the Fund or to entities in which the Fund has invested. The Adviser and the
Sub-Adviser will consider the cost of any taxes in determining whether to
acquire any particular investments, but can provide no assurance that the taxes
will not be subject to change.
FOREIGN CURRENCIES -- Each Fund may invest up to 100% of its assets in
securities denominated in foreign currencies. Accordingly, changes in the value
of these currencies against the U.S. dollar may result in corresponding changes
in the U.S. dollar value of a Fund's asset denominated in those currencies. Each
Fund will attempt to minimize the impact of these changes to the U.S. dollar
value of the Fund's portfolio by engaging in certain hedging practices, such as
entering into Futures Contracts and Options on Foreign Securities as described
below.
Some emerging market countries also may have managed currencies, which are not
free floating against the U.S. dollar. In addition, there is risk that certain
emerging market countries may restrict the free conversion of their currencies
into other currencies. Further, certain emerging market currencies may not be
internationally traded. Certain of these currencies have experienced a steep
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which a Fund's portfolio securities are denominated may have a detrimental
impact on the Fund's net asset value.
INVESTMENT IN OTHER INVESTMENT COMPANIES: A Fund's investment in other
investment companies, as described in the Prospectus, is limited in amount by
the Investment Company Act of 1940, as amended (the "1940 Act"), so that a Fund
may purchase shares or interests in another investment company unless (i) such a
purchase would cause the Fund to own in aggregate more than 3% of the total
outstanding voting stock of the company or (ii) such a purchase would cause the
Fund to have more than 5% of its total assets invested in one investment company
or more than 10% of its total assets invested in the aggregate in all other
investment companies. Such investment may also involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities, and the total return on such investment will be reduced by the
operating expenses and fees of such other investment companies, including
advisory fees.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements with
sellers who are member firms (or a subsidiary thereof) of the New York Stock
Exchange (the "Exchange"), members of the Federal Reserve System, recognized
domestic or foreign securities dealers or institutions which the Adviser or the
Sub-Adviser has determined to be of comparable creditworthiness. The securities
that a Fund purchases and holds have values which are equal to or greater than
the repurchase price agreed to be paid by the seller. The repurchase
price may be higher than the purchase price, the difference being income to the
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.
The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, a 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. Each Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, a Fund
only enters into repurchase agreements after the Adviser or the Sub-Adviser has
determined that the seller is creditworthy, and the Adviser or the Sub-Adviser
monitors that seller's creditworthiness on an ongoing basis. Moreover, under
such agreements, the value of the securities (which are marked to market every
business day) is required to be greater than the repurchase price, and the Fund
has the right to make margin calls at any time if the value of the securities
falls below the agreed upon margin.
DEPOSITARY RECEIPTS: Each Fund may invest in American Depositary Receipts
("ADRs") which are certificates issued by a U.S. depositary (usually a bank) and
represent a specified quantity of shares of an underlying non-U.S. stock on
deposit with a custodian bank as collateral. ADRs may be sponsored or
unsponsored. A sponsored ADR is issued by a depositary which has an exclusive
relationship with the issuer of the underlying security. An unsponsored ADR may
be issued by any number of U.S. depositaries. Each Fund may invest in either
type of ADR. Although the U.S. investor holds a substitute receipt of ownership
rather than direct stock certificates, the use of the depositary receipts in the
United States can reduce costs and delays as well as potential currency exchange
and other difficulties. Each Fund may purchase securities in local markets and
direct delivery of these ordinary shares to the local depository of an ADR agent
bank in the foreign country. Simultaneously, the ADR agents create a certificate
which settles at the Fund's custodian in five days. Each Fund may also execute
trades on the U.S. markets using existing ADRs. A foreign issuer of the security
underlying an ADR is generally not subject to the same reporting requirements in
the United States as a domestic issuer. Accordingly, information available to a
U.S. investor will be limited to the information the foreign issuer is required
to disclose in its own country and the market value of an ADR may not reflect
undisclosed material information concerning the issuer of the underlying
security. ADRs may also be subject to exchange rate risks if the underlying
foreign securities are denominated in foreign currency. Each Fund may also
invest in Global Depositary Receipts ("GDRs") and other types of depositary
receipts.
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<PAGE> 46
GDRs and other types of depositary receipts are typically issued by foreign
banks or trust companies and evidence ownership of underlying securities issued
by either a foreign or U.S. company.
LOANS AND OTHER DIRECT INDEBTEDNESS: Each Fund may purchase loans and other
direct claims against an issuer of emerging market debt instruments (a
"borrower"). In purchasing a loan, a Fund acquires some or all of the interest
of a bank or other lending institution in a loan to a corporate, governmental or
other borrower. Many such loans are secured, although some may be unsecured.
Such loans may be in default at the time of purchase. Loans that are fully
secured offer a Fund more protection than an unsecured loan in the event of
non-payment of scheduled interest or principal. However, there is no assurance
that the liquidation of collateral from a secured loan would satisfy the
corporate borrower's obligation, or that the collateral can be liquidated.
Certain of the loans acquired by a Fund may involve revolving credit facilities
or other standby financing commitments which obligate the Fund to pay additional
cash on a certain date or on demand. These commitments may have the effect of
requiring a Fund to increase its investment in a company at a time when the Fund
might not otherwise decide to do so (including at a time when the company's
financial condition makes it unlikely that such amounts will be repaid). To the
extent that a Fund is committed to advance additional funds, it will at all
times hold and maintain in a segregated account cash or other high grade debt
obligations in an amount sufficient to meet such commitments.
A Fund's ability to receive payments of principal, interest and other amounts
due in connection with these investments will depend primarily on the financial
condition of the borrower. Direct indebtedness of developing countries involves
the risk that the governmental entities responsible for the repayment of the
note may be unable, or unwilling, to pay interest and repay principal where due.
In selecting the loans and other direct investments which a Fund will purchase,
the Adviser will rely upon its (and not that of the original lending
institution's) own credit analysis of the borrower. As a Fund may be required to
rely upon another lending institution to collect and pass on to the Fund amounts
payable with respect to the loan and to enforce the Fund's rights under the
loan, an insolvency, bankruptcy or reorganization of the lending institution may
delay or prevent the Fund from receiving such amounts. In such cases, the Fund
will evaluate as well the creditworthiness of the lending institution and will
treat both the borrower and the lending institution as an "issuer" of the loan
for purposes of certain investment restrictions pertaining to the
diversification of the Fund's portfolio investments. The highly leveraged nature
of many such loans may make such loans especially vulnerable to adverse changes
in economic or market conditions. Investments in such loans may involve
additional risks to a Fund.
WHEN-ISSUED OR FORWARD DELIVERY SECURITIES: When a Fund commits to purchase a
security on a "when-issued" or "forward delivery" basis, it will set up
procedures consistent with the General Statement of Policy of the SEC concerning
such purchases. Since that policy currently recommends that an amount of each
Fund's assets equal to the amount of the purchase be held aside or segregated to
be used to pay for the commitment, a Fund will always have cash, short-term
money market instruments or high quality debt securities sufficient to cover any
commitments or to limit any potential risk. However, although a Fund does not
intend to make such purchases for speculative purposes and intends to adhere to
the provisions of the SEC policy, purchases of securities on such bases may
involve more risk than other types of purchases. For example, a Fund may have to
sell assets which have been set aside in order to meet redemptions. Also, if a
Fund determines it necessary to sell the "when-issued" or "forward delivery"
securities before delivery, it may incur a loss because of market fluctuations
since the time the commitment to purchase such securities was made.
LENDING OF SECURITIES: Each Fund may seek to increase its income by lending
portfolio securities to entities deemed creditworthy by the Adviser or the
Sub-Adviser. Such loans would be required to be secured continuously by
collateral in cash, cash equivalents, U.S. Government securities or other
liquid, high grade debt securities maintained on a current basis at an amount at
least equal to the market value of the securities loaned. Each Fund would have
the right to call a loan and obtain the securities loaned at any time on
customary industry settlement notice (which will usually not exceed five days).
During the existence of a loan, a Fund would continue to receive the equivalent
of the interest or dividends paid by the issuer on the securities loaned and
would also receive compensation based on investment of the collateral. A Fund
would not, however, have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of an
important vote to be taken among holders of the securities or of the giving or
withholding of their consent on a material matter affecting the investment. As
with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, the loans would be made only to firms deemed by the
Adviser and the Sub-Adviser to be of good standing, and when, in the judgment of
the Adviser or the Sub-Adviser, the consideration which could be earned
currently from securities loans of this type justifies the attendant risk. If
the Adviser or the Sub-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.
WARRANTS: Each Fund will not invest more than 10% of its net assets, taken at
market value, in warrants not acquired in a unit transaction. Warrants are
securities that give a Fund the right to purchase equity securities from the
issuer at a specific price (the "strike price") for a limited period of time.
The strike price of warrants typically is much lower than the current market
price of the underlying securities, yet they are subject to similar price
fluctuations. As a result, warrants may be more volatile investments than the
underlying securities and may offer greater potential for capital appreciation
as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect to
the underlying securities and do not represent
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<PAGE> 47
any rights in the assets of the issuing company. Also, the value of the warrant
does not necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to the expiration
date. These factors can make warrants more speculative than other types of
investments.
OPTIONS ON SECURITIES: Each Fund may write (sell) covered call and put options
on securities ("Options") 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
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
a 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 a Fund holds a call on the same
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, U.S. Government securities or other liquid, high grade debt
securities in a segregated account with its custodian. A put option written by a
Fund is "covered" if the Fund maintains cash, short-term money market
instruments, U.S. Government securities or other liquid, high grade debt
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 a Fund may also be
covered in such other manner as may be in accordance with the requirements of
the exchange on which, or the counter party 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.
Each Fund may write Options for the purpose of increasing its return and for
hedging purposes. In particular, if a 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
exercised and the Fund will then be required to purchase or sell the security at
a disadvantageous price, which might only partially be offset by the amount of
the premium.
Each Fund may write Options in connection with buy-and-write transactions; that
is, a 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 a Fund
in the same market environments in which call Options are used in equivalent
buy-and-write transactions.
Each Fund may also write combinations of put and call Options on the same
security, a practice known as a "straddle". By writing a straddle, a 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, a 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, a 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 a Fund solely for hedging purposes, and may involve certain risks
which are not present in the case of hedging transactions. Moreover, even where
Options are written for hedging purposes, such transactions will constitute only
a partial hedge against declines in the value of portfolio securities or against
increases in the value of securities to be acquired, up to the amount of the
premium.
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<PAGE> 48
Each Fund may also purchase put and call Options. 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. A 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 a 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 15% of a
Fund's assets. Although the Adviser disagrees with this position, the Adviser
intends to limit each 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
each 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 a Fund for writing
the Option, plus the amount, if any, of the Option's intrinsic value (i.e., the
amount that the Option is in-the-money). The formula may also include a factor
to account for the difference between the price of the security and the strike
price of the Option if the Option is written out-of-the-money. Each Fund will
treat all or a portion of the formula as illiquid for purposes of the 15% test
imposed by the SEC staff. The Fund may also write over-the-counter Options with
non-primary dealers, including foreign dealers, and will treat the assets used
to cover these Options as illiquid for purposes of such 15% test.
OPTIONS ON STOCK INDICES: As noted in the Prospectus, each Fund may write (sell)
covered call and put options and purchase call and put options on stock indices
("Options on Stock Indices"). The Fund may cover call Options on Stock Indices
by owning securities whose price changes, in the opinion of the Adviser or the
Sub-Adviser, are expected to be similar to those of the underlying index, or by
having an absolute and immediate right to acquire such securities without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities in its portfolio. Where a Fund covers a call option on a stock index
through ownership of securities, such securities may not match the composition
of the index and, in that event, the Fund will not be fully covered and could be
subject to risk of loss in the event of adverse changes in the value of the
index. Each Fund may also cover call options on stock indices by holding a call
on the same index 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 or cash equivalents
in a segregated account with its custodian. Each Fund may cover put options on
stock indices by maintaining cash or cash equivalents with a value equal to the
exercise price in a segregated account with its custodian, or else by holding a
put on the same security and in the same principal amount as the put written
where the exercise price of the put held (a) is 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 cash
equivalents in a segregated account with its custodian. Put and call options on
stock indices may also be covered in such other manner as may be in accordance
with the rules of the exchange on which, or the counterparty with which, the
option is traded and applicable laws and regulations.
Each Fund will receive a premium from writing a put or call option on a stock
index, which increases the Fund's gross income in the event the option expires
unexercised or is closed out at a profit. If the value of an index on which a
Fund has written a call option falls or remains the same, the Fund will realize
a profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any decline in the value of the securities it owns.
If the value of the index rises, however, the Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in the Fund's stock investments. By writing a put option, a Fund
assumes the risk of a decline in the index. To the extent that the price changes
of securities owned by a Fund correlate with changes in the value of the index,
writing covered put options on indices will increase a Fund's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the option.
Each Fund may also purchase put options on stock indices to hedge its
investments against a decline in value. By purchasing a put option on a stock
index, a Fund will seek to offset a decline in the value of securities it owns
through appreciation of the put option. If the value of the Fund's investments
does not decline as anticipated, or if the value of the option does not
increase, the Fund's loss will be limited to the premium paid for the option
plus related transaction costs. The success of this strategy will largely depend
on the accuracy of the correlation between the changes in value of the index and
the changes in value of the Fund's security holdings.
7
<PAGE> 49
The purchase of call options on stock indices may be used by a Fund to attempt
to reduce the risk of missing a broad market advance, or an advance in an
industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, a Fund will also bear the risk of losing all or a portion of the
premium paid if the value of the index does not rise. The purchase of call
options on stock indices when a Fund is substantially fully invested is a form
of leverage, up to the amount of the premium and related transaction costs, and
involves risks of loss and of increased volatility similar to those involved in
purchasing calls on securities the Fund owns.
FUTURES CONTRACTS: Each Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indices of securities as such instruments become available
for trading ("Futures Contracts"). This investment technique is designed to
hedge (i.e., to protect) against anticipated future changes in interest or
exchange rates which otherwise might adversely affect the value of a Fund's
portfolio securities or adversely affect the prices of long-term bonds or other
securities which a Fund intends to purchase at a later date. Futures Contracts
may also be entered into for non-hedging purposes to the extent permitted by
applicable law. A "sale" of a Futures Contract means a contractual obligation to
deliver the securities or foreign currency called for by the contract at a fixed
price at a specified time in the future. A "purchase" of a Futures Contract
means a contractual obligation to acquire the securities or foreign currency at
a fixed price at a specified time in the future.
While Futures Contracts provide for the delivery of securities or currencies,
such deliveries are very seldom made. Generally, a Futures Contract is
terminated by entering into an offsetting transaction. A Fund will incur
brokerage fees when it purchases and sells Futures Contracts. At the time such a
purchase or sale is made, the Fund must allocate cash or securities as a margin
deposit ("initial deposit"). It is expected that the initial deposit will vary
but may be as low as 5% or less of the value of the contract. The Futures
Contract is valued daily thereafter and the payment of "variation margin" may be
required to be paid or received, so that each day the Fund may provide or
receive cash that reflects the decline or increase in the value of the contract.
The purpose of the purchase or sale of a Futures Contract, for hedging purposes
in the case of a portfolio holding long-term debt securities, is to protect a
Fund from fluctuations in interest rates without actually buying or selling
long-term debt securities. For example, if a Fund owned long-term bonds and
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 should increase at approximately the same rate,
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have. A Fund could accomplish similar results by selling bonds
with long maturities and investing in bonds with short maturities when interest
rates are expected to increase or by buying bonds with long maturities and
selling bonds with short maturities when interest rates are expected to decline.
However, since the futures market is more liquid than the cash market, the use
of Futures Contracts as an investment technique allows a Fund to maintain a
defensive position without having to sell its portfolio securities. Transactions
entered into for non-hedging purposes have greater risk, including the risk of
losses which are not offset by gains on other portfolio assets.
Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to hedge against anticipated 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, a Fund could take advantage of the
anticipated rise in the value of long-term bonds without actually buying them
until 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. Purchases
of Futures Contracts would be particularly appropriate when the cash flow from
the sale of new shares of a Fund could have the effect of diluting dividend
earnings. To the extent a Fund enters into Futures Contracts for this purpose,
the assets in the segregated asset account maintained to cover the Fund's
obligations with respect to such Futures Contracts will consist of cash, cash
equivalents or short-term money market instruments from the portfolio of the
Fund in an amount equal to the difference between the fluctuating market value
of such Futures Contracts and the aggregate value of the initial and variation
margin payments made by the Fund with respect to such Futures Contracts, thereby
assuring that the transactions are unleveraged.
Futures Contracts on foreign currencies may be used in a similar manner, in
order to protect against declines in the dollar value of portfolio securities
denominated in foreign currencies, or increases in the dollar value of
securities to be acquired.
A Futures Contract on an index of securities provides for the making and
acceptance of a cash settlement based on changes in value of the underlying
index. The index underlying a Futures Contract is a broad based index of
fixed-income securities designed to reflect movements in the relevant market as
a whole.
OPTIONS ON FUTURES CONTRACTS: Each Fund may write and purchase Options to buy or
sell Futures Contracts ("Options on Futures Contracts") for hedging purposes.
Each Fund may also enter into transactions in Options on Futures Contracts for
non-hedging purposes to the extent permitted by applicable law. The purchase of
a call Option on a Futures Contract is similar in some respects to the purchase
of a call option on an individual security. Depending on the pricing of the
option compared to either the price of the Futures Contract upon which it is
based or the price of the underlying debt securities, it may or may not be less
risky than ownership of the Futures Contract or underlying securities. As with
the purchase of Futures Contracts, when a Fund is not fully invested it may
purchase a call Option on a Futures Contract to hedge against a market advance
due to declining interest rates.
8
<PAGE> 50
The writing of a call Option on a Futures Contract constitutes a partial hedge
against declining prices of the security underlying the Futures Contract. If the
futures price at expiration of the option is below the exercise price, a 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 constitutes 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 a 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, a 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.
Each 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 decline in the dollar value of
foreign currencies in which portfolio securities are denominated, a 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 a Fund will increase prior to acquisition,
due to a market advance or a rise in the dollar value of foreign currencies in
which securities to be acquired are denominated, a 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 a 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 a Fund to forego all or a portion of
such benefits up to the amount of the premium paid and related transaction
costs.
The amount of risk a Fund assumes when it purchases an Option on a Futures
Contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
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 purchased.
A Fund's ability to engage in the options and futures strategies described above
will depend on the availability of liquid markets in such instruments. It is
impossible to predict the amount of trading interest that may exist in various
types of options or futures. Therefore, no assurance can be given that a Fund
will be able to utilize these instruments effectively for the purposes set forth
above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations.
Each 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 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, U.S.
Government securities or other liquid, high grade debt securities in a
segregated account with its custodian. A 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,
U.S. Government securities or other liquid, high grade debt 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, U.S.
Government securities or other liquid, high grade debt 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
a 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 a 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 Contact, subject to regulation by the CFTC and the
performance guarantee of the exchange clearing house. Options on Futures
Contracts, as noted in the Prospectus, are also traded on foreign exchanges.
FORWARD CONTRACTS: Each Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a specific currency at a future date at a
price set at the time of the contract (a "Forward Contract"). Each Fund may also
enter into Forward Contracts for "cross-hedging" as noted in the Prospectus. A
Fund may enter into Forward Contracts for hedging purposes as well as for
non-hedging purposes. Transactions in Forward Contracts entered into for hedging
purposes will include forward purchases or sales of foreign currencies for the
purpose of protecting the dollar value of fixed income securities denominated in
a foreign currency or protecting the dollar equivalent of
9
<PAGE> 51
PART C
------
Item 24 Financial Statements and Exhibits
---------------------------------
(a) FINANCIAL STATEMENTS ON BEHALF OF MFS/FOREIGN & COLONIAL
INTERNATIONAL GROWTH FUND, MFS/FOREIGN & COLONIAL
INTERNATIONAL GROWTH AND INCOME FUND AND MFS/FOREIGN &
COLONIAL EMERGING MARKETS EQUITY FUND
INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
None
INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
None
(b) Exhibits
1 (a) Amended and Restated Declaration of Trust, dated
January 19, 1995. (7)
(b) Amendment to the Declaration of Trust dated May 17, 1995
to change the name of the Trust and for the establishment
and designation of series and classes; filed herewith.
2 Amended and Restated By-Laws, dated December 21, 1994. (7)
3 Not Applicable.
4 (a) Form of Share Certificate for Class A shares of the Funds.
(4)
(b) Form of Share Certificate for Class B shares of the Funds.
(4)
5 (a) Investment Advisory Agreement, dated December 19, 1985. (1)
(b) Form of Investment Advisory Agreement for MFS Series Trust
X (the "Trust") on behalf of MFS/Foreign & Colonial
International Growth Fund; filed herewith.
(c) Form of Investment Advisory Agreement for the Trust on
behalf of MFS/Foreign & Colonial International Growth and
Income Fund; filed herewith.
(d) Form of Investment Advisory Agreement for the Trust on
behalf of MFS/Foreign & Colonial Emerging Markets Equity
Fund; filed herewith.
(e) Form of 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; filed herewith.
(f) Form of Sub-Advisory Agreement between the Adviser and
the Sub-Adviser with respect to MFS/Foreign & Colonial
International Growth and Income Fund; filed herewith.
(g) Form of Sub-Advisory Agreement between the Adviser and
the Sub-Adviser with respect to MFS/Foreign & Colonial
Emerging Markets Equity Fund; filed herewith.
<PAGE> 52
(h) Form of Sub-Advisory Agreement between the Sub-Adviser
and Foreign & Colonial Emerging Markets Limited ("FCEM")
with respect to the MFS/Foreign & Colonial International
Growth Fund; filed herewith.
(i) Form of Sub-Advisory Agreement between the Sub-Adviser
and FCEM with respect to the MFS/Foreign & Colonial
International Growth and Income Fund; filed herewith.
(j) Form of Sub-Advisory Agreement between the Sub-Adviser
and FCEM with respect to the MFS/Foreign & Colonial
Emerging Markets Equity Fund; filed herewith.
6 (a) Distribution Agreement between MFS Government Mortgage
Fund and MFS Funds Distributors, Inc., dated January 1,
1995. (7)
(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. (5)
7 Retirement Plan for Non-Interested Person Trustees,
dated January 1, 1991. (3)
8 (a) Custodian Agreement, dated February 19, 1988. (1a)
(b) Amendment No. 1 to Custodian Agreement, dated
February 29, 1988. (2)
(c) Amendment No. 2 to Custodian Agreement, dated
October 1, 1989. (1b)
(d) Amendment No. 3 to Custodian Agreement, dated
September 17, 1991. (3)
9 (a) Shareholder Servicing Agent Agreement, dated
December 19, 1985. (1)
(b) Amendment to Shareholder Servicing Agent Agreement,
dated September 7, 1993. (4)
(c) Form of Exchange Privilege Agreement; filed herewith.
(d) 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. (6)
(e) Dividend Disbursing Agency Agreement, dated
February 1, 1986. (2)
10 Opinion and Consent of Counsel (for the fiscal year
ended July 31, 1994) was filed on March 30, 1995 with
Post-Effective Amendment No. 11 and for the fiscal year
ended July 31, 1995 to be filed with the Rule 24f-2
Notice on or before October 2, 1995.
11 Not Applicable.
12 Not Applicable.
<PAGE> 53
13 (a) Investment Representation Letter for MFS Government
Mortgage Fund.(1)
(b) Form of Investment Representation Letter with respect
to MFS/Foreign & Colonial International Growth Fund,
MFS/Foreign & Colonial International Growth and Income
Fund and MFS/Foreign & Colonial Emerging Markets
Equity Fund; filed herewith.
14 (a) Forms for Individual Retirement Account Disclosure
Statement as currently in effect. (2)
(b) Forms for MFS 403(b) Custodial Account Agreement as
currently in effect. (2)
(c) Forms for MFS Prototype Paired Defined Contribution
Plans and Funds Agreement as currently in effect. (2)
15 (a) Amended and Restated Distribution Plan for Class A
shares of MFS Government Mortgage Fund dated
December 21, 1994. (7)
(b) Distribution Plan for Class B shares of MFS Government
Mortgage Fund dated December 21, 1994. (7)
(c) Form of Distribution Plan for Class A shares of
MFS/Foreign & Colonial International Growth Fund,
MFS/Foreign & Colonial International Growth and Income
Fund and MFS/Foreign & Colonial Emerging Markets
Equity Fund; filed herewith.
(d) Form of Distribution Plan for Class B shares of
MFS/Foreign & Colonial International Growth Fund,
MFS/Foreign & Colonial International Growth and Income
Fund and MFS/Foreign & Colonial Emerging Markets
Equity Fund; filed herewith.
16 Schedule for Computation of Performance Quotations -
Average Annual Total Rate of Return and Standardized
Yield. (7)
17 Financial Data Schedules for each class of MFS
Government Mortgage Fund. (7)
Power of Attorney, dated September 21, 1994. (7)
_____________________________
(1) Incorporated by reference to Pre-Effective Amendment No. 1 filed with the
SEC on December 20, 1985.
(1a) Incorporated by reference to Post-Effective Amendment No. 4 filed with
the SEC on January 27, 1989.
(1b) Incorporated by reference to Post-Effective Amendment No. 5 filed with
the SEC on January 29, 1990.
(2) Incorporated by reference to Post-Effective Amendment No. 6 filed with
the SEC on January 28, 1991.
(3) Incorporated by reference to Post-Effective Amendment No. 8 filed with
the SEC on January 29, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 10 filed with
the SEC on January 28, 1994.
(5) Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915
and 811-4096) Post-Effective Amendment No. 26 filed with the SEC on
February 22, 1995.
(6) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS Municipal
Income Trust (File No. 811-4841) filed with the SEC on February 28, 1995.
(7) Incorporated by reference to Post-Effective Amendment No. 11 filed with
the SEC on March 30, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
Not Applicable.
<PAGE> 54
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 31,954
(without par value) (as of May 31, 1995)
CLASS B SHARES
--------------
Shares of Beneficial Interest 51,592
(without par value) (as of May 31, 1995)
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
CLASS A SHARES
--------------
Shares of Beneficial Interest None
(without par value) (as of June 16, 1995)
CLASS B SHARES
--------------
Shares of Beneficial Interest None
(without par value) (as of June 16, 1995)
ITEM 27. INDEMNIFICATION
---------------
Article V of the Registrant's Declaration of Trust provides that the
Registrant 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 Trust, unless as to liabilities to the
Registrant 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 Registrant. In the case of a
settlement, such indemnification will not be provided unless it has been
determined in accordance with the Declaration of Trust that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in their offices.
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.
<PAGE> 55
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 Funds, MFS Growth Opportunities Funds, MFS
Government Securities Funds, MFS Government Mortgage Funds, MFS Government
Limited Maturity Funds, MFS Series Trust I (which has three series: MFS Managed
Sectors Funds, MFS Cash Reserve Funds and MFS World Asset Allocation Funds),
MFS Series Trust II (which has four series: MFS Emerging Growth Funds, MFS
Capital Growth Funds, MFS Intermediate Income Funds and MFS Gold & Natural
Resources Funds), MFS Series Trust III (which has two series: MFS High Income
Funds and MFS Municipal High Income Funds), MFS Series Trust IV (which has four
series: MFS Money Market Funds, MFS Government Money Market Funds, MFS
Municipal Bond Funds and MFS OTC Funds), MFS Series Trust V (which has two
series: MFS Total Return Funds and MFS Research Funds), MFS Series Trust VI
(which has three series: MFS World Total Return Funds, MFS Utilities Funds and
MFS World Equity Funds), MFS Series Trust VII (which has two series: MFS World
Governments Funds and MFS Value Funds), MFS Series Trust VIII (which has two
series: MFS Strategic Income Funds and MFS World Growth Funds), MFS Municipal
Series Trust (which has 19 series: MFS Alabama Municipal Bond Funds, MFS
Arkansas Municipal Bond Funds, MFS California Municipal Bond Funds, MFS Florida
Municipal Bond Funds, MFS Georgia Municipal Bond Funds, MFS Louisiana Municipal
Bond Funds, MFS Maryland Municipal Bond Funds, MFS Massachusetts Municipal Bond
Funds, MFS Mississippi Municipal Bond Funds, MFS New York Municipal Bond Funds,
MFS North Carolina Municipal Bond Funds, MFS Pennsylvania Municipal Bond Funds,
MFS South Carolina Municipal Bond Funds, MFS Tennessee Municipal Bond Funds,
MFS Texas Municipal Bond Funds, MFS Virginia Municipal Bond Funds, MFS
Washington Municipal Bond Funds, MFS West Virginia Municipal Bond Funds and MFS
Municipal Income Funds) and MFS Series Trust IX (which has three series: MFS
Bond Funds, MFS Limited Maturity Funds and MFS Municipal Limited Maturity
Funds) (the "MFS Funds"). The principal business address of each of the
aforementioned Funds is 500 Boylston Street, Boston, Massachusetts 02116.
MFS also serves as investment adviser of the following no-load,
open-end Funds: MFS Institutional Trust ("MFSIT") (which has two series), MFS
Variable Insurance Trust ("MVI") (which has twelve series) and MFS Union
Standard Trust ("UST") (which has two series). The principal business address
of each of the aforementioned Funds is 500 Boylston Street, Boston,
Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end Funds: MFS Municipal Income Trust, MFS Multimarket Income Trust,
MFS Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the aforementioned Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL"), Sun Growth Variable Annuity 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 Funds
(which has four portfolios: MFS International Funds-U.S. Equity Funds, MFS
International Funds-U.S. Emerging Growth Funds, MFS International
Funds-International Governments Funds and MFS International Funds-Charter
Income Funds) (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.
<PAGE> 56
MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Funds, MFS Meridian Charter Income Funds, MFS
Meridian Global Government Funds, MFS Meridian U.S. Emerging Growth Funds, MFS
Meridian Global Equity Funds, MFS Meridian Limited Maturity Funds, MFS Meridian
World Growth Funds, MFS Meridian Money Market Funds and MFS Meridian U.S.
Equity Funds (collectively the "MFS Meridian Funds"). Each of the MFS Meridian
Funds is organized as an exempt company under the laws of the Cayman Islands.
The principal business address of each of the MFS Meridian Funds is P.O. Box
309, Grand Cayman, Cayman Islands, British West Indies.
MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales, whose current
address is 4 John Carpenter Street, London 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 Funds Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned subsidiary of
MFS, serves as distributor for certain life insurance and annuity contracts
issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFS Institutional Trust, MFS Variable Insurance Trust and MFS Union
Standard Trust.
MFS Asset Management, Inc. ("AMI"), a wholly owned subsidiary of MFS,
provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.
MFS
---
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold D.
Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the Chairman, Mr.
Shames is the President, Mr. Scott is a Senior Executive Vice President and
Secretary, James E. Russell is a Senior Vice President and the Treasurer,
Stephen E. Cavan is a Senior Vice President, General Counsel and an Assistant
Secretary, and Robert T. Burns is a Vice President and an Assistant Secretary
of MFS.
MASSACHUSETTS INVESTORS TRUST
-----------------------------
MASSACHUSETTS INVESTORS GROWTH STOCK FUNDS
------------------------------------------
MFS GROWTH OPPORTUNITIES FUNDS
------------------------------
MFS GOVERNMENT SECURITIES FUNDS
-------------------------------
MFS GOVERNMENT MORTGAGE FUNDS
-----------------------------
MFS SERIES TRUST I
------------------
MFS SERIES TRUST V
------------------
MFS GOVERNMENT LIMITED MATURITY FUNDS
-------------------------------------
MFS SERIES TRUST VI
-------------------
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President of
MFS, is Assistant Treasurer, James R. Bordewick, Jr., Vice President and
Associate General Counsel of MFS, is Assistant Secretary.
<PAGE> 57
MFS SERIES TRUST II
-------------------
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer, and James R. Bordewick, Jr., is Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
-----------------------------------
MFS INTERMEDIATE INCOME TRUST
-----------------------------
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice President of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is the Assistant Secretary.
MFS SERIES TRUST III
--------------------
A. Keith Brodkin is the Chairman and President, James T. Swanson,
Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is Assistant Secretary.
MFS SERIES TRUST IV
-------------------
MFS SERIES TRUST IX
-------------------
A. Keith Brodkin is the Chairman and President, Robert A. Dennis and
Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is Assistant Treasurer and James R. Bordewick, Jr., is Assistant
Secretary.
MFS Series Trust VII
--------------------
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS Series Trust VIII
---------------------
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D. Laupheimer,
Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS Municipal Series Trust
--------------------------
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L. Schechter and
David R. King, Vice Presidents of MFS, are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
<PAGE> 58
MFS VARIABLE INSURANCE TRUST
----------------------------
MFS INSTITUTIONAL TRUST
-----------------------
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS UNION STANDARD TRUST
------------------------
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost and Karen C. Jordan
are Assistant Treasurers and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS MUNICIPAL INCOME TRUST
--------------------------
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is Assistant Treasurer and James
R. Bordewick, Jr., is Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
----------------------------
MFS CHARTER INCOME TRUST
------------------------
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is Assistant Treasurer and James R. Bordewick, Jr., is Assistant
Secretary.
MFS SPECIAL VALUE TRUST
-----------------------
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, and James O. Yost, is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
SGVAF
-----
W. Thomas London is the Treasurer.
MIL
---
A. Keith Brodkin is a Director and the 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, Anthony F. Clarizio is an Assistant Vice President,
Stephen E. Cavan is a Director, Senior Vice President and the Clerk, James R.
Bordewick, Jr. is a Director, Vice President and an Assistant Clerk, Robert T.
Burns is an Assistant Clerk and James E. Russell is the Treasurer.
MIL-UK
------
A. Keith Brodkin, 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, James E. Russell is the Treasurer, and
Robert T. Burns is the Assistant Secretary.
<PAGE> 59
MIL FUNDS
---------
A. Keith Brodkin is the Chairman, President and a Director, Arnold D.
Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the Secretary,
W. Thomas London is the Treasurer, James O. Yost is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary, and Ziad Malek is a Senior
Vice President.
MFS MERIDIAN FUNDS
------------------
A. Keith Brodkin is the Chairman, President and a Director, Arnold D.
Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the Secretary,
W. Thomas London is the Treasurer, James R. Bordewick, Jr., is the Assistant
Secretary and Ziad Malek is a Senior Vice President.
MFD
---
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey L. Shames
are Directors, William W. Scott, Jr., an Executive Vice President of MFS, is
the President, Stephen E. Cavan is the Secretary, Robert T. Burns is the
Assistant Secretary, and James E. Russell is the Treasurer.
CIAI
----
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey L. Shames
are Directors, Cynthia Orcott is President, Bruce C. Avery, Executive Vice
President of MFS, is the Vice President, James E. Russell is the Treasurer,
Stephen E. Cavan is the Secretary, and Robert T. Burns is the Assistant
Secretary.
MFSC
----
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey L. Shames
are Directors, Joseph A. Recomendes, Senior Vice President of MFS, is the
President, James E. Russell is the Treasurer, Stephen E. Cavan is the
Secretary, and Robert T. Burns is the Assistant Secretary.
AMI
---
A. Keith Brodkin is the Chairman and a Director, Jeffrey L. Shames,
Leslie J. Nanberg and Arnold D. Scott are Directors, Thomas J. Cashman is the
President and a Director, James E. Russell is the Treasurer and Robert T. Burns
is the Secretary.
RSI
---
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery are
Directors, Arnold D. Scott is the Chairman, Douglas C. Grip, a Senior Vice
President of MFS, is the President, James E. Russell is the Treasurer, Stephen
E. Cavan is the Secretary, Robert T. Burns is the Assistant Secretary and Henry
A. Shea is an Executive Vice President.
In addition, the following persons, Directors or officers of MFS, have
the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life
Executive Park, Wellesley Hills,
Massachusetts
Director, Sun Life Insurance and Annuity Company
of New York, 67 Broad Street, New York,
New York
<PAGE> 60
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)
The business of the Sub-Adviser is summarized under the section of the
Prospectus entitled "Management of the Funds-Sub-Adviser" constituting Part A
of this Post-Effective Amendment to the Registrant's Registration Statement on
Form N-1A, which summary is incorporated herein by reference.
The business or other connections of each trustee and officer of the
Sub-Adviser is currently listed in the investment adviser registration on Form
ADV for the Sub-Adviser (File No. 801-44724) and is hereby incorporated herein
by reference.
The business of Foreign & Colonial Emerging Markets Limited ("FCEM") is
summarized under the section of the Prospectus entitled "Management of the
Funds-Foreign & Colonial Emerging Markets Limited" constituting Part A of this
Post-Effective Amendment to the Registrant's Registration Statement on Form
N-1A, which summary is incorporated herein by reference.
The business or other connections of each trustee and officer of FCEM
is currently listed in the investment adviser registration on Form ADV for FCEM
(File No. 801-40119) and is hereby incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Reference is made to Item 28 above.
(b) Reference is made to Item 28 above.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant 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
<PAGE> 61
NAME ADDRESS
---- --------
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116
Foreign & Colonial Management Ltd. Exchange House
(sub-advisers) Primrose Steeet
London EC2A 2NY, United Kingdom
Foreign & Colonial Emerging Exchange House
Markets Limited Primrose Street
(sub-advisers) London EC2A 2NY, United Kingdom
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment to
this registration statement, 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 effective date of this post-effective amendment 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.
<PAGE> 62
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 15th day of June, 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 June 15, 1995.
SIGNATURE TITLE
--------- -----
A. KEITH BRODKIN* Chairman, President (Principal
- ------------------------- Executive Officer) and Trustee
A. Keith Brodkin
W. THOMAS LONDON* Treasurer (Principal Financial
- ------------------------- Officer and Principal Accounting
W. Thomas London Officer)
RICHARD B. BAILEY* Trustee
- -------------------------
Richard B. Bailey
PETER G. HARWOOD* Trustee
- -------------------------
Peter G. Harwood
J. ATWOOD IVES* Trustee
- -------------------------
J. Atwood Ives
<PAGE> 63
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 SEC on March 30, 1995.
<PAGE> 64
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ----------- ---------------------- --------
<S> <C> <C>
1(b) Amendment to the Declaration of Trust dated
May 17, 1995 to change the name of the Trust
and for the establishment and designation of
series and classes.
5(b) Form of Investment Advisory Agreement for the
Trust on behalf of MFS/Foreign & Colonial
International Growth Fund.
(c) Form of Investment Advisory Agreement for the
Trust on behalf of MFS/Foreign & Colonial
International Growth and Income Fund.
(d) Form of Investment Advisory Agreement for the
Trust on behalf of MFS/Foreign & Colonial
Emerging Markets Equity Fund.
(e) Form of Sub-Advisory Agreement between
Massachusetts Financial Services Company (the
"Adviser") and Foreign & Colonial
Management Ltd. (the "Sub-Adviser") with
respect to MFS/Foreign & Colonial
International Growth Fund.
(f) Form of Sub-Advisory Agreement between the
Adviser and the Sub-Adviser with respect to
MFS/Foreign & Colonial International Growth
and Income Fund.
(g) Form of Sub-Advisory Agreement between the
Adviser and the Sub-Adviser with respect to
MFS/Foreign & Colonial Emerging Markets
Equity Fund.
(h) Form of Sub-Advisory Agreement between the
Sub-Adviser and Foreign & Colonial Emerging
Markets Limited ("FCEM") with respect to the
MFS/Foreign & Colonial InternationalGrowth
Fund.
(i) Form of Sub-Advisory Agreement between the
Sub-Adviser and FCEM with respect to the
MFS/Foreign & Colonial InternationalGrowth
and Income Fund.
(j) Form of Sub-Advisory Agreement between the
Sub-Adviser and FCEM with respect to the
MFS/Foreign & Colonial Emerging Markets
Equity Fund.
9(c) Form of Exchange Privilege Agreement
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ----------- ---------------------- --------
<S> <C> <C>
13(b) Form of Investment Representation Letter
15(c) Form of Distribution Plan for Class A shares of MFS/Foreign &
Colonial International Growth Fund, MFS/Foreign & Colonial
International Growth and Income Fund and MFS/Foreign & Colonial
Emerging Markets Equity Fund.
(d) Form of Distribution Plan for Class B shares of MFS/Foreign &
Colonial International Growth Fund, MFS/Foreign & Colonial
International Growth and Income Fund and MFS/Foreign & Colonial
Emerging Markets Equity Fund.
</TABLE>
<PAGE> 1
Exhibit No. 1(b)
MFS GOVERNMENT MORTGAGE FUND
CERTIFICATION OF AMENDMENT
TO DECLARATION OF TRUST
ESTABLISHMENT AND DESIGNATION
OF SERIES
AND
ESTABLISHMENT AND DESIGNATION
OF CLASSES
Pursuant to Section 9.3 of the Amended and Restated Declaration of
Trust dated January 19, 1995 (the "Declaration"), of MFS Government Mortgage
Fund (the "Trust"), the Trustees of the Trust hereby amend Section 1.1 of the
Declaration to read in its entirety as follows:
"SECTION 1.1 - NAME. The name of trust created hereby is the
MFS Series Trust X, the current address of which is 500 Boylston
Street, Boston, Massachusetts 02116."
Pursuant to Section 6.9 of the Declaration, the Trustees of the Trust
hereby establish and designate new series of Shares (as defined in the
Declaration), such series to have the following special and relative rights:
1. The new series shall be designated:
-MFS Government Mortgage Fund;
-MFS/Foreign & Colonial Emerging Markets Equity Fund;
-MFS/Foreign & Colonial International Growth and Income Fund; and
-MFS/Foreign & Colonial International Growth Fund.
2. The series shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in
the Trust's then currently effective registration statement under
the Securities Act of 1933, as amended, to the extent
pertaining to the offering of Shares of such series. Each Share
of the series shall be redeemable, shall be entitled to one vote
or fraction thereof in respect of a fractional share on
<PAGE> 2
matters on which Shares of the series shall be entitled to vote,
shall represent a pro rata beneficial interest in the assets
allocated or belonging to the series, and shall be entitled to
receive its pro rata share of the net assets of the series upon
liquidation of the series, all as provided in Section 6.9 of the
Declaration.
3. Shareholders of each series shall vote separately as a class on
any matter to the extent required by, and any matter shall be
deemed to have been effectively acted upon with respect to
the series as provided in Rule 18f-2, as from time to time in
effect, under the Investment Company Act of 1940, as amended, or
any successor rule, and by the Declaration.
4. The assets and liabilities of the Trust shall be allocated among
the previously established and existing series of the Trust
and such new series as set forth in Section 6.9 of the
Declaration.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor
Trustees) shall have the right at any time and from time to
time to reallocate assets and expenses or to change the
designation of any series now or hereafter created, or to
otherwise change the special and relative rights of any such
series.
Pursuant to Section 6.9(h) of the Declaration, this Certificate of
Amendment to Declaration of Trust shall be effective upon the execution by a
majority of the Trustees of the Trust.
The undersigned, being a majority of the Trustees of the Trust, acting
pursuant to Section 6.10 of the Declaration, do hereby divide the Shares of
MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth and Income Fund and MFS/Foreign & Colonial International
Growth Fund to create two classes of Shares, within the meaning of Section 6.10,
as follows:
1. The two classes of shares are designated "Class A Shares" and
"Class B Shares".
2. Class A Shares and Class B Shares shall be entitled to all the
rights and preferences accorded to shares under the Declaration.
3. The purchase price of Class A Shares and Class B Shares, the
method of determination of the net asset value of Class A Shares
and Class B Shares, the price, terms and manner of redemption of
Class A Shares and Class B Shares, any conversion feature
of the Class B Shares, and the relative dividend rights of holders
of Class A Shares and Class B Shares shall be established by the
Trustees of the Trust in accordance with the
<PAGE> 3
Declaration and shall be set forth in the current prospectus and
statement of additional information of such series, as amended
from time to time, contained in the Trust's registration statement
under the Securities Act of 1933, as amended.
4. Class A Shares and Class B Shares of each such series shall vote
together as a single class except that shares of a class may vote
separately on matters affecting only that class and shares of
a class not affected by a matter will not vote on that matter.
5. A class of shares of any such series may be terminated by the
Trustees by written notice to the Shareholders of the class.
<PAGE> 4
IN WITNESS WHEREOF, a majority of the Trustees of the Trust have
executed this amendment, in one or more counterparts, all constituting a single
instrument, as an instrument under seal in The Commonwealth of Massachusetts,
as of this day of May, 1995 and further certify, as provided by the
provisions of Section 9.3(d) of the Declaration, that this amendment was duly
adopted by the undersigned in accordance with the second sentence of Section
9.3(a) of the Declaration.
A. KEITH BRODKIN CHARLES W. SCHMIDT
- --------------------------- ---------------------------
A. Keith Brodkin Charles W. Schmidt
RICHARD B. BAILEY ARNOLD D. SCOTT
- --------------------------- ---------------------------
Richard B. Bailey Arnold D. Scott
PETER G. HARWOOD JEFFREY L. SHAMES
- --------------------------- ---------------------------
Peter G. Harwood Jeffrey L. Shames
J. ATWOOD IVES ELAINE R. SMITH
- --------------------------- ---------------------------
J. Atwood Ives Elaine R. Smith
LAWRENCE T. PERERA DAVID B. STONE
- --------------------------- ---------------------------
Lawrence T. Perera David B. Stone
WILLIAM J. POORVU
- ---------------------------
William J. Poorvu
<PAGE> 1
Exhibit 5(b)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this _____ 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 management of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's 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
investment policy and notify the Adviser thereof in writing, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked. The
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers, dealers or other entities selected by it,
and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers, dealers or other entities and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable price
by responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or other
entity an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker, dealer or would have charged for
effecting that transaction, if the
- 1 -
<PAGE> 2
Adviser determined in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided by such broker, dealer or other entity, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect
to the Fund and to other clients of the Adviser as to which the Adviser
exercises investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund
to perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate
the services of any Sub-Adviser at any time in its sole discretion, and shall
at such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Fund. The Adviser
shall arrange, if desired by the Trust, for Directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of Trustees
of the Trust who are not affiliated persons of the Trust or the Adviser,
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Trust, fees and expenses of independent
auditors, of legal counsel and of any transfer agent, registrar or dividend
disbursing agent of the Trust, expenses of repurchasing and redeeming shares and
servicing shareholder accounts, expenses of preparing, printing and mailing
stock certificates, prospectuses, periodic reports, notices and proxy statements
to shareholders and to governmental officers and commissions, brokerage and
other expenses connected with the execution, recording and settlement of
portfolio security transactions, insurance premiums, fees and expenses of the
custodian for all services to the Trust, including safekeeping of funds and
securities, keeping of books and accounts and calculation of the net asset value
of shares of the Fund, expenses of shareholder meetings, and expenses relating
to the issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes (except to
the extent that any Distribution Agreement to which the Trust is a party on
behalf of the Fund provides that another party is to pay some or all of such
expenses).
- 2 -
<PAGE> 3
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 1.00% of
the Fund's average daily net assets. If the Adviser shall serve for less than
the whole of any period specified in this Article 3, the compensation payable to
the Adviser with respect to the Fund shall be prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the 1940 Act, will
not take a long or short position in the shares of the Fund, except as provided
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser, and
its Directors, officers and employees, shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in the execution and management of the Fund, except for
willful misfeasance, bad faith or gross negligence in the performance of its or
their duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial"
or "MFS". It is understood that Trustees, officers, and shareholders of the
Trust are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT.
This Agreement shall become effective on the date of its execution and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until 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.
- 3 -
<PAGE> 4
This Agreement may be terminated at any time without the payment of
any penalty by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, or by the Adviser, on not more than
sixty days' nor less that thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by
vote of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: CERTAIN TERMS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: RECORD KEEPING. The Adviser will maintain records in a
form acceptable to the Trust and in compliance with the rules and regulations
of the Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
ARTICLE 11: LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Declaration of the Trust is on file with the Secretary of State
of The Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of
the Trust's trustees, officers, employees, agents or shareholders individually,
but are binding solely upon the assets and property of the Trust in accordance
with its proportionate interest hereunder. If this instrument is executed by
the Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on
whose behalf the Trust has executed this instrument. If the Trust has executed
this instrument on behalf of more than one series of the Trust, the parties
hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
- 4 -
<PAGE> 5
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 MFS/FOREIGN &
COLONIAL INTERNATIONAL
GROWTH FUND
By:
-------------------------------
A. Keith Brodkin
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
-------------------------------
Jeffrey L. Shames
President
- 5 -
<PAGE> 1
Exhibit 5(c)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this _____ 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 management of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's 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
investment policy and notify the Adviser thereof in writing, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked. The
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers, dealers or other entities selected by it,
and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers, dealers or other entities and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable price
by responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or other
entity an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker, dealer or would have charged for
effecting that transaction, if the
- 1 -
<PAGE> 2
Adviser determined in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided by such broker, dealer or other entity, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Fund. The Adviser
shall arrange, if desired by the Trust, for Directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of Trustees
of the Trust who are not affiliated persons of the Trust or the Adviser,
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Trust, fees and expenses of independent
auditors, of legal counsel and of any transfer agent, registrar or dividend
disbursing agent of the Trust, expenses of repurchasing and redeeming shares and
servicing shareholder accounts, expenses of preparing, printing and mailing
stock certificates, prospectuses, periodic reports, notices and proxy statements
to shareholders and to governmental officers and commissions, brokerage and
other expenses connected with the execution, recording and settlement of
portfolio security transactions, insurance premiums, fees and expenses of the
custodian for all services to the Trust, including safekeeping of funds and
securities, keeping of books and accounts and calculation of the net asset value
of shares of the Fund, expenses of shareholder meetings, and expenses relating
to the issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes (except to
the extent that any Distribution Agreement to which the Trust is a party on
behalf of the Fund provides that another party is to pay some or all of such
expenses).
- 2 -
<PAGE> 3
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 1.00% of
the Fund's average daily net assets. If the Adviser shall serve for less than
the whole of any period specified in this Article 3, the compensation payable to
the Adviser with respect to the Fund shall be prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the 1940 Act, will
not take a long or short position in the shares of the Fund, except as provided
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser, and
its Directors, officers and employees, shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in the execution and management of the Fund, except for
willful misfeasance, bad faith or gross negligence in the performance of its or
their duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial"
or "MFS". It is understood that Trustees, officers, and shareholders of the
Trust are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT.
This Agreement shall become effective on the date of its execution and shall
govern the relations between the parties hereto thereafter, and shall remain in
force until 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.
- 3 -
<PAGE> 4
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less that thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by
vote of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: CERTAIN TERMS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: RECORD KEEPING. The Adviser will maintain records in a
form acceptable to the Trust and in compliance with the rules and regulations of
the Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Declaration of the Trust is on file with the Secretary of State of
The Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of more than one series of the Trust, the parties hereto
also agree that the obligations of each series hereunder shall be several and
not joint, in accordance with its proportionate interest hereunder, and the
parties hereto agree not to proceed against any series for the obligations of
another series.
- 4 -
<PAGE> 5
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 MFS/FOREIGN &
COLONIAL INTERNATIONAL
GROWTH AND INCOME FUND
By:
----------------------------------
A. Keith Brodkin
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
----------------------------------
Jeffrey L. Shames
President
- 5 -
<PAGE> 1
Exhibit 5(d)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this _____ 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 management of its funds. The Adviser shall act
as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's 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
investment policy and notify the Adviser thereof in writing, the Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked. The
Adviser shall take, on behalf of the Fund, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers, dealers or other entities selected by it,
and to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers, dealers or other entities and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable price
by responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker, dealer or other
entity an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker, dealer or would have charged for
effecting that transaction, if the
- 1 -
<PAGE> 2
Adviser determined in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided by such broker, dealer or other entity, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
The Adviser may from time to time enter into investment sub-advisory
agreements with one or more investment advisers (a "Sub-Adviser") to the Fund to
perform some or all of the services for which the Adviser is responsible
pursuant to this Article 1 upon such terms and conditions as the Adviser may
determine provided that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, the Adviser or the Sub-Adviser and by vote of a majority
of the outstanding voting securities of the Fund. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. Subject to the provisions of Article 6, the
Adviser shall not be liable for any error of judgment or mistake of law by any
Sub-Adviser or for any loss arising out of any investment made by any
Sub-Adviser or for any act or omission in the execution and management of the
Fund by any Sub-Adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Fund. The Adviser
shall arrange, if desired by the Trust, for Directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law. It is understood that the Trust will pay
all of its own expenses including, without limitation, compensation of Trustees
of the Trust who are not affiliated persons of the Trust or the Adviser,
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Trust, fees and expenses of independent
auditors, of legal counsel and of any transfer agent, registrar or dividend
disbursing agent of the Trust, expenses of repurchasing and redeeming shares and
servicing shareholder accounts, expenses of preparing, printing and mailing
stock certificates, prospectuses, periodic reports, notices and proxy statements
to shareholders and to governmental officers and commissions, brokerage and
other expenses connected with the execution, recording and settlement of
portfolio security transactions, insurance premiums, fees and expenses of the
custodian for all services to the Trust, including safekeeping of funds and
securities, keeping of books and accounts and calculation of the net asset value
of shares of the Fund, expenses of shareholder meetings, and expenses relating
to the issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes (except to
the extent that any Distribution Agreement to which the Trust is a party on
behalf of the Fund provides that another party is to pay some or all of such
expenses).
- 2 -
<PAGE> 3
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. If the Adviser shall serve for less than
the whole of any period specified in this Article 3, the compensation payable to
the Adviser with respect to the Fund shall be prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Fund have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the Fund
upon request to the best of its ability, with compensation for the Adviser's
services to be agreed upon with respect to each such occasion as it arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Trust's
distributor as principals in making purchases or sales of securities or other
property for the account of the Fund, except as permitted by the 1940 Act, will
not take a long or short position in the shares of the Fund, except as provided
by the Declaration, and will comply with all other provisions of the Declaration
and By-Laws relative to the Adviser and its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser, and its
Directors, officers and employees, shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution and management of the Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties, or by reason of reckless disregard of its or their obligations and
duties hereunder.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to
the Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other fund clients to use the words
"Massachusetts Financial" or "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the words "Massachusetts Financial" or
"MFS". It is understood that Trustees, officers, and shareholders of the Trust
are or may be or become interested in the Adviser, as Directors, officers,
employees, or otherwise and that Directors, officers and employees of the
Adviser are or may become similarly interested in the Trust and that the Adviser
may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until 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.
- 3 -
<PAGE> 4
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, on not more than sixty days'
nor less that thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by
vote of a majority of the outstanding voting securities of the Fund.
ARTICLE 9: CERTAIN TERMS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "specifically approved at least
annually," "affiliated person" and "interested persons," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
ARTICLE 10: RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations thereunder, which at all times will be the property of the Trust and
will be available for inspection and use by the Trust.
ARTICLE 11: LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A
copy of the Declaration of the Trust is on file with the Secretary of State of
The Commonwealth of Massachusetts. The parties hereto acknowledge that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. If this instrument is executed by the
Trust on behalf of one or more series of the Trust, the parties hereto
acknowledge that the assets and liabilities of each series of the Trust are
separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the series on whose
behalf the Trust has executed this instrument. If the Trust has executed this
instrument on behalf of more than one series of the Trust, the parties hereto
also agree that the obligations of each series hereunder shall be several and
not joint, in accordance with its proportionate interest hereunder, and the
parties hereto agree not to proceed against any series for the obligations of
another series.
- 4 -
<PAGE> 5
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 MFS/FOREIGN &
COLONIAL EMERGING
MARKETS EQUITY FUND
By:
-----------------------
A. Keith Brodkin
Chairman and Trustee
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
-----------------------
Jeffrey L. Shames
President
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Exhibit 5(e)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this _____ 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 , 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 in accordance with instructions, which may be standing
instructions, of the Adviser; (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
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Fund's assets. The Sub-Adviser shall be responsible for monitoring the Fund's
compliance with the Prospectus, the Statement, the Declaration, the By-Laws and
the 1940 Act and the rules, regulations and orders thereunder and in monitoring
such compliance the Sub-Adviser shall do so in the functional currency of the
Fund. The Adviser agrees to provide the Sub-Adviser with such assistance as may
be reasonably requested by the Sub-Adviser in connection with its activities
under this Agreement, including, without limitation, information concerning the
Fund, its funds available, or to become available, for investment and generally
as to the conditions of the Fund's affairs. From time to time the Adviser will
notify the Sub-Adviser of the aggregate U.S. Dollar amount of the Fund's
assets. The Adviser will have responsibility for exercising proxy, consent and
other rights pertaining to the Fund's portfolio securities; provided, however,
that the Sub-Adviser will provide the Adviser with the appropriate information
to permit the Adviser to exercise such proxy, consent and other rights and,
provided, further, 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
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Trust or the Adviser, and such additional information, reports, evaluations,
analyses and opinions as the Trustees of the Trust or the Adviser, as
appropriate, may request from time to time.
5. Brokerage. In connection with the selections of brokers,
dealers or other entities and the placing of orders for the purchase and sale
of portfolio investments for the Fund, the Sub-Adviser is directed to seek for
the Fund execution at the most favorable price by responsible brokerage firms
at reasonably competitive commission rates. In fulfilling this requirement,
the Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if the Sub-Adviser determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by such broker, dealer or
other entity, viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to other
clients of the Sub-Adviser as to which the Sub-Adviser exercises investment
discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to
allocate similarly opportunities to sell or otherwise dispose of securities
among the Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter
into investment sub-advisory agreements with one or more investment advisers,
(an "Other Sub-Adviser"), to the Fund to perform some or all of the services
for which the Sub-Adviser is responsible pursuant to this Agreement upon such
terms and conditions as the Adviser and the Sub-Adviser may determine;
provided, however, that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote
of a majority of the outstanding voting securities of the Fund; and, provided,
further, that the Sub-Adviser shall own a majority of the voting securities of
any Other Sub-Adviser. The Sub-Adviser may terminate the services of any
Other Sub-Adviser at any time in its sole discretion, and shall at such time
assume the responsibilities of such Other Sub-Adviser unless and until a
successor Other Sub-Adviser is selected. The Sub-Adviser shall be liable for
any error of judgment or mistake of law by any Other Sub-Adviser and for any
loss arising out of any investment made by any Other Sub-Adviser and for any
act or omission in the execution and management of the Fund by any Other Sub-
Adviser.
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8. Compensation of the Sub-Adviser. For the services to be
rendered by the Sub-Adviser under this Agreement, the Adviser shall pay to the
Sub-Adviser compensation, computed and paid monthly in arrears in U.S. dollars,
at a rate of 0.80% of the average daily net asset value of the Fund's assets
on an annualized basis. If the Sub-Adviser shall serve for less than the whole
of any month, the compensation payable to the Sub-Adviser with respect to the
Fund will be prorated. The Sub-Adviser will pay its expenses incurred in
performing its duties under this Agreement. Neither the Trust nor the Fund
shall be liable to the Sub-Adviser for the compensation of the Sub-Adviser.
For the purpose of determining fees payable to the Sub-Adviser, the value of
the Fund's net assets shall be computed at the times and in the manner
specified in the Prospectus and/or Statement. In the event that the Adviser
reduces its management fee payable under the Advisory Agreement voluntarily
(e.g., in order to maintain the Fund's expenses at or below a specified level)
or in order to comply with the expense limitations of a State securities
commission or otherwise, 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
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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,
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including any material violations of or amendments to the code of
ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its
Form ADV as most recently filed with the Securities and Exchange
Commission (the "SEC") and will, promptly after filing any
amendment to its Form ADV with the SEC, furnish a copy of such
amendment to the Adviser and the Trust.
13. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until 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 ____________________ in
the case of the Sub-Adviser, ____________________ in the case of the Adviser,
and the Trust's Secretary in the case of the Fund, or such other person as
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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.
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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:
--------------------
A. Keith Brodkin
Chairman
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
--------------------
( )
( )
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property
of the series on whose behalf the Trust has executed this instrument. If the
Trust has executed this instrument on behalf of more than one series of the
Trust, the parties hereto also agree that the obligations of each series
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the parties hereto agree not to proceed against any
series for the obligations of another series.
MFS SERIES TRUST X,
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
By:
--------------------------
A. Keith Brodkin
Chairman
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EXHIBIT 5(f)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this ____ 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
, 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 shall from time to time 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 in accordance
with instructions, which may be standing instructions, of the Adviser; (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 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 provide the Adviser with the appropriate information to
permit the Adviser to exercise such proxy, consent and other rights and,
provided, further, 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, 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
loss arising out of any investment made 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 ______% 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
voluntarily (e.g., in order to maintain the Fund's expenses at or below a
specified level) or in order to comply with the expense limitations of a State
securities commission or otherwise, the Sub-Adviser agrees to reduce its fee
payable under this Agreement by a pro rata amount.
<PAGE> 2
9. Limitation of Liability of the Sub-Adviser. The Sub-Adviser
shall not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties and obligations hereunder. The
Trust, on behalf of the Fund, may enforce any obligations of the Sub-Adviser
under this Agreement and may recover directly from the Sub-Adviser for any
liability it may have to the Fund.
10. Activities of the Sub-Adviser. The services of the
Sub-Adviser to the Fund are not deemed to be exclusive, the Sub-Adviser being
free to render investment advisory and/or other services to others. The
Sub-Adviser may permit other fund clients to use the words "Foreign & Colonial"
in their names. The Adviser and the Trust agree that if the Sub-Adviser shall
for any reason no longer serve as the Sub-Adviser to the Fund, the Fund will
change its name so as to delete the words "Foreign & Colonial". It is
understood that the Trustees, officers and shareholders of the Trust, the Fund
or the Adviser are or may be or become interested in the Sub-Adviser or any
person controlling, controlled by or under common control with the Sub-Adviser,
as trustees, officers, employees or otherwise and that trustees, officers and
employees of the Sub-Adviser or any person controlling, controlled by or under
common control with the Sub-Adviser may become similarly interested in the
Trust, the Fund or the Adviser and that the Sub- Adviser may be or become
interested in the Fund as a shareholder or otherwise.
11. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it
(a) will not deal with itself, "affiliated persons" of the Sub-Adviser, the
Trustees of the Trust or the Fund's distributor, as principals, agents, brokers
or dealers in making purchases or sales of securities or other property for the
account of the Fund, except as permitted by the 1940 Act and the rules,
regulations and orders thereunder and subject to the prior written approval of
the Adviser, (b) will not take a long or short position in the shares of the
Fund except as permitted by the Declaration and (c) will comply with all other
provisions of the Declaration and the By-Laws and the then-current Prospectus
and Statement relative to the Sub-Adviser and its trustees, officers, employees
and affiliates.
12. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940 (the "Advisers Act"), is
authorized to undertake investment business in the United
Kingdom by virtue of its membership in the Investment
Management Regulatory Organisation ("IMRO") and is registered
under the laws of any jurisdiction in which the Sub-Adviser is
required to be registered as an investment adviser in order to
perform its obligations under this Agreement, and will
continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or
the Advisers Act from performing the services contemplated by
this Agreement; (iii) has met, and will continue to meet for
so long as this Agreement remains in effect, any other
applicable Federal or State requirements, or the applicable
requirements of any regulatory or industry self-regulatory
agency, necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this
Agreement; (v) will immediately notify the Adviser in writing
of the occurrence of any event that would disqualify the
Sub-Adviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in
writing of any change of control of the Sub-Adviser or any
parent of the Sub-Adviser resulting in an "assignment" of this
Agreement.
(b) It will maintain, keep current and preserve on behalf of the
Fund, in the manner and for the periods of time required or
permitted by the 1940 Act and the rules, regulations and
orders thereunder and the Advisers Act and the rules,
regulations and orders thereunder, records relating to
investment transactions made by the Sub-Adviser for the Fund
as may be reasonably requested by the Adviser or the Fund from
time to time. The Sub-Adviser agrees that such records are
the property of the Fund, and will be surrendered to the Fund
promptly upon request; provided, however, that the Sub-Adviser
may retain copies of such records for archival purposes as
required by IMRO.
(c) The Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and, if
it has not already done so, will provide the Adviser and the
Trust with a copy of such code of ethics, and upon any
amendment to such code of ethics, promptly provide such
amendment. At least annually the Sub-Adviser will provide the
Trust and the Adviser with a certificate signed by the chief
compliance officer (or the person performing such function) of
the Sub-Adviser certifying, to the best of his or her
knowledge, compliance with the code of ethics during the
immediately preceding twelve (12) month period, including any
material violations of or amendments to the code of ethics or
the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its
Form ADV as most recently filed with the Securities and
Exchange Commission (the "SEC") and will, promptly after
filing any amendment to its Form ADV with the SEC, furnish a
copy of such amendment to the Adviser and the Trust.
13. Duration and Termination of this Agreement. This Agreement
shall become effective on the date first above written and shall govern the
relations between the parties hereto thereafter, and shall remain in force
until 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
____________________ in the case of the Sub-Adviser, ____________________ 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> 3
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:_________________________
A. Keith Brodkin
Chairman
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:_________________________
[ ]
[ ]
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property
of the series on whose behalf the Trust has executed this instrument. If the
Trust has executed this instrument on behalf of more than one series of the
Trust, the parties hereto also agree that the obligations of each series
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the parties hereto agree not to proceed against any
series for the obligations of another series.
MFS SERIES TRUST X,
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
By:_____________________________
A. Keith Brodkin
Chairman
- 3 -
A:SUB4A
<PAGE> 1
Exhibit 5(g)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this _____ 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 ___, 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 in accordance with instructions, which may be standing
instructions, of the Adviser; (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
<PAGE> 2
Fund's assets. The Sub-Adviser shall be responsible for monitoring the Fund's
compliance with the Prospectus, the Statement, the Declaration, the By-Laws and
the 1940 Act and the rules, regulations and orders thereunder and in monitoring
such compliance the Sub-Adviser shall do so in the functional currency of the
Fund. The Adviser agrees to provide the Sub-Adviser with such assistance as
may be reasonably requested by the Sub-Adviser in connection with its
activities under this Agreement, including, without limitation, information
concerning the Fund, its funds available, or to become available, for
investment and generally as to the conditions of the Fund's affairs. From time
to time the Adviser will notify the Sub-Adviser of the aggregate U.S. Dollar
amount of the Fund's assets. The Adviser will have responsibility for
exercising proxy, consent and other rights pertaining to the Fund's portfolio
securities; provided, however, that the Sub-Adviser will provide the Adviser
with the appropriate information to permit the Adviser to exercise such proxy,
consent and other rights and, provided, further, 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
- 2 -
<PAGE> 3
Trust or the Adviser, and such additional information, reports, evaluations,
analyses and opinions as the Trustees of the Trust or the Adviser, as
appropriate, may request from time to time.
5. Brokerage. In connection with the selections of brokers,
dealers or other entities and the placing of orders for the purchase and sale
of portfolio investments for the Fund, the Sub-Adviser is directed to seek for
the Fund execution at the most favorable price by responsible brokerage firms
at reasonably competitive commission rates. In fulfilling this requirement,
the Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if the Sub-Adviser determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by such broker, dealer or
other entity, viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to other
clients of the Sub-Adviser as to which the Sub-Adviser exercises investment
discretion.
6. Services to Other Companies or Accounts. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction will be made by the Sub-Adviser in the
manner it considers to be the most equitable. The Sub-Adviser agrees to
allocate similarly opportunities to sell or otherwise dispose of securities
among the Fund and other clients of the Sub-Adviser.
7. Other Sub-Advisers. The Sub-Adviser may from time to time enter
into investment sub-advisory agreements with one or more investment advisers,
(an "Other Sub-Adviser"), to the Fund to perform some or all of the services
for which the Sub-Adviser is responsible pursuant to this Agreement upon such
terms and conditions as the Adviser and the Sub-Adviser may determine;
provided, however, that such investment sub-advisory agreements have been
approved by a majority of the Trustees of the Trust who are not interested
persons of the Trust, or the Sub-Adviser or the Other Sub-Adviser and by vote
of a majority of the outstanding voting securities of the Fund; and, provided,
further, that the Sub-Adviser shall own a majority of the voting securities of
any Other Sub-Adviser. The Sub-Adviser may terminate the services of any
Other Sub-Adviser at any time in its sole discretion, and shall at such time
assume the responsibilities of such Other Sub-Adviser unless and until a
successor Other Sub-Adviser is selected. The Sub- Adviser shall be liable for
any error of judgment or mistake of law by any Other Sub-Adviser and for any
loss arising out of any investment made by any Other Sub-Adviser and for any
act or omission in the execution and management of the Fund by any Other Sub-
Adviser.
- 3 -
<PAGE> 4
8. Compensation of the Sub-Adviser. For the services to be
rendered by the Sub-Adviser under this Agreement, the Adviser shall pay to the
Sub-Adviser compensation, computed and paid monthly in arrears in U.S. dollars,
at a rate of 1.00% of the average daily net asset value of the Fund's assets on
an annualized basis. If the Sub-Adviser shall serve for less than the whole of
any month, the compensation payable to the Sub-Adviser with respect to the Fund
will be prorated. The Sub-Adviser will pay its expenses incurred in performing
its duties under this Agreement. Neither the Trust nor the Fund shall be
liable to the Sub-Adviser for the compensation of the Sub-Adviser. For the
purpose of determining fees payable to the Sub-Adviser, the value of the Fund's
net assets shall be computed at the times and in the manner specified in the
Prospectus and/or Statement. In the event that the Adviser reduces its
management fee payable under the Advisory Agreement voluntarily (e.g., in order
to maintain the Fund's expenses at or below a specified level) or in order to
comply with the expense limitations of a State securities commission or
otherwise, 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.
- 4 -
<PAGE> 5
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.
- 5 -
<PAGE> 6
(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 ____________________ in
the case of the Sub-Adviser, ____________________ 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.
- 6 -
<PAGE> 7
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:
-------------------------------
A. Keith Brodkin
Chairman
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
-------------------------------
( )
( )
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property
of the series on whose behalf the Trust has executed this instrument. If the
Trust has executed this instrument on behalf of more than one series of the
Trust, the parties hereto also agree that the obligations of each series
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the parties hereto agree not to proceed against any
series for the obligations of another series.
MFS SERIES TRUST X,
on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
By:
------------------------------
A. Keith Brodkin
Chairman
- 7 -
<PAGE> 1
Exhibit 5(h)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this _____ 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 ___, 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 ___, 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 Sub-Adviser shall from time to time 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 in accordance
with instructions, which may be standing instructions, of the Sub-Adviser; (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
<PAGE> 2
Assets (FCEM shall promptly notify the Adviser and the Sub-Adviser of such
instructions); (f) employ professional portfolio managers to provide research
services to the Fund; (g) attend periodic meetings of the Board of Trustees of
the Trust and (h) obtain all the registrations, qualifications and consents, on
behalf of the Fund, which are necessary for the Fund to purchase and sell
assets in each jurisdiction (other than the United States) in which the
Designated Assets are to be invested (FCEM shall promptly provide the Adviser
and the Sub-Adviser with copies of any such registrations, qualifications and
consents). In providing these services, FCEM will furnish continuously an
investment program with respect to the Designated Assets. FCEM shall be
responsible for monitoring the Fund's compliance with the Prospectus, the
Statement, the Declaration, the By-Laws and the 1940 Act and the rules,
regulations and orders thereunder and in monitoring such compliance FCEM shall
do so in the functional currency of the Fund. FCEM shall only be responsible
for compliance with the above-mentioned restrictions in regards to the
Designated Assets. The Sub-Adviser agrees to provide FCEM with such assistance
as may be reasonably requested by FCEM in connection with its activities under
this Agreement, including, without limitation, information concerning the Fund,
its funds available, or to become available, for investment and generally as to
the conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser and the Sub-Adviser undertake to discuss with FCEM
any such determinations of investment policy and any such suspensions or
restrictions on the right of FCEM to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust,
FCEM is hereby appointed the Sub-Adviser's and the Trust's agent and
attorney-in-fact to execute account documentation, agreements, contracts and
other documents as FCEM shall be requested by brokers, dealers, counterparties
and other persons in connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers,
dealers or other entities and the placing of orders for the purchase and sale
of portfolio investments for the Fund with respect to the Designated Assets,
FCEM is directed to seek for the Fund execution at the most favorable price by
responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement, FCEM shall not be deemed to have acted unlawfully
or to have breached any duty, created by this Agreement or otherwise, solely by
reason of its having caused the Fund to pay a broker, dealer or other entity an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker, dealer or other entity would have charged
for effecting that transaction, if FCEM determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research
- 2 -
<PAGE> 3
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or FCEM's overall responsibilities
with respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the
Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM
deems the purchase or sale of a security to be in the best interest of the Fund
as well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or
otherwise dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM
under this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed
and paid monthly in arrears, at a rate of % 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 voluntarily (e.g., in order to
maintain the Fund's expenses at or below a specified level) or in order to
comply with the expense limitations of a State securities commission or
otherwise, 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.
- 3 -
<PAGE> 4
8. Activities of FCEM. The services of FCEM to the Fund are not
deemed to be exclusive, FCEM being free to render investment advisory and/or
other services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or under
common control with FCEM, as trustees, officers, employees or otherwise and
that trustees, officers and employees of FCEM or any person controlling,
controlled by or under common control with FCEM may become similarly interested
in the Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or
become interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with
itself, "affiliated persons" of FCEM, the 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,
- 4 -
<PAGE> 5
regulations and orders thereunder and the Advisers Act and the
rules, regulations and orders thereunder, records relating to
investment transactions made by FCEM for the Fund as may be
reasonably requested by the Adviser or the Fund from time to
time. FCEM agrees that such records are the property of the
Fund, and will be surrendered to the Fund promptly upon request;
provided, however, that the Sub-Adviser 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 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.
- 5 -
<PAGE> 6
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to
Section 9 hereof shall survive for the duration of this Agreement and FCEM
shall immediately notify, but in no event later than five (5) business days,
the Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed
in accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by ____________________ in
the case of the Sub-Adviser, by ____________________ in the case of the
Adviser, by _____________________ in the case of FCEM 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.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered in their names and on their behalf by the
undersigned, thereunto duly authorized, and their respective seals to be hereto
affixed, all as of the day and year first written above.
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
-------------------------------
( )
( )
FOREIGN & COLONIAL EMERGING
MARKETS LIMITED
By:
-------------------------------
( )
( )
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property
of the series on whose behalf the Trust has executed this instrument. If the
Trust has executed this instrument on behalf of more than one series of the
Trust, the parties hereto also agree that the obligations of each series
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the parties hereto agree not to proceed against any
series for the obligations of another series.
MFS SERIES TRUST X
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH FUND
By:
------------------------------
A. Keith Brodkin
Chairman and Trustee
- 7 -
<PAGE> 8
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
------------------------------
Jeffrey L. Shames
President
- 8 -
<PAGE> 1
Exhibit 5(i)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this _____ 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 ___, 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 ___, 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 Sub-Adviser shall from time to time 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 in accordance
with instructions, which may be standing instructions, of the Sub-Adviser; (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
<PAGE> 2
Assets (FCEM shall promptly notify the Adviser and the Sub-Adviser of such
instructions); (f) employ professional portfolio managers to provide research
services to the Fund; (g) attend periodic meetings of the Board of Trustees of
the Trust and (h) obtain all the registrations, qualifications and consents, on
behalf of the Fund, which are necessary for the Fund to purchase and sell assets
in each jurisdiction (other than the United States) in which the Designated
Assets are to be invested (FCEM shall promptly provide the Adviser and the
Sub-Adviser with copies of any such registrations, qualifications and consents).
In providing these services, FCEM will furnish continuously an investment
program with respect to the Designated Assets. FCEM shall be responsible for
monitoring the Fund's compliance with the Prospectus, the Statement, the
Declaration, the By-Laws and the 1940 Act and the rules, regulations and orders
thereunder and in monitoring such compliance FCEM shall do so in the functional
currency of the Fund. FCEM shall only be responsible for compliance with the
above-mentioned restrictions in regards to the Designated Assets. The
Sub-Adviser agrees to provide FCEM with such assistance as may be reasonably
requested by FCEM in connection with its activities under this Agreement,
including, without limitation, information concerning the Fund, its funds
available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser and the Sub-Adviser undertake to discuss with FCEM
any such determinations of investment policy and any such suspensions or
restrictions on the right of FCEM to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust,
FCEM is hereby appointed the Sub-Adviser's and the Trust's agent and
attorney-in-fact to execute account documentation, agreements, contracts and
other documents as FCEM shall be requested by brokers, dealers, counterparties
and other persons in connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers,
dealers or other entities and the placing of orders for the purchase and sale
of portfolio investments for the Fund with respect to the Designated Assets,
FCEM is directed to seek for the Fund execution at the most favorable price by
responsible brokerage firms at reasonably competitive commission rates. In
fulfilling this requirement, FCEM shall not be deemed to have acted unlawfully
or to have breached any duty, created by this Agreement or otherwise, solely by
reason of its having caused the Fund to pay a broker, dealer or other entity an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker, dealer or other entity would have charged
for effecting that transaction, if FCEM determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research
- 2 -
<PAGE> 3
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or FCEM's overall responsibilities
with respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the
Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM
deems the purchase or sale of a security to be in the best interest of the Fund
as well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or
otherwise dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM
under this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed
and paid monthly in arrears, at a rate of % 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 voluntarily (e.g., in order to
maintain the Fund's expenses at or below a specified level) or in order to
comply with the expense limitations of a State securities commission or
otherwise, 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.
- 3 -
<PAGE> 4
8. Activities of FCEM. The services of FCEM to the Fund are not
deemed to be exclusive, FCEM being free to render investment advisory and/or
other services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or under
common control with FCEM, as trustees, officers, employees or otherwise and
that trustees, officers and employees of FCEM or any person controlling,
controlled by or under common control with FCEM may become similarly interested
in the Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or
become interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with
itself, "affiliated persons" of FCEM, the 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,
- 4 -
<PAGE> 5
regulations and orders thereunder and the Advisers Act and the
rules, regulations and orders thereunder, records relating to
investment transactions made by FCEM for the Fund as may be
reasonably requested by the Adviser or the Fund from time to
time. FCEM agrees that such records are the property of the
Fund, and will be surrendered to the Fund promptly upon request;
provided, however, that the Sub-Adviser 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 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.
- 5 -
<PAGE> 6
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when
used in this Agreement, shall have the respective meanings specified, and shall
be construed in a manner consistent with, the 1940 Act and the rules,
regulations and orders thereunder, subject, however, to such exemptions as may
be granted by the SEC under the 1940 Act.
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to
Section 9 hereof shall survive for the duration of this Agreement and FCEM
shall immediately notify, but in no event later than five (5) business days,
the Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed
in accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by ____________________ in
the case of the Sub-Adviser, by ____________________ in the case of the
Adviser, by _____________________ in the case of FCEM 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.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed,
all as of the day and year first written above.
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
--------------------------------
( )
( )
FOREIGN & COLONIAL EMERGING
MARKETS LIMITED
By:
--------------------------------
( )
( )
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property
of the series on whose behalf the Trust has executed this instrument. If the
Trust has executed this instrument on behalf of more than one series of the
Trust, the parties hereto also agree that the obligations of each series
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the parties hereto agree not to proceed against any
series for the obligations of another series.
MFS SERIES TRUST X
on behalf of MFS/FOREIGN & COLONIAL INTERNATIONAL GROWTH AND INCOME FUND
By:
-----------------------------
A. Keith Brodkin
Chairman and Trustee
- 7 -
<PAGE> 8
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
--------------------
Jeffrey L. Shames
President
- 8 -
<PAGE> 1
Exhibit 5(j)
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this ___ 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 _____, 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 ___, 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 Sub-Adviser shall from time to time 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 in accordance with
instructions, which may be standing instructions, of the Sub-Adviser; (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
<PAGE> 2
Assets (FCEM shall promptly notify the Adviser and the Sub-Adviser of such
instructions); (f) employ professional portfolio managers to provide research
services to the Fund; (g) attend periodic meetings of the Board of Trustees of
the Trust and (h) obtain all the registrations, qualifications and consents, on
behalf of the Fund, which are necessary for the Fund to purchase and sell assets
in each jurisdiction (other than the United States) in which the Designated
Assets are to be invested (FCEM shall promptly provide the Adviser and the
Sub-Adviser with copies of any such registrations, qualifications and consents).
In providing these services, FCEM will furnish continuously an investment
program with respect to the Designated Assets. FCEM shall be responsible for
monitoring the Fund's compliance with the Prospectus, the Statement, the
Declaration, the By-Laws and the 1940 Act and the rules, regulations and orders
thereunder and in monitoring such compliance FCEM shall do so in the functional
currency of the Fund. FCEM shall only be responsible for compliance with the
above-mentioned restrictions in regards to the Designated Assets. The
Sub-Adviser agrees to provide FCEM with such assistance as may be reasonably
requested by FCEM in connection with its activities under this Agreement,
including, without limitation, information concerning the Fund, its funds
available, or to become available, for investment and generally as to the
conditions of the Fund's affairs.
Should the Trustees of the Trust or the Adviser and the Sub-Adviser at
any time make any determination as to investment policy and notify FCEM thereof
in writing, FCEM shall be bound by such determination for the period, if any,
specified in such notice or until notified that such determination has been
revoked. Further, the Adviser and the Sub-Adviser or the Trustees of the Trust
may at any time, upon written notice to FCEM, suspend or restrict the right of
FCEM to determine what assets of the Fund shall be purchased or sold and what
portion, if any, of the Fund's assets shall be held uninvested. It is understood
that the Adviser and the Sub-Adviser undertake to discuss with FCEM any such
determinations of investment policy and any such suspensions or restrictions on
the right of FCEM to determine what assets of the Fund shall be purchased or
sold or held uninvested, prior to the implementation thereof.
2. Execution of Certain Documents. Subject to any other written
instructions of the Adviser, the Sub-Adviser and the Trustees of the Trust, FCEM
is hereby appointed the Sub-Adviser's and the Trust's agent and attorney-in-fact
to execute account documentation, agreements, contracts and other documents as
FCEM shall be requested by brokers, dealers, counterparties and other persons in
connection with its management of the Designated Assets.
3. Brokerage. In connection with the selections of brokers, dealers or
other entities and the placing of orders for the purchase and sale of portfolio
investments for the Fund with respect to the Designated Assets, FCEM is directed
to seek for the Fund execution at the most favorable price by responsible
brokerage firms at reasonably competitive commission rates. In fulfilling this
requirement, FCEM shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker, dealer or other entity an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker, dealer or other entity would have charged for
effecting that transaction, if FCEM determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
- 2 -
<PAGE> 3
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by such broker, dealer or other entity, viewed in
terms of either that particular transaction or FCEM's overall responsibilities
with respect to the Fund and to other clients of FCEM as to which FCEM exercises
investment discretion.
4. Reports. FCEM shall furnish to the Trustees of the Trust, the
Adviser or the Sub-Adviser, or all of them, as may be appropriate, quarterly
reports of its activities on behalf of the Fund, as required by applicable law
or as otherwise requested from time to time by the Trustees of the Trust, the
Adviser or the Sub-Adviser, and such additional information, reports,
evaluations, analyses and opinions as the Trustees of the Trust, the Adviser or
the Sub-Adviser, as appropriate, may request from time to time.
5. Services to Other Companies or Accounts. On occasions when FCEM
deems the purchase or sale of a security to be in the best interest of the Fund
as well as other clients, FCEM, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction will be made by FCEM in the manner it considers to be the most
equitable. FCEM agrees to allocate similarly opportunities to sell or otherwise
dispose of securities among the Fund and other clients of FCEM.
6. Compensation of FCEM. For the services to be rendered by FCEM under
this Agreement, the Sub-Adviser shall pay to FCEM compensation, computed and
paid monthly in arrears, at a rate of % 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 voluntarily (e.g., in order to maintain the Fund's
expenses at or below a specified level) or in order to comply with the expense
limitations of a State securities commission or otherwise, 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.
- 3 -
<PAGE> 4
8. Activities of FCEM. The services of FCEM to the Fund are not deemed
to be exclusive, FCEM being free to render investment advisory and/or other
services to others. It is understood that the Trustees, officers and
shareholders of the Trust, the Fund, the Adviser or the Sub-Adviser are or may
become interested in FCEM or any person controlling, controlled by or under
common control with FCEM, as trustees, officers, employees or otherwise and that
trustees, officers and employees of FCEM or any person controlling, controlled
by or under common control with FCEM may become similarly interested in the
Trust, the Fund, the Adviser or the Sub-Adviser and that FCEM may be or become
interested in the Fund as a shareholder or otherwise.
9. Covenants of FCEM. FCEM agrees that it (a) will not deal with
itself, "affiliated persons" of FCEM, the 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,
- 4 -
<PAGE> 5
regulations and orders thereunder and the Advisers Act and the
rules, regulations and orders thereunder, records relating to
investment transactions made by FCEM for the Fund as may be
reasonably requested by the Adviser or the Fund from time to time.
FCEM agrees that such records are the property of the Fund, and
will be surrendered to the Fund promptly upon request; provided,
however, that the Sub-Adviser 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 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.
- 5 -
<PAGE> 6
13. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities",
"assignment", "control", "affiliated person" and "interested person", when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
14. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by FCEM pursuant to Section
9 hereof shall survive for the duration of this Agreement and FCEM shall
immediately notify, but in no event later than five (5) business days, the
Adviser and the Sub-Adviser in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
15. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by ____________________ in the
case of the Sub-Adviser, by ____________________ in the case of the Adviser, by
_____________________ in the case of FCEM 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.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of the day and year first written above.
FOREIGN & COLONIAL
MANAGEMENT LTD.
By:
-----------------------------------
( )
( )
FOREIGN & COLONIAL EMERGING
MARKETS LIMITED
By:
-----------------------------------
( )
( )
The foregoing is hereby agreed to:
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The parties hereto
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. If this
instrument is executed by the Trust on behalf of one or more series of the
Trust, the parties hereto acknowledge that the assets and liabilities of each
series of the Trust are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or property of
the series on whose behalf the Trust has executed this instrument. If the Trust
has executed this instrument on behalf of more than one series of the Trust, the
parties hereto also agree that the obligations of each series hereunder shall be
several and not joint, in accordance with its proportionate interest hereunder,
and the parties hereto agree not to proceed against any series for the
obligations of another series.
MFS SERIES TRUST X
on behalf of MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY FUND
By:
---------------------------
A. Keith Brodkin
Chairman and Trustee
- 7 -
<PAGE> 8
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By:
---------------------------
Jeffrey L. Shames
President
- 8 -
<PAGE> 1
Exhibit 9(c)
EXCHANGE PRIVILEGE AGREEMENT
AGREEMENT, dated as of September 1, 1993 and as amended and restated as of
___________________, 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
- 1 -
<PAGE> 2
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.
- 2 -
<PAGE> 3
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.
- 3 -
<PAGE> 4
MFS SERIES TRUST I MFS MUNICIPAL SERIES TRUST
MFS SERIES TRUST II MFS GROWTH OPPORTUNITIES FUND
MFS SERIES TRUST III MFS GOVERNMENT SECURITIES FUND
MFS SERIES TRUST IV MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS SERIES TRUST V MFS GOVERNMENT LIMITED MATURITY FUND
MFS SERIES TRUST VI MASSACHUSETTS INVESTORS TRUST
MFS SERIES TRUST VII
MFS SERIES TRUST VIII
MFS SERIES TRUST IX
MFS SERIES TRUST X
By:
--------------------------------
A. Keith Brodkin
Chairman
MFS FUND DISTRIBUTORS, INC.
By:
--------------------------------
William W. Scott, Jr.,
President
- 4 -
<PAGE> 1
Exhibit 13(b)
____________, 1995
MFS/Foreign & Colonial International Growth Fund,
A Series of MFS Series Trust X
500 Boylston Street
Boston, MA 02116
Gentlemen:
In connection with the purchase by the undersigned of ____________
Class A Shares of Beneficial Interest (without par value) of MFS/Foreign &
Colonial International Growth Fund (the "Fund"), a series of MFS Series Trust X,
and ____________ Class B Shares of Beneficial Interest (without par value) of
the Fund, the undersigned hereby represents and warrants to you that it is
purchasing said shares as an investment WITH NO INTENTION OF RESELLING SAID
SHARES UNTIL A DATE AT LEAST TWO YEARS HEREAFTER.
Very truly yours,
Massachusetts Financial
Services Company
By:________________________
Arnold D. Scott
Senior Executive Vice
President
<PAGE> 1
Exhibit 15(c)
MFS SERIES TRUST X
( )
DISTRIBUTION PLAN
DISTRIBUTION PLAN with respect to the shares of beneficial interest to be
designated "CLASS A" of the ( ) (the "Fund"), a series of MFS
Series Trust X (the "Trust"), a Massachusetts business trust, dated the ____ of
June, 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
- 1 -
<PAGE> 2
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
- 2 -
<PAGE> 3
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.
- 3 -
<PAGE> 4
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.
- 4 -
<PAGE> 5
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.
- 5 -
<PAGE> 1
Exhibit 15(d)
MFS SERIES TRUST X
( )
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION with respect to the shares of beneficial interest to be
designated "CLASS B" of the ( ) (the "Fund"), a series of MFS
Series Trust X (the "Trust"), a Massachusetts business trust, dated the ____
day of _________, 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
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
- 1 -
<PAGE> 2
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.
- 2 -
<PAGE> 3
4. As partial consideration for the personal services and/or account
maintenance services performed by each Dealer in the performance of its
obligations under its dealer agreement with the Distributor, the Fund shall pay
each Dealer a service fee periodically at a rate not to exceed 0.25% per annum
of the portion of the average daily net assets of the Fund that is represented
by Shares that are owned by investors for whom such Dealer is the holder or
dealer of record. That portion of the Fund's average daily net assets on which
the fees payable under this paragraph 4 hereof are calculated may be subject to
certain minimum amount requirements as may be determined, and additional or
different dealer qualification standards that may be established from time to
time, by the Distributor. The Distributor shall be entitled to be paid any fees
payable under this paragraph 4 hereof with respect to Shares for which no Dealer
of record exists or qualification standards have not been met as partial
consideration for personal services and/or account maintenance services provided
by the Distributor to the Shares. The service fee payable pursuant to this
paragraph 4 may from time to time be paid by the Fund to the Distributor and the
Distributor will then pay these fees on behalf of the Fund.
5. The Fund understands that agreements between the Distributor and the Dealers
may provide for payment of commissions to Dealers in connection with the sales
of Shares and may provide for a portion (which may be all or substantially all)
of the fees payable by the Fund to the Distributor under the Distribution
Agreement to be paid by the Distributor to the Dealers in consideration of 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.
- 3 -
<PAGE> 4
7. Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Declaration of Trust or By-Laws or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the responsibility for
and control of the conduct of the affairs of the Fund.
8. This Plan shall become effective upon (a) approval by a vote of at least a
"majority of the outstanding voting securities" of the Shares, and (b) approval
by a vote of the Board of Trustees and a vote of a majority of the Trustees who
are not "interested persons" of the 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
- 4 -
<PAGE> 5
value of the Fund's net assets shall be computed in the manner specified in the
Fund's then-current prospectus and statement of additional information for
computation of the net asset value of the Shares of the Fund.
14. The 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.
- 5 -
