<PAGE>
As filed with the Securities and Exchange Commission on May 18, 1995
1933 Act File No. 33-37615
1940 Act File No. 811-6174
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 7
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 11
MFS INSTITUTIONAL TRUST
(Exact Name of Registrant as Specified in Charter)
500 Boylston, Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 954-5000
Stephen E. Cavan, Massachusetts Financial Services Company
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|_| on [date] pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|X| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
STATEMENT PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
securities under the Securities Act of 1933 and filed a Rule 24f-2 Notice with
respect to its fiscal year ended June 30, 1994 on August 30, 1994 and with
respect to its fiscal year ended June 30, 1995 will file a Rule 24f-2 Notice on
or before August 31, 1995.
================================================================================
<PAGE>
MFS INSTITUTIONAL TRUST
MFS EMERGING MARKETS FIXED INCOME FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ---------------------- ------------------ -----------------------
<S> <C> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) * *
(b) * *
(c) Information Concerning Shares *
of the Fund - Performance
Information
(d) * *
4 (a) Front Cover Page; The Fund; *
Investment Objective and Policies;
Risk Factors; Information
Concerning Shares of the Fund -
Description of Shares, Voting
Rights and Liabilities
(b) Investment Objective and Policies; *
Risk Factors
(c) Investment Objective and *
Policies; Risk Factors
5 (a) The Fund; Management of the *
Fund - Investment Adviser
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ---------------------- ------------------ -----------------------
<S> <C> <C>
(b) Front Cover Page; Management *
of the Fund - Investment
Adviser; Back Cover Page
(c) Management of the Fund - *
Investment Adviser
(d) Management of the Fund - *
Investment Adviser; Back
Cover Page
(e) Management of the Fund - *
Shareholder Servicing Agent;
Back Cover Page
(f) Expense Summary; Information *
Concerning Shares of the Fund
- Investment Adviser
(g) Information Concerning Shares *
of the Fund - Purchases;
Investment Objective and Policies
- Portfolio Trading
5A (a), (b), (c) * *
6 (a) Information Concerning Shares *
of the Fund - Description of
Shares, Voting Rights and
Liabilities; Information
Concerning Shares of the
Fund - Redemptions
(b) Description of Shareholder Voting *
Rights and Liabilities
(c) * *
(d) * *
(e) Shareholder Services *
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ---------------------- ------------------ -----------------------
<S> <C> <C>
(f) Information Concerning Shares *
of the Fund -Distributions;
Shareholder Services -
Distribution Options
(g) Information Concerning Shares *
of the Fund - Tax Status
7 (a) Front Cover Page; Management *
of the Fund - Distributor; Back
Cover Page
(b) Information Concerning Shares *
of the Fund - Purchases; Net
Asset Value
(c) Information Concerning Shares *
of the Fund - Purchases;
Exchanges; Shareholder Services
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases
(e) * *
(f) * *
8 (a) Information Concerning Shares *
of the Fund - Redemptions;
Information Concerning Shares
of the Fund - Purchases
(b), (c), (d) Information Concerning Shares *
of the Fund - Redemptions
9 * *
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ---------------------- ------------------ -----------------------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * *
13 (a), (b), (c) * Investment Objectives;
Policies and Restrictions
(d) Investment Objective and *
Policies - Portfolio Trading
14 (a), (b) * Management of the Fund -
Trustees and Officers
(c) * Management of the Fund -
Trustees and Officers;
Appendix A
15 (a) * Management of the Fund -
Trustees and Officers
(b), (c) * Management of the Fund -
Trustees and Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser; Trustees
and Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
(c) * *
(d) * *
(e) * Portfolio Transactions and
Brokerage Commissions
(f) * *
(g) * *
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ---------------------- ------------------ -----------------------
<S> <C> <C>
(h) * Management of the Fund -
Custodian; Independent
Accountants and Financial
Statements; Back Cover Page
(i) * Management of the Fund -
Shareholder Servicing Agent
17 (a), (c), * Portfolio Transactions and
Brokerage Commissions
(b),(d), (e) * *
18 (a) Information Concerning Shares Description of Shares,
of the Fund - Description Voting Rights and Liabilities
of Shares, Voting Rights and
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Services
of the Fund - Purchases
(b) Information Concerning Shares Determination of Net Asset
of the Trust - Net Asset Value; Value and Performance;
Purchases Management of the Fund -
Distributor
(c) * *
20 * Tax Status
21 (a) * Management of the Fund-
Distributor
(b),(c) * *
22 (a) * *
(b) * Determination of Net Asset
Value and Performance
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ---------------------- ------------------ -----------------------
<S> <C> <C>
23 * Independent Accountants and
Financial Statement
- ------------------------
* Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
MFS(R) EMERGING MARKETS [August 1, 1995]
FIXED INCOME FUND Shares of Beneficial Interest
- ------------------------------------------------------------------------------
Page
----
1. Expense Summary .................................................. 2
2. The Fund ......................................................... 2
3. Investment Objective and Policies ................................ 3
4. Risk Factors ..................................................... 9
5. Management of the Fund ........................................... 11
6. Information Concerning Shares of the Fund ........................ 12
Purchases .................................................... 12
Exchanges .................................................... 13
Redemptions .................................................. 13
Distributions ................................................ 14
Tax Status ................................................... 14
Net Asset Value .............................................. 15
Description of Shares, Voting Rights and Liabilities ......... 15
Performance Information ...................................... 15
Expenses ..................................................... 15
7. Shareholder Services ............................................. 16
Appendix A -- Description of Bond Ratings ........................ A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MFS(R) EMERGING MARKETS FIXED INCOME FUND
500 Boylston Street, Boston, MA 02116 (617) 954-5000
MFS Emerging Markets Fixed Income Fund (the "Fund") is a non-diversified series
of MFS Institutional Trust (the "Trust").
The investment objective of the Fund is to seek total return (high current
income and long-term growth of capital). The Fund seeks to achieve its
investment objective by investing primarily in fixed income securities of
government, government-related, supranational and corporate issuers located or
primarily conducting their business in emerging market countries. THE FUND MAY
INVEST UP TO 100% OF ITS ASSETS IN BONDS ISSUED BY FOREIGN ISSUERS RATED BELOW
INVESTMENT GRADE, WHICH ENTAIL GREATER RISKS OF UNTIMELY INTEREST AND PRINCIPAL
PAYMENTS, DEFAULT AND PRICE VOLATILITY THAN HIGHER RATED SECURITIES, AND MAY
PRESENT PROBLEMS OF LIQUIDITY AND VALUATION. INVESTORS SHOULD CAREFULLY CONSIDER
THESE RISKS BEFORE INVESTING. THE FUND IS DESIGNED FOR INVESTORS WHO WISH TO
SPREAD THEIR INVESTMENTS BEYOND THE UNITED STATES AND WHO ARE PREPARED TO ACCEPT
THE RISKS ENTAILED IN SUCH INVESTMENTS, WHICH MAY BE HIGHER THAN THOSE
ASSOCIATED WITH CERTAIN UNITED STATES INVESTMENTS (SEE "INVESTMENT OBJECTIVE AND
POLICIES" AND "RISK FACTORS"). The Fund is designed exclusively for
institutional investor clients of MFS Asset Management, Inc., a wholly owned
subsidiary of the Fund's investment adviser. The minimum initial investment is
generally $3 million per investor (see "Purchases").
The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor ought to know before investing. The Trust,
on behalf of the Fund, has filed with the Securities and Exchange Commission
(the "SEC") a Statement of Additional Information, dated [August 1,] 1995, which
contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. See page 16 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>
1. EXPENSE SUMMARY
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases of Shares ............................................None
Maximum Sales Load Imposed on Reinvested Dividends and Distributions .........................None
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):<F1>
Management Fees ........................................................................... 0.85%
Other Expenses (after expense reimbursement)<F2>........................................... 0.40%
----
Total Operating Expenses (after expense reimbursement)<F2>................................. 1.25%
- ----------
<FN>
<F1>Based on estimates of expenses for the fiscal year ending June 30, 1996.
<F2>MFS has agreed to bear, subject to reimbursement by the Fund, until
[December 31, 2005], expenses of the Fund such that the Fund's aggregate
expenses do not exceed 1.25%, on an annualized basis, of its average daily
net assets. This arrangement may be terminated or revised by MFS at any
time. See "Information Concerning Shares of the Fund -- Expenses" below.
Absent this expense arrangement, "Other Expenses" and "Total Operating
Expenses" would be estimated as 1.58% and 2.43%, respectively.
</FN>
</TABLE>
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (1) 5% annual return and (2) redemption at the
end of each of the time periods indicated:
1 year ........................................................$13
3 years .......................................................$40
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. More complete descriptions of the expenses of the
Fund are set forth under the caption "Management of the Fund -- Investment
Adviser" and "Information Concerning Shares of the Fund -- Expenses" below.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
2. THE FUND
The Fund is a non-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 1990. The Trust presently consists of three
separate series, one of which is the Fund. The Fund commenced investment
operations in [August of 1995]. Shares of the other two series of the Trust are
offered pursuant to separate prospectuses. Shares of the Fund are continuously
offered and sold to investors and the Fund uses the proceeds to buy securities
for its portfolio. The Trust's Board of Trustees provides broad supervision over
the affairs of the Trust and the Fund. The Adviser is responsible for the
management of the Fund's assets and the officers of the Trust are responsible
for its operations. The Adviser manages the portfolio from day to day in
accordance with the Fund's investment objective and policies. The selection of
investments and the way they are managed depend primarily on the conditions and
trends in emerging market economies and their financial marketplaces. The Fund
also offers to buy back (redeem) its shares from its shareholders at any time at
net asset value.
3. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to seek total return
(high current income and long term growth of capital.) Any investment involves
risk and there can be no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund may be changed without
shareholder approval. A change in the Fund's investment 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.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 65% of its net assets (and
currently expects to invest a substantial portion of its net assets) in fixed
income securities of government, government-related, supranational and corporate
issuers located, or primarily conducting their business, in emerging markets.
The Fund will generally invest not less than 50% of its net assets in government
and government-related issuers. The Fund considers emerging markets to be
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and countries or regions with the
potential for rapid economic growth. 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 the World Bank publications as developing; or (iv) determined by the
Adviser to be an emerging market as defined above.
The Fund may invest in government, government-related and restructured debt
securities which will consist of: (i) debt securities or obligations issued or
guaranteed by governments, governmental agencies or instrumentalities and
political subdivisions located in emerging countries (including loans between
governments and financial institutions); (ii) debt securities or obligations
issued by government owned, controlled or sponsored entities located in emerging
countries; (iii) interests in issuers organized and operated for the purpose of
restructuring the investment characteristics of instruments issued by any of the
entities described above; and (iv) debt obligations issued by supranational
organizations such as Asian Development Bank and the Inter-American Development
Bank, among others. The restructuring described above involves the deposit with
or purchase by an entity of specific instruments and the issuance by that entity
of one or more classes of securities backed by, or representing interests in,
the underlying instruments. Certain issuers of such structured securities may be
deemed to be "investment companies" as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). As a result, the Fund's investment in such
securities may be limited by certain investment restrictions contained in the
1940 Act. See "Structured Securities" and "Investment in Other Investment
Companies" below.
The Fund also may invest in fixed income securities of companies in emerging
market countries, which include: (i) companies the principal securities trading
market for which is in 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 emerging market
countries or sold in emerging market countries.
The Fund takes a global approach to portfolio management and the Fund currently
expects to pursue investment opportunities in Latin America, Asia, Africa, the
Middle East and the developing countries of Europe, primarily in Eastern Europe.
While the Fund is not "diversified" for purposes of the 1940 Act, it intends to
maintain investments, under normal market conditions, in at least five countries
(outside of the United States).
Emerging market debt securities held by the Fund may take the form of bonds
(including Brady bonds, Yankee bonds and Eurobonds), notes, bills, debentures,
bank debt obligations, short-term paper, mortgage and other asset-backed
securities, loans, loan assignments and interests issued by entities organized
and operated for the purpose of restructuring the investment characteristics of
instruments issued by emerging market issuers. The Fund is not restricted by
limits on weighted average maturity or duration of an individual issue. Fixed
income securities in which the Fund may invest may have stated maturities from
overnight to 30 years. When unfavorable international political or economic
conditions exist, the Fund may, until favorable conditions return, invest all or
a portion of its assets in cash (U.S. dollars, foreign currencies or
international currency units) or cash equivalents (such as certificates of
deposit, bankers acceptances and time deposits), commercial paper, short-term
obligations, preferred stock, repurchase agreements and obligations issued or
guaranteed by the U.S. or any foreign government or any of their agencies or
instrumentalities.
While the Fund will not invest in equity securities, the Adviser considers a
variety of factors in selecting emerging market fixed income securities to
achieve capital appreciation, including the creditworthiness of issuers,
interest rates, and currency exchange rates.
The Fund is not restricted in the portion of its assets which may be invested in
securities denominated in a particular currency and up to 100% of the Fund's
assets may be invested in securities denominated in foreign currencies and
international currency units. The portion of the Fund's assets invested in
securities denominated in currencies other than the U.S. dollar will vary
depending on market conditions. Therefore, the value of the Fund's investments
may be significantly affected by changes in currency exchange rates. (See "Risk
Factors -- Foreign Currencies" below.)
Emerging markets fixed income securities generally are rated in the lower rating
categories of recognized rating agencies (that is, ratings of Ba or lower by
Moody's Investors Service, Inc. ("Moody's"), or BB or lower by Standard & Poor's
Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch")) (and
comparable unrated securities). These securities are considered speculative and,
while generally providing greater income than investments in higher rated
securities, will involve greater risk of principal and income (including the
possibility of default or bankruptcy of the issuers of such securities) and may
involve greater volatility of price than securities in the higher rating
categories. (See "Risk Factors -- Lower Rated Fixed Income Securities" below.)
INVESTMENT TECHNIQUES -- The 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.
BRADY BONDS: The 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 constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments in
Brady bonds may be viewed as speculative.
STRUCTURED SECURITIES: The 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 the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments. The 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.
INVESTMENT IN OTHER INVESTMENT COMPANIES: The 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 securities of emerging
market companies having limited free float, or (iii) when the Adviser believes
such investments may be more advantageous to the Fund than a direct market
purchase of securities. If the 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.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: Fixed income
securities in which the 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 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. The Fund will accrue income on such investments for tax
and accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities under disadvantageous circumstances to
satisfy the Fund's distribution obligations.
INDEXED SECURITIES: The 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: The Fund may invest a portion of its assets
in loans and other direct indebtedness. By purchasing a loan, the 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. The 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 the 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, and such risk
may be enhanced when investing in emerging markets. 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, the Fund may be unable to sell such investments
at an opportune time or may have to resell them at less than fair market value.
WHEN-ISSUED OR FORWARD DELIVERY SECURITIES: The Fund may purchase securities on
a "when-issued" or on a "forward delivery" basis, which means that the
obligations will be delivered to the Fund at a future date usually beyond
customary settlement time. The commitment to purchase a security for which
payment will be made on a future date may be deemed a separate security.
Although the 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, the Fund will not commit more than 15% of its assets to such
purchases. The 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, the Fund will hold cash, short-term money market instruments or
U.S. Government securities in a segregated account to pay for the commitment.
Although the Fund does not intend to make such purchases for speculative
purposes, purchases of securities on such basis may involve more risk than other
types of purchases.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Fund's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize the risks of investing in repurchase
agreements.
LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans will usually be made to member firms (and subsidiaries thereof) of
the New York Stock Exchange and to member banks of the Federal Reserve System,
and would be required to be secured continuously by collateral in cash, letters
of credit or U.S. Government securities maintained on a current basis at an
amount at least equal to the market value of the securities loaned. If the
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 total assets of
the Fund.
RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933 ("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 illiquid and thus subject to the Fund's limitations on investing not
more than 15% of its net assets in illiquid investments, or liquid and thus not
subject to such limitation. The Board of Trustees has adopted guidelines and
delegated to MFS the daily function of determining and monitoring the liquidity
of Rule 144A securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Board will carefully
monitor the 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 increasing the
level of illiquidity in a Fund 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 the Fund's 15% limitation on investments in
illiquid investments, the Fund may also invest in restricted securities that may
not be sold under Rule 144A, which presents certain risks. As a result, the Fund
might not be able to sell these securities when the Adviser wishes to do so, or
might have to sell them at less than fair value. In addition, market quotations
are less readily available. Therefore, judgment may at times play a greater role
in valuing these securities than in the case of unrestricted securities.
OPTIONS ON SECURITIES: The Fund may write (sell) covered put and call options on
securities ("Options") and purchase put and call Options. The Fund will write
such Options for the purpose of protecting the value of its portfolio. In
particular, where the Fund writes an Option which expires unexercised or is
closed out by the Fund at a profit, it will retain the premium paid for the
Option, which will increase its gross income and will offset in part the reduced
value of a portfolio security in connection with which the Option may have been
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
be required to purchase or sell the security at a disadvantageous price,
resulting in losses which may only be partially offset by the amount of the
premium. The 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.
The 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. In the event that the expected changes occur, the Fund may be able to
offset the resulting adverse effect on its portfolio, in whole or in part,
through the Options purchased. The risk assumed by the Fund in connection with
such transactions is limited to the amount of the premium and related
transaction costs associated with the Option, although the Fund may be required
to forfeit such amounts in the event that the prices of securities underlying
the Options do not move in the direction or to the extent anticipated.
The 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 the Fund will be "covered" but could
involve additional risks, as discussed in the Statement of Additional
Information.
FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indexes of securities as such instruments become available
for trading ("Futures Contracts"). Such transactions will be entered into for
hedging purposes, in order to protect the 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 general increase in interest rates or a decline in the dollar value
of foreign currencies in which portfolio securities are denominated, the adverse
effects of such changes may be offset, in whole or part, by gains on Futures
Contracts sold by the Fund. Conversely, the adverse effects of an increase in
the cost of portfolio securities to be acquired, occurring as a result of a
decline in interest rates or a rise in the dollar value of securities
denominated in foreign currencies, may be offset, in whole or in part, by gains
on Futures Contracts purchased by the Fund. The 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 the Fund
believes that use of such contracts will benefit the Fund, if the Adviser's
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. The Fund will
not enter into any Futures Contract if immediately thereafter the value of all
such Futures Contracts would exceed 50% of the value of its total assets.
OPTIONS ON FUTURES CONTRACTS: The Fund may also purchase and write options on
Futures Contracts ("Options on Futures Contracts") for the purpose of protecting
against declines in the value of portfolio securities or against increases in
the cost of securities to be acquired, or for non-hedging purposes, to the
extent permitted by applicable law. Purchases of Options on Futures Contracts
may present less risk in hedging the portfolio of the Fund than the purchase or
sale of the underlying Futures Contracts, since the potential loss is limited to
the amount of the premium paid for the option, plus related transaction costs.
The writing of such options, however, does not present less risk than the
trading of Futures Contracts, and will constitute only a partial hedge, up to
the amount of the premium received, less related transaction costs. In addition,
if an option is exercised, the Fund may suffer a loss on the transaction.
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.
FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase and sale of a fixed quantity of a foreign currency at
a future date ("Forward Contracts"). The Fund may enter into Forward Contracts
for hedging purposes as well as for non-hedging purposes. By entering into
transactions in Forward Contracts, however, the 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. 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. The 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, a
reasonable degree of correlation can be expected between movements in the values
of the two currencies. The 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.
OPTIONS ON FOREIGN CURRENCIES: The 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 portfolio securities and
against increases in the dollar cost of securities to be acquired. As in the
case of other types of options, however, the writing of an Option on Foreign
Currency will constitute only a partial hedge, up to the amount of the premium
received, and the 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 the Fund's position, it may forfeit the entire amount of the premium paid for
the option plus related transaction costs.
SWAPS AND RELATED TRANSACTIONS: As one way of managing its exposure to different
types of investments, the 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 the Fund with another party of cash
payments based upon different interest rate indexes, currencies, and other
prices or rates, such as the value of mortgage prepayment rates. For example, in
the typical interest rate swap, the Fund might exchange a sequence of cash
payments based on a floating rate index for cash payments based on a fixed rate.
Payments made by both parties to a swap transaction are based on a principal
amount determined by the parties.
The Fund may also purchase and sell caps, floors and collars. In a typical cap
or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. For
example, the purchase of an interest rate cap entitles the buyer, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the
counterparty selling such interest rate cap. The sale of an interest rate floor
obligates the seller to make payments to the extent that a specified interest
rate falls below an agreed-upon level. A collar arrangement combines elements of
buying a cap and selling a floor.
Swap agreements will tend to shift the Fund's investment exposure from one type
of investment to another. For example, if the 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. Depending on how
they are used, swap agreements may increase or decrease the overall volatility
of the Fund's investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on the
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. The 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 on, and the risks
involved in, these activities.
PORTFOLIO TRADING: Although the Fund does not intend to seek short-term profits,
securities in its portfolio will be sold whenever the Adviser believes it is
appropriate to do so without regard to the length of time the particular asset
may have been held. A high turnover rate involves greater expenses to the Fund.
The Fund engages in portfolio trading if it believes a transaction net of costs
(including custodian charges) will help in achieving its investment objective.
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 Fund and of the
investment company clients of MFD, a wholly owned subsidiary of MFS and the
principal underwriter of certain funds in the MFS Family of Funds (the "MFS
Funds"), as a factor in the selection of broker-dealers to execute the Fund's
portfolio transactions. From time to time, the Adviser may direct certain
portfolio transactions to broker-dealer firms which, in turn, have agreed to pay
a portion of the Fund's operating expenses (e.g. fee charged by the custodian of
the Fund's assets). For a further discussion of portfolio trading, see the
Statement of Additional Information. For the fiscal year ending June 30, 1996,
the Adviser estimates that the rate of portfolio turnover will not exceed 200%.
Because the Fund is expected to have a portfolio turnover rate of over 100%,
transaction costs incurred by the Fund and the realized capital gains and losses
of the Fund may be greater than that of a fund with a lesser portfolio turnover
rate.
----------------
The policies described above are not fundamental and may be changed without
shareholder approval.
The Statement of Additional Information includes a discussion of investment
policies and a listing of specific investment restrictions which govern the
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. The Fund's investment limitations and
policies are adhered to at the time of purchase or utilization of assets; a
subsequent change in circumstances will not be considered to result in a
violation of policy.
4. RISK FACTORS
FOREIGN SECURITIES: Transactions involving foreign 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. The 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 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 United States. 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 the
Fund is uninvested and no return is earned thereon. The inability of the 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. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to 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 expenses of the Fund. See "Investment Policies and Restrictions" in
the Statement of Additional Information for a further discussion of emerging
markets debt securities, as well as the associated risks.
ALLOCATION AMONG EMERGING MARKETS: The Fund may allocate its investments among
the emerging markets of Latin America, Asia, Africa, the Middle East and the
developing countries of Europe, primarily in Eastern Europe. The Fund will
allocate its investments among these emerging market regions in accordance with
the Adviser's determination as to the allocation most appropriate with respect
to the Fund's investment objective of seeking total return. The Fund has no
limitation on the percentage of its assets which may be invested in any
particular region, and may, in accordance with the Adviser's investment
discretion, at times be fully invested in emerging market securities of issuers
located in a single region (e.g., Latin America). To the extent that the Fund's
investments are concentrated in one or a few emerging market regions, the Fund's
investment performance will correspondingly be more dependent upon the economic,
political and social conditions and changes in those regions. The ability of the
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 regional allocations.
FOREIGN CURRENCIES: Since the Fund may invest in non-U.S. dollar denominated
securities, the value of the Fund's investments, and the value of interest
earned by the 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 Fund.
Although the Adviser may attempt to manage currency exchange rate risks, there
is no assurance that the Adviser will do so at an appropriate time or that the
Adviser will be able to predict exchange rates accurately. For example, if the
Adviser hedges the 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. The Fund may hold foreign currency received in connection with
investments in foreign securities, Forward Contracts and Options on Foreign
Currencies when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. dollars at a later date, based on anticipated
changes in the relevant exchange rates. While the holding of foreign currencies
will permit the 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.
FIXED INCOME SECURITIES: Because of the Fund's investment 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. The Fund is not
subject to restrictions with respect to the maturities or duration of the fixed
income securities it holds, and maturities may range from overnight to 30 years.
The Fund's investment in fixed income securities with longer terms to maturity
or greater duration are subject to greater volatility than the Fund's
shorter-term obligations, and may have the effect of increasing the volatility
of the Fund, as compared to a fund which has maturities and duration
limitations.
LOWER RATED FIXED INCOME SECURITIES: The emerging market fixed income securities
in which the Fund may invest may be rated Baa by Moody's or BBB by S&P (and
comparable unrated securities). 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.
The Fund may also invest in fixed income securities rated Ba or lower by Moody's
or BB or lower by S&P (and comparable unrated securities). These securites are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds".
No minimum rating standard is required by the 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 publicly)
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 the 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, the 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. For
example, new federal rules require that savings and loan associations gradually
reduce their holdings of high-yield securities. An effect of such legislation
may be to depress the prices of outstanding lower rated high yielding fixed
income securities. 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
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 may refer to ratings issued by established credit rating
agencies, it is not the Fund's policy to rely exclusively on ratings issued by
these rating agencies, but rather to supplement such ratings with the Adviser's
own independent and ongoing review of credit quality. The Fund's achievement of
its investment objective may be more dependent on the Adviser's own credit
analysis than in the case of an investment company primarily investing in higher
quality fixed income securities.
Since shares of the 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 the Fund.
NON-DIVERSIFIED STATUS: The Fund has registered as a "non-diversified"
investment company. As a result, the Fund is limited as to the percentage of its
assets which may be invested in the securities of any one issuer only by its own
investment restrictions and the diversification requirements imposed by the
Internal Revenue Code of 1986, as amended (the "Code"). Since the Fund may
invest a relatively high percentage of its assets in a limited number of
issuers, the Fund may be more susceptible to any single economic, political or
regulatory occurrence and to the financial conditions of the issuers in which it
invests. For these reasons, an investment in shares of the Fund should not be
considered to constitute a complete investment program.
5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated [August 1,] 1995 (the "Advisory Agreement"). The
Adviser provides the Fund with overall investment advisory and administrative
services, as well as general office facilities. Jeffrey A. Kaufman, an
Investment Officer of the Adviser, is the Fund's portfolio manager. Prior to
joining the Adviser in 1994, he held positions as a Research Consultant with
Apogee Research and Salomon Brothers. Subject to such policies as the Trustees
may determine, the Adviser makes investment decisions for the Fund. For its
services and facilities, the Adviser receives a management fee computed and paid
monthly equal on an annualized basis to 0.85% of the Fund's average daily net
assets.
MFS also serves as investment adviser to each of the MFS Funds and to MFS
Municipal Income Trust, MFS Multimarket Income Trust, MFS Government Markets
Income Trust, MFS Intermediate Income Trust, MFS Charter Income Trust, MFS
Special Value Trust, MFS Union Standard Trust, MFS Variable Insurance Trust,
MFS/Sun Life Series Trust, Sun Growth Variable Annuity Fund, Inc. and seven
variable accounts, each of which is a registered investment company established
by Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)") in
connection with the sale of Compass-2 and Compass-3 combination fixed/variable
annuity contracts. MFS and its wholly owned subsidiary, MFS Asset Management,
Inc., also provide investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $[ ] billion on behalf of approximately [ ] million investor
accounts as of [ ]. As of such date, the MFS organization managed approximately
$[ ] billion of assets invested in fixed income securities of total assets, $[ ]
billion are invested in securities of foreign issuers and non-U.S. dollar
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 of MFS, Mr. Shames is the
President of MFS, Mr. Scott is the Secretary and a Senior Executive Vice
President of MFS, and 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
United States since 1895, establishing a headquarters office in the United
States in 1973. The executive officers of MFS report to the Chairman of Sun
Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is also the Chairman,
President and a Trustee of the Trust. W. Thomas London, James O. Yost, Stephen
E. Cavan and James R. Bordewick, Jr., all of whom are officers of MFS, are
officers of the Trust.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency,
certain dividend disbursing agency and other services for the Fund.
6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
The Fund is designed exclusively for institutional investor clients of MFS Asset
Management, Inc. Shares of the Fund may be purchased through MFD in cash or
in-kind without a sales charge at their net asset value next computed after
acceptance of the purchase order. The minimum initial investment is generally $3
million. There is no minimum on additional investments.
The Fund intends to be as fully invested at all times as is reasonably
practicable in order to maximize total return. In order to make investments
which will immediately generate income, the Fund must have federal funds
available to it (i.e., monies credited to its custodian bank by a Federal
Reserve bank). An order for the purchase of shares of the Fund is accepted (i)
immediately upon receipt of federal funds by wire as described below or (ii) on
the next business day after receipt of a check. Therefore, a non-federal funds
investment will remain idle for one business day after receipt.
All investments in the Fund are credited to the shareholder's account in the
form of full and fractional shares at the net asset value per share next
determined after acceptance of the purchase order. The Fund does not generally
issue share certificates, but the Shareholder Servicing Agent maintains an
account for each shareholder and mails to each shareholder a confirmation of
each purchase or sale of shares in its account.
The Fund reserves the right to reject any specific purchase order or to restrict
purchases by a particular purchaser (or group of related purchasers). Purchases
and exchanges should be made for investment purposes only. A pattern of frequent
exchanges may be deemed by MFS to be abusive and contrary to the best interests
of a Fund's other shareholders and, at the discretion of MFS, may be limited by
the Fund's refusal to accept additional purchases and/or exchanges from the
investor. Although the Fund does not have any specific definition of what
constitutes a pattern of frequent purchases or exchanges, and will consider all
relevant factors in determining whether a particular situation is abusive and
contrary to the best interests of the Fund and its other shareholders, investors
should be aware that the Fund may in its discretion limit or otherwise restrict
the number of times purchases or exchanges may be made by an investor.
OPENING AN ACCOUNT: Payments by check should be made to the order of "MFS
Emerging Markets Fixed Income Fund" and sent to the Fund as follows: MFS Service
Center, Inc., P.O. Box 1400, Boston, MA 02107-9906. Payments of federal funds
should be sent by wire to the custodian of the Fund as follows: State Street
Bank and Trust Company, Attn: Mutual Funds Division, For the account of:
[Shareholder's name], Re: MFS Emerging Markets Fixed Income Fund (Account No. )
and Wire Number: [Assigned by telephone].
Information on how to wire federal funds is available at any national bank or
any state bank which is a member of the Federal Reserve System. Shareholders
should also mail the Account Application to the Shareholder Servicing Agent.
A shareholder must first telephone the Shareholder Servicing Agent (see back
cover for telephone number) to advise of its intended action and, if funds are
to be wired, to obtain a wire order number.
IN-KIND PURCHASES: Shares of the Fund may be purchased with bonds or other fixed
income debt securities acceptable to the Fund for Fund shares. The Fund need not
accept any security offered for an in-kind purchase unless it is consistent with
the Fund's investment objective, policies and restrictions and is otherwise
acceptable to the Fund. Securities accepted in-kind for shares will be valued in
accordance with the Fund's usual valuation procedures (see "Net Asset Value").
Investors interested in making an in-kind purchase of Fund shares must first
telephone the Shareholder Servicing Agent (see back cover for telephone number)
to advise of its intended action and obtain instructions for an in-kind
purchase.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of MFS Worldwide Fixed Income
Fund or MFS Emerging Equities Fund, each a series of the Trust (if available for
sale) at net asset value. Exchanges will be made only after instructions in
writing or by telephone (an "Exchange Request") are received for an established
account by the Shareholder Servicing Agent in proper form (see "Redemptions"
below). If an Exchange Request is being used to open a new account with a Fund,
the exchange must involve shares having an aggregate value of at least $3
million. If the Exchange Request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange, the
exchange usually will occur on that day if all the requirements set forth above
have been complied with at that time. 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 non-tax-exempt
shareholders making the exchange. The exchange privilege (or any aspect of it)
may be changed or discontinued upon sixty days prior written notice to
shareholders.
REDEMPTIONS
Shares of the Fund may be redeemed on any business day in cash or in-kind. If
the Adviser determines, in its sole discretion, that it would be detrimental to
the best interests of the remaining shareholders of the Fund, the Fund may make
payment of the redemption price, either totally or partially, by a distribution
in-kind of securities (instead of cash) from the Fund's portfolio. The
securities distributed in such a distribution would be valued at the same amount
as that assigned to them in calculating the net asset value for the shares being
sold (see "Net Asset Value"). Securities distributed by the Fund will be
selected by the Adviser in light of the Fund's objective and will not generally
represent a pro rata distribution of each security held in the Fund's portfolio.
If a shareholder received a distribution in-kind, it would incur brokerage
charges when it converted the securities to cash.
Within seven days after receipt of a redemption request in "good order," by the
Shareholder Servicing Agent, the Fund will make payment in cash in the amount of
(or, as described above, in-kind with a value equal to) the net asset value of
the shares next determined after such redemption request was received, except
during any period in which the right of redemption is suspended or date of
payment is postponed because the New York Stock Exchange (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. Redemptions in cash will be
made by transfer of federal funds for payment into the investor's account.
Redemptions in-kind will be made by the transfer and delivery of securities as
directed by the investor.
When opening an account with the Fund, shareholders will be required to
designate the account(s) to which funds or securities may be transferred upon
redemption. Designation of additional accounts and any change in the accounts
originally designated must be made in writing.
The value of shares redeemed may be more or less than the shareholder's cost,
depending on portfolio performance and distributions made during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
a shareholder that is not an exempt shareholder may realize a gain or loss (see
"Tax Status").
The Trust 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 $500,000 because of
redemptions. 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.
DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income to its
shareholders as dividends on an annual basis. The Fund may make one or more
distributions during the calendar year to its shareholders from any long-term
capital gains, and may also make one or more distributions during the calendar
year to its shareholders from short-term capital gains. In determining the net
investment income available for distributions, the Fund may rely on projections
of its anticipated net investment income over a longer term, rather than its
actual net investment income for the period. If the Fund earns less than
projected, or otherwise distributes more than its earnings for the year, a
portion of the distributions may constitute a return of capital. The Fund
intends to distribute premiums from options, if any, annually. Shareholders may
elect to receive dividends and capital gain distributions in either cash or
additional shares. See "Tax Status" and "Shareholder Services -- Distribution
Options" below.
TAX STATUS
In order to minimize the taxes the Fund would otherwise be required to pay, the
Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Code, and to make distributions to its shareholders in
accordance with the timing and certain other requirements imposed by the Code.
It is expected that the Fund will not be required to pay entity level federal
income or excise taxes although foreign-source income received by the Fund may
be subject to foreign withholding taxes. Shareholders of the Fund normally will
have to pay federal income taxes, and any state or local taxes, on dividends and
capital gain distributions from the Fund whether paid in cash or additional
shares.
Shortly after the end of each calendar year, each shareholder will be sent a
statement setting forth the federal income status of all dividends and
distributions for that year, including the portion taxable as ordinary income,
the portion taxable as long-term capital gain, the portion if any, representing
a return of capital (which is free of current taxes but results in a basis
reduction) and the amount, if any, of federal income tax withheld. In certain
circumstances, the Fund may 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.
Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares just before the Fund makes a distribution of taxable
income may thus pay the full price for the shares and then effectively receive a
portion of the purchase price back as a taxable distribution.
The Fund intends to withhold U.S. federal income tax at a rate of 30% on
dividends and certain other payments that are subject to such withholding, and
that are made to non-exempt persons who are neither citizens nor residents of
the U.S., regardless of whether a lower rate may be permitted under an
applicable law or treaty. The Fund is also required in certain circumstances to
apply backup withholding of 31% on reportable dividends and redemption proceeds
paid to any shareholder (including a shareholder who is neither a citizen nor a
resident of the U.S.) who does not furnish to the Fund certain information and
certifications or who is otherwise subject to backup withholding. However,
backup withholding will not be applied to such shareholders payments which have
had 30% withholding taken. 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 the Fund.
NET ASSET VALUE
The net asset value of shares of the Fund is determined each day during which
the Exchange is open for trading. This determination is made once each day as of
the close of regular trading on the Exchange by deducting the amount of the
Fund's liabilities from the value of its assets and dividing the difference by
the number of its shares outstanding. Assets in the 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. A
share's net asset value is effective for orders received by the Fund prior to
its calculation and received by the Fund prior to the close of that business
day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust has only one class of shares, entitled Shares of Beneficial Interest
(without par value). The Trust presently has three series and has reserved the
right to create and issue additional series. Each share of a series represents
an equal proportionate interest in that series with each other share of that
series. The shares of each series participate equally in the earnings, dividends
and assets of the particular series. Shares when issued are fully paid and
non-assessable. Shareholders are entitled to one vote for each share held.
Shares of each series generally vote separately, for example to approve
investment advisory agreements, but shares of all series vote together,
including shares of other series of the Trust, to the extent required under the
1940 Act, in the election or selection of Trustees and accountants. Shareholders
of each series would be entitled to share pro rata in the net assets of that
series available for distribution to shareholders upon liquidation of the Trust
or that series. The Trust is not required to and has no current intention to
hold annual shareholder meetings, although special meetings may be called for
purposes of electing or removing Trustees, changing fundamental investment
restrictions or approving an investment advisory agreement.
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 is limited to circumstances in which both inadequate
insurance existed (e.g., fidelity bonding and errors and omissions insurance)
and the Trust itself was unable to meet its obligations.
Because the Adviser has furnished the intital capital of the Fund, as of the
date of this Prospectus, the Adviser owns 100% of the Fund's shares and,
therefore, controls the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund will provide total rate of return and yield
quotations and may also quote fund rankings from various sources, such as the
Lipper Analytical Services, Inc. and Wiesenberger Investment Companies Service.
Total rate of return quotations will reflect the average annual percentage
change over stated periods in the value of an investment in the Fund made at the
net asset value with all distributions reinvested. Yield quotations are based on
the annualized net investment income per share of the Fund over a 30-day period
stated as a percent of the net asset value on the last day of that period. The
Fund's total rate of return and yield quotations are based on historical
performance and are not intended to indicate future performance. Total rate of
return reflects all components of investment return over a stated period of
time, while yield reflects only net portfolio income as of a stated time. The
Fund's quotations may from time to time be used in advertisements, shareholder
reports or other communications to shareholders. For a discussion of the manner
in which the Fund will calculate its total rate of return and yield, see the
Statement of Additional Information.
EXPENSES
The Trust pays the compensation of the Trustees who are not officers of MFS and
all expenses of the 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 the Fund, fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing 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 State Street
Bank and Trust Company, the Trust's Custodian, for all services to the Fund,
including safekeeping of funds and securities and maintaining required books and
accountspenses of calculating the net asset value of shares of the Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses 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 agreed to pay until December 31, 2005 the expenses of the Fund such that the
aggregate operating expenses do not exceed, on an annualized basis, 1.25% of its
average daily 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
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 Fund which will be
accomplished by the payment by the Fund of an expense reimbursement fee to MFS
computed and paid monthly at a percentage of its average daily net assets for
its then current fiscal year, with a limitation that immediately after such
payment the aggregate operating expenses of the Fund would not exceed, on an
annualized basis, 1.25% of its average daily net assets. The expense
reimbursement agreement terminates for the Fund on the earlier of the date on
which payments made thereunder by the Fund equal the prior payment of such
reimbursable expenses by MFS or December 31, 2005.
7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund, should contact the Shareholder
Servicing Agent.
ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in its account. At the
end of each calendar year, each shareholder will receive income tax information
regarding any reportable dividends, capital gain distributions or other
distributions for that year.
DISTRIBUTION OPTIONS -- The following options are available to all accounts and
may be changed as often as desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified.
-- Dividends in cash; capital gain distributions reinvested in additional
shares.
-- Dividends and capital gain distributions in cash.
Dividends and capital gains distributions will be reinvested (net of any tax
withholding) in additional full and fractional 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 the Fund. 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 distributions or redemption checks.
----------------
The Fund's Statement of Additional Information, dated [August 1,] 1995, contains
more detailed information about the Trust and the Fund, including, but not
limited to, information related to: (i) the Fund's investment policies and
restrictions, including the purchase and sale of Options, Futures Contracts,
Options on Futures Contracts, Forward Contracts and Options on Foreign
Currencies; (ii) the Trustees, officers and Adviser; (iii) portfolio trading;
(iv) the Fund's shares, including rights and liabilities of shareholders; (v)
tax status of dividends and distributions and (vi) various services and
privileges provided by the Fund for the benefit of its shareholders.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of various debt instruments. It should be emphasized, however, that ratings are
not absolute standards of quality. Consequently, debt instruments with the same
maturity, coupon and rating may have different yields while debt instruments of
the same maturity and coupon with different ratings may have the same yield.
MOODY'S INVESTORS SERVICE, INC.
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 fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance 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; and
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.
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB: 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.
C1: The rating C1 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
rating 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.
A-1 AND P-1 COMMERCIAL PAPER RATINGS
Description of S&P, Fitch and Moody's highest commercial paper ratings:
The rating "A" is the highest commercial paper rating assigned by S&P and Fitch,
and issues so rated are regarded as having the greatest capacity for timely
payment. Issues in the "A" category are delineated with the numbers 1, 2 and 3
to indicate the relative degree of safety. The A-1 designation indicates that
the degree of safety regarding timely payment is either overwhelming or very
strong. Those A-1 issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated P-1 have a superior ability for repayment. P-1 repayment capacity
will normally be evidenced by the following characteristics: (1) leading market
positions in well established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structure with moderate reliance on
debt and ample asset protection; (4) broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and (5) well established
access to a range of financial markets and assured sources of alternate
liquidity.
FITCH INVESTORS SERVICE, INC.
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 forseeble events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rated 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 a "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.
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
(800) 637-8730
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll free: (800) 637-8730
MAILING ADDRESS:
P.O. Box 1400
Boston, MA 02107-9906
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) EMERGING MARKETS
FIXED INCOME FUND
500 Boylston Street
Boston, MA 02116
MFS
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) EMERGING MARKETS
FIXED INCOME FUND
PROSPECTUS
AUGUST 1, 1995
MTR-1 2/95/490M 12/212
MFS(R)
EMERGING MARKETS
500 BOYLSTON STREET
BOSTON, MA 02116
MGS-13-8/94/.5M 26/226
<PAGE>
MFS(R) EMERGING MARKETS STATEMENT OF
FIXED INCOME FUND ADDITIONAL INFORMATION
[August 1,] 1995
- --------------------------------------------------------------------------------
Page
----
1. Definitions .................................................. 2
2. Investment Policies and Restrictions ......................... 2
3. Management of the Fund ....................................... 10
Trustees ................................................. 10
Officers ................................................. 10
Investment Adviser ....................................... 11
Custodian ................................................ 11
Shareholder Servicing Agent .............................. 11
Distributor .............................................. 11
4. Portfolio Transactions and Brokerage Commissions ............. 11
5. Tax Status ................................................... 12
6. Determination of Net Asset Value and Performance ............. 13
7. Description of Shares, Voting Rights and Liabilities ......... 14
8. Independent Accountants and Financial Statements ............. 15
MFS(R) EMERGING MARKETS FIXED INCOME FUND
A Series of MFS Institutional Trust
500 Boylston Street, Boston, Massachusetts 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 Fund's
Prospectus, dated [August 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>
1. DEFINITIONS
"Trust" -- MFS Institutional Trust, a Massachusetts business
trust. On June 1, 1992, the Trust changed its
name from Public Funds Investment Trust. The
Trust is composed of three series, one of which
is the Fund.
"Fund" -- MFS Emerging Markets Fixed Income Fund, a series
of MFS Institutional Trust.
"MFS" or the "Adviser" -- Massachusetts Financial Services Company, a
Delaware corporation.
"MFD" -- MFS Fund Distributors, Inc., a Delaware Corporation
"Prospectus" -- The Prospectus, dated [August 1,], 1995, of the Fund.
2. INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES. The investment objective and policies of the Fund are
described in the Prospectus. The following discussion of the Fund's investment
policies and restrictions supplements and should be read in conjunction with the
information set forth in the "Investment Objective and Policies" section of the
Prospectus.
EMERGING MARKETS: The Fund invests primarily in fixed income securities of
government, government-related, supranational and corporate issuers located or
primarily conducting their business in emerging markets. Such investments entail
significant risks as described in the Prospectus under the caption "Risk
Factors" and as more fully described below.
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 averages 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 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 the 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 its 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.
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 the
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 the Fund's assets should these conditions recur.
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 the 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 the 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 -- The 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 the 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.
The 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 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.
TAX WITHHOLDING -- Income from securities held by the 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. The 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 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 -- The Fund may invest up to 100% of its assets in securities
denominated in foreign currencies and international currency units. Accordingly,
changes in the value of these currencies and units against the U.S. dollar may
result in corresponding changes in the U.S. dollar value of the Fund's assets
denominated in those currencies and units.
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 the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund's net asset value.
LOANS AND OTHER DIRECT INDEBTEDNESS: The Fund may purchase loans and other
direct claims against an issuer of emerging market debt instrument (a
"borrower"). In purchasing a loan, the 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 the Fund more protection than an unsecured loan in the event of
non-payment of schedule interest or principal. However, there is no assurance
that the liquidation of collateral from a secured loan would satisfy the
corporate borrower's obligation, or that the collateral can be liquidated.
These loans are made generally to finance internal growth, mergers,
acquisitions, stock repurchases, leveraged buy-outs and other corporate
activities. Such loans are typically made by a syndicate of lending
institutions, represented by an agent lending institution which has negotiated
and structured the loans and is responsible for collecting interest, principal
and other amounts due on its own behalf and on behalf of the others in the
syndicate, and for enforcing its and their other rights against the borrower.
Alternatively, such loans may be structured as a novation, pursuant to which the
Fund would assume all of the rights of the lending institution in a loan, or as
an assignment, pursuant to which the Fund would purchase an assignment of a
portion of a lender's interest in a loan either directly from the lender or
through an intermediary. The Fund may also purchase trade or other claims
against companies, which generally represent money owed by the company to a
supplier of goods or services. These claims may also be purchased at a time when
the company is in default.
Certain of the loans acquired by the Fund may involve revolving credit
facilities or other standby financing commitments which obligate the Fund to pay
additional cash or a certain date or on demand. These commitments may have the
effect of requiring the 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 the 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.
The 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 the 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 the 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 participation 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 the Fund. For example, if a loan is foreclosed, the Fund
could become part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral. In addition,
it is conceivable that under emerging legal theories of lender liability, the
Fund could be held liable as a co-lender. It is unclear whether loans and other
forms of direct indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the Fund
relies on the Adviser's research in an attempt to avoid situations where fraud
or misrepresentation could adversely affect the Fund. In addition, 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, the Fund may be unable to sell such investments
at an opportune time or may have to resell them at less than fair market value.
To the extent that the Adviser determines that any such investments are
illiquid, the Fund will include them in the investment limitations described
below.
WHEN-ISSUED OR FORWARD DELIVERY SECURITIES: When the 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 the
Fund's assets equal to the amount of the purchase be held aside or segregated to
be used to pay for the commitment, the Fund will always have cash, short-term
money market instruments or high quality debt securities sufficient to cover any
commitments or to limit any potential risk. However, although the 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, the Fund may have
to sell assets which have been set aside in order to meet redemptions. Also, if
the 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.
INDEXED SECURITIES: The Fund may purchase securities whose prices are indexed to
the prices of other securities, securities, indices, currencies, or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic. Currency-indexed securities
typically are short-term to intermediate-term debt securities whose maturity
values or interest rates are determined by reference to the values of one or
more specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign-denominated instrument, or their maturity
value may decline when foreign currencies increase, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S. and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their value may decline
substantially if the issuer's creditworthiness deteriorates.
REPURCHASE AGREEMENTS: As described in the Prospectus, the Fund may enter into
repurchase agreements with sellers who are member firms (or a subsidiary
thereof) of the New York Stock Exchange or members of the Federal Reserve
System, recognized domestic or foreign securities dealers or institutions which
the Adviser has determined to be of comparable creditworthiness. The securities
that the Fund purchases and holds have values that 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, the Fund will have the right to liquidate the securities. If at the time
the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans would be required to be secured continuously by collateral in cash,
letter of credit or U.S. Government securities maintained on a current basis at
an amount at least equal to the market value of the securities loaned. The Fund
would have the right to call a loan and obtain the securities loaned at any time
on customary industry settlement notice (which will usually not exceed five
days). During the existence of a loan, the 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. The 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 to be of good standing, and when, in the judgment of the
Adviser, the consideration which could be earned currently from securities loans
of this type justifies the attendant risk. If the Adviser determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the value of the Fund's total assets.
OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options on
securities ("Options") and purchase call and put Options. The Fund may write
Options for the purpose of increasing its return and for hedging purposes. In
particular, if the Fund writes an Option which expires unexercised or is closed
out by the Fund at a profit, the Fund retains the premium paid for the Option
less related transaction costs, which increases its gross income and offsets in
part the reduced value of the portfolio security in connection with which the
Option is written, or the increased cost of portfolio securities to be acquired.
In contrast, however, if the price of the security underlying the Option moves
adversely to the Fund's position, the Option may be 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.
The Fund may write Options in connection with buy-and-write transactions; that
is, the Fund may purchase a security and then write a call Option against that
security. The exercise price of the call Option the Fund determines to write
depends upon the expected price movement of the underlying security. The
exercise price of a call Option may be below ("in-the-money"), equal to ("at-
the-money") or above ("out-of-the-money") the current value of the underlying
security at the time the Option is written.
The writing of covered put Options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put Options may be used by the
Fund in the same market environments in which call Options are used in
equivalent buy-and-write transactions.
The Fund may also write combinations of put and call Options on the same
security, a practice known as a "straddle." By writing a straddle, the Fund
undertakes a simultaneous obligation to sell or purchase the same security in
the event that one of the Options is exercised. If the price of the security
subsequently rises sufficiently above the exercise price to cover the amount of
the premium and transaction costs, the call will likely be exercised and the
Fund will be required to sell the underlying security at a below market price.
This loss may be offset, however, in whole or in part, by the premiums received
on the writing of the two Options. Conversely, if the price of the security
declines by a sufficient amount, the put will likely be exercised. The writing
of straddles will likely be effective, therefore, only where the price of a
security remains stable and neither the call nor the put is exercised. In an
instance where one of the Options is exercised, the loss on the purchase or sale
of the underlying security may exceed the amount of the premiums received.
By writing a call Option on a portfolio security, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the Option. By writing a put Option, the
Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price above its then current market value, resulting in
a loss unless the security subsequently appreciates in value. The writing of
Options will not be undertaken by the Fund 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.
The 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. The Fund will purchase call Options to hedge against an
increase in the price of securities that the Fund anticipates purchasing in the
future. If such an increase occurs, the call Option will permit the Fund to
purchase the securities underlying such Option at the exercise price or to close
out the Option at a profit. The premium paid for a call or put Option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the Option, and, unless the price of the underlying security rises
or declines sufficiently, the Option may expire worthless to the Fund. In
addition, in the event that the price of the security in connection with which
an Option was purchased moves in a direction favorable to the Fund, the benefits
realized by the Fund as a result of such favorable movement will be reduced by
the amount of the premium paid for the Option and related transaction costs.
The staff of the SEC has taken the position that purchased over-the-counter
options and certain assets used to cover written over-the-counter options are
illiquid and, therefore, together with other illiquid securities, cannot exceed
a certain percentage of the Fund's assets (the "SEC illiquidity ceiling").
Although the Adviser disagrees with this position, the Adviser intends to limit
the Fund's writing of over-the-counter options in accordance with the following
procedure. Except as provided below, the Fund intends to write over-the-counter
options only with primary U.S. Government securities dealers recognized by the
Federal Reserve Bank of New York. Also, the contracts the Fund has in place with
such primary dealers will provide that the Fund has the absolute right to
repurchase an option it writes at any time at a price which represents the fair
market value, as determined in good faith through negotiation between the
parties, but which in no event will exceed a price determined pursuant to a
formula in the contract. Although the specific formula may vary between
contracts with different primary dealers, the formula will generally be based on
a multiple of the premium received by the Fund for writing the option, plus the
amount, if any, of the option's intrinsic value (i.e., the amount that the
option is in-the-money). The formula may also include a factor to account for
the difference between the price of the security and the strike price of the
option if the option is written out-of-the-money. The Fund will treat all or a
portion of the formula as illiquid for purposes of the SEC illiquidity ceiling
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 SEC illiquidity ceiling.
YIELD CURVE OPTIONS: The Fund may also enter into options on the yield "spread"
or yield differential between two securities, transactions referred to as a
"yield curve" options. In contrast to other types of options, a yield curve
option is based on the difference between the yields of designated securities,
rather than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease.
Yield curve options may be used for the same purposes as other options on
securities. Specifically, the Fund may purchase or write such options for
hedging purposes. For example, the Fund may purchase a call option on the yield
spread between two securities, if it owns one of the securities and anticipates
purchasing the other security and wants to hedge against an adverse change in
the yield spread between the two securities. The Fund may also purchase or write
yield curve options for other than hedging purposes (i.e., in an effort to
increase its current income) if, in the judgment of the Adviser, the Fund will
be able to profit from movements in the spread between the yields of the
underlying securities. The trading of yield curve options is subject to all of
the risks associated with the trading of other types of options. In addition,
however, such options present risk of loss even if the yield of one of the
underlying securities remains constant, if the spread moves in a direction or to
an extent which was not anticipated. Yield curve options written by the Trust
will be "covered." A call (or put) option is covered if the Fund holds another
call (or put) option on the spread between the same two securities and maintains
in a segregated account with its custodian cash or cash equivalents sufficient
to cover the Fund's net liability under the two options. Therefore, the Fund's
liability for such a covered option is generally limited to the difference
between the amount of the Fund's liability under the option written by the Fund
less the value of the option held by the Fund. Yield curve options may also be
covered in such other manner as may be in accordance with the requirements of
the counter party with which the option is traded and applicable laws and
regulations. Yield curve options are traded over-the-counter, and because they
have been only recently introduced, established trading markets for these
securities have not yet developed.
FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indexes 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 the Fund's
portfolio securities or adversely affect the prices of long-term bonds or other
securities which the 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. The 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 the
Fund from fluctuations in interest rates without actually buying or selling
long-term debt securities. For example, if the 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. The 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 the Fund to maintain a
defensive position without having to sell its portfolio securities. Transactions
entered into for non-hedging purposes include 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, the 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 the Fund could have the effect of diluting
dividend earnings. To the extent the 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: The Fund may write and purchase options to buy or
sell Futures Contracts ("Options on Futures Contracts"). The writing of a call
Option on a Futures Contract constitutes a partial hedge against declining
prices of the security or currency underlying the Futures Contract. If the
futures price at expiration of the option is below the exercise price, the Fund
will retain the full amount of the option premium, less related transaction
costs, which provides a partial hedge against any decline that may have occurred
in the Fund's portfolio holdings. The writing of a put Option on a Futures
Contract constitutes a partial hedge against increasing prices of the security
or currency underlying the Futures Contract. If the futures price at expiration
of the option is higher than the exercise price, the Fund will retain the full
amount of the option premium, less related transaction costs, which provides a
partial hedge against any increase in the price of securities which the Fund
intends to purchase. If a put or call option the Fund has written is exercised,
the Fund will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing Options on Futures Contracts may to some extent be
reduced or increased by changes in the value of portfolio securities.
The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts, or for
non-hedging purposes to the extent permitted by applicable law. For example,
where a decrease in the value of portfolio securities is anticipated as a result
of a projected market-wide decline, a rise in interest rates or a decline in the
dollar value of foreign currencies in which portfolio securities are
denominated, the Fund may, in lieu of selling Futures Contracts, purchase put
options thereon. In the event that such decrease in portfolio value occurs, it
may be offset, in whole or part, by a profit on the option. Conversely, where it
is projected that the value of securities to be acquired by the Fund will
increase prior to acquisition, due to a market advance, or a decline in interest
rates or a rise in the dollar value of foreign currencies in which securities to
be acquired are denominated, the Fund may purchase call Options on Futures
Contracts, rather than purchasing the underlying Futures Contracts. As in the
case of Options, the writing of Options on Futures Contracts may require the
Fund to forego all or a portion of the benefits of favorable movements in the
price of portfolio securities, and the purchase of Options on Futures Contracts
may require the Fund to forego all or a portion of such benefits up to the
amount of the premium paid and related transaction costs. Transactions entered
into for non-hedging purposes include greater risk, including the risk of losses
which are not offset by gains on other portfolio assets.
FORWARD CONTRACTS: The 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"). The Fund may enter
into Forward Contracts for hedging purposes as well as for non-hedging purposes.
The Fund may also enter into Forward Contracts for "cross hedging" as noted in
the Prospectus. 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 securities denominated in a foreign
currency or protecting the dollar equivalent of interest or dividends to be paid
on such securities. By entering into such transactions, however, the Fund may be
required to forego the benefits of advantageous changes in exchange rates. The
Fund may also enter into transactions in Forward Contracts for other than
hedging purposes which presents greater profit potential but also involves
increased risk. For example, if the Adviser believes that the value of a
particular foreign currency will increase or decrease relative to the value of
the U.S. dollar, the Fund may purchase or sell such currency, respectively,
through a Forward Contract. If the expected changes in the value of the currency
occur, the Fund will realize profits which will increase its gross income. Where
exchange rates do not move in the direction or to the extent anticipated,
however, the Fund may sustain losses which will reduce its gross income. Such
transactions, therefore, could be considered speculative.
The Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such contracts. In those instances in which the
Fund satisfies this requirement through segregation of assets, it will maintain,
in a segregated account, cash, cash equivalents or high grade debt securities,
which will be marked to market on a daily basis, in an amount equal to the value
of its commitments under Forward Contracts.
OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write put and call
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. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the value of the
currency did decline, the Fund would have the right to sell such currency for a
fixed amount in dollars and would thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Fund deriving from purchases of foreign currency options would be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write Options on Foreign Currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates
it may, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurred, the option would most likely not be
exercised, and the diminution in value of portfolio securities would be offset
by the amount of the premium received less related transaction costs. As in the
case of other types of options, therefore, the writing of Options on Foreign
Currencies will constitute only a partial hedge.
SWAPS AND RELATED TRANSACTIONS: The Fund may enter into interest rate swaps,
currency swaps and other types of available swap agreements, such as caps,
collars and floors.
Swap agreements may be individually negotiated and structured to include
exposure to a variety of different types of investments or market factors.
Depending on their structure, swap agreements may increase or decrease the
Fund's exposure to long or short-term interest rates (in the U.S. or abroad),
foreign currency values, mortgage securities, corporate borrowing rates, or
other factors such as securities prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. The Fund is not
limited to any particular form or variety of swap agreement if MFS determines it
is consistent with the Fund's investment objective and policies.
The Fund will maintain cash or appropriate liquid assets with its custodian to
cover its current obligations under swap transactions. If the Fund enters into a
swap agreement on a net basis (i.e., the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments), the Fund will maintain cash or liquid assets with its
Custodian with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis, it will maintain cash or liquid assets with
a value equal to the full amount of the Fund's accrued obligations under the
agreement.
The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, currency or other factor
that determines the amount of payments to be made under the arrangement. If MFS
is incorrect in its forecasts of such factors, the investment performance of the
Fund would be less than what it would have been if these investment techniques
had not been used. If a swap agreement calls for payments by the Fund, the Fund
must be prepared to make such payments when due. In addition, if the
counter-party's creditworthiness declined, the value of the swap agreement would
be likely to decline, potentially resulting in losses. If the counterparty
defaults, the Fund's risk of loss consists of the net amount of payments that
the Fund is contractually entitled to receive. The Fund anticipates that it will
be able to eliminate or reduce its exposure under these arrangements by
assignment or other disposition or by entering into an offsetting agreement with
the same or another counterparty.
RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts, and Forward
Contracts will depend on the degree to which price movements in the underlying
instruments correlate with price movements in the relevant portion of the Fund's
portfolio. If the values of portfolio securities being hedged do not move in the
same amount or direction as the instruments underlying options, Futures
Contracts or Forward Contracts traded, the Fund's hedging strategy may not be
successful and the Fund could sustain losses on its hedging strategy which would
not be offset by gains on its portfolio. It is also possible that there may be a
negative correlation between the instrument underlying an option, Future
Contract or Forward Contract traded and the portfolio securities being hedged,
which could result in losses both on the hedging transaction and the portfolio
securities. In such instances, the Fund's overall return could be less than if
the hedging transaction had not been undertaken. In the case of futures and
options based on an index of securities or individual fixed income securities,
the portfolio will not duplicate the components of the index, and in the case of
futures and options on fixed income securities, the portfolio securities which
are being hedged may not be the same type of obligation underlying such
contract. As a result, the correlation probably will not be exact. Consequently,
the Fund bears the risk that the price of the portfolio securities being hedged
will not move in the same amount or direction as the underlying index or
obligation. In addition, where the Fund enters into Forward Contracts as a
"cross hedge" (i.e., the purchase or sale of a Forward Contract on one currency
to hedge against risk of loss arising from changes in value of a second
currency), the Fund incurs the risk of imperfect correlation between changes in
the values of the two currencies, which could result in losses.
The correlation between prices of securities and prices of options, Futures
Contracts or Forward Contracts may be distorted due to differences in the nature
of the markets, such as differences in margin requirements, the liquidity of
such markets and the participation of speculators in the option, Futures
Contract and Forward Contract markets. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction. The trading of Options on Futures Contracts
also entails the risk that changes in the value of the underlying Futures
Contract will not be fully reflected in the value of the option. The risk of
imperfect correlation, however, generally tends to diminish as the maturity or
termination date of the option, Futures Contract or Forward Contract approaches.
The trading of options, Futures Contracts and Forward Contracts also entails the
risk that, if the Adviser's judgment as to the general direction of interest or
exchange rates is incorrect, the Fund's overall performance may be poorer than
if it had not entered into any such contract. For example, if the Fund has
hedged against the possibility of an increase in interest rates, and rates
instead decline, the Fund will lose part or all of the benefit of the increased
value of the securities being hedged, and may be required to meet ongoing daily
variation margin payments.
It should be noted that the Fund may purchase and write Options not only for
hedging purposes, but also for the purpose of increasing its return. As a
result, the Fund will incur the risk that losses on such transactions will not
be offset by corresponding increases in the value of portfolio securities or
decreases in the cost of securities to be acquired.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET -- Prior to exercise or expiration,
a position in an exchange-traded Option, Futures Contract, Option on a Futures
Contract or Option on a Foreign Currency can only be terminated by entering into
a closing purchase or sale transaction, which requires a secondary market for
such instruments on the exchange on which the initial transaction was entered
into. If no such market exists, it may not be possible to close out a position,
and the Fund could be required to purchase or sell the underlying instrument or
meet ongoing variation margin requirements. The inability to close out option or
futures positions also could have an adverse effect on the Fund's ability
effectively to hedge its portfolio.
The liquidity of a secondary market in an option or Futures Contract may be
adversely affected by "daily price fluctuation limits," established by the
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. Such limits could prevent the Fund from liquidating open
positions, which could render its hedging strategy unsuccessful and result in
trading losses. The exchanges on which options and Futures Contracts are traded
have also established a number of limitations governing the maximum number of
positions which may be traded by a trader, whether acting alone or in concert
with others. Further, the purchase and sale of exchange-traded options and
Futures Contracts is subject to the risk of trading halts, suspensions, exchange
or clearing corporation equipment failures, government intervention, insolvency
of a brokerage firm, intervening broker or clearing corporation or other
disruptions of normal trading activity, which could make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
OPTIONS ON FUTURES CONTRACTS -- In order to profit from the purchase of an
Option on a Futures Contract, it may be necessary to exercise the option and
liquidate the underlying Futures Contract, subject to all of the risks of
futures trading. The writer of an Option on a Futures Contract is subject to the
risks of futures trading, including the requirement of initial and variation
margin deposits.
ADDITIONAL RISKS OF TRANSACTIONS RELATED TO FOREIGN CURRENCIES AND TRANSACTIONS
NOT CONDUCTED ON UNITED STATES EXCHANGES -- The available information on which
the Fund will make trading decisions concerning transactions related to foreign
currencies or foreign securities may not be as complete as the comparable data
on which the Fund makes investment and trading decisions in connection with
other transactions. Moreover, because the foreign currency market is a global,
24-hour market, and the markets for foreign securities as well as markets in
foreign countries may be operating during non-business hours in the United
States, events could occur in such markets which would not be reflected until
the following day, thereby rendering it more difficult for the Fund to respond
in a timely manner.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Fund's position, unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund. This
could make it difficult or impossible to enter into a desired transaction or
liquidate open positions, and could therefore result in trading losses. Further,
over-the-counter transactions are not subject to the performance guarantee of an
exchange clearing house and the Fund will therefore be subject to the risk of
default by, or the bankruptcy of, a financial institution or other counterparty.
Transactions on exchanges located in foreign countries may not be conducted in
the same manner as those entered into on United States exchanges, and may be
subject to different margin, exercise, settlement or expiration procedures.
As a result, many of the risks of over-the-counter trading may be present in
connection with such transactions. Moreover, the SEC or the Commodities Futures
Trading Commission ("CFTC") has jurisdiction over the trading in the United
States of many types of over-the-counter and foreign instruments, and such
agencies could adopt regulations or interpretations which would make it
difficult or impossible for the Fund to enter into the trading strategies
identified herein or to liquidate existing positions.
As a result of its investments in foreign securities, the Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in foreign currencies. The Fund may also be required to receive
delivery of the foreign currencies underlying options on foreign currencies or
Forward Contracts it has entered into. This could occur, for example, if an
option written by the Fund is exercised or the Fund is unable to close out a
Forward Contract it has entered into. In addition, the Fund may elect to take
delivery of such currencies. Under such circumstances, the Fund may promptly
convert the foreign currencies into dollars at the then current exchange rate.
Alternatively, the Fund may hold such currencies for an indefinite period of
time if the Adviser believes that the exchange rate at the time of delivery is
unfavorable or if, for any other reason, the Adviser anticipates favorable
movements in such rates.
While the holding of currencies will permit the 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. Certain
tax requirements may limit the extent to which the Fund will be able to hold
currencies.
RESTRICTIONS ON THE USE OF OPTIONS AND FUTURES: In order to assure that the Fund
will not be deemed to be a "commodity pool" for purposes of the Commodity
Exchange Act, regulations of the CFTC require that the Fund enter into
transactions in Futures Contracts and Options on Futures Contracts only (i) for
bona fide hedging purposes (as defined in CTFC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums on
such non-hedging positions does not exceed 5% of the liquidation value of the
Fund's assets. In addition, the Fund must comply with the requirements of
various state securities laws in connection with such transactions.
The Fund has adopted the additional policy that it will not enter into a Futures
Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Futures Contracts would exceed 50% of the value
of the Fund's total assets. Moreover, the Fund will not purchase put and call
options if, as a result, more than 5% of its total assets would be invested in
such options.
When the Fund purchases a Futures Contract, an amount of cash and cash
equivalents will be deposited in a segregated account with the Fund's custodian
so that the amount so segregated will at all times equal the value of the
Futures Contract, thereby insuring that the use of such Futures is unleveraged.
The policies stated above are not fundamental and may be changed without
shareholder approval, as may the Fund's investment objectives.
INVESTMENT RESTRICTIONS. The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of the
Fund's shares (which, as used in this Statement of Additional Information, means
the lesser of (i) more than 50% of its outstanding shares, or (ii) 67% or more
of its outstanding shares present at a meeting at which holders of more than 50%
of its outstanding shares are represented in person or by proxy):
The Fund may not:
(1) borrow amounts in excess of 33 1/3% of its assets including
amounts borrowed;
(2) underwrite securities issued by other persons except insofar as the
Fund may technically be deemed an underwriter under the Securities Act of
1933 in selling a portfolio security;
(3) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein and securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein), interests in oil, gas or
mineral leases, commodities or commodity contracts (excluding Options,
Options on Futures Contracts and any other type of option, and Futures
Contracts) in the ordinary course of its business. The Fund reserves the
freedom of action to hold and to sell real estate, mineral leases,
commodities or commodity contracts (including Options, Options on Futures
Contracts and any other type of option, and Futures Contracts) acquired as a
result of the ownership of securities;
(4) issue any senior securities except as permitted by the 1940 Act. For
purposes of this restriction, collateral arrangements with respect to any
type of option (including Options and Options on Futures Contracts), Forward
Contracts and Futures Contracts and collateral arrangements with respect to
initial and variation margin are not deemed to be the issuance of a senior
security;
(5) make loans to other persons. For these purposes, the purchase of
short-term commercial paper, the purchase of a portion or all of an issue of
debt securities, the lending of portfolio securities, or the investment of
the Fund's assets in repurchase agreements, shall not be considered the
making of a loan; or
(6) purchase any securities of an issuer of a particular industry if, as
a result, 25% or more of its gross assets would be invested in securities of
issuers whose principal business activities are in the same industry (except
obligations issued or guaranteed by the U.,S. Government or its agencies and
instrumentalities and repurchase agreements collateralized by such
obligations).
In addition, the Fund has adopted the following nonfundamental policies which
may be changed without shareholder approval. The Fund will not:
(1) invest in illiquid investments, including securities subject to
legal or contractual restrictions on resale or for which there is no readily
available market (e.g., trading in the security is suspended, or, in the
case of unlisted securities, where no market exists) if more than 15% of the
Fund's net assets (taken at market value) would be invested in such
securities. Repurchase agreements maturing in more than seven days will be
deemed to be illiquid for purposes of the Fund's limitation on investment in
illiquid securities. Securities that are not registered under the Securities
Act of 1933, as amended, and sold in reliance on Rule 144A thereunder, but
are determined to be liquid by the Trust's Board of Trustees (or its
delegee), will not be subject to this 15% limitation;
(2) purchase securities issued by any other investment company in excess
of the amount permitted by the 1940 Act, except when such purchase is part
of a plan of merger or consolidation;
(3) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Trust, or is an officer or a director of the investment adviser of the Fund,
if one or more of such persons also owns beneficially more than 0.5% of the
securities of such issuer, and such persons owning more than 0.5% of such
securities together own beneficially more than 5% of such securities;
(4) purchase any securities or evidences of interest therein on margin,
except that the Fund may obtain such short-term credit as may be necessary
for the clearance of any transaction and except that the Fund may make
margin deposits in connection with any type of option (including Options on
Futures Contracts, Options, Options on Foreign Currencies and Futures
Contracts);
(5) sell any security which the Fund does not own unless by virtue of
its ownership of other securities the Fund has at the time of sale a right
to obtain securities without payment of further consideration equivalent in
kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions;
(6) invest more than 5% of its gross assets in companies which,
including predecessors, controlling persons, sponsoring entities, general
partners and guarantors, have a record of less than three years' continuous
operation or relevant business experience;
(7) pledge, mortgage or hypothecate in excess of 33 1/3% of its gross
assets. For purposes of this restriction, collateral arrangements with
respect to any type of option (including Options on Futures Contracts,
Options and Options on Foreign Currencies), Futures Contracts and payments
of initial and variation margin in connection therewith, are not considered
a pledge of assets;
(8) purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent (a) the purchase, ownership, holding or
sale of (i) warrants where the grantor of the warrants is the issuer of the
underlying securities or (ii) put or call options or combinations thereof
with respect to securities, indexes of securities, Options on Futures
Contracts or (b) the purchase, ownership, holding or sale of contracts for
the future delivery of securities or currencies; or
(9) invest for the purpose of exercising control or management.
3. MANAGEMENT OF THE FUND
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The Adviser is responsible for the investment management of the Fund's
assets, and the officers of the Trust are responsible for its operations. The
Trustees and officers are listed below, together with their principal
occupations during the past five years. (Their titles may have varied during
that period.)
TRUSTEES
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman and Director
NELSON J. DARLING, JR.
Director or Trustee of several corporations or trusts, including Eastern
Enterprises (diversified holding company)
Address: 18 Tremont Street, Boston, Massachusetts
WILLIAM R. GUTOW
Executive Vice-President of Capitol Entertainment Management Company
Address: 3 Ruedulac, Dallas, Texas
OFFICERS
W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President and Assistant
Treasurer
STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary
JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President
JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel (since September, 1990); associated with major law firm (prior to
August, 1990).
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*"Interested persons" (as defined in the 1940 Act) of the Adviser, whose address
is 500 Boylston Street, Boston, Massachusetts 02116.
Each Trustee and officer holds comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor.
The Fund pays the compensation of any Trustee who is not affiliated with the
Adviser (who will receive from $867 to $1,667 annually, depending on attendance
at meetings, plus fees for meetings of special committees, such as the Audit
Committee).
Set forth in Exhibit A hereto is certain information concerning cash
compensation paid to non-interested Trustees.
The Trust's Declaration of Trust provides that the Trust 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 Trust 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 Trust. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such officers and
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned subsidiary of Sun Life Assurance Company of
Canada (U.S.) which in turn is a wholly owned subsidiary of Sun Life Assurance
Company of Canada. The Prospectus contains information with respect to the
management of the Adviser and other investment companies for which MFS serves as
investment adviser.
The Adviser manages the assets of the Fund pursuant to an Investment Advisory
Agreement, dated [August 1,] 1995, (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative services,
as well as general office facilities. Subject to such policies as the Trustees
may determine, the Adviser makes investment decisions for the Fund. For these
services and facilities, the Adviser receives a management fee computed and paid
monthly equal on an annualized basis to 0.85% of the Fund's average daily net
assets.
MFS pays the compensation of the Trust's officers and any Trustee who is
affiliated with the Adviser. The Adviser also furnishes at its own expense all
necessary administrative services, including office space, equipment, clerical
personnel, investment advisory facilities, and all executive and supervisory
personnel necessary for managing the Fund's investments, effecting the Fund's
portfolio transactions and, in general, administering the Fund's affairs.
The Advisory Agreement will remain in effect until [August 1, 1997], and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's outstanding voting securities (as defined in "Investment Policies and
Restrictions -- Investment Restrictions") and, in either case, by a majority of
the Trustees who are not parties to the Advisory Agreement or interested persons
of any such party. The Advisory Agreement terminates automatically if it is
assigned and may be terminated without penalty by vote of a majority of the
Fund's outstanding voting securities (as defined in "Investment Policies and
Restrictions -- Investment Restrictions") or by either party on not more than 60
days' nor less than 30 days' written notice. The Advisory Agreement further
provides that MFS may render services to others. The Advisory Agreement also
provides that neither the Adviser nor its personnel shall be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its or
their obligations and duties under the Advisory Agreement.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest and dividends on the
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of shares of the Fund. The Custodian does not determine the
investment policies of the Fund or decide which securities the Fund will buy or
sell. The Fund may, however, invest in securities, including repurchase
agreements, issued by the Custodian and may deal with the Custodian as principal
in securities transactions. The Trustees have reviewed and approved as in the
best interests of the Fund and its shareholders subcustodial arrangements with
the Chase Manhattan Bank, N.A. for securities of the Fund held outside the
United States. The Custodian also acts as the dividend disbursing agent of the
Fund. The Custodian has contracted with the Adviser for the Adviser to perform
certain accounting functions related to options transactions.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Trust's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, dated October 31, 1990 (the "Agency
Agreement"). The Shareholder Servicing Agent's responsibilities under the Agency
Agreement include administering and performing transfer agent functions and
keeping records in connection with the issuance, transfer and redemption of the
shares of the Fund. For these services, the Shareholder Servicing Agent will
receive a fee based on the net assets of the Fund computed and paid monthly. In
addition, the Shareholder Servicing Agent will be reimbursed by the Fund for
certain expenses incurred by the Shareholder Servicing Agent on behalf of the
Fund. State Street Bank and Trust Company, the dividend and distribution
disbursing agent of the Fund, has contracted with the Shareholder Servicing
Agent to perform certain dividend and distribution disbursing functions for the
Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of the Trust pursuant to a Distribution Agreement
dated as of June 15, 1994 (the "Distribution Agreement").
The Distribution Agreement will remain in effect until June 15, 1996 and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Trust's shares (as defined in "Investment Restrictions") and in either case, by
a majority of the Trustees who are not parties to such Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.
4. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. Changes in the Fund's investments are
reviewed by its Board of Trustees. The Fund's portfolio manager may serve other
clients of the Adviser or any subsidiary of the Adviser in a similar capacity.
The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and broker-dealers through which it seeks this result. In the
United States and in some other countries debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers. In other countries both debt and equity
securities are traded on exchanges at fixed commission rates. The cost of
securities purchased from underwriters includes an underwriter's commission or
concession, and the prices at which securities are purchased and sold from and
to dealers include a dealer's mark-up or mark-down. The Adviser normally seeks
to deal directly with the primary market makers or on major exchanges unless, in
its opinion, better prices are available elsewhere. Subject to the requirement
of seeking execution at the best available price, securities may, as authorized
by the Advisory Agreement, be bought from or sold to dealers who have furnished
statistical, research and other information or services to the Adviser. At
present no arrangements for the recapture of commission payments are in effect.
Consistent with the foregoing primary consideration, the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the "NASD") and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Trust and of the other investment company clients of MFD, the
principal underwriter of certain funds in the MFS Family of Funds (the "MFS
Funds"), as a factor in the selection of broker-dealers to execute the Trust's
portfolio transactions.
Under the Advisory Agreement and as permitted by Section 28(e) of the Securities
Exchange Act of 1934, the Adviser may cause the Fund to pay a broker-dealer
which provides brokerage and research services to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of the
amount other broker-dealers would have charged for the transaction if the
Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
their respective overall responsibilities to the Fund or to their other clients.
Not all of such services are useful or of value in advising the Fund.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto, such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to the
availability of securities or of purchasers or sellers of securities and
services in effecting securities transactions and performing functions
incidental thereto, such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other factual
information or services ("Research") to the Adviser for no consideration other
than brokerage or underwriting commissions. Securities may be bought or sold
through such broker-dealers, but at present, unless otherwise directed by the
Fund, a commission higher than one charged elsewhere will not be paid to such a
firm solely because it provided such Research.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for that of one or more of the other clients of the Adviser
or any subsidiary of the Adviser. Investment decisions for the Fund and for such
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Fund is concerned.
In other cases, however, the Adviser believes that the Fund's ability to
participate in volume transactions will produce better executions for the Fund.
5. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing and certain other requirements imposed by the Code,
it is not expected that the Fund will be required to pay any federal income or
excise taxes, although the Fund's foreign-source income may be subject to
foreign withholding taxes. If the Fund should fail to qualify as a "regulated
investment company" in any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and Fund distributions would
generally be taxable as ordinary dividend income to shareholders.
Shareholders of the Fund normally will have to pay federal income taxes, and any
state or local taxes, on the dividends and capital gain distributions they
receive from the Fund. Dividends from income, including certain foreign currency
gains, and any distributions from net short-term capital gains (whether received
in cash or reinvested in additional shares) are taxable to the Fund's
shareholders as ordinary income for federal income tax purposes. Because the
Fund expects to earn primarily interest income, it is expected that no Fund
dividends will qualify for the dividends received deduction for corporations.
Distributions of net capital gains (i.e., the excess of the net long-term
capital gains over the short-term capital losses), whether received in cash or
invested in additional shares, are taxable to the Fund's shareholders as
long-term capital gains regardless of how long they have owned shares in the
Fund. Fund dividends declared in October, November or December and paid the
following January will be taxable to shareholders as if received on December 31
of the year in which they are declared.
Any dividend or distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the dividend or distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than twelve months and otherwise as a short-term capital gain or loss. However,
any loss realized upon a disposition of shares in the Fund held for six months
or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a redemption of shares may also be disallowed under rules relating
to wash sales. Gain may be increased (or loss reduced) upon a redemption of
shares within ninety days after their purchase followed by any purchase
(including purchases by exchanges or by reinvestment) of the Fund or of another
MFS Fund (or other shares of an MFS Fund generally sold subject to a sales
charge) without payment of an additional sales charge.
The Fund's transactions in options, Futures Contracts and Forward Contracts will
be subject to special tax rules that may affect the amount, timing and character
of distributions to shareholders. For example, certain positions held by the
Fund on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out) on such day, and any gain or loss associated
with such positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by the Fund that substantially diminish its
risk of loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that may cause deferral of
Fund losses, adjustments in the holding periods of Fund securities and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may alter the effects of these rules. The Fund will
limit its activities in options, Futures Contracts, Forward Contracts, and Swaps
and related transactions to the extent necessary to meet the requirements of
Subchapter M of the Code.
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. The
Fund's investment in zero coupon bonds and certain securities purchased at a
market discount will cause it to realize income prior to the receipt of cash
payments with respect to those securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially resulting
in additional taxable gain or loss to the Fund.
Special tax considerations apply with respect to foreign investments of the
Fund. For example, foreign exchange gains and losses (including exchange gains
and losses on Forward Contracts) realized by the Fund will generally be treated
as ordinary income or losses. Use of foreign currencies and Forward Contracts
for nonhedging purposes and investment by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid imposition of a tax on
the Fund. Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of tax or an exemption from tax on such
income; the Fund intends to qualify for treaty reduced rates where available. It
is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested within various countries is not
known.
If the Fund holds more than 50% of its assets in foreign securities at the close
of its taxable year, the Fund may elect to "pass through" to the Fund's
shareholders foreign income taxes paid. If the Fund so elects, shareholders will
be required to treat their pro rata portion of the foreign income taxes paid by
the Fund as part of the amounts distributed to them by the Fund and thus
includible in their gross income for federal income tax purposes. Shareholders
who itemize deductions would then be allowed to claim a deduction or credit (but
not both) on their federal income tax returns for such amounts, subject to
certain limitations. Shareholders who do not itemize deductions would be able
(subject to such limitations) to claim a credit but not a deduction.
Dividends and certain other payments to persons who are not citizens or
residents of the United States ("Non-U.S. Persons") are generally subject to
U.S. tax withholding at the rate of 30%. The Fund intends to withhold U.S.
Federal income tax at the rate of 30% on any taxable dividends or other payments
made to Non-U.S. Persons that are subject to withholding, regardless of whether
a lower rate may be permitted. Any amounts overwithheld may be recovered by such
persons by filing a claim for refund with the U.S. Internal Revenue Service
within the time period applicable to such claims. Distributions received from
the Fund by Non-U.S. Persons may also be subject to tax under the laws of their
own jurisdictions. The Fund is also required in certain circumstances to apply
backup withholding of 31% of taxable dividends and redemption proceeds paid to
any shareholder (including a Non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. However, backup withholding will not be applied to payments which
have had 30% withholding taken.
As long as the Fund qualifies as a regulated investment company under the Code,
it will not be subject to income or excise tax in The Commonwealth of
Massachusetts.
6. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
NET ASSET VALUE -- The net asset value of shares of the Fund is determined each
day during which the New York Stock Exchange (the "Exchange") is open for
trading. (As of the date of this Statement of Additional Information, such
Exchange is open for trading every week day except for the following holidays or
the days on which they are observed: New Year's Day; President's Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.) This determination of net asset value of shares of the Fund is
made once during each such day as of the close of regular trading on such
Exchange by deducting the amount of the Fund's liabilities from the value of its
assets and dividing the difference by the number of its shares outstanding.
Bonds and other fixed income securities (other than short-term obligations but
including listed issues) in the Fund's portfolio are valued on the basis of
valuations furnished by a pricing service which utilizes both dealer-supplied
valuations and electronic data processing techniques which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed by the Board of Trustees to reflect the fair value of such securities.
Use of the pricing service has been approved by the Board of Trustees. Forward
Contracts will be valued using a pricing model taking into consideration market
data from an external pricing source. All other securities, futures contracts
and listed options in the Fund's portfolio (other than short-term obligations)
for which the principal market is one or more securities or commodities
exchanges (whether domestic or foreign) will be valued at the last reported sale
price or at the settlement price prior to the determination (or if there has
been no current sale, at the closing bid price) on the primary exchange on which
such securities, Futures Contracts or options are traded; but, if a securities
exchange is not the principal market for securities, such securities will, if
market quotations are readily available, be valued at current bid prices unless
such securities are reported on the NASDAQ system, in which case they are valued
at the last sale price or, if no sales occurred during the day, at the last
quoted bid price. Short-term securities with a remaining maturity in excess of
60 days will be valued upon dealer supplied valuations. Other short-term
obligations are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Portfolio investments for which there are
no such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees.
Short-term obligations with a remaining maturity in excess of 60 days will be
valued based upon dealer supplied valuations. Other short-term obligations in
the Fund's portfolio are valued at amortized cost, which constitutes fair value
as determined by the Board of Trustees. Portfolio investments for which there
are no such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of regular trading on the New York Stock
Exchange. Occasionally, events affecting the values of such securities may occur
between the times at which they are determined and the close of regular trading
on the Exchange which will not be reflected in the computation of the Fund's net
asset value unless the Trustees deem that such event would materially affect the
net asset value in which case an adjustment would be made.
All investments and assets are expressed in U.S. dollars based upon current
currency exchange rates. A share's net asset value is effective for orders
received by the dealer prior to its calculation and received by MFD, the Fund's
principal underwriter, prior to the close of that business day.
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for
certain periods by determining the average annual compounded rates of return
over those periods that would cause an investment of $1,000 (made at net asset
value with all distributions reinvested) to reach the value of that investment
at the end of the periods. The Fund may also calculate total rates of return
which represent aggregate performance over a period or year-by-year performance.
Total rate of return reflects the performance of both principal and income.
YIELD: Any yield quotation of the Fund is based on the annualized net investment
income per share of the Fund over a 30-day period. The yield for the Fund is
calculated by dividing the net investment income per share of the Fund earned
during the period by the net asset value per share of the Fund on the last day
of that period. The resulting figure is then annualized. Net investment income
per share is determined by dividing (i) the dividends and interest earned by the
Fund during the period, minus accrued expenses for the period, by (ii) the
average number of Fund shares entitled to receive dividends during the period
multiplied by the net asset value per share on the last day of the period.
PERFORMANCE INFORMATION: Any yield or total rate of return quotation provided by
the Fund should not be considered as representative of the performance of the
Fund in the future since the net asset value of shares of the Fund will vary
based not only on the type, quality and maturities of the securities held in the
Fund's portfolio, but also on changes in the current value of such securities
and on changes in the expenses of the Fund. These factors and possible
differences in the methods used to calculate yields and total rates of return
should be considered when comparing the yield and total rate of return of the
Fund to yields and total rates of return published for other investment
companies or other investment vehicles.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established as the first open-end
mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make full
public disclosure of its operations in shareholder reports.
-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to register
under the Securities Act of 1933 ("Truth in Securities Act" or "Full
Disclosure Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional shares
or cash.
-- 1976 -- MFS(R) Municipal Bond Fund is among the first municipal bond funds
established.
-- 1979 -- Spectrum becomes the first combination fixed/variable annuity with
no initial sales charge.
-- 1981 -- MFS(R) World Governments Fund is established as America's first
globally diversified fixed/income mutual fund.
-- 1984 -- MFS(R) Municipal High Income Fund is the first open-end mutual fund
to seek high tax-free income from lower-rated municipal securities.
-- 1986 -- MFS(R) Managed Sectors Fund becomes the first mutual fund to target
and shift investments among industry sectors for shareholders.
-- 1986 -- MFS(R) Municipal Income Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.
-- 1987 -- MFS(R) Multimarket Income Trust is the first-closed-end,
multimarket high income fund listed on the New York Stock Exchange.
-- 1989 -- MFS Regatta becomes America's first non-qualified market-value-
adjusted fixed/variable annuity.
-- 1990 -- MFS(R) World Total Return Fund is the first global balanced fund.
-- 1993 -- MFS(R) World Growth Fund is the first global emerging markets fund
to offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes investment adviser of MFS(R) Union Standard Trust, the
first investment company to invest solely in companies deemed to be
union-friendly by an Advisory Board of senior labor officials, senior
managers of companies with significant labor contracts, academics and other
national labor leaders.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional Shares of Beneficial Interest (without par value) and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in the Trust. The Trust
presently has three series and reserves the right to create and issue additional
series of shares. Each share of a series represents an equal proportionate
interest in that series with each other share of that series. Shares of each
series participate equally in the earnings, dividends and assets of the
particular series. Shares of each series vote separately to approve investment
advisory agreements or changes in investment restrictions, but shares of all
series vote together in the election of Trustees or selection of accountants.
Should the Trust be liquidated, shareholders of each series would be entitled to
share pro rata in the net assets of their respective series available for
distribution to shareholders.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Although Trustees are not elected annually by the shareholders, shareholders
have the right under certain circumstances to remove one or more Trustees. No
material amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of a majority of the Trust's outstanding shares
(as defined in "Investment Policies and Restrictions -- Investment
Restrictions"). Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable. The Trust may be terminated (i) upon
the merger or consolidation of the Trust with another organization or upon the
sale of all or substantially all of its assets, if approved by the vote of the
holders of two-thirds of the outstanding shares of the Trust, except that if the
Trustees recommend such merger, consolidation or sale, the approval by vote of
the holders of more than 50% of the outstanding shares will be sufficient, (ii)
upon liquidation and distribution of the assets of the Trust or the Fund (as
applicable), if approved by the holders of not less than two-thirds of the
outstanding shares of the Trust or the Fund (as applicable), or (iii) by the
Trustees by written notice to the Trust's shareholders or Fund shareholders (as
applicable). If not so terminated, the Trust will continue indefinitely.
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 Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and provides for indemnification
and reimbursement of expenses out of the Trust property for any shareholder held
personally liable for the obligations of the Trust. The Declaration of Trust
also provides that the Trust shall maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, Trustees, officers, employees and agents covering
possible tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
The Declaration of Trust further provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
8. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Deloitte & Touche are the Fund's independent certified public accountants. The
Fund's Statement of Assets and Liabilities at May 16, 1995, the notes thereto
and the Independent Auditors' Report dated May 16, 1995, have been included in
this Statement of Additional Information in reliance on the report of Deliotte &
Touche, LLP, independent certified public accountants, as experts in accounting
and auditing.
<PAGE>
MFS EMERGING MARKETS FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 16, 1995
Assets:
Cash $ 100
Deferred organization expenses 17,600
--------
Total assets $ 17,700
Liabilities:
Accrued expenses 17,600
--------
Net assets for 10.00 shares of
beneficial interest outstanding $ 100
========
Net Asset Value, Redemption Price
and Offering Price Per Share $ 10.00
--------
NOTES:
(1) The MFS Emerging Markets Fixed Income Fund (the "Fund") was organized on
May 16, 1995 as a series of MFS Institutional Trust (the "Trust"), a
business trust under the laws of The Commonwealth of Massachusetts. The
Trust consists of three series of shares or funds. The Fund has been
inactive except for matters relating to its organization and registration
as a series of the Trust and the sale of 10 shares of beneficial interest
(initial shares) to Massachusetts Financial Services Company.
(2) Organization expenses are being deferred and will be amortized over five
years. The amount paid by the Fund on any redemption by Massachusetts
Financial Services Company, or any current holder of any Fund's initial
shares, will be reduced by the pro rata portion of any unamortized
organization expenses which the number of initial shares redeemed bears to
the total number of initial shares outstanding immediatly prior to such
redemption.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of MFS Institutional Trust and Shareholders of MFS
Emerging Markets Fixed Income Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Emerging Markets Fixed Income Fund (the "Fund") (a series of the MFS
Institutional Trust (the "Trust")) as of May 16, 1995. This financial statement
is the responsibility of the Fund's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the statement of
assets and liabilities provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of the Fund at May 16, 1995 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
May 16, 1995
<PAGE>
EXHIBIT A
TRUSTEE
COMPENSATION TABLE
TOTAL TRUSTEE FEES
TRUSTEE FEES FROM FROM THE FUND
NAME OF TRUSTEE FUND(1) COMPLEX(2)
- --------------- ----------------- ------------------
William R. Gutow ....................... $[ ] $[10,618]
Nelson J. Darling....................... $[ ] $[20,618]
NOTES:
(1)Estimated, for fiscal year ending June 30, 1996.
(2)Estimated, for calendar year ended December 31, 1995. All Trustees served as
Trustees of 17 funds advised by MFS (having aggregate net assets at December
31, 1994, of approximately $143 million).
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
(800) 637-8730
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 637-8730
MAILING ADDRESS:
P.O. Box 1400, Boston, MA 02107-9906
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston MA 02110
MFS(R)
EMERGING MARKETS FIXED
INCOME FUND
500 BOYLSTON STREET
BOSTON, MA 02116
MFS(SM)
THE FIRST NAME IN MUTUAL FUNDS
11/94
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS ON BEHALF OF THE MFS EMERGING MARKETS FIXED
INCOME FUND
INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
None
INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
Statement of Assets and Liabilities dated May 16, 1995
(B) EXHIBITS ON BEHALF OF MFS INSTITUTIONAL TRUST
1 (a) Declaration of Trust, dated September 13, 1990; filed
herewith.
(b) Certificate of Amendment to Declaration of Trust, dated
June 1, 1992; filed herewith.
(c) Amendment No. 2 to the Declaration of Trust, dated August
13, 1992; filed herewith.
(d) Amendment to Declaration of Trust - Designation of Series
dated May 16, 1995; filed herewith.
2 (a) Amended and Restated By-Laws, dated June 1, 1992. (2)
(b) Amendment No. 1 to Amended and Restated By-Laws, dated
October 14, 1993. (4)
3 Not Applicable.
4 (a) Specimen of Certificate representing ownership of the
Registrant's Shares of Beneficial Interest. (1)
(b) Form of Share Certificate for MFS Emerging Markets Fixed
Income Fund; filed herewith.
5 (a) Investment Advisory Agreement between MFS Emerging Equities
Fund and Massachusetts Financial Services Company, as
adviser, dated August 7, 1992. (3)
(b) Investment Advisory Agreement between MFS Worldwide Fixed
Income Fund and Massachusetts Financial Services Company,
as adviser, dated August 7, 1992. (3)
(c) Form of Investment Advisory Agreement between the
Registrant, on behalf of MFS Emerging Markets Fixed Income
Fund, and Massachusetts Financial Services Company, as
adviser; filed herewith.
6 Not Applicable.
7 Not Applicable.
8 (a) Custodian Agreement Amendment between the Registrant and
State Street Bank andTrust Company, as custodian, dated
October 31, 1990. (1)
(b) Amendment to Custodian Agreement between the Registrant and
State Street Bank and Trust Company, as custodian, dated
October 31, 1990. (1)
(c) Amendment to Custodian Agreement between the Registrant and
State Street Bank and Trust Company, as custodian, dated
February 12, 1992. (2)
9 (a) Amended and Restated Shareholder Servicing Agent Agreement
between Registrant and MFS Service Center, Inc. as
Shareholder Servicing Agent, dated April 26, 1995; filed
herewith.
(b) Form of Exchange Privilege Agreement between the MFS
Institutional Trust, on behalf of each of its series, and
MFS Fund Distributors, Inc.; filed herewith.
(c) Dividend Disbursing Agency Agreement between the Registrant
and State Street Bank and Trust Company, dated October 31,
1990. (1)
10 Opinion and Consent of Counsel (for the fiscal year ended
June 30, 1994 was filed on August 30, 1994 and for the
fiscal year ended June 30, 1995 to be filed with Rule 24f-2
Notice on or before August 3, 1995).
11 Consent of Deloitte & Touche LLP; filed herewith.
12 Not Applicable.
13 Investment representation letter from initial shareholder
of MFS Emerging Markets Fixed Income Fund; filed herewith.
14 Not Applicable.
15 Distribution Agreement by and between MFS Institutional
Trust and MFS Investors Services, Inc., dated June 15,
1994. (5)
16 Schedule of Computation for Performance Quotations -
Aggregate Total Rate of Return and Yield Calculations;
filed herewith.
17 Not Applicable
Power of Attorney dated August 12, 1994. (5).
- ---------------------
(1) Incorporated by reference to Registrant's initial Registration Statement on
Form N-1A filed with the SEC on November 5, 1990
(2) Incorporated by reference to Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed with the SEC on June 8, 1992
(3) Incorporated by reference to Post-Effective Amendment No. 4 to Registrant's
Registration Statement on Form N-1A filed with the SEC on February 5, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A filed with the SEC on October 28, 1993.
(5) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A filed with the SEC on
August 29, 1994.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
MFS EMERGING EQUITIES FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Shares of Beneficial Interest 13
(without par value) (as of April 28, 1995)
<PAGE>
MFS WORLDWIDE FIXED INCOME FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Shares of Beneficial Interest 13
(without par value) (as of April 28, 1995)
MFS EMERGING MARKETS FIXED INCOME FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Shares of Beneficial Interest 1
(without par value) (as of May 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.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Massachusetts Financial Services Company ("MFS") serves as investment
adviser to the following open-end funds comprising the MFS Family of Funds:
Massachusetts Investors Trust, Massachusetts Investors Growth Stock Fund, MFS
Growth Opportunities Fund, MFS Government Securities Fund, MFS Government
Mortgage Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has three series: MFS Managed Sectors Fund, MFS Cash Reserve Fund and MFS World
Asset Allocation Fund), MFS Series Trust II (which has four series: MFS Emerging
Growth Fund, MFS Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold
& Natural Resources Fund), MFS Series Trust III (which has two series: MFS High
Income Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has
four series: MFS Money Market Fund, MFS Government Money Market Fund, MFS
Municipal Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series:
MFS Total Return Fund and MFS Research Fund), MFS Series Trust VI (which has
three series: MFS World Total Return Fund, MFS Utilities Fund and MFS World
Equity Fund), MFS Series Trust VII (which has two series: MFS World Governments
Fund and MFS Value Fund), MFS Series Trust VIII (which has two series: MFS
Strategic Income Fund and MFS World Growth Fund), MFS Municipal Series Trust
(which has 19 series: MFS Alabama Municipal Bond Fund, MFS Arkansas Municipal
Bond Fund, MFS California Municipal Bond Fund, MFS Florida Municipal Bond Fund,
MFS Georgia Municipal Bond Fund, MFS Louisiana Municipal Bond Fund, MFS Maryland
Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi
Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North Carolina
Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South Carolina
Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Texas Municipal Bond
Fund, MFS Virginia Municipal Bond Fund, MFS Washington Municipal Bond Fund, MFS
West Virginia Municipal Bond Fund and MFS Municipal Income Fund) and MFS Series
Trust IX (which has three series: MFS Bond Fund, MFS Limited Maturity Fund and
MFS Municipal Limited Maturity Fund) (the "MFS Funds"). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
MFS also serves as investment adviser of the following no-load,
open-end funds: MFS Institutional Trust ("MFSIT") (which has two series), MFS
Variable Insurance Trust ("MVI") (which has twelve series) and MFS Union
Standard Trust ("UST") (which has two series). The principal business address of
each of the aforementioned funds is 500 Boylston Street, Boston, Massachusetts
02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the aforementioned funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL"), Sun Growth Variable Annuity Fund, Inc. ("SGVAF"), Money Market
Variable Account, High Yield Variable Account, Capital Appreciation Variable
Account, Government Securities Variable Account, World Governments Variable
Account, Total Return Variable Account and Managed Sectors Variable Account. The
principal business address of each is One Sun Life Executive Park, Wellesley
Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company organized
under the laws of the Republic of Ireland and a subsidiary of MFS, whose
principal business address is 41-45 St. Stephen's Green, Dublin 2, Ireland,
serves as investment adviser to and distributor for MFS International Funds
(which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Governments Fund and MFS International Fund-Charter Income
Fund) (the "MIL Funds"). The MIL Funds are organized in Luxembourg and qualify
as an undertaking for collective investments in transferable securities (UCITS).
The principal business address of the MIL Funds is 47, Boulevard Royal, L-2449
Luxembourg.
MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund and MFS Meridian U.S. Equity
Fund (collectively the "MFS Meridian Funds"). Each of the MFS Meridian Funds is
organized as an exempt company under the laws of the Cayman Islands. The
principal business address of each of the MFS Meridian Funds is P.O. Box 309,
Grand Cayman, Cayman Islands, British West Indies.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned subsidiary
of MFS, serves as distributor for certain life insurance and annuity contracts
issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFS Institutional Trust, MFS Variable Insurance Trust and MFS Union
Standard Trust.
MFS Asset Management, Inc. ("AMI"), a wholly owned subsidiary of MFS,
provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold
D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the Chairman, Mr.
Shames is the President, Mr. Scott is a Senior Executive Vice President and
Secretary, James E. Russell is a Senior Vice President and the Treasurer,
Stephen E. Cavan is a Senior Vice President, General Counsel and an Assistant
Secretary, and Robert T. Burns is a Vice President and an Assistant Secretary of
MFS.
<PAGE>
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS GOVERNMENT MORTGAGE FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS GOVERNMENT LIMITED MATURITY FUND
MFS SERIES TRUST VI
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is Assistant Treasurer, James R. Bordewick, Jr., Vice President and
Associate General Counsel of MFS, is Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer, and James R. Bordewick, Jr., is Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice President of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is the Assistant Secretary.
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T. Swanson,
Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A. Dennis and
Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D. Laupheimer,
Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L. Schechter and
David R. King, Vice Presidents of MFS, are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS UNION STANDARD TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost and Karen C.
Jordan are Assistant Treasurers and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is Assistant Treasurer and James
R. Bordewick, Jr., is Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is Assistant Treasurer and James R. Bordewick, Jr., is Assistant
Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, and James O. Yost, is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the President, Arnold D. Scott,
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is a
Senior Vice President and Managing Director, Thomas J. Cashman, Jr., a Vice
President of MFS, is a Senior Vice President, Stanley T. Kwok is a Vice
President, Anthony F. Clarizio is an Assistant Vice President, Stephen E. Cavan
is a Director, Senior Vice President and the Clerk, James R. Bordewick, Jr. is a
Director, Senior Vice President and an Assistant Clerk, Robert T. Burns is an
Assistant Clerk and James E. Russell is the Treasurer.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Arnold D.
Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary, and Ziad Malek is a Senior
Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Arnold D.
Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James R. Bordewick, Jr., is the Assistant
Secretary and Ziad Malek is a Senior Vice President.
<PAGE>
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
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)
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Reference is hereby made to Item 28.
(b) Reference is hereby made to Item 28.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Registrant's corporate documents are kept by the Registrant at its
offices. Portfolio brokerage orders, other purchase orders, reasons for
brokerage allocation and lists of persons authorized to transact business for
the Registrant are kept by Massachusetts Financial Services Company at 500
Boylston Street, Boston, Massachusetts 02116. Shareholder account records are
kept by MFS Service Center, Inc. at 500 Boylston Street, Boston, Massachusetts
02116. Transaction journals, receipts for the acceptance and delivery of
securities and cash, ledgers and trial balances are kept by State Street Bank
and Trust Company at State Street South, 5-West, North Quincy, Massachusetts
02171.
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 Emerging Markets Fixed Income Fund, which need not be
certified, within four to six months from the effective date of
this post-effective amendment.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its latest annual report to
shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 18th day of May, 1995.
MFS INSTITUTIONAL TRUST
/s/ By: A. KEITH BRODKIN
----------------------
Name: A. Keith Brodkin
Title: President
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 May 18, 1995.
SIGNATURE TITLE
/s/ A. KEITH BRODKIN Chairman, President (Principal
---------------------- Executive Officer) and Trustee
A. Keith Brodkin
/s/ W. THOMAS LONDON Treasurer (Principal Financial Officer
---------------------- and Principal Accounting Officer)
W. Thomas London
/s/ WILLIAM R. GUTOW Trustee
----------------------
William R. Gutow
/s/ NELSON J. DARLING, JR. Trustee
----------------------
Nelson J. Darling, Jr.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ----------- ---------------------- --------
1 (a) Declaration of Trust, dated September 13, 1990.
(b) Certificate of Amendment to Declaration of Trust,
dated June 1, 1992.
(c) Amendment No. 2 to the Declaration of Trust,
dated August 13, 1992.
(d) Amendment to Declaration of Trust - Designation
of Series dated May 16, 1995.
4 (b) Form of Share Certificate.
5 (c) Form of Investment Advisory Agreement between the
Registrant, on behalf of MFS Emerging Markets
Fixed Income Fund, and Massachusetts Financial
Services Company, as adviser.
9 (a) Amended and Restated Shareholder Servicing Agent
Agreement between Registrant and MFS Service
Center, Inc. as Shareholder Servicing Agent,
dated April 26, 1995.
(b) Form of Exchange Privilege Agreement between the
MFS Institutional Trust, on behalf of each of its
series, and MFS Fund Distributors, Inc.
11 Consent of Deloitte & Touche LLP.
13 Investment representation letter from initial
shareholder of MFS Emerging Markets Fixed
Income Fund.
16 Schedule of Computation for Performance
Quotations - Aggregate Total Rate of Return
and Yield Calculations.
<PAGE>
EXHIBIT 99.1(a)
MFS INSTITUTIONAL TRUST
DECLARATION OF TRUST
SEPTEMBER 13, 1990
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- NAME AND DEFINITIONS
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II -- TRUSTEES
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 3
Section 2.4 Vacancies 3
Section 2.5 Delegation of Power to Other Trustees 4
ARTICLE III -- POWERS OF TRUSTEES
Section 3.1 General 4
Section 3.2 Investments 4
Section 3.3 Legal Title 5
Section 3.4 Issuance and Repurchase of Securities 5
Section 3.5 Borrowing Money; Lending Trust Property 6
Section 3.6 Delegation; Committees 6
Section 3.7 Collection and Payment 6
Section 3.8 Expenses 6
Section 3.9 Manner of Acting; By-Laws 6
Section 3.10 Miscellaneous Powers 6
Section 3.11 Principal Transactions 7
Section 3.12 Trustees and Officers as Shareholders 7
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
Section 4.1 Investment Adviser 8
Section 4.2 Distributor 8
Section 4.3 Transfer Agent 8
Section 4.4 Parties to Contract 8
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 9
Section 5.2 Non-Liability of Trustees, etc. 9
Section 5.3 Mandatory Indemnification 9
Section 5.4 No Bond Required of Trustees 11
Section 5.5 No Duty of Investigation; Notice in Trust 11
Instruments, etc.
Section 5.6 Reliance on Experts, etc. 11
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest 12
Section 6.2 Rights of Shareholders 12
Section 6.3 Trust Only 12
Section 6.4 Issuance of Shares 12
Section 6.5 Register of Shares 12
Section 6.6 Transfer of Shares 13
Section 6.7 Notices 13
Section 6.8 Voting Powers 13
Section 6.9 Series Designation 14
ARTICLE VII -- REDEMPTIONS
Section 7.1 Redemptions of Shares 16
Section 7.2 Price 16
Section 7.3 Payment 16
Section 7.4 Effect of Suspension of Determination of Net 16
Asset Value
Section 7.5 Redemption of Shares in order to Qualify as 17
Regulated Investment Company; Disclosure
of Holding
Section 7.6 Suspension of Right to Redemption 17
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS 18
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE IX -- DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1 Duration 18
Section 9.2 Termination of Trust 18
Section 9.3 Amendment Procedure 19
Section 9.4 Merger, Consolidation and Sale of Assets 20
Section 9.5 Incorporation, Reorganization 20
Section 9.6 Incorporation or Reorganization of Series 20
ARTICLE X -- REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS 21
ARTICLE XI -- MISCELLANEOUS
Section 11.1 Filing 21
Section 11.2 Governing Law 22
Section 11.3 Counterparts 22
Section 11.4 Reliance by Third Parties 22
Section 11.5 Provisions in Conflict with Law or Regulations 22
SIGNATURE PAGE 23
<PAGE>
DECLARATION OF TRUST
OF
PUBLIC FUNDS INVESTMENT TRUST
Dated: September 13, 1990
DECLARATION OF TRUST, made September 13, 1990, by the Trustees;
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable Shares of Beneficial Interest (without par
value) issued in one or more series, as hereinafter provided; and
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares of Beneficial
Interest (without par value) issued hereunder and subject to the provisions
hereof:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. - Name. The name of the trust created hereby is the Public
Funds Investment Trust, the current address of which is 500 Boylston Street,
Boston, Massachusetts 02116.
Section 1.2. - Definitions. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) "Commission", has the meaning given that term in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration", "hereof",
"herein", and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to the
contract described in Section 4.2 hereof.
(e) "Interested Person" has the meaning given that term in the 1940
Act.
(f) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(g) "Majority Shareholder Vote" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the 1940
Act, except that such term may be used herein with respect to the Shares of the
Trust as a whole or the Shares of any particular series, as the context may
require.
(h) "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulation thereunder, as amended from time to time.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign.
(j) "Shareholder" means a record owner of outstanding Shares.
(k) "Shares" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series of Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(l) "Transfer Agent" means the party, other than the Trust, to a
contract described in Section 4.3 hereof.
(m) "Trust" means the trust created hereby.
(n) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(o) "Trustees" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to such person or
persons in their capacity as trustees hereunder.
<PAGE>
ARTICLE II
TRUSTEES
Section 2.1. - Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three nor more than 15.
Section 2.2. - Term of Office of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided; except
(a) that any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) that any Trustee may be removed with cause, at any
time by written instrument, signed by at least two-thirds of the remaining
Trustees, specifying the date when such removal shall become effective; (c) that
any Trustee who requests in writing to be retired or who has become
incapacitated by illness or injury may be retired by written instrument signed
by a majority of the other Trustees, specifying the date of his retirement; and
(d) a Trustee may be removed at any meeting of Shareholders by a vote of
two-thirds of the outstanding Shares of each series. Upon the resignation or
removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute
and deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust Property
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute anal deliver on his
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.3. - Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason exist, the remaining Trustees shall fill such vacancy by
appointing such other person as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section l6(a)
of the 1940 Act.
Section 2.4. - Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
Section 2.5. - Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. - General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. - Investments.
(a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an
investment company;
(ii) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange,
distribute, lend or otherwise deal in or dispose of U.S. and foreign currencies,
any form of gold and other precious metals, commodity contracts, options,
contracts for the future acquisition or delivery of fixed income or other
securities, and securities of every nature and kind, including, without
limitation, all types of bonds, debentures, stocks, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, bankers' acceptances, and
other securities of any kind, issued, created, guaranteed or sponsored by any
and all Persons, including, without limitation, states, territories and
possessions of the United States and the District of Columbia and any political
subdivision, agency or instrumentality of any such Person, or by the U.S.
Government, any foreign government, any political subdivision or any agency or
instrumentality of the U.S. Government, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or savings institution, or by any
corporation or organization organized under the laws of the United States or of
any state, territory or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" contracts for
any such securities, to retain Trust assets in cash and from time to time change
the investments of the assets of the Trust; and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to designate
one or more persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and
(iii) to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, and to do every other
act or thing incidental or appurtenant to or connected with the aforesaid
purposes, objects or powers.
(b) The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Section 3.3 - Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person or nominee, on such terms as the Trustees may determine. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not convincing documents have been executed and delivered.
Section 3.4. - Issuance and Repurchase of Securities. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares and, subject to the provisions set forth in Articles VII, VIII and IX and
Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds of the Trust or other Trust
Property whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the Commonwealth of Massachusetts governing
business corporations.
Section 3.5. - Borrowing Money; Lending Trust Property. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust Property.
Section 3.6. - Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
Section 3.7. - Collection and Payment. Subject to Section 6.9 hereof,
the Trustees shall have the power to collect all property due to the Trust; to
pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 3.8. - Expenses. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 3.9. - Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of all the Trustees.
The Trustees may adopt By-Laws not inconsistent with this Declaration to provide
for the conduct of the business of the Trust and may amend or repeal such
By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10. - Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees or agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent, and any dealer, to such extent as the Trustees shall determine; (g)
determine and change the fiscal year of the Trust and the method by which its
accounts shall be kept; and (h) adopt a seal for the Trust, provided, that the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
Section 3.11. - Principal Transactions. Except in transactions
permitted by the 1940 Act, or any order of exemption issued by the Commission,
the Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor, or Transfer agent or with any
Interested Person of such Person; but the Trust may employ any such Person, or
firm or company in which such Person is an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or custodian upon
customary terms.
Section 3.12. - Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or member of the Advisory Board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser or of the Distributor and no Investment Adviser or Distributor of the
Trust, shall take long or short positions in the securities issued by the Trust.
The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, trustee or member of the Advisory Board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the Trust's current prospectus; or
(d) The Investment Adviser, the Distributor or any of their officers,
partners, directors or trustees from purchasing Shares prior to the effective
date of the Registration Statement relating to the Shares under the Securities
Act of 1933 as amended.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
Section 4.1. - Investment Adviser. Subject to a Majority Shareholder
Vote of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby a party to such contract shall undertake to furnish
the Trust such management, investment advisory, statistical and research
facilities and services, promotional activities, and such other facilities and
services, if any, with respect to one or more series of Shares, as the Trustees
shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provision of the Declaration, the Trustees may delegate to the Investment
adviser authority (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of assets of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases sales, loans or exchanges shall be
deemed to have been authorized by all the Trustees.
Section 4.2. - Distributor. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of Shares whereby the
Trust may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
Section 4.3. - Transfer Agent. The Trustees may in their discretion
from time to time enter into a transfer agency and shareholder service contract
or contracts whereby the other party or parties to such contract or contracts
shall undertake to furnish transfer agency and/or shareholder services. The
contract or contracts shall have such terms and conditions as the Trustees may
in their discretion determine not inconsistent with the Declaration or the
By-Laws. Such services may be provided by one or more Persons.
Section 4.4. - Parties to Contract. Any contract of the character
described in Section 4.1, 4.2 or 4.3 of this Article IV or any Custodian
contract, as described in the By-Laws, may be entered into with any Person,
although one or more of the Trustees or officers of the Trust may be an officer,
partner, director, trustee, shareholder, or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship; nor shall any Person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article IV or
the By-Laws. The same Person may be the other party to contracts entered into
pursuant to Sections 4.1, 4.2 and 4.3 above or custodian contracts, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all of the contracts mentioned in this Section 4.4.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 5.1. - No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series other than Trust Property
allocated or belonging to such series.
Section 5.2. - Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
Section 5.3. - Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is or has been a Trustee or officer of the
Trust shall be indemnified by the Trust against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim", "action", "suit", or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a
Trustee or officer or other disposition not involving a final adjudication as
provided in paragraph (b) (i) or (b) (ii) above resulting in a payment by a
Trustee or officer, unless there has been either a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition
or by a reasonable determination, based upon a review of readily available facts
(as opposed to a full trial-type inquiry) that he did not engage in such
conduct:
(A) by vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a Person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person. Nothing contained herein shall affect any rights
to indemnification to which personnel other than Trustees and officers may be
entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Section 5.4. - No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 5.5. - No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, Transfer Agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under the Declaration or in
their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees shall recite that the same
is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind any of
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, the Trust's
Shareholders, Trustees, officers, employees and agent in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 5.6. - Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust, upon an opinion of counsel, or upon
reports made to the Trust by any of its officers or employees or by the
Investment Adviser, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. - Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of Beneficial Interest
(without par value), all of one class, which shall be divided into one or more
series as provided in Section 6.9 hereof. The number of Shares authorized
hereunder is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.
Section 6.2. - Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any series
or Shares.
Section 6.3 - Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4 - Issuance of Shares. The Trustees, in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares of any series into a greater or lesser number
without thereby changing their proportionate beneficial interests in Trust
Property allocated or belonging to such series. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000ths
of a Share or integral multiples thereof.
Section 6.5 - Register of Shares. A register shall be kept at the
principal office of the Trust or at an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-Laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of Share certificates and promulgate appropriate rules and regulations as to
their use.
Section 6.6 - Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with any certificate or
certificates (if issued) for such Shares and such evidence of the genuineness of
each such execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer agent or registrar nor any officer, employee or agent
of the Trust shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the date,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent; but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 6.7 - Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 6.8 - Voting Powers. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Section 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote, except that Shares
held in the treasury of the Trust shall not be voted. Shares shall be voted by
individual series on any matter submitted to a vote of the Shareholders of the
Trust except as provided in Section 6.9(g) hereof. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the By-Laws to be taken by Shareholders. The By-Laws may include
further provisions for Shareholder votes and meetings and related matters.
Section 6.9 - Series Designation. Shares of the Trust may be divided
into series, the number and relative rights, privileges and preferences of which
shall be established and designated by the Trustees, in their discretion, in
accordance with the terms of this Section 6.9. The Trustees may from time to
time exercise their power to authorize the division of Shares into one or more
series by establishing and designating one or more series of Shares upon and
subject to the following provisions:
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption and the price, terms and manner
of redemption, and special and relative rights as to dividends and on
liquidation.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series, the Trustees shall allocate them among any
one or more of the series established and designated from time to time in such a
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all series for all purposes. No holder of Shares of any
particular series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to any particular series be charged with liabilities attributable
to any other series. All Persons who have extended credit which has been
allocated to a particular series, or who have a claim or contract which has been
allocated to any particular series, shall look only to the assets of that
particular series for payment of such credit, claim or contract.
(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest in the
net assets allocated or belonging to such series only, and such interest shall
not extend to the assets of the Trust generally. Dividends and distributions on
Shares of a particular series may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that series, only from such
of the income and capital gains, accrued or realized, from the assets belonging
to that series, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series. All dividends and distributions on
Shares of a particular series shall be distributed pro rata to the holders of
that series in proportion to the number of Shares of that series held by such
holders at the date and time of record established for the payment of such
dividends or distributions. Shares of any particular series of the Trust may be
redeemed solely out of Trust Property allocated or belonging to that series.
Upon liquidation or termination of a series of the Trust, Shareholders of such
series shall be entitled to receive a pro rata share of the net assets of such
series only. A Shareholder of a particular series of the Trust shall not be
entitled to participate in a derivative or class action on behalf of any other
series or the Shareholders of any other series of the Trust.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series, except that (I) when required by
the 1940 Act to be voted in the aggregate, Shares shall not be voted by
individual series, and (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
ARTICLE VII
REDEMPTIONS
Section 7.1. - Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose in the Trust's then effective prospectus under the Securities
Act of 1933. The Trustees may from time to time specify additional conditions,
not inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of 1933.
Section 7.2. - Price. Shares shall be redeemed at their net asset value
determined as set forth in Article VIII hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Article VIII hereof after
receipt of such application.
Section 7.3. - Payment. Payment of the redemption price of Shares of
any series shall be made in cash or in property out of the assets of such series
to the Shareholder of record at such time and in the manner, not inconsistent
with the 1940 Act or other applicable laws, as may be specified from time to
time in the Trust's then effective prospectus under the Securities Act of 1933,
subject to the provisions of Section 7.4 hereof.
Section 7.4. - Effect of Suspension of Determination of Net Asset
Value. If, pursuant to Section 7.6 hereof, the Trustees shall declare a
suspension of the determination of net asset value, the rights of Shareholders
(including those who shall leave applied for redemption pursuant to Section 7.1
hereof but who shall not yet have received payment) to have Shares redeemed and
paid for by the Trust shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any certificates on
deposits. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Article VIII after the termination of such suspension, and payment
shall be made within seven days after the date upon which the application was
made plus the period after such applications during which the determination of
net asset value was suspended.
Section 7.5. - Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify the Trust or any series of the Trust as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number, or
principal amount, of Shares or other securities of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust into conformity with the requirements for such qualification and
(ii) to refuse to transfer to issue Shares or other securities of the Trust to
any Person whose acquisition of the Shares or other securities of the Trust in
question would result in such disqualification. The redemption shall be effected
at the redemption price and in the manner provided in Section 7.1.
The holders of Shares of other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code of 1986, as amended, or to comply with the requirements of any other taxing
authority.
Section 7.6. - Suspension of Right of Redemption. The Trust may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust of
security, owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the commission may for the protection of
security holders of the Trust by order permit suspension of the right on
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the commission shall govern as to with the
conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the Suspension
shall terminate in any event on the first day on which said stock exchange shall
have reopened or the period specified in (ii) or ( ii) shall have expired (as to
which in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension as provided in Section 7.4 hereof.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
Subject to Section 6.9 hereof, the Trustees, in their absolute
discretion, may prescribe and shall set forth in the By-Laws or in a duly
adopted vote of the Trustees such bases and times for determining the per Share
or net asset value of the Shares of any series or net income attributable to the
Shares of any series, or the declaration and payment of dividends and
distributions on the Shares of any series, as they may deem necessary or
desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. - Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
Section 9.2. - Termination of Trust.
(a) The Trust may be terminated (i) by the affirmative vote of the
holders of not less than two-thirds of the Shares outstanding and entitled to
vote its Shares, or (ii) by the Trustees by written notice to the Shareholders.
Any series of the Trust may be terminated (i) by the affirmative vote of the
holders of not less than two-thirds of the Shares outstanding and entitled to
vote of that series, or (ii) by the Trustees by written notice to the
Shareholders of that series.
Upon the termination of the Trust or any series of the Trust:
(i) The Trust or series of the Trust shall carry on no business except
for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or series of the Trust and all the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or series of the Trust
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust or series of the Trust, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or Trust Property of the series to one or more persons
at public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its business;
provided, that any sale, canvas, assignment, exchange, transfer or other
disposition of all or substantially all of the Trust Property shall require
Shareholder approval in accordance with Section 9.4 hereof, and any sale,
conveyance, assignment, exchange, transfer or other disposition of all or
substantially all of the Trust Property allocated or belonging to any series
shall require the approval of the Shareholders of such series as provided in
Section 9.6 hereof; and
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property of the series, in cash
or in kind or partly in cash and partly in kind, among the Shareholders of the
Trust or the series according to their respective rights.
(b) After termination of the Trust or series and distribution to the
Shareholders of the Trust or series as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder with
respect to the Trust or series, and the rights and interests of all Shareholders
of the Trust or series shall thereupon cease.
Section 9.3 - Amendment Procedure.
(a) This Declaration may be amended by a Majority Shareholder Vote of
the Shareholders of the Trust or by any instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by the holders of
not less than a majority of the Shares of the Trust. The Trustees may also amend
this Declaration without the vote or consent of Shareholders to designate series
in accordance with Section 6.9 hereof, to change the name of the Trust, to
supply any omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary or advisable to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code of 1986, as amended, but the Trustees shall not be
liable for failing so to do.
(b) No amendment which the Trustees shall have determined shall affect
the rights, privileges or interests of holders of a particular series of Shares,
but not the rights, privileges or interests of holders of Shares of the Trust
generally, may be made except with the vote or consent by a Majority Shareholder
Vote of such series.
(c) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with a Majority Shareholder Vote of Shares or series
of Shares. Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(d) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
(e) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
Section 9.4 - Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for such purpose by the holders of not less than two-thirds of the Shares
outstanding and entitled to vote of the Trust, or such other vote as may be
established by the Trustees with respect to any series of Shares, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of not less than two-thirds of the Shares outstanding and entitled to
vote of the Trust; provided, however, that if such merger, consolidation, sale,
lease or exchange is recommended by the Trustees, the vote of the holders of a
majority of the Shares outstanding and entitled to vote, or such other vote as
may be established by the Trustees with respect to any series of Shares, shall
be sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of the Commonwealth of Massachusetts. Nothing contained
herein shall be construed as requiring approval of Shareholders for any sale of
assets in the ordinary course of the business of the Trust.
Section 9.5 - Incorporation, Reorganization. With the approval of the
holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
Section 9.6 - Incorporation or Reorganization of Series. With the
approval of a Majority Shareholder Vote of any series, the Trustees may sell,
lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
Whenever ten or more Shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least $25,000 or at least
1% of the Shares outstanding, whichever is less, shall apply to the Trustees in
writing, stating that they wish to communicate with other shareholders with a
view to obtaining signatures to a request for a meeting of Shareholders for the
purpose of removing one or more Trustees pursuant to Section 2.2 hereof and
accompany such application with a form of communication and request which they
wish to transmit, the Trustees shall within five business days after receipt of
such application either:
(a) afford to such applicants access to a list of the names and
addresses of all Shareholders as recorded on the books of the Trust; or
(b) inform such applicants as to the approximate number of Shareholders
of record, and the approximate cost of mailing to them the proposed
communication and form of request. If the Trustees elect to follow the course
specified in (b) above, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all Shareholders of record, unless within five business days after
such tender the Trustees mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion.
ARTICLE XI
MISCELLANEOUS
Section 11.1 - Filing. This Declaration, as amended, and any subsequent
amendment hereto shall be filed in the office of the Secretary of The
Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of The Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, integrating into a single instrument all of
the provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu of
the original Declaration and the various amendments thereto.
Section 11.2 - Governing Law. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 11.3 - Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4 - Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders, (iv) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (v) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (vi) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 11.5 - Provisions in Conflict with Law or Regulations. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration; provided however, that such determination shall not
affect any of the remaining provisions of the Declaration or render invalid or
improper any actions taken or omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this
13th day of September, 1990.
-----------------------------------
Arnold D. Scott
as Trustee and not individually
500 Boylston Street
Boston, Massachusetts
-----------------------------------
Linda J. Hoard
as Trustee and not individually
500 Boylston Street
Boston, Massachusetts
-----------------------------------
W. Thomas London
as Trustee and not individually
500 Boylston Street
Boston, Massachusetts
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS. BOSTON, MASSACHUSETTS
9/13/90
Then personally appeared the above-named Arnold D. Scott, Linda J.
Hoard and W. Thomas London and who severally acknowledged the foregoing
instrument to be their free act and deed.
Before me,
/s/ Maria Pereira
-----------------------------------
Notary Public
My commission expires: 7/6/95
<PAGE>
The resident address of each Trustee is as follows:
Arnold D. Scott
176 Fisherville Lane
Westport, MA 02790
Linda J. Hoard
452 High Rock Street
Needham, MA 02192
W. Thomas London
103 Grant Street
Needham, MA 02191
<PAGE>
EXHIBIT 99.1(b)
PUBLIC FUNDS INVESTMENT TRUST
AMENDMENT TO THE DECLARATION OF TRUST
Change of Name and Establishment and Designation of Additional
Series of Shares of Beneficial Interest
(without par value)
Pursuant to Section 9.3. of the Declaration of Trust dated September
13, 1990 (the "Declaration of Trust") of Public Funds Investment Trust (the
"Trust"), the Trustees of the Trust hereby amend Section 1.1. of the Declaration
of Trust to read in its entirety as follows:
Section 1.1. - Name. The name of trust created hereby is the
MFS Institutional Trust, the current address of which is 500
Boylston Street, Boston, Massachusetts 02116.
Pursuant to Section 6.9. and 9.3. of the Declaration of Trust of the
Trust, the Trustees of the Trust hereby establish and designate three series of
Shares (as defined in the Declaration of Trust), such series to have the
following special and relative rights:
1. The series shall be designated:
- MFS Public Funds Investment Fund
- MFS Worldwide Fixed Income Fund
- MFS Emerging Equities 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 to the extent pertaining to
the offering of Shares of each such series. Each Share of each
series shall be redeemable, shall be entitled to one vote or
fraction thereof in respect of a fractional share on matters
on which Shares of that 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 of Trust.
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 of Trust.
4. The assets and liabilities of the Trust shall be allocated
among the previously established and existing series of the
Trust and these series as set forth in Section 6.9 of the
Declaration of Trust.
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(i) of the Declaration of Trust, this
establishment and designation of series of Shares shall be effective upon the
execution of a majority of the Trustees of the Trust.
IN WITNESS WHEREOF, a majority of the Trustees of the Trust have
executed this certificate of amendment to the Declaration of Trust, in one or
more counterparts, all constituting a single instrument, as an instrument under
seal in The Commonwealth of Massachusetts, as of this 1st day of June, 1992.
-------------------------------
A. Keith Brodkin, Trustee
-------------------------------
Marshall N. Cohan, Trustee
<PAGE>
EXHIBIT 99.1(c)
MFS INSTITUTIONAL TRUST
AMENDMENT TO THE DECLARATION OF TRUST
Abolishment of Establishment and Designation of
MFS Public Funds Investment Fund,
a Series of Shares of Beneficial Interest
(without par value)
Pursuant to Section 6.9.(h) and 9.3. of the Declaration of Trust dated
September 13, 1990, as amended (the "Declaration of Trust"), of the Trust, the
Trustees of the Trust hereby abolish the establishment and designation of the
MFS Public Funds Investment Fund, a series of Shares (as defined in the
Declaration of Trust) established and designated by the Trustees of the Trust by
an amendment to the Declaration of Trust dated as of June 2, 1992.
IN WITNESS WHEREOF, a majority of the Trustees of the Trust have
executed this certificate of amendment to the Declaration of Trust, in one or
more counterparts, all constituting a single instrument, as an instrument under
seal in The Commonwealth of Massachusetts, as of this 13th day of August, 1992.
----------------------------------
A. Keith Brodkin, Trustee
----------------------------------
Marshall N. Cohan, Trustee
<PAGE>
EXHIBIT 99.1(d)
MFS INSTITUTIONAL TRUST
AMENDMENT TO THE DECLARATION OF TRUST
ESTABLISHMENT AND DESIGNATION
OF ADDITIONAL SERIES OF SHARES OF BENEFICIAL INTEREST
(WITHOUT PAR VALUE)
Pursuant to Section 6.9 and 9.3 of the Declaration of Trust dated
September 13, 1990, as amended (the "Declaration of Trust"), of MFS
Institutional Trust (the "Trust"), the Trustees of the Trust hereby establish
and designate a new series of Shares (as defined in the Declaration of Trust),
such series to have the following special and relative rights:
1. The new series shall be designated:
MFS Emerging Markets Fixed Income 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 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 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 of Trust.
3. Shareholders of the 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 of Trust.
4. The assets and liabilities of the Trust shall be allocated
among the previously established and existing series of the
Trust and this series as set forth in Section 6.9 of the
Declaration of Trust.
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 of Trust, this
establishment and designation of series of Shares shall be effective upon the
execution of a majority of the Trustees of the Trust.
<PAGE>
IN WITNESS WHEREOF, a majority of the Trustees of the Trust have
executed this certificate of amendment to the Declaration of Trust, 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 , 1995.
/s/ A. KEITH BRODKIN
-------------------------------
A. Keith Brodkin, Trustee
/s/ NELSON J. DARLING, JR.
-------------------------------
Nelson J. Darling, Jr., Trustee
/s/ WILLIAM R. GUTOW
-------------------------------
William R. Gutow, Trustee
<PAGE>
EXHIBIT 99.4(b)
-------------------------
FORM OF SHARE CERTIFICATE
-------------------------
MFS Emerging Markets Fixed Income Fund
ORGANIZED AS A BUSINESS TRUST UNDER THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the registered holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF BENEFICIAL INTEREST WITHOUT PAR VALUE,
OF THE TRUST OR SERIES OF THE TRUST IDENTIFIED ABOVE,
transferable only on the books of the Trust, by the holder hereof, in person or
by duly authorized attorney, upon surrender of this Certificate properly
endorsed. The aforesaid holder is entitled to require the Trust to purchase all
or any part of the Shares represented by this Certificate at net asset value,
all as more fully set forth on the reverse of this Certificate. This Certificate
is not valid until countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the said Trust has caused this Certificate to be
signed by its duly authorized officer and its seal to be hereunto affixed.
Dated:
COUNTERSIGNED
MFS Service Center, Inc.
(Boston, MA) Transfer Agent
CHAIRMAN
SEAL
TREASURER BY:
------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
157136
CERTIFICATE NO. SHARES
ACCOUNT NO. ALPHA CODE DEALER NO. CHAIRMAN
TRADE DATE: CONFIRM DATE ---------
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT THE
CORRECT INFORMATION BELOW, AND RETURN TO:
MFS SERVICE CENTER, INC.
P.O. BOX 2281
BOSTON, MA 02107-9906
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
IDENT. OR SOC. SEC. NO.: ----------------
<PAGE>
THE REGISTERED HOLDER OF THIS CERTIFICATE IS ENTITLED TO ALL THE RIGHTS,
INTEREST AND PRIVILEGES OF A SHAREHOLDER AS PROVIDED BY THE DECLARATION OF TRUST
AND BY-LAWS OF THE TRUST, AS AMENDED, WHICH ARE INCORPORATED BY REFERENCE
HEREIN. IN PARTICULAR THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
TRANSFERABLE BY THE HOLDER, IN PERSON OR BY HIS DULY AUTHORIZED ATTORNEY, BUT
ONLY ON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED AND WHEN THE TRANSFER IS
MADE ON THE BOOKS OF THE TRUST.
THE HOLDER OF THIS CERTIFICATE, AS PROVIDED IN SAID DECLARATION OF TRUST
AND BY-LAWS, AS AMENDED, SHALL NOT IN ANY WISE BE PERSONALLY LIABLE FOR ANY
DEBT, OBLIGATION OR ACT OF TRUST.
ANY SHAREHOLDER DESIRING TO DISPOSE OF HIS SHARES MAY DEPOSIT HIS
CERTIFICATE, DULY ENDORSED IN BLANK OR ACCOMPANIED BY AN INSTRUMENT OR TRANSFER
EXECUTED IN BLANK, AT THE OFFICE OF MFS SERVICE CENTER, INC. OR ANY SUCCESSOR
TRANSFER AGENT OF THE TRUST, TOGETHER WITH AN IRREVOCABLE OFFER IN WRITING TO
SELL THE SHARES REPRESENTED THEREBY AT THE NET ASSET VALUE THEREOF AND THE TRUST
WILL THEREAFTER PURCHASE SAID SHARES FOR CASH AT NET ASSET VALUE. THE
COMPUTATION OF NET ASSET VALUE, THE LIMITATIONS UPON THE DATE OF PAYMENT AND
PROVISIONS DEALING WITH SUSPENSION OF THIS RIGHT IN CERTAIN EMERGENCIES ARE
FULLY DESCRIBED IN SAID DECLARATION OF TRUST AND BY-LAWS, AS AMENDED.
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED IN ACCORDANCE WITH A CURRENT
PROSPECTUS OF THE TRUST.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
TEN COM - as tenants in common UNIF GIFT/TRANSFER MIN ACT - Custodian
---- ----
TEN ENT - as tenants by the entireties (Cust) (Minor)
<S> <C> <C>
JT TEN - as joint tenants with right of survivorship
and not as tenants in common under Uniform Gift/Transfer to Minors
Act
---------------------------------------
(State)
</TABLE>
Additional abbreviations may also be used though no in the above list.
For value received, hereby sell, assign and transfer unto
-----------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of Beneficial Interest represented by the within Certificate, and do
hereby irrevocably constitute and appoint
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated,
-------------------------
---------------------------------
Owner
---------------------------------
Signature of Co-Owner, if any
IMPORTANT ( BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH NOTICE PRINTED ABOVE.
Signature(s) guaranteed by:
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.5(c)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this day of , 1995, by and between MFS
INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"), on behalf of
MFS EMERGING MARKETS FIXED INCOME FUND, a series of the Trust (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenant and agree as follows:
ARTICLE 1. Duties of the Adviser. The Adviser shall provide the Fund with such
investment advice and supervision as the latter may from time to time consider
necessary for the proper supervision of its funds. The Adviser shall act as
Adviser to the Fund and as such shall furnish continuously an investment program
and shall determine from time to time what securities shall be purchased, sold
or exchanged and what portion of the assets of the Fund shall be held
uninvested, subject always to the restrictions of the Declaration of Trust of
the Trust, dated September 13, 1990, and By-Laws, each as amended from time to
time (respectively, the "Declaration" and the "By-Laws"), to the provisions of
the Investment Company Act of 1940 and the Rules, Regulations and orders
thereunder and to the Fund's then-current Prospectus and Statement of Additional
Information, as amended or supplemented from time to time. The Adviser shall
also make recommendations as to the manner in which voting rights, rights to
consent to corporate action and any other rights pertaining to the Fund's
portfolio securities shall be exercised. Should the Trustees at any time,
however, make any definite determination as to the investment policy and notify
the Adviser thereof in writing, the Adviser shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination shall be revoked. The Adviser shall take, on behalf of
the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders for
the purchase or sale of portfolio securities for the Fund's account with brokers
or dealers selected by it, and to that end, the Adviser is authorized as the
agent of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at the most
reasonable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement the Adviser shall not be deemed
to have acted unlawfully or to have breached any duty, created by this Agreement
or otherwise, solely by reason of its having caused the Fund to pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Adviser determined in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to the Fund and to other clients of the Adviser as to which the
Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory agreements
with one or more investment advisers with such terms and conditions as the
Adviser may determine, provided that such sub-investment advisory agreements
have been approved 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. Subject to the
provisions of Article 5, the Adviser shall not be liable for any error of
judgment or mistake of law by any sub-adviser or for any loss arising out of any
investment made by any sub-adviser or for any act or omission in the execution
and management of the Fund by any sub-adviser.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish at its
own expense investment advisory and administrative services, office space,
equipment and clerical personnel necessary for servicing the investments of the
Fund and maintaining its organization, and investment advisory facilities and
executive and supervisory personnel for managing the investments and effecting
the portfolio transactions of the Fund. The Adviser shall arrange, if desired by
the Trust, for Directors, officers and employees of the Adviser to serve as
Trustees, officers or agents of the Trust if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party on behalf of the Fund provides that another party is to pay some or all of
such expenses).
ARTICLE 3. Compensation of the Adviser. For the services to be rendered and the
facilities provided, the Fund shall pay to the Adviser an investment advisory
fee computed and paid monthly at a rate equal to 0.85% of the Fund's average
daily net assets on an annualized basis. If the Adviser shall serve for less
than the whole of any period specified in this Article 3, the compensation
payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Special Services. Should the Trust have occasion to request the
Adviser to perform services not herein contemplated or to request the Adviser to
arrange for the services of others, the Adviser will act for the Trust on behalf
of the Fund upon request to the best of its ability, with compensation for the
Adviser's services to be agreed upon with respect to each such occasion as it
arises.
ARTICLE 5. Covenants of the Adviser. The Adviser agrees that it will not deal
with itself, or with the Trustees of the Trust or the Trust's distributor, if
any, as principals in making purchases or sales of securities or other property
for the account of the Fund, except as permitted by the Investment Company Act
of 1940 and the Rules, Regulations or orders thereunder, will not take a long or
short position in the shares of the Fund except as permitted by the Declaration
and will comply with all other provisions of the Declaration and the By-Laws and
the then-current Prospectus and Statement of Additional Information of the Fund
relative to the Adviser and its Directors and officers.
ARTICLE 6. Limitation of Liability of the Adviser. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management of
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties and obligations hereunder. As used in this Section 5,
the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as that corporation itself.
ARTICLE 7. Activities of the Adviser. The services of the Adviser to the Fund
are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Fund, the
Fund will change its name so as to delete the initials "MFS". It is understood
that the Trustees, officers and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Trust, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. Duration, Termination and Amendment of this Agreement. This Agreement
shall become effective on the date first above written and shall govern the
relations between the parties hereto thereafter, and shall remain in force until
August 1, 1997 on which date it will terminate unless its continuance after
August 1, 1997 is "specifically approved at least annually" (i) by the vote of a
majority of the Trustees of the Trust who are not "interested persons" of the
Trust or of the Adviser at a meeting specifically called for the purpose of
voting on such approval, and (ii) by the Board of Trustees of the Trust, or by
"vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any penalty
by the Trustees or by "vote of a majority of the outstanding voting securities"
of the Fund, or by the Adviser, in each case on not more than sixty days' nor
less than thirty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment."
This Agreement may be amended only if such amendment is approved by "vote of a
majority of the outstanding voting securities" of the Fund.
ARTICLE 9. Scope of Trust's Obligations. A copy of the Trust's Declaration of
Trust is on file with the Secretary of State of the Commonwealth of
Massachusetts. The Adviser acknowledges that the obligations of or arising out
of this Agreement are not binding upon any of the Trust's trustees, officers,
employees, agents or shareholders individually, but are binding solely upon the
assets and property of the Trust. If this Agreement is executed by the Trust on
behalf of one or more series of the Trust, the Adviser further acknowledges that
the assets and liabilities of each series of the Trust are separate and distinct
and that the obligations of or arising out of this Agreement are binding solely
upon the assets or property of the series on whose behalf the Trust has executed
this Agreement.
ARTICLE 10. Definitions. The terms "specifically approved at least annually,"
"vote of a majority of the outstanding voting securities," "assignment,"
"affiliated person," and "interested person," when used in this Agreement, shall
have the respective meanings specified, and shall be construed in a manner
consistent with, the Investment Company Act of 1940 and the Rules and
Regulations promulgated thereunder, subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission under said Act.
ARTICLE 11. Record Keeping. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered in their names and on their behalf by the undersigned, thereunto duly
authorized, and their respective seals to be hereto affixed, all as of the day
and year first written above. The undersigned officers of the Trust and the
Adviser have executed this Agreement not individually, but as officers of the
Trust and the Adviser, respectively.
MFS INSTITUTIONAL TRUST
on behalf of
MFS EMERGING MARKETS FIXED
INCOME FUND, one of its series
/s/ By: STEPHEN E. CAVAN
------------------------------------
Stephen E. Cavan
Secretary, and not individually
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
/s/ By: ARNOLD D. SCOTT
------------------------------------
Arnold D. Scott
Senior Executive Vice President, and
not individually
<PAGE>
EXHIBIT 99.9(a)
MFS INSTITUTIONAL TRUST
500 Boylston Street
Boston, Massachusetts 02116
April 26, 1995
MFS Service Center, Inc.
500 Boylston Street
Boston, Massachusetts 02116
Amended and Restated Shareholder Servicing Agent Agreement
Dear Sir:
MFS Institutional Trust, which is a Massachusetts business trust
(referred to as the "Fund"), currently with two series MFS Emerging Equities
Fund and MFS Worldwide Fixed Income Fund, is an open-end registered investment
company. The Fund has selected you to act as its Shareholder Servicing Agent and
you hereby agree to act as such Agent and to perform the duties and functions
thereof in the manner and on the conditions hereinafter set forth. Accordingly,
the Fund hereby agrees with you as follows:
1. The Facility. You represent that you have the necessary computer
equipment, software and other office equipment ("Facility") adequate to perform
the services contemplated hereby for the Fund as well as for other investment
companies (such investment companies, together with the Fund, are herein
collectively referred to as the "MFS Funds") for which Massachusetts Financial
Services Company ("MFS") acts as investment adviser. The Facility is presently
located at 500 Boylston Street, Boston, Massachusetts, and is to be dedicated
solely to the performance of services for the MFS Funds, provided that the
Facility may be utilized to perform services for others with the permission of
the MFS Funds.
2. Name. Unless otherwise directed in writing by MFS, you shall perform
the services contemplated hereby under the name "MFS Service Center, Inc.",
which name and any similar names and any logos of which shall remain the
property and under the control of MFS. Upon termination of this Agreement, you
shall cease to use such name or any similar name within a reasonable period of
time.
<PAGE>
3. Services to be Performed. As Shareholder Servicing Agent ("Agent"),
you shall be responsible for administering and performing transfer and dividend
and distribution disbursing functions in connection with the issuance, transfer
and redemption of the various classes of shares of beneficial interest of the
various series of the Fund existing from time to time ("Shares"). The details of
the operating standards and procedures to be followed by you shall be determined
from time to time by agreement between you and the Fund.
4. Standard of Service. As Agent for the Fund, you agree to provide
service equal to or better than that provided by you or others furnishing
shareholder services to other open-end investment companies ("Standard") at a
fee comparable to the fee paid you for your services hereunder. The Standard
shall include at least the following:
(a) Prompt reconciliation of any differences as to the number
of outstanding shares between various Facility records or between Facility
records and records of the Fund's custodian;
(b) Prompt processing of shareholder correspondence and of
other matters requiring action by you;
(c) Prompt clearance of any daily volume backlog;
(d) Providing innovative services and technological
improvements;
(e) Meeting the requirements of any governmental authority
having jurisdiction over you or the Fund; and
(f) Prompt reconciliation of all bank accounts under your
control belonging to the Fund or MFS.
If any MFS Fund serviced by you is reasonably of the view that the
service provided by you does not meet the Standard, it shall give you written
notice specifying the particulars, and you then shall have 120 days in which to
restore the service so that it meets the Standard, except that such period shall
be 180 days with respect to meeting that portion of the Standard described above
in item (d) of this paragraph 4. If at the end of such period the Fund remains
reasonably of the view that the service provided by you, in the particulars
specified, does not meet the Standard, then the MFS Fund or Funds having a
majority of the accounts for which you are then Agent may, by appropriate action
(including the concurrence of a majority of the Trustees of such MFS Fund or
Funds, who are not interested persons of MFS), elect to terminate this Agreement
for cause as to all such Funds upon 90 days notice to you. Upon termination
hereof, the Fund shall pay you such compensation as may be due to you as of the
date of such termination, and shall likewise reimburse you for any costs,
expenses, and disbursements reasonably incurred by you to such date in the
performance of your duties hereunder.
<PAGE>
5. Purchase of Facility. In the event that you have given notice of
termination of this Agreement pursuant to the provisions of paragraph 14 hereof,
or for cause as provided in paragraph 4 hereof, the MFS Funds shall have the
right, but shall not be required (a) to purchase the Facility and assume the
unexpired portion of any leases of equipment or real estate relating to the
Facility from you at a price equal to your estimated unrecovered acquisition
value (as supported by the schedules and records used in determining monthly
billings) of the machinery, equipment, software, furniture, fixtures and
leasehold improvements included in the Facility, and (b) to negotiate with
persons then employed by you in the operation of the Facility and to hire all of
them in connection with the purchase of the Facility from you by the MFS Funds.
You agree to release each such employee from any contractual obligations such
persons may have to you that may interfere with such person's being hired at
such time by the MFS Funds and agree not to interfere with the negotiation and
hiring of any such persons at any such time. In the event that the MFS Funds
have given notice of termination of this Agreement pursuant to the provisions of
paragraph 14 hereof, for reasons other than cause as defined in paragraph 4
hereof, the MFS Funds shall purchase the Facility under the terms and conditions
set forth in subsections (a) and (b) of this paragraph 5.
You shall effect the transfer of the Facility pursuant to this
paragraph 5 upon the termination date specified in the notice, or at such other
time as shall be agreed upon by the parties hereto.
6. Rights in Data and Confidentiality. You agree that all records,
data, files, input materials, reports, forms and other data received, computed
or stored in the performance of this Agreement are the exclusive property of the
Fund and that all such records and other data shall be furnished without
additional charge, except for actual processing costs, to the Fund in machine
readable as well as printed form immediately upon termination of this Agreement
or at the Fund's request. You shall safeguard and maintain the confidentiality
of the Fund's data and information supplied to you by the Fund and you shall not
transfer or disclose the Fund's data to any third party without the Fund's prior
written consent unless compelled to do so by order of a court or regulatory
authority.
7. Fees. The fee for your services hereunder shall not be in excess of
such amount as shall be agreed in writing between us (see Exhibit A attached
hereto). Such fee shall be payable in monthly installments of one-twelfth of the
annual fee. Such fee shall be subject to review at least annually and fixed by
the parties in good faith negotiation on the basis of a statement of the
expenses of the Facility prepared by you, which either you or the Fund may
require to be certified by a major accounting firm acceptable to the parties.
The party or parties requesting such certification shall bear all expenses
thereof. In addition to the foregoing fee, you will be reimbursed by the Fund
for out-of-pocket expenses reasonably incurred by you on behalf of the Fund,
including but not limited to expenses for stationery (including business forms
and checks), postage, telephone and telegraph line and toll charges, and
premiums for negotiable instrument insurance and similar items.
<PAGE>
8. Record Keeping. You will maintain records in a form acceptable to
the Fund and in compliance with the rules and regulations of the Securities and
Exchange Commission, including but not limited to records required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder, which at all times will be the property of the Fund and will be
available for inspection and use by the Fund.
9. Duty of Care and Indemnification. You will at all times act in good
faith in performing your duties hereunder. You will not be liable or responsible
for delays or errors by reason of circumstances beyond your control, including
acts of civil or military authority, national emergencies, labor difficulties,
fire, mechanical breakdown beyond your control, flood or catastrophe, acts of
God, insurrection, war, riots or failure beyond your control of transportation,
communication or power supply. The Fund will indemnify you against and hold you
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit not resulting from your bad faith or negligence, and
arising out of, or in connection with, your duties on behalf of the Fund
hereunder. In addition, the Fund will indemnify you against and hold you
harmless from any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action or suit as a result of your acting in accordance with any
instructions reasonably believed by you to have been executed or orally
communicated by any person duly authorized by the Fund or its Principal
Underwriter, or as a result of acting in accordance with written or oral advice
reasonably believed by you to have been given by counsel for the Fund, or as a
result of acting in accordance with any instrument or share certificate
reasonably believed by you to have been genuine and signed, countersigned or
executed by any person or persons authorized to sign, countersign or execute the
same (unless contributed to by your gross negligence or bad faith). In any case
in which the Fund may be asked to indemnify you or hold you harmless, the Fund
shall be advised of all pertinent facts concerning the situation in question and
you will use reasonable care to identify and notify the Fund promptly concerning
any situation which presents or appears likely to present a claim for
indemnification against the Fund. The Fund shall have the option to defend you
against any claim which may be the subject of this indemnification, and in the
event that the Fund so elects such defense shall be conducted by counsel chosen
by the Fund and satisfactory to you and it will so notify you, and thereupon the
Fund shall take over complete defense of the claim and you shall sustain no
further legal or other expenses in such situation for which you seek
indemnification under this paragraph, except the expense of any additional
counsel retained by you. You will in no case confess any claim or make any
compromise in any case in which the Fund will be asked to indemnify you except
with the Fund's prior written consent. The obligations of the parties hereto
under this paragraph shall survive the termination of this Agreement.
If any officer of the Fund shall no longer be vested with authority to
sign for the Fund, written notice thereof shall forthwith be given to you by the
Fund and until receipt of such notice by it, you shall be fully indemnified and
held harmless by the Fund in recognizing and acting upon certificates or other
instruments bearing the signatures or facsimile signatures of such officer.
<PAGE>
10. Insurance. You will notify the Fund should any of your insurance
coverage, as set forth on Exhibit A hereto, be changed for any reason, such
notification to include the date of change and reason or reasons therefor.
11. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed sufficient if mailed to either party at the
addresses set forth in this Agreement, or at such other addresses as the parties
hereto may designate by notice to each other.
12. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
13. Use of a Sub- or Co-Transfer Agent. Notwithstanding any other
provision of this Agreement, it is expressly understood and agreed that you are
authorized in the performance of your duties hereunder to employ, from time to
time, one or more Sub-Transfer Agents and/or Co-Transfer Agents.
14. Amendment and Termination. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing, which, except in the case of termination, shall be signed
by the party against which enforcement of such change, waiver or discharge is
sought. Except as otherwise provided in paragraph 4 hereof, this Agreement shall
continue indefinitely until terminated by 90 days' written notice given by the
Fund to you or by you to the Fund. Upon termination hereof, the Fund shall pay
you such compensation as may be due to you as of the date of such termination,
and shall likewise reimburse you for any costs, expenses, and disbursements
reasonably incurred by you to such date in the performance of your duties
hereunder. You agree to cooperate with the Fund and provide all necessary
assistance in effectuating an orderly transition upon termination of this
Agreement.
15. Successor. In the event that in connection with termination a
successor to any of your duties or responsibilities hereunder is designated by
the Fund by written notice to you, you will, promptly upon such termination and
at the expense of the Fund, transfer to such successor a certified list of the
shareholders of the Fund (with name, address and tax identification or Social
Security number), an historical record of the account of each shareholder and
the status thereof, and all other relevant books, records, correspondence, and
other data established or maintained by you under this Agreement in form
reasonably acceptable to the Fund (if such form differs from the form in which
you have maintained the same, the Fund shall pay any expenses associated with
transferring the same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance from your
cognizant personnel in the establishment of books, records and other data by
such successor.
<PAGE>
17. Trust Only. A copy of the Declaration of Trust of the Fund
is on file with the Secretary of State of The Commonwealth of Massachusetts. You
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Fund's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Fund in accordance with its proportionate interest hereunder. If this
instrument is executed by the Fund on behalf of one or more series of the Fund,
you further acknowledge that the assets and liabilities of each series of the
Fund are separate and distinct and that the obligations of or arising out of
this instrument are binding solely upon the assets or property of the series on
whose behalf the Fund has executed this instrument on behalf of more than one
series of the Fund, you also agree that the obligations of each series hereunder
shall be several and not joint, in accordance with its proportionate interest
hereunder, and you agree not to proceed against any series for the obligations
of another series.
Very truly yours,
MFS INSTITUTIONAL TRUST
on behalf of its various series
/s/ A. Keith Brodkin
---------------------------------
Chairman
The foregoing is hereby accepted as of the date thereof.
MFS SERVICE CENTER, INC.
/s/ Joseph A. Recomendes
- -------------------------------
President
<PAGE>
As of January 1, 1995
EXHIBIT A TO SHAREHOLDER SERVICING AGENT AGREEMENT
(THE "AGREEMENT")
MFS INSTITUTIONAL TRUST
Pursuant to Section 7 of the Agreement, the fees to be paid by each
Fund to MFS Service Center, Inc. ("MFSC"), for MFSC's services as shareholder
servicing agent under the Agreement, are 0.0075% per annum for each Fund's
average daily net assets.
MFS INSTITUTIONAL TRUST
By: /s/ A. Keith Brodkin
-------------------------------
A. Keith Brodkin
Chairman and President
MFS SERVICE CENTER, INC.
By: /s/ Joseph A. Recomendes
-------------------------------
Joseph A. Recomendes
President
<PAGE>
EXHIBIT 99.9(b)
EXCHANGE PRIVILEGE AGREEMENT
AGREEMENT, dated as of the --- day of -----, 1995, by and between
MFS Institutional Trust, on behalf of each of its series (as existing on this
date and created from time to time) (the "Funds"), and MFS Fund Distributors,
Inc. ("MFD").
WITNESSETH THAT:
WHEREAS, the Funds are each a series of MFS Institutional Trust; (the
"Trust"); and
WHEREAS, pursuant to the terms of a Distribution Agreement by and
between each Fund and MFD, MFD has the exclusive right to purchase from such
Funds shares of each Fund at the net asset value on which orders for shares were
based, but subject to the exceptions therein set forth or referred to; and
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, of the shares of any one or more of the Funds by use of the proceeds of
redemption of shares 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; and
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 of the Funds
may, subject to the restrictions hereinafter set forth, be offered by MFD as
distributor at net asset value to shareholders of each of the Funds, subject to
the restrictions hereinafter set forth, who wish to apply the proceeds of
redemption of shares of any such Fund, provided that either the net asset value
of the shares to be redeemed in the exchange is at least $3,000,000 or all the
shares owned by the shareholder are to be redeemed. MFD may specify the manner
in which such shareholders may accept its offer to sell such shares at net asset
value (each such acceptance is hereinafter referred to as an "Exchange
Request").
(b) Massachusetts Financial Services Company ("MFS"), MFD's parent,
serves as investment adviser.
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.
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 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 or contained
in applicable rules and regulations.
5. To the extent that a Fund's effective Prospectus contains
provisions that are inconsistent with the terms of this Agreement, the terms of
the Prospectus shall be controlling.
6. The terms of this Agreement shall become effective as of the date
first above written.
7. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts. The Adviser
acknowledges that the obligations of or arising out of this Agreement are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust. If this Agreement is executed by the Trust on behalf of one or
more series of the Trust, the Adviser further acknowledges that the assets and
liabilities or each series of the Trust are separate and distinct and that the
obligations of or arising out of this Agreement are binding solely upon the
assets or property of the series on whose behalf the Trust has executed this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written and caused their seals to be affixed by their
representatives thereunto duly authorized.
MFS INSTITUTIONAL TRUST
Attest: /s/ JAMES R. BORDEWICK, JR. /s/ *By: A. KEITH BRODKIN
----------------------- ---------------------
James R. Bordewick, Jr. A. Keith Brodkin
Assistant Secretary Chairman
MFS FUND DISTRIBUTORS, INC.
Attest: /s/ JAMES R. BORDEWICK, JR. /s/ By: WILLIAM W. SCOTT, JR.
----------------------- ---------------------
James R. Bordewick, Jr. William W. Scott, Jr.
Assistant Secretary President
- ------------------------
* The above-signed Trustee of the above-mentioned Trust has executed this
Agreement not individually, but as a Trustee under the Declaration of Trust, as
amended from time to time, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of the Trust, individually, but bind
only the Trust estate of each such Trust.
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 7 to the Registration
Statement No. 33-37615 of MFS Institutional Trust of our report dated May 16,
1995, relating to MFS Emerging Markets Fixed Income Fund appearing in the
Statement of Additional Information which is part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
May 16, 1995
<PAGE>
EXHIBIT 99.13
May 16, 1995
MFS Emerging Markets Fixed Income Fund
500 Boylston Street
Boston, MA 02116
Gentlemen:
In connection with the purchase by the undersigned of 10 Shares of
Beneficial Interest (without par value) of MFS Emerging Markets Fixed Income
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
/s/ By: A. KEITH BRODKIN
------------------------------------
A. Keith Brodkin
Chairman
<PAGE>
EXHIBIT 99.16
AGGREGATE TOTAL RATE OF RETURN
FORMULA
1000(1 + T) = ERV
Where:
T = aggregate total return
ERV = ending redeemable value
<PAGE>
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| | | 6 |
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| | a - b | |
YIELD = 2 x | | ----- + 1 | |
| | c x d | |
| | | - 1|
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