<PAGE>
As filed with the Securities and Exchange Commission on October 27, 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. 9
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 13
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)
|X| on October 27, 1995 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
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, 1995 on August 29, 1995.
================================================================================
<PAGE>
MFS INSTITUTIONAL TRUST
MFS INSTITUTIONAL EMERGING EQUITIES FUND
MFS INSTITUTIONAL WORLDWIDE 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)
ITEM NUMBER STATEMENT OF
FORM N-1A, ADDITIONAL
PART A PROSPECTUS CAPTION INFORMATION CAPTION
- ----------- ------------------ -------------------
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 Objectives and Policies;
Investment Techniques; Additional Risk Factors;
Information Concerning Shares of the
Fund - Description of Shares, Voting
Rights and Liabilities
(b) Investment Objectives and Policies; *
Investment Techniques; Additional Risk Factors
(c) Investment Objectives and *
Policies; Investment Techniques;
Additional Risk Factors
5 (a) The Fund; Management of the *
Fund - Investment Adviser
(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 Techniques - 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 *
(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>
ITEM NUMBER
FORM N-1A, STATEMENT OF ADDITIONAL
PART B PROSPECTUS CAPTION INFORMATION CAPTION
- ----------- ------------------ ------------------------
10(a),(b) * Front Cover Page
11 * Front Cover Page
12 * *
13(a),(b),(c) * Investment Objectives;
Policies; Investment Techniques;
Restrictions
(d) Investment Techniques - *
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 Funds - Management of the Fund -
Investment Adviser Investment Adviser; Trustees
and Officers
(b) Management of the Funds - Management of the Fund -
Investment Adviser Investment Adviser
(c) * *
(d) * *
(e) * Portfolio Transactions and
Brokerage Commissions
(f) * *
(g) * *
(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 Fund - 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
23 * *
- ------------------------
*Not Applicable
<PAGE>
PROSPECTUS
MFS(R) INSTITUTIONAL November 1, 1995
EMERGING EQUITIES FUND Shares of Beneficial Interest
- ------------------------------------------------------------------------------
Page
----
1. Expense Summary ................................................... 2
2. The Fund .......................................................... 2
3. Condensed Financial Information ................................... 3
4. Investment Objective and Policies ................................. 3
5. Investment Techniques ............................................. 4
6. Additional Risk Factors ........................................... 7
7. Management of the Fund ............................................ 7
8. Information Concerning Shares of the Fund ......................... 8
Purchases ....................................................... 8
Exchanges ....................................................... 9
Redemptions ..................................................... 9
Distributions ................................................... 10
Tax Status ...................................................... 11
Net Asset Value ................................................. 11
Description of Shares, Voting Rights and Liabilities ............ 11
Performance Information ......................................... 12
Expenses ........................................................ 12
9. Shareholder Services .............................................. 12
MFS(R) INSTITUTIONAL EMERGING EQUITIES FUND
500 Boylston Street, Boston, MA 02116 (617) 954-5000
MFS Institutional Emerging Equities Fund (the "Fund") is a series of MFS
Institutional Trust (the "Trust").
The Fund's investment objective is to seek long-term growth of capital. The Fund
seeks to achieve this objective by investing primarily in common stocks of small
and medium-sized companies that are early in their life cycle but which may have
the potential to become major enterprises (emerging growth companies). THE FUND
IS INTENDED FOR INVESTORS WHO UNDERSTAND AND ARE WILLING TO ACCEPT THE RISKS
ENTAILED IN SEEKING LONG-TERM GROWTH OF CAPITAL (see "Additional Risk Factors").
Shares of the Fund are sold to investors by the Trust.
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.
The Fund is designed exclusively for institutional investor clients of MFS and
MFS Asset Management, Inc. The minimum initial investment generally is $3
million per investor (see "Purchases").
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 November 1, 1995, which
contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. See page 13 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.
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.
<PAGE>
1. EXPENSE SUMMARY
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):
Management Fees (after applicable fee reduction)(1) ................ 0.63%
Other Expenses ..................................................... 0.12%
----
Total Operating Expenses of the Fund
(after applicable fee reduction)(2) ................................ 0.75%
- ----------
(1) MFS has voluntarily agreed to waive its management fees and/or pay Fund
expenses in order to maintain total expenses of the Fund at no more than
0.75% of the Fund's average daily net assets until June 30, 1997. Absent the
expense arrangement, Management Fees would have been 0.75% of the Fund's
average daily net assets. The arrangement may be terminated or revised by
MFS at any time.
(2) Percentages are based on fees incurred during the fiscal year ended June 30,
1995. Absent the expense arrangement, "Total Operating Expenses" would have
been 0.87% of the Fund's average daily net assets.
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated:
1 year ........................................................... $ 8
3 years .......................................................... $24
5 years .......................................................... $42
10 years .......................................................... $93
The purpose of the expense table above is to assist investors in
understanding the various costs and expenses that a shareholder of the Fund will
bear directly or indirectly. More complete descriptions of the 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 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 seven
separate series, one of which is the Fund. The Fund commenced operations in
June, 1993. Shares of the other series of the Trust are offered pursuant to a
separate prospectus and statement of additional information. Shares of the Fund
are continuously offered and sold by the Trust 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 on
the conditions and trends in the economy and the financial marketplaces. The
Fund also offers to buy back (redeem) its shares from its shareholders at any
time at net asset value.
3. CONDENSED FINANCIAL INFORMATION
The following per share information should be read in conjunction with the
financial statements included in the Fund's Annual Report to shareholders which
are incorporated by reference into the Statement of Additional Information in
reliance upon the report of the Fund's independent auditors, as experts in
accounting and auditing. The Fund's current independent auditors are Deloitte &
Touche LLP.
FINANCIAL HIGHLIGHTS
YEAR ENDED JUNE 30,
---------------------------
1995 1994 1993*
------ ------ ------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $11.75 $10.17 $10.00
------ ------ ------
Income from investment operations# --
Net investment income (loss)(S) $(0.03) $(0.03) $ 0.01
Net realized and unrealized gain on investments 5.04 1.82## 0.16
------ ------ ------
Total from investment operations $ 5.01 $ 1.79 $ 0.17
------ ------ ------
Less distributions declared to shareholders --
From net investment income $ -- $ -- ** $ --
From net realized gain on investments (0.34) (0.21) --
------ ------ ------
Total distributions declared to shareholders $ (0.34) $(0.21) $ --
------ ------ ------
Net asset value - end of period $16.42 $11.75 $10.17
------ ------ ------
TOTAL RETURN 43.21% 17.50% 1.70%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses 0.75% 0.78% 0.90%+
Net investment income (loss) (0.19)% (0.27)% 2.24%+
PORTFOLIO TURNOVER 86% 94% 0%
NET ASSETS AT END OF PERIOD (000 OMITTED) $107,019 $27,559 $3,052
* For the period from the commencement of investment operations, June 16, 1993
to June 30, 1993.
** The per share distribution from net investment income was $0.00175.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to June 30, 1993 is based on
average shares outstanding.
## The per share data is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares and
the amount of per share realized and unrealized gains and losses at such
time.
(S) The investment adviser did not impose a portion of its management fee for
the periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment loss $(0.07) $(0.11) --
RATIOS (TO AVERAGE NET ASSETS):
Expenses 0.98% 1.54% 2.50%+
Net investment income (loss) (0.42)% (1.02)% 0.64%+
FURTHER INFORMATION ABOUT THE PERFORMANCE OF THE FUND IS CONTAINED IN THE
FUND'S ANNUAL REPORT TO SHAREHOLDERS, WHICH CAN BE OBTAINED FROM THE
SHAREHOLDER SERVICING AGENT WITHOUT CHARGE.
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to seek 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's policy is to invest primarily (i.e., at least
80% of its assets under normal circumstances) in common stocks of small and
medium-sized companies that are early in their life cycle but which have the
potential to become major enterprises (emerging growth companies). Such
companies generally have annual gross revenues ranging from $10 million to $1
billion, would be expected to show earnings growth over time that is well above
the growth rate of the overall economy and the rate of inflation, and would have
the products, management and market opportunities which are usually necessary to
become more widely recognized as growth companies. However, the Fund may also
invest in more established companies whose rates of earnings growth are expected
to accelerate because of special factors, such as rejuvenated management, new
products, changes in consumer demand or basic changes in the economic
environment. The Fund may also invest to a limited extent in restricted
securities of companies which the Adviser believes have significant growth
potential. These securities may be considered speculative and may not be readily
marketable.
The selection of securities is made solely on the basis of potential for growth
of capital. Dividend and interest income from portfolio securities, if any, is
incidental to the Fund's investment objective of long-term growth of capital.
The Fund has adopted the following policy which is fundamental and which may not
be changed without shareholder approval: While the Fund will invest primarily in
common stocks, the Fund may, to a limited extent, seek appreciation in other
types of securities such as foreign or convertible securities and warrants when
relative values make such purchases appear attractive either as individual
issues or as types of securities in certain economic environments. The Fund may
hold cash equivalents or other forms of debt securities as a reserve for future
purchases of common stock or to meet liquidity needs, and as a defensive measure
when the Adviser determines that equity securities are overvalued.
5. INVESTMENT TECHNIQUES
Consistent with its investment objectives and policies, 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.
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 marketvalue 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 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 liquid and thus not
subject to the Fund's limitations on investing not more than 15% of its net
assets in illiquid investments. 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 decreasing the
level of liquidity 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.
AMERICAN DEPOSITORY RECEIPTS: The Fund may invest in American Depositary
Receipts ("ADRs"), which are certificates issued by a U.S. depository (usually a
bank) representing a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. Although ADRs are issued
by a U.S. depository, they are subject to many of the risks of foreign
securities such as changes in exchange rates and more limited information about
foreign issuers. See the Statement of Additional Information for further
discussion of foreign securities, ADRs and the holding of foreign currency, as
well as the associated risks.
OPTIONS ON SECURITIES -- The Fund may write (sell) covered put and call options
on securities and purchase put and call options on securities. The Fund will
write such options for the purpose of increasing its return and/or 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 such declines or increases 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.
OPTIONS ON STOCK INDEXES -- The Fund may write (sell) covered call and put
options and purchase call and put options on stock indexes. The Fund may write
options on stock indexes for the purpose of increasing its gross income and to
protect its portfolio against declines in the value of securities it owns or
increases in the value of securities to be acquired. When the Fund writes an
option on a stock index, and the value of the index moves adversely to the
holder's position, the option will not be exercised, and the Fund will either
close out the option at a profit or allow it to expire unexercised. The Fund
will thereby retain the amount of the premium, which will increase its gross
income and offset part of the reduced value of portfolio securities or the
increased cost of securities to be acquired. Such transactions, however, will
constitute only partial hedges against adverse price fluctuations, since any
such fluctuations will be offset only to the extent of the premium received by
the Fund for the writing of the option. In addition, if the value of an
underlying index moves adversely to the Fund's option position, the option may
be exercised, and the Fund will experience a loss which may only be partially
offset by the amount of the premium received.
The Fund may also purchase put or call options on stock indexes in order,
respectively, to hedge its investments against a decline in value or to attempt
to reduce the risk of missing a market or industry segment advance. The Fund's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.
FUTURES CONTRACTS -- The Fund may enter into stock index futures contracts
("Futures Contracts"). Purchases or sales of Futures Contracts are used to
attempt to protect the Fund's current or intended stock investments from broad
fluctuations in stock prices, or for non-hedging purposes, to the extent
permitted by applicable law. In the event that an anticipated decrease in the
value of portfolio securities occurs as a result of a general stock market
decline, the adverse effects of such changes may be offset, in whole or part, by
gains on the sale of Futures Contracts. Conversely, the increased cost of
portfolio securities to be acquired, caused by a general rise in the stock
market, may be offset, in whole or part, by gains on Futures Contracts purchased
by the Fund. Transactions entered into for non-hedging purposes involve greater
risk, and could involve losses which are not offset by gains on other portfolio
assets. The Fund will incur brokerage fees when it purchases and sells Futures
Contracts, and it will be required to make and maintain margin deposits.
OPTIONS ON FUTURES CONTRACTS -- The Fund may purchase and write options on
Futures Contracts ("Options on Futures Contracts") in order to protect against
declines in the values of portfolio securities or against increases in the cost
of securities to be acquired, or for non-hedging purposes, the extent permitted
by applicable law. Purchases of Options on Futures Contracts may present less
risk in hedging the Fund's portfolio than the purchase or sale of the underlying
Futures Contracts since the potential loss is limited to the amount of the
premium plus related transaction costs, although it may be necessary to exercise
the option to realize any profit, which results in the establishment of a
futures position. The writing of Options on Futures Contracts, however, does not
present less risk than the trading of Futures Contracts and will constitute only
a partial hedge, up to the amount of the premium received. In addition, if an
option is exercised, the Fund may suffer a loss on the transaction. Transactions
entered into for non-hedging purposes involve greater risk, and could involve
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") in order to attempt to minimize the risk
from the effects of exchange rate changes on the Fund's current or intended
investments in foreign securities. These transactions 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. 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 options or Futures Contracts 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.
The policies described above are not fundamental and may be changed without
shareholder approval. See Appendix A to the Statement of Additional Information
for a description of the characteristics of options, Futures Contracts, Options
on Futures Contracts and Forward Contracts. See the Statement of Additional
Information for a discussion of other investment policies and a listing of
specific investment restrictions which govern the Fund's investment policies.
The specific investment restrictions listed in the Statement of Additional
Information may not be changed without shareholder approval. The Fund's
limitations, policies and rating standards are adhered to at the time of
purchase or utilization of assets; a subsequent change in circumstances will not
be considered to result in a violation of policy.
PORTFOLIO TRADING: While it is not generally the Fund's policy to invest or
trade for short-term profits, the Fund may dispose of a portfolio security
whenever the Adviser is of the opinion that that security no longer has an
appropriate appreciation potential or when another security appears to offer
relatively greater appreciation potential. Portfolio changes are made without
regard to the length of time a security has been held, or whether a sale would
result in a profit or loss. Therefore, the rate of portfolio turnover is not a
limiting factor when a change in the portfolio is otherwise appropriate.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD") and
such other policies as the Trustees may determine, the Adviser may consider
sales of shares of the Fund and of 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. fees charged by the custodian of the Fund's assets).
6. ADDITIONAL RISK FACTORS
EMERGING GROWTH SECURITIES: The nature of investing in emerging growth companies
involves greater risk than is customarily associated with investments in more
established companies. Emerging growth companies often have limited product
lines, markets or financial resources, and they may be dependent on one-person
management. The securities of emerging growth companies may have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger, more established growth companies or the market averages
in general. Shares of the Fund, therefore, are subject to greater fluctuation in
value than shares of a conservative equity fund or of a growth fund which
invests entirely in proven growth stocks. Therefore, the Fund is intended for
long-term investors who understand and can accept the risks entailed in seeking
long-term growth of capital. The Fund is not meant to provide a vehicle for
those who wish to play short-term swings in the stock market. Accordingly, an
investment in shares of the Fund should not be considered a complete investment
program. Each prospective purchaser should take into account his investment
objectives as well as his other investments when considering the purchase of
shares of the Fund.
FOREIGN SECURITIES: Investing in securities of foreign issuers generally
involves risks not ordinarily associated with investing in securities of
domestic issuers. These include changes in currency rates, exchange control
regulations, governmental administration or economic or monetary policy (in the
United States or abroad) or circumstances in dealings between nations. Costs may
be incurred in connection with conversions between various currencies. Special
considerations may also include more limited information about foreign issuers,
higher brokerage costs, different 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. The Fund may
hold foreign currency received in connection with investments in foreign
securities when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. dollars at a later date, based on anticipated
changes in the relevant exchange rate. The Fund may invest up to 20% (and
expects generally to invest between 5% and 10%) of its total assets in foreign
securities (not including American Depositary Receipts). The Fund may also hold
foreign currency in anticipation of purchasing foreign securities.
FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS: Although the
Fund will enter into certain transactions in Futures Contracts, Options on
Futures Contracts, Forward Contracts and certain options solely for hedging
purposes, their use does involve certain risks. For example, a lack of
correlation between the index or instrument underlying an option or Futures
Contract and the assets being hedged, or unexpected adverse price movements,
could render the Fund's hedging strategy unsuccessful and could result in
losses. The Fund also may enter into transactions in such instruments for other
than hedging purposes, which involves greater risk and may result in losses. In
addition, there can be no assurance that a liquid secondary market will exist
for any contract purchased or sold, and the Fund may be required to maintain a
position until exercise or expiration, which could result in losses. The Fund
may also be required or may elect to receive delivery of the foreign currencies
underlying Forward Contracts, which may involve certain risks. Further, Forward
Contracts entail particular risks related to conditions affecting the underlying
currency. Over-the-counter transactions in options on securities and Forward
Contracts also involve risks arising from the lack of an organized exchange
trading environment. Transactions in Futures Contracts, Options on Futures
Contracts, Forward Contracts and options are subject to other risks as well.
7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated August 7, 1992 (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative services,
as well as general office facilities. John W. Ballen, a Senior Vice President
and Director of Research for the Adviser and Christian Felipe, a Vice President
of Investments of the Adviser, are the Fund's portfolio managers. Mr. Ballen
became the portfolio manager of the Fund in June, 1993 and joined the Adviser in
1984. Mr. Felipe became the portfolio manager of the Fund in June, 1993 and has
been employed by the Adviser since 1988. 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 0.75% of the Fund's average
daily net assets.
For the fiscal year ended June 30, 1995, MFS incurred management fees under the
Advisory Agreement of $540,536, equivalent to 0.75% of the Fund's average daily
net assets. Due to the voluntary waiver of management fees, $168,512 was not
borne by the Fund. (See "Information Concerning Shares of the Fund -- Expenses"
below.)
MFS also serves as investment adviser to the other series of the Trust, each of
the other funds in 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(R)/Sun Life Series Trust, Sun
Growth Variable Annuity Fund, Inc. and seven variable accounts, each of which is
a registered investment company established by Sun Life Assurance Company of
Canada (U.S.) ("Sun Life of Canada (U.S.)") in connection with the sale of
various combination fixed/variable annuity contracts. MFS and its wholly-owned
subsidiary, MFS Asset Management, Inc. provide investment advice to substantial
private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $39.5 billion on behalf of approximately 1.7 million investor
accounts as of September 30, 1995. As of such date, the MFS organization managed
approximately $16 billion of assets invested in equity securities. Of total
assets, $3 billion are invested in securities of foreign issuers and non-U.S.
dollar securities. MFS is a wholly-owned subsidiary of Sun Life of Canada (U.S.)
which in turn is a wholly-owned subsidiary of Sun Life Assurance Company of
Canada ("Sun Life"). The Directors of MFS are A. Keith Brodkin, Jeffrey L.
Shames, Arnold D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the
Chairman 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 and a Trustee of the Trust. W. Thomas
London, Stephen E. Cavan, James O. Yost and James R. Bordewick, Jr., all of
whom are officers of MFS, are officers of the Trust.
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.
8. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
The Fund is designed exclusively for institutional investor clients of MFS and
MFS Asset Management, Inc. Shares of the Fund may be purchased directly from the
Fund 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
generally is $3 million. There is no minimum on additional investments.
An order for the purchase of shares of the Fund will be in "good order" and will
be 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 his 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 the 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 a 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 Equities 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 Equities Fund (Account No. 4230-813-0) 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 MFS Asset Management, Inc.
A shareholder must first telephone MFS Asset Management, Inc. toll-free at (800)
343-2923 extension 5757 to advise of his intended action and, if funds are to be
wired, to obtain a wire order number.
The Fund reserves the right to reject any specific purchase order or to restrict
purchases by a particular purchaser (or group of related purchasers).
IN-KIND PURCHASES: Shares of the Fund may be purchased by exchanging stocks or
other equity securities acceptable to the Fund for Fund shares. The Fund need
not accept any security offered for exchange unless it is consistent with the
Fund's investment objective and restrictions and is otherwise acceptable to the
Fund. Securities accepted in exchange for shares will be valued in accordance
with the Fund's usual valuation procedures. 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 (i.e., an established
account) may be exchanged for shares of any of the other 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 any other series of the Trust, 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" below). 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, he would incur brokerage
charges when he 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 such Exchange is restricted or to the extent otherwise
permitted by the Investment Company Act of 1940, as amended (the "1940 Act"), if
an emergency exists. "Good order" generally means that the stock power, written
request for redemption, letter of instruction or share certificate must be
endorsed by the record owner(s) exactly as the shares are registered and the
signature(s) must be guaranteed in the manner set forth below under the caption
"Signature Guarantee," In addition, in some cases "good order" will require the
furnishing of additional documents. The Shareholder Servicing Agent may make
certain de minimus exceptions to the above requirements for redemptions.
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
the Statement of Additional Information).
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.
SIGNATURE GUARANTEE: In order to protect shareholders to the greatest extent
possible against fraud, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent. With
respect to written requests for redemptions, no signature guarantee or evidence
that the individual executing the stock power, written request for redemption,
letter of instruction or certificate will be required if the amount of the
redemption proceeds does not exceed specified minimums established from time to
time by MFD and the proceeds are wired or mailed to a predesignated account or
address.
DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income to its
shareholders as dividends on an annual basis. In determining the net investment
income available for distributions, the Fund may rely on projections of its
anticipated net investment income over a longer term, rather than its actual net
investment income for the period. If the Fund earns less than projected, or
otherwise distributes more than its earnings for the year, a portion of the
distributions may constitute a return of capital. The Fund may make one or more
distributions during the calendar year to its shareholders from any long-term
capital gains, and may also make one or more distributions during the calendar
year to its shareholders from short-term capital gains. Shareholders may elect
to receive dividends and capital gain distributions in either cash or additional
shares. See "Tax Status" below and "Shareholder Services -- Distribution
Options".
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. A portion of the dividends received
from the Fund (but none of the Fund's capital gains distributions) may qualify
for the dividends received deduction for corporations.
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 generally free of current taxes but results in a
basis reduction), and the amount, if any, of the federal income tax withheld.
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 Fund's
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 New York Stock Exchange is open for trading. This determination is made once
during each such day as of the close of regular trading on such Exchange by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other 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 in
"good order" by the dealer 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 seven series of shares and has
reserved 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. 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 would vote
together 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.
PERFORMANCE INFORMATION
From time to time, the Fund will provide total rate of return quotations and may
also quote fund rankings in the relevant fund category from various sources,
such as the Lipper Analytical Services, Inc. and Wiesenberger Investment
Companies Service. 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 net asset value with all distributions reinvested. Total rate
of return reflects all components of investment return over a stated period of
time. The Fund's total rate of return quotations are based on historical
performance and are not intended to indicate future performance. 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, see the Statement of
Additional Information.
EXPENSES
The Trust pays the compensation of its 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
accounts; expenses of calculating the net asset value of shares of the Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses 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.
The Adviser has voluntarily agreed to waive its management fee and/or pay
expenses of the Fund in order to maintain total operating expenses of the Fund
at no more than 0.75% per annum of the Fund's average daily net assets from
December 1, 1993 through June 30, 1997. This obligation to pay expenses 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.
9. 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 November 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) its 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>
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
Auditors
Deloitte & Touche LLP
[LOGO] M F S (R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) INSTITUTIONAL EMERGING
EQUITIES FUND
500 Boylston Street
Boston, MA 02116
MEE
[LOGO] M F S (R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) INSTITUTIONAL EMERGING
EQUITIES FUND
Prospectus
November 1, 1995
<PAGE>
MFS(R) INSTITUTIONAL STATEMENT OF
EMERGING EQUITIES FUND ADDITIONAL INFORMATION
November 1, 1995
- ---------------------------------------------------------------------------
Page
----
1. Definitions .................................................... 2
2. Investment Policies and Restrictions ........................... 2
3. Management of the Fund ......................................... 8
Trustees ..................................................... 9
Officers ..................................................... 9
Investment Adviser ........................................... 9
Custodian .................................................... 10
Shareholder Servicing Agent .................................. 10
Distributor .................................................. 10
4. Portfolio Transactions and Brokerage Commissions ............... 10
5. Tax Status ..................................................... 11
6. Determination of Net Asset Value and Performance ............... 12
7. Description of Shares, Voting Rights and Liabilities ........... 13
8. Independent Auditors and Financial Statements .................. 14
Appendix A ........................................................ 15
Exhibit A -- Trustee Compensation Table ........................... 17
MFS(R) INSTITUTIONAL EMERGING EQUITIES 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 November 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 MFS Asset Management, Inc. at (800) 343-
2923 Extension 5757.
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 seven
series, one of which is the
Fund.
"Fund" -- MFS Institutional Emerging
Equities Fund, a series of
MFS Institutional Trust.
"MFS" or the "Adviser" -- Massachusetts Financial
Services Company, a Delaware
corporation.
"Prospectus" -- The Prospectus, dated
November 1, 1995, of the
Fund.
2. INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES. The Fund seeks to achieve its investment objective by
investing primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of small and medium-sized companies that are
early in their life cycle but which have the potential to become major
enterprises (emerging growth companies). Such companies generally have annual
gross revenues ranging from $10 million to $1 billion, would be expected to show
earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation, and would have the products, management and
market opportunities which are usually necessary to become more widely
recognized as growth companies. However, the Fund may also invest in more
established companies whose rates of earnings growth are expected to accelerate
because of special factors, such as rejuvenated management, new products,
changes in consumer demand or basic changes in the economic environment. The
Fund may also invest in restricted securities of companies which the Adviser
believes have significant growth potential. These securities may be subject to
legal or contractual restrictions on resale. Consequently, there may not be a
public trading market for these securities and market quotations may not be
readily available. 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. The companies issuing restricted securities are often smaller,
unseasoned companies with less operating history and available information than
companies issuing the publicly traded securities in which the Fund generally
invests. The Fund may not invest more than 15% of its assets in certain
restricted securities and certain other securities. See "Investment
Restrictions."
The selection of securities is made solely on the basis of potential for growth
of capital. Dividend and interest income from portfolio securities, if any, is
incidental to the Fund's investment objective of long-term growth of capital.
The Fund has adopted the following policy which is fundamental and which may not
be changed without shareholder approval. While the Fund will invest primarily in
common stocks, the Fund may, to a limited extent, seek appreciation in other
types of securities such as foreign or convertible securities and warrants when
relative values make such purchases appear attractive either as individual
issues or as types of securities in certain economic environments. The Fund may
hold cash equivalents or other forms of debt securities as a reserve for future
purchases of common stock or to meet liquidity needs, and as a defensive measure
when the Adviser determines that equity securities are overvalued.
While it is not generally the Fund's policy to invest or trade for short-term
profits, the Fund may dispose of a portfolio security whenever the Adviser is of
the opinion that that security no longer has an appropriate appreciation
potential or when another security appears to offer relatively greater
appreciation potential. Portfolio changes are made without regard to the length
of time a security has been held, or whether a sale would result in a profit or
loss. Therefore, the rate of portfolio turnover is not a limiting factor when a
change in the portfolio is otherwise appropriate.
REPURCHASE AGREEMENTS: As described in the Prospectus, the Fund may enter into
repurchase agreements with sellers who are member firms (or subsidiaries
thereof) of the New York Stock Exchange or members of the Federal Reserve
System, recognized primary U.S. Government securities dealers or institutions
which the Adviser has determined to be of comparable creditworthiness. The
securities that the Fund purchases and holds through its agent are U.S.
Government securities, the values of which are equal to or greater than the
repurchase price agreed to be paid by the seller. The repurchase price may be
higher than the purchase price, the difference being income to the Fund, or the
purchase and repurchase prices may be the same, with interest at a standard rate
due to the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the U.S.
Government securities.
The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, the Fund will have the right to liquidate the securities. If at the time
the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
FOREIGN SECURITIES: The Fund may invest in foreign securities. The Fund may
invest up to 20% (and expects generally to invest between 5% and 10%) of its
total assets in foreign securities (excluding American Depositary Receipts). As
discussed in the Prospectus, investing in foreign securities generally
represents a greater degree of risk than investing in domestic securities, due
to possible exchange rate fluctuations, less publicly available information,
more volatile markets, less securities regulation, less favorable tax
provisions, war or expropriation. 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 the foreign currencies in which
such securities are denominated. Under certain circumstances, such as where the
Adviser believes that the applicable exchange rate is unfavorable at the time
the currencies are received or the Adviser anticipates, for any other reason,
that the exchange rate will improve, the Fund may hold such currencies for an
indefinite period of time. While the holding of currencies will permit the Fund
to take advantage of favorable movements in the applicable exchange rate, such
strategy also exposes the Fund to risk of loss if exchange rates move in a
direction adverse to the Fund's position. Such losses could reduce any profits
or increase any losses sustained by the Fund from the sale or redemption of
securities and could reduce the dollar value of interest or dividend payments
received.
AMERICAN DEPOSITARY RECEIPTS: American Depositary Receipts ("ADRs") are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. ADRs may be sponsored or unsponsored. A sponsored
ADR is issued by a depository which has an exclusive relationship with the
issuer of the underlying security. An unsponsored ADR may be issued by any
number of U.S. depositories. Under the terms of most sponsored arrangements,
depositaries agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
ADR holders at the request of the issuer of the deposited securities. The
depositary of an unsponsored ADR, on the other hand, is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through voting rights to ADR holders in respect of
deposited securities. The Fund may invest in either type of ADR. Although the
U.S. investor holds a substitute receipt of ownership rather than direct stock
certificates, the use of the depository receipts in the United States can reduce
costs and delays as well as potential currency exchange and other difficulties.
The Fund may purchase securities in local markets and direct delivery of these
ordinary shares to the local depository of an ADR agent bank in the foreign
country. Simultaneously, the ADR agents create a certificate which settles at
the Fund's custodian in five days. The Fund may also execute trades on the U.S.
markets using existing ADRs. A foreign issuer of the security underlying an ADR
is generally not subject to the same reporting requirements in the United States
as a domestic issuer. Accordingly, the information available to a U.S. investor
will be limited to the information the foreign issuer is required to disclose in
its own country and the market value of an ADR may not reflect undisclosed
material information concerning the issuer of the underlying security. ADRs may
also be subject to exchange rate risks if the underlying foreign securities are
denominated in foreign currency.
OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options on
securities and purchase call and put options on securities. The Fund may write
options on securities for the purpose of increasing its return on such
securities and for hedging purposes.
A call option written by the Fund is covered if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire such
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if a Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (i) is
equal to or less than the exercise price of the call written or (ii) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash or high grade government securities in a segregated account
with its custodian. A put option written by the Fund is covered if the Fund
maintains cash or high grade government securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds a put
on the same security and in the same principal amount as the put written where
the exercise price of the put held (i) is equal to or greater than the exercise
price of the put written or (ii) is less than the exercise price of the put
written if the difference is maintained by the Fund in cash or high grade
government securities in a segregated account with its custodian. Put and call
options written by the Fund may also be covered in such other manner as may be
in accordance with the requirements of the exchange on which, or the
counterparty with which, the option is traded, and applicable laws and
regulations.
Effecting a closing transaction in the case of a written call option will permit
the Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both, or in the case of a written
put option will permit the Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-term
securities. Such transactions permit the Fund to generate additional premium
income, which will partially offset declines in the value of portfolio
securities or increases in the cost of securities to be acquired. Also,
effecting a closing transaction will permit the proceeds from the concurrent
sale of any securities subject to the option to be used for other investments of
the Fund, provided that another option on such security is not written. If the
Fund desires to sell a particular security from its portfolio on which it has
written a call option, it will effect a closing transaction in connection with
the option prior to or concurrent with the sale of the security.
The Fund will realize a profit from a closing transaction if the premium paid in
connection with the closing of an option written by the Fund is less than the
premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, the Fund will suffer a loss
if the premium paid or received in connection with a closing transaction is more
or less, respectively, than the premium received or paid in establishing the
option position. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the closing out of a call option previously written by the
Fund is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.
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
will depend upon the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"), equal to ("at-
the-money") or above ("out-of-the-money") the current value of the underlying
security at the time the option is written. If the call options are exercised in
such transactions, the Fund's maximum gain will be the premium received by it
for writing the option, adjusted upwards or downwards by the difference between
the Fund's purchase price of the security and the exercise price, less related
transaction costs. If the options are not exercised and the price of the
underlying security declines, the amount of such decline will be offset in part,
or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options could be used by the
Fund in the same market environments that call options would be used in
equivalent buy-and-write transactions.
The Fund may 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 and purchase the same security in the event that
one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and
transaction costs, the call will likely be exercised and the 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, 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 capital loss unless the security
subsequently appreciates in value. The writing of options on securities will be
undertaken by the Fund for purposes in addition to hedging, and could involve
certain risks which are not present in the case of hedging transactions.
Moreover, even where options are written for hedging purposes, such transactions
will constitute only a partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be acquired, up to
the amount of the premium.
The Fund also may purchase put and call options on securities. Put options would
be 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 underlying securities at the exercise price, or to close out the
options at a profit. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and related transaction costs. The Fund
may 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
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 rose or declined sufficiently, the option may expire
worthless to the Fund.
OPTIONS ON STOCK INDEXES: The Fund may write (sell) covered call and put options
on stock indexes and purchase call and put options on stock indexes for the
purpose of increasing its gross income and to protect its portfolio against
declines in the value of securities it owns or increases in the value of
securities to be acquired.
The Fund may cover call options on stock indexes by owning securities whose
price changes, in the opinion of the Adviser, are expected to be similar to
those of the index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities in its portfolio. Nevertheless, where the Fund
covers a call option on a stock index through ownership of securities, such
securities may not match the composition of the index and, in that event, the
Fund will not be fully covered and could be subject to risk of loss in the event
of adverse changes in the value of the index. A Fund may also cover call options
on stock indexes by holding a call on the same index and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash or high grade government securities in a segregated account
with its custodian. The Fund may cover put options on stock indexes by
maintaining cash or high grade government securities with a value equal to the
exercise price in a segregated account with its custodian, or else by holding a
put on the same security and in the same principal amount as the put written
where the exercise price of the put held (a) is equal to or greater than the
exercise price of the put written or (b) is less than the exercise price of the
put written if the difference is maintained by the Fund in cash or high grade
government securities in a segregated account with its custodian. Put and call
options on stock indexes written by the Fund may also be covered in such other
manner as may be in accordance with the rules of the exchange on which, or the
counterparty with which, the option is traded, and applicable laws and
regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
the Fund's stock investments. By writing a put option, the Fund assumes the risk
of a decline in the index. To the extent that the price changes of securities
owned by a Fund correlate with changes in the value of the index, writing
covered put options on indexes will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The purchase of call options on stock indexes may be used by the Fund to attempt
to reduce the risk of missing a broad market advance, or an advance in an
industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, the Fund will also bear the risk of losing all or a portion of the
premium paid, and related transaction costs, if the value of the index does not
rise. The purchase of call options on stock indexes when the Fund is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing calls on securities
the Fund owns.
The Fund also may purchase put options on stock indexes to hedge its investments
against a decline in value. By purchasing a put option on a stock index, the
Fund will seek to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option, plus related
transaction costs. The success of this strategy will largely depend on the
accuracy of the correlation between the changes in value of the index and the
changes in value of the Fund's security holdings.
The staff of the Securities and Exchange Commission (the "SEC") has taken the
position that purchased over-the-counter options and assets used to cover
written over-the-counter options are illiquid and, therefore, together with
other illiquid securities, cannot exceed a certain percentage (the "SEC
illiquidity ceiling") of the Fund's assets. 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 which 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-money. The Fund will treat all or a part of the
formula price 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.
FUTURES CONTRACTS: The Fund may enter into stock index futures contracts
("Futures Contracts") in order to protect the Fund's current or intended stock
investments from broad fluctuations in stock prices, or for non-hedging
purposes, to the extent permitted by applicable law. For example, the Fund may
sell Futures Contracts in anticipation of or during a market decline to attempt
to offset the decrease in market value of the Fund's securities portfolio that
might otherwise result. If such decline occurs, the loss in value of portfolio
securities may be offset, in whole or in part, by gains on the futures position.
When the Fund is not fully invested in the securities market and anticipates a
significant market advance, it may purchase Futures Contracts in order to gain
rapid market exposure that may, in part or in whole, offset increases in the
cost of securities that the Fund intends to purchase. As such acquisitions are
made, the corresponding positions in Futures Contracts will be closed out. In a
substantial majority of these transactions, the Fund will purchase such
securities upon the termination of the futures position, but under unusual
market conditions, a long futures position may be terminated without a related
purchase of securities.
OPTIONS ON FUTURES CONTRACTS: The Fund may write or 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 securities or other instruments required to be delivered under the
terms of 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 securities or other instruments required to be
delivered under the terms of the Futures Contract. If the futures price at
expiration of the option is higher than the exercise price, the Fund will retain
the full amount of the option premium, less related transaction costs, which
provides a partial hedge against any increase in the price of securities which
the Fund intends to purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing Options on Futures Contracts may to
some extent be reduced or increased by changes in the value of portfolio
securities. The Fund may also enter into such transactions for non-hedging
purposes, to the extent permitted by applicable law.
The Fund may cover the writing of call Options on Futures Contracts (a) through
purchases of the underlying Futures Contract, (b) through ownership of the
instrument, or instruments included in the index, underlying the Futures
Contract, or (c) through the holding of a call on the same Futures Contract and
in the same principal amount as the call written where the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash and high grade government securities in a
segregated account with its custodian. The Fund may cover the writing of put
Options on Futures Contracts (a) through sales of the underlying Futures
Contract, (b) through segregation of cash or cash equivalents in an amount equal
to the value of the security or index underlying the Futures Contract, or (c)
through the holding of a put on the same Futures Contract and in the same
principal amount as the put written where the exercise price of the put held (i)
is equal to or greater than the exercise price of the put written or (ii) is
less than the exercise price of the put written if the difference is maintained
by the Fund in cash or high grade government securities in a segregated account
with its custodian. Put and call Options on Futures Contracts written by the
Fund may also be covered in such other manner as may be in accordance with the
rules of the exchange on which, or the counterparty with which, the option is
traded, and applicable laws and regulations. Upon the exercise of a call Option
on a Futures Contract written by the Fund, the Fund will be required to sell the
underlying Futures Contract which, if the Fund has covered its obligation
through the purchase of such Contract, will serve to liquidate its futures
position. Similarly, where a put Option on a Futures Contract written by the
Fund is exercised, the Fund will be required to purchase the underlying Futures
Contract which, if the Fund has covered its obligation through the sale of such
Contract, will close out its futures position.
The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or changes in interest or exchange
rates, the Fund could, in lieu of selling Futures Contracts, purchase put
options thereon. In the event that such decrease occurs, it may be offset, in
whole or part, by a profit on the option. Conversely, where it is projected that
the value of securities to be acquired by the Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call Options on Futures Contracts, rather than
purchasing the underlying Futures Contracts.
FORWARD CONTRACTS: The Fund may enter into contracts for the purchase or sale of
a specific currency at a future date at a price set at the time the contract is
entered into (a "Forward Contract") for hedging purposes only. The Fund will
enter into Forward Contracts for the purpose of protecting its current or
intended investments from fluctuations in currency exchange rates.
A Forward Contract to sell a currency may be entered into where the Fund seeks
to protect against an anticipated increase in the exchange rate for a specific
currency which could reduce the dollar value of portfolio securities denominated
in such currency. Conversely, the Fund may enter into a Forward Contract to
purchase a given currency to protect against a projected increase in the dollar
value of securities denominated in such currency which the Fund intends to
acquire.
If a hedging transaction in Forward Contracts is successful, the decline in the
value of portfolio securities or the increase in the cost of securities to be
acquired may be offset, at least in part, by profits on the Forward Contract.
Nevertheless, by entering into such Forward Contracts, the Fund may be required
to forego all or a portion of the benefits which otherwise could have been
obtained from favorable movements in exchange rates. The Fund does not presently
intend to hold Forward Contracts entered into until maturity, at which time it
would be required to deliver or accept delivery of the underlying currency, but
will seek in most instances to close out positions in such Contracts by entering
into offsetting transactions, which will serve to fix the Fund's profit or loss
based upon the value of the Contracts at the time the offsetting transaction is
executed.
The Fund may also choose to or be required to receive delivery of the foreign
currencies underlying Forward Contracts it has entered into. The holding of
currencies exposes the Fund to risk of loss if such exchange rates move in a
direction adverse to the Fund's position.
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.
RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE TRUST'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
index or instrument correlate with price movements in the relevant portion of
the Fund's portfolio. Because the securities in the Fund's portfolio will most
likely not be the same as those securities underlying a stock index, the
correlation between movements in the portfolio and in the securities underlying
the index will not be perfect. The trading of Futures Contracts and options
entails the additional risk of imperfect correlation between movements in the
futures or option price and the price of the underlying index or obligation. The
anticipated spread between the prices may be distorted due to the differences in
the nature of the markets, such as differences in margin requirements, the
liquidity of such markets and the participation of speculators in such markets.
In this regard, trading by speculators in options and Futures Contracts has in
the past occasionally resulted in market distortions, which may be difficult or
impossible to predict, particularly near the expiration of such contracts. It
should be noted that Futures Contracts or options based upon a narrower index of
securities, such as those of a particular industry group, may present greater
risk than options or Futures Contracts based on a broad market index, because a
narrower index is more susceptible to rapid and extreme fluctuations as a result
of changes in the value of a small number of securities. The trading of Options
on Futures Contracts also entails the risk that changes in the value of the
underlying Futures Contracts will not be fully reflected in the value of the
option. Further, with respect to options on securities, options on stock indexes
and Options on Futures Contracts, the Fund is subject to the risk of market
movements between the time that the option is exercised and the time of
performance thereunder. In writing a covered call option on a security, index or
Futures Contract, the Fund also incurs the risk that changes in the value of the
instruments used to cover the position will not correlate closely with changes
in the value of the option or underlying index or instrument. 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 Fund will invest in a hedging instrument only if, in the judgment of its
Adviser, there would be expected to be a sufficient degree of correlation
between movements in the value of the instrument and movements in the value of
the relevant portion of the Fund's portfolio for such hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.
It should also be noted that the Fund may enter into transactions in such
instruments not only for hedging purposes, but also for the purpose of
increasing its return on portfolio securities. As a result, in the event of
adverse market movements, the Fund might be subject to losses, which would not
be offset by increases in the value of portfolio securities or declines in the
cost of securities to be acquired. In addition, the method of covering an option
employed by the Fund may not fully protect it against risk of loss and, in any
event, the Fund could suffer losses on the option position which might not be
offset by corresponding portfolio gains.
With respect to the writing of straddles on securities, the Fund incurs the risk
that the price of the underlying security will not remain stable, that one of
the options written will be exercised and that the resulting loss will not be
offset by the amount of the premiums received.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET -- Prior to exercise or expiration,
a futures or option position can only be terminated by entering into a closing
purchase or sale transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was entered into.
While the Fund will enter into options or futures positions only if there
appears to be a liquid secondary market therefor, there can be no assurance that
such a market will exist for any particular contracts at any specific time. In
that event, it may not be possible to close out a position held by the Fund, and
the Fund could be required to purchase or sell the instrument underlying an
option, make or receive a cash settlement or meet ongoing variation margin
requirements. Under such circumstances, if the Fund had insufficient cash
available to meet margin requirements, it might be necessary to liquidate
portfolio securities at a time when it would be disadvantageous to do so. The
inability to close out options and futures positions, therefore, could have an
adverse impact on the Fund's ability effectively to hedge its portfolios, and
could result in trading losses. The liquidity of a secondary market in a Futures
Contract or options thereon may also be adversely affected by "daily price
fluctuation limits," established by exchanges, which limit the amount of
fluctuation in the price of a contract during a single trading day. The trading
of Futures Contracts and options is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
MARGIN -- Because of low initial margin deposits made upon the opening of a
futures position and the writing of an option, such transactions involve
substantial leverage. As a result, relatively small movements in the price of
the contract can result in substantial unrealized gains or losses. Because the
Fund would engage in the purchase or sale of Futures Contracts and the writing
of Options on Futures Contracts solely for hedging purposes, however, and would
purchase and write options on securities and stock indexes in part for hedging
purposes, any losses incurred in connection therewith should, if the hedging
strategy is successful, be offset, in whole or in part, by increases in the
value of securities held by the Fund or decreases in the prices of securities
the Fund intends to acquire. Where the Fund writes options on securities or
options on stock indexes for other than hedging purposes, the margin
requirements associated with such transactions could expose the Fund to greater
risk.
TRADING AND POSITION LIMITS -- The exchanges on which Futures Contracts and
options are traded may impose limitations governing the maximum number of
positions on the same side of the market and involving the same underlying
instrument which may be held by a single investor, whether acting alone or in
concert with others (regardless of whether such contracts are held on the same
or different exchanges or held or written in one or more accounts or through one
or more brokers). In addition, the Commodity Futures Trading Commission (the
"CFTC") and the various contract markets have established limits referred to as
"speculative position limits" on the maximum net long or net short position
which any person may hold or control in a particular futures or option contract.
An exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. The Adviser does
not believe that these trading and position limits will have any adverse impact
on the strategies for hedging the portfolio of the Fund.
RISK OF OPTIONS ON FUTURES CONTRACTS -- The amount of risk the Fund assumes when
it purchases an Option on a Futures Contract is the premium paid for the option,
plus related transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the
underlying Futures Contract, subject to the risks of the availability of a
liquid offset market described herein. The writer of an Option on a Futures
Contract is subject to the risks of commodity futures trading, including the
requirement of initial and variation margin payments, as well as the additional
risk that movements in the price of the option may not correlate with movements
in the price of the underlying index or Futures Contract.
ADDITIONAL RISKS OF TRANSACTIONS NOT CONDUCTED ON EXCHANGES -- Transactions in
Forward Contracts are subject to all of the correlation, liquidity and other
risks outlined above. In addition, however, such transactions are subject to the
risk of governmental actions affecting trading in or the prices of currencies
underlying such contracts, which could restrict or eliminate trading and could
have a substantial adverse effect on the value of positions held by the Fund. In
addition, the value of such positions could be adversely affected by a number of
other complex political and economic factors applicable to the countries issuing
the underlying currencies. Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale information with
respect to the foreign currencies underlying contracts thereon. As a result, the
available information on which trading systems will be based may not be as
complete as the comparable data on which the Fund makes investment and trading
decisions in connection with other transactions. Moreover, because the foreign
currency market is a global, 24- hour market, events could occur on that market
which would not be reflected in the forward markets until the following day,
thereby preventing the Fund from responding to such events in a timely manner.
Settlements of exercises of Forward Contracts generally must occur within the
country issuing the underlying currency, which in turn requires traders to
accept or make delivery of such currencies in conformity with any United States
or foreign restrictions and regulations regarding the maintenance of foreign
banking relationships, fees, taxes or other charges.
Forward Contracts, and over-the-counter options on securities, are not traded on
exchanges regulated by the CFTC or the SEC, but through financial institutions
acting as market-makers. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. In
addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
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. Where
no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of over-the-counter contracts, and the Fund could be required to retain options
purchased or written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's ability to profit
from open positions or to reduce losses experienced, and could result in greater
losses. Further, over-the-counter transactions are not subject to the
performance guarantee of an exchange clearing house, and the Fund will therefore
be subject to the risk of default by, or the bankruptcy of, the financial
institution serving as its counterparty.
While Forward Contracts are not presently subject to regulation by the CFTC, the
CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, the Fund's ability to utilize Forward Contracts in
the manner set forth above could be restricted.
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 CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums on
such non-hedging positions does not exceed 5% of the liquidation value of the
Fund's assets. In addition, the Fund must comply with the requirements of
various state securities laws in connection with such transactions.
The Fund has adopted the additional policy that it will not enter into a Futures
Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Futures Contracts would exceed 50% of the value
of the Fund's total assets. Moreover, the Fund will not purchase put and call
options if, as a result, more than 5% of its total assets would be invested in
such options.
When the Fund purchases a Futures Contract, an amount of cash and cash
equivalents will be deposited in a segregated account with the Fund's custodian
so that the amount so segregated will at all times equal the value of the
Futures Contract, thereby insuring that the use of such Futures Contract is
unleveraged.
INVESTMENT RESTRICTIONS. The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of its
shares (which, as used in this Statement of Additional Information, means the
lesser of (i) more than 50% of its outstanding shares, or (ii) 67% or more of
its outstanding shares present at a meeting if holders of more than 50% of its
outstanding shares are represented at such meeting in person or by proxy):
The Fund may not:
(1) borrow amounts in excess of 5% of its gross assets, and then only as a
temporary measure for extraordinary purposes, or pledge, mortgage or
hypothecate an amount of its assets taken at market value which would exceed
15% of its gross assets, in each case taken at the lower of cost or market
value. For the purpose of this restriction, collateral arrangements with
respect to options, Futures Contracts, Options on Futures Contracts, Forward
Contracts, and payments of initial and variation margin in connection
therewith are not considered a pledge of assets;
(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) concentrate investments in any particular industry, but if it is deemed
appropriate for the attainment of the Fund's investment objective, up to 25%
of the Fund's assets, at market value at the time of each investment, may be
invested in any one industry;
(4) purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein) or mineral leases, commodities
or commodity contracts (except for options, Futures Contracts, Options on
Futures Contracts and Forward Contracts) in the ordinary course of its
business. The Fund reserves the freedom of action to hold and to sell real
estate or mineral leases, commodities or commodity contracts acquired as a
result of the ownership of securities. The Fund will not purchase securities
for the purpose of acquiring real estate or mineral leases, commodities or
commodity contracts (except for options, Futures Contracts, Options on Futures
Contracts and Forward Contracts);
(5) make loans to other persons except that the Fund may enter into
repurchase agreements. Not more than 15% of the Fund's total assets will be
invested in repurchase agreements maturing in more than seven days. Subject to
the limitation set forth in the policies below, the Fund may purchase a
portion of an issue of debt securities of types commonly distributed to
financial institutions. For these purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan;
(6) purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of the Fund's total assets taken at market
value to be invested in the securities of such issuer, other than U.S.
Government securities;
(7) purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held by the Fund;
(8) invest for the purpose of exercising control or management;
(9) purchase securities issued by any other registered investment company or
registered investment trust except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such purchase, though
not made in the open market, is part of a plan of merger or consolidation;
provided, however, that the Fund shall not purchase the securities of any
investment company or investment trust if such purchase at the time thereof
would cause more than 10% of the Fund's total assets, taken at market value,
to be invested in the securities of such issuer; and provided, further, that
the Fund shall not purchase securities issued by any open-end investment
company;
(10) purchase or retain any securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the Trust,
or is a member, officer or Director of the Adviser, if after the purchase of
the securities of such issuer by the Fund one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, all
taken at market value, of such issuer, and such persons owning more than 1/2
of 1% of such shares or securities together own beneficially more than 5% of
such shares or securities, or both, all taken at market value;
(11) 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 purchases and sales of securities and except that the Fund
may make margin deposits in connection with options, Futures Contracts,
Options on Futures Contracts and Forward Contracts;
(12) 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; or
(13) issue any senior securities except as permitted by the Investment
Company Act of 1940, as amended (the "1940 Act").
In addition, the Fund has adopted the following operating policies which are not
fundamental and which may be changed without shareholder approval. The Fund will
not invest in securities which are subject to legal or contractual restrictions
on resale, or for which there is no readily available market (e.g., trading in
the security is suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers) unless the Board of Trustees
has determined that such securities are liquid based upon trading markets for
the specific security, or repurchase agreements maturing in more than seven
days, if more than 15% of the Fund's assets (taken at market value) would be
invested in such securities or such repurchase agreements. The Fund may invest
up to 20% (and expects generally to invest between 5% and 10%) of its total
assets in foreign securities (excluding American Depositary Receipts) (which may
represent a greater degree of risk (e.g., risk related to exchange rate
fluctuation, tax provisions, war or expropriation) than do securities of
domestic issuers). In addition, purchases of warrants will not exceed 5% of the
Fund's net assets. Included within that amount, but not exceeding 2% of the
Fund's net assets, may be warrants which are not listed on the New York or
American Stock Exchange. Any such warrants will be valued at the lower of cost
or market except that warrants which are attached to securities at the time such
securities are acquired by the Fund will be deemed to be without value for the
purpose of this restriction. The Fund will not invest more than 5% of its assets
in companies which, including their respective predecessors, have a record of
less than three years' continuous operation.
The Fund's investment limitations, policies and rating standards are adhered to
at the time of purchase or utilization of assets; a subsequent change in
circumstances will not be considered to result in a violation of policy.
The policies described regarding options, Futures Contracts, Options on Futures
Contracts and Forward Contracts are not fundamental and may be changed without
shareholder approval, as may the Fund's investment objective.
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, 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
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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.
As of September 30, 1995, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
The Fund pays the compensation of any Trustee who is not affiliated with the
Adviser (who will receive from $1,250 to $1,925 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.
As of September 30, 1995, the University of Miami Growth Pool, c/o MFS Asset
Management, Inc., 500 Boylston St., Boston, MA, owned 6.19% of the outstanding
shares of the Fund. As of September 30, 1995, The Jewish Community Federation of
Cleveland, c/o MFS Asset Management, Inc., 500 Boylston St., Boston, MA, owned
5.14% of the outstanding shares of the Fund. As of September 30, 1994, Dakota
Clinic Ltd. Retirement Plan, c/o MFS Asset Management, Inc., 500 Boylston St.,
Boston, MA, owned 12.4% of the outstanding shares of the Fund. As of September
30, 1995, Rosemount Inc. Master Investment Trust, 733 Marquette Avenue,
Minneapolis, MN, owned 21.83% of the outstanding shares of the Fund.
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 a settlement, such indemnification will not be
provided unless it has been determined pursuant to the Declaration of Trust,
that such officers or Trustees have not engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in their
offices.
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 ("Sun Life").
The Adviser manages the Fund pursuant to an Investment Advisory Agreement, dated
August 7, 1992 (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 0.75% of the Fund's average daily net assets.
The Advisor has voluntarily agreed, through June 30, 1997, to waive its
management fees and/or pay expenses of the Fund in order to maintain total
expenses of the Fund at no more than 0.75% each year. Although this management
fee is greater than that paid by many investment companies, it is not greater
than the management fees generally paid by funds with similar investment
objectives.
For the period from the commencement of operations on June 16, 1993 to June 30,
1993, June 30, 1994 and for the fiscal year ended June 30, 1995, MFS received
management fees under the Advisory Agreement of $743 (before a reduction of
$743), and $127,028 (before a reduction of $127,028), and, $540,536 (before a
reduction of $168,512), respectively.
MFS pays the compensation of the Trust's officers and of any Trustee who is an
officer of 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 its affairs.
The Advisory Agreement will remain in effect until August 1, 1996, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's outstanding voting securities (as defined under "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
Trust's outstanding voting securities or by either party on not more than 60
days' nor less than 30 days' written notice. The Advisory Agreement provides
that if MFS ceases to serve as the Adviser to the Fund, the Fund will change its
name so as to delete the term "MFS" and that MFS may render services to others
and may permit fund clients in addition to the Trust to use the term "MFS" in
their names. The Advisory Agreement also provides that neither MFS nor its
personnel shall be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in the execution
and management of the 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.
<PAGE>
CUSTODIAN
The Fund has engaged State Street Bank and Trust Company (the "Custodian") as
its custodian. 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 custodial arrangements with
Chase Manhattan Bank, N.A. for securities of the Fund held outside the United
States. The Custodian has contracted with the Adviser for the Adviser to perform
certain accounting functions related to options transactions for which the
Adviser receives remuneration on a cost basis.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, effective April 26, 1995, (the "Agency
Agreement") with the Trust. 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 number of accounts in 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 administer and perform certain dividend and
distribution disbursing functions for the Fund. For the fiscal year ended June
30, 1995, the Fund paid the Shareholder Servicing Agent $3,612 under the Agency
Agreement.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of the Fund pursuant to a Distribution Agreement
dated 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 the
Fund's portfolio manager who is an employee of the Adviser and who is appointed
and supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. The 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 with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the general level of their
brokerage commissions. In the case of securities traded in the over-the-counter
market (where no stated commissions are paid but the prices include a dealer's
markup or markdown), the Adviser normally seeks to deal directly with the
primary market makers, unless in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. Securities firms or futures commission merchants may receive
brokerage commissions on transactions involving options, Futures Contracts and
Options on Futures Contracts and the purchase and sale of underlying securities
upon exercise of options. The brokerage commissions associated with buying and
selling options may be proportionately higher than those associated with general
securities transactions. From time to time soliciting dealer fees are available
to the Adviser on the tender of the Fund's portfolio securities in so-called
tender or exchange offers. Such soliciting dealer fees are in effect recaptured
for the Fund by the Adviser. At present no other recapture arrangements are in
effect.
Consistent with the foregoing primary consideration, the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the "NASD") and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of investment company clients of MFS Financial Services,
Inc., 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.
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
the Adviser's overall responsibilities to the Fund or to its 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 Research to the Adviser. The Trustees of the
Fund (together with the Trustees of the other MFS Funds) have directed the
Adviser to allocate a total of $20,000 of commission business from the MFS Funds
to the Pershing Division of Donaldson, Lufkin & Jenrette as consideration for
the annual renewal of the Lipper Directors' Analytical Data Service (which
provides information useful to the Trustees in reviewing the relationship
between the Fund and the Adviser).
The Adviser's investment management personnel attempt to evaluate the quality of
Research provided by brokers. Results of this effort are sometimes used by the
Adviser as a consideration in the selection of brokers to execute portfolio
transactions. However, the Adviser is unable to quantify the amount of
commissions set forth below which were paid as a result of such Research because
a substantial number of transactions were effected through brokers which provide
Research but which were selected principally because of their execution
capabilities.
The management fee that the Fund pays to the Adviser will not be reduced as a
consequence of the Adviser's receipt of brokerage and research services. To the
extent the Fund's portfolio transactions are used to obtain such services, the
brokerage commissions paid by the Fund will exceed those that might otherwise be
paid, by an amount which cannot be presently determined. Such services would be
useful and of value to the Adviser in serving both the Fund and other clients
and, conversely, such services obtained by the placement of brokerage business
of other clients would be useful to the Adviser in carrying out its obligations
to the Fund. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through use of the services, avoid the additional
expenses which would be incurred if it should attempt to develop comparable
information through its own staff.
For the Fund's fiscal year ended June 30, 1994, total brokerage commissions of
$51,752 were paid on total transactions (other than U.S. Government securities,
Purchased options transactions and short-term obligations) of $41,139,373.
In certain instances there may be securities which are suitable for the Trust'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 Fund believes that its 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 the shareholders.
Shareholders of the Fund normally will have to pay federal income taxes, and any
state or local taxes, on the dividends and capital gain distributions they
receive from the Fund. Dividends from 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. A portion of
the Fund's ordinary income dividends (but none of its capital gains) is eligible
for the dividends-received deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Fund shares.
Availability of the deduction for particular corporate shareholders is subject
to certain limitations, and deducted amounts may be subject to the alternative
minimum tax or result in certain basis adjustments. Distributions from 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 for
federal income tax purposes 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 any other shares of an MFS Fund generally sold subject to a sales
charge) without payment of an additional sales charge.
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders.
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 Fund income and distributions to shareholders. For example, certain
positions held by the Fund on the last business day of each taxable year will be
marked to market (i.e., treated as if closed out) on such day, and any gain or
loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund will limit its activities in options, Futures Contracts, and
Forward contracts to the extent necessary to meet the requirements of Subchapter
M of the Code.
Special tax considerations apply with respect to foreign investments of the
Fund. For example, foreign exchange gains and losses realized by the Fund will
generally be treated as ordinary income and losses. Use of foreign currencies
for non-hedging purposes and investments by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid 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 Fund does not
expect to be able to pass through to shareholders foreign tax credits with
respect to such foreign taxes. The United States has entered into tax treaties
with many foreign countries that may 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 of tax where available. It is impossible to determine the
effective rate of foreign taxes in advance since the amount of the Fund's assets
to be invested within various countries is not known.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Fund intends
to withhold U.S. Federal income tax at the rate of 30% on taxable dividends and
other payments made to Non-U.S. Persons that are subject to such withholding,
regardless of whether a lower treaty rate may be permitted. Any amounts
overwithheld may be recovered by such persons by filing a claim for refund with
the U.S. Internal Revenue Service within the time period appropriate 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 who does not furnish
to the Fund certain information and certifications or who is otherwise subject
to backup withholding. Backup withholding will not, however, be applied to
payments that have been subject to 30% withholding.
As long as it qualifies as a regulated investment company under the Code, the
Fund will not be required to pay Massachusetts income or excise taxes.
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 weekday except for the following holidays or the days on which
they are observed: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.) This
determination is made once each 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.
Equity securities in the Fund's portfolio are valued at the last sale price on
the exchange on which they are primarily traded or on the NASDAQ system for
unlisted national market issues, or at the last quoted bid price for securities
in which there were no sales during the day or for unlisted securities not
reported on the NASDAQ system. Short-term obligations 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. Positions in listed options,
Futures Contracts and Options on Futures Contracts will normally be valued at
the last reported sales price or the settlement price prior to the determination
(or if there has been no current sale, at the closing bid price) on the exchange
(whether domestic or foreign) on which they are primarily traded. Positions in
over-the-counter options will be valued using dealer supplied valuations.
Portfolio securities and over-the-counter options and other 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. Forward Contracts will be valued using a pricing model taking into
consideration market data from an external pricing source.
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 FSI, the Trust's
principal underwriter, prior to the close of that business day.
PERFORMANCE INFORMATION
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.
Any 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.
The aggregate total rate of return for the Fund for the fiscal year ended June
30, 1994 was 17.50%. The aggregate total rate of return for the period from
commencement of investment operations (June 16, 1993) to June 30, 1994 was 19.5%
(on a non-annualized basis). The average annual total rate of return for the
Fund for the same period was 18.71%. This annualized total rate of return
represents a limited time frame and may not be indicative of future performance.
Total rate of return figures would have been lower had certain fee waivers not
been in place.
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 ("Trust 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 two 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 AUDITORS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Trust's Independent Auditors, providing audit
services, tax return preparation and assistance and consultation with respect to
the preparation of filings with the SEC.
The Portfolio of Investments at June 30, 1995, Statement of Assets and
Liabilities, as of June 30, 1995, the related Statement of Operations for the
year then ended June 30, 1995 and the Statement of Changes in Net Assets and the
Financial Highlights for the year ended June 30, 1995, June 30, 1994 and for the
period from June 16, 1993 (commencement of operations) to June 30, 1993, Notes
to the Financial Statements and the Independent Auditors' Report, each of which
is included in the Annual Report to shareholders of the Fund, are incorporated
by reference into this Statement of Additional Information and have been so
incorporated in reliance upon the report of Deloitte & Touche LLP, independent
Auditors', as experts in accounting and auditing. A copy of the Annual Report
accompanies this Statement of Additional Information.
<PAGE>
APPENDIX A
DESCRIPTION OF OPTIONS, FUTURES AND FORWARD CONTRACTS
OPTIONS ON SECURITIES
An option on a security provides the purchaser, or "holder," with the right, but
not the obligation, to purchase, in the case of a "call" option, or sell, in the
case of a "put" option, the security or securities underlying the option, for a
fixed exercise price up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although this entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price in the case of a put option. If the writer's obligation is not so covered,
it is subject to the risk of the full change in value of the underlying security
from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase price of
the underlying security, in the case of a call option, or to deliver the
security in return for the purchase price in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities and options on indexes of securities, discussed below, are
traded on national securities exchanges, such as the Chicago Board Options
Exchange and the New York Stock Exchange, which are regulated by the SEC. The
Options Clearing Corporation guarantees the performance of each clearing member
which is a party to an exchange-traded option, by in effect taking the opposite
side of each such option. A holder or writer may engage in transactions in
exchange-traded options on securities and options on indexes of securities only
through a registered broker-dealer which is a member of the exchange on which
the option is traded.
In addition, options on certain securities are traded over-the-counter through
financial institutions dealing in such options as well as the underlying
instruments. Such options are traded in a manner substantially similar to
exchange-traded options, except that many of the protections offered in an
exchange environment, such as a clearing house performance guarantee, are not
available. The particular risks of over-the-counter transactions are set forth
more fully in the Statement of Additional Information.
OPTIONS ON STOCK INDEXES
In contrast to an option on a security, an option on a stock index provides the
holder with the right to make or receive a cash settlement upon exercise of the
option, rather than the right to purchase or sell a security. The amount of this
settlement is equal to (i) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a call) or is below (in the case of a put)
the closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." The purchaser of the option receives this cash
settlement amount if the closing level of the stock index on the day of exercise
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount if the option is
exercised. As in the case of options on securities, the writer or holder may
liquidate positions in stock index options prior to exercise or expiration by
entering into closing transactions on the exchange on which such positions were
established, subject to the availability of a liquid secondary market.
The index underlying a stock index option may be a "broad-based" index, such as
the Standard & Poor's 500 Index or the New York Stock Exchange Composite Index,
the changes in value of which ordinarily will reflect movements in the stock
market in general. In contrast, certain options may be based on narrower market
indexes, such as the Standard & Poor's 100 Index, or on indexes of securities of
particular industry groups, such as those of oil and gas or technology
companies. A stock index assigns relative values to the stocks included in the
index and the index fluctuates with changes in the market values of the stocks
so included.
FUTURES CONTRACTS
A Futures Contract is a bilateral agreement providing for the making and
acceptance of a cash settlement, at a stated time in the future for a fixed
price, based on movements in the value of an index similar to that underlying
options on stock indexes. At the termination of a Futures Contract, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, Futures Contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract also differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index underlying the Futures Contract fluctuates, making positions in the
Futures Contract more or less valuable, a process known as "marking to the
market."
A Futures Contract may be purchased or sold only on an exchange, known as a
"contract market," designated by the CFTC for the trading of such contracts, and
only through a registered futures commission merchant which is a member of such
contract market. A commission must be paid on each completed purchase and sale
transaction. The contract market clearing house guarantees the performance of
each clearing member which is a party to a Futures Contract, by in effect taking
the opposite side of such Contract. At any time prior to the expiration of a
Futures Contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
A stock index futures contract provides for the making and acceptance of a cash
settlement in much the same manner as the settlement of an option on a stock
index. The types of indexes underlying stock index futures contracts are
essentially the same as those underlying stock index options, as described
above. The index assigns relative values to the securities included in the index
and its composition is changed periodically.
OPTIONS ON FUTURES CONTRACTS
An Option on a Futures Contract provides the holder with the right to enter into
a "long" position in the underlying Futures Contract, in the case of a call
option, or a "short" position in the underlying Futures Contract, in the case of
a put option, at a fixed exercise price up to a stated expiration date. Upon
exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of margin deposits. In addition, the writer of an Option on a Futures Contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
A position in an Option on a Futures Contract may be terminated by the purchaser
or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether on a security, an index or a Futures Contract, becomes
worthless to the holder when it expires. Upon exercise of an option, the
exchange or contract market clearing house assigns exercise notices on a random
basis to those of its members which have written options of the same series and
with the same expiration date. A brokerage firm receiving such notices then
assigns them on a random basis to those of its customers which have written
options of the same series and expiration date. A writer therefore has no
control over whether an option will be exercised against it, nor over the timing
of such exercise.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A Forward Contract is a contractual obligation to purchase or sell a specific
quantity of a given foreign currency for a fixed exchange rate at a future date.
Forward Contracts are individually negotiated and are traded through the
"interbank currency market," an informal network of banks and brokerage firms
which operates around the clock and throughout the world. Transactions in the
interbank market may be executed only through financial institutions acting as
market-makers in the interbank market, or through brokers executing purchases
and sales through such institutions. Market-makers in the interbank market
generally act as principals in taking the opposite side of their customers'
positions in Forward Contracts, and ordinarily charge a mark-up or commission
which may be included in the cost of the Forward Contract. In addition,
market-makers may require their customers to deposit collateral upon entering
into a Forward Contract, as security for the customer's obligation to make or
receive delivery of currency, and to deposit additional collateral if exchange
rates move adversely to the customer's position. Such deposits may function in a
manner similar to the margining of Futures Contracts, described above.
Prior to the stated maturity date of a Forward Contract, it may be possible to
liquidate the transaction by entering into an offsetting Contract. In order to
do so, however, a customer may be required to maintain both Contracts as open
positions until maturity and to make or receive a settlement of the difference
owed to or from the market-maker or broker at that time.
<PAGE>
EXHIBIT A
MFS INSTITUTIONAL EMERGING EQUITIES FUND
TRUSTEE COMPENSATION TABLE
TOTAL TRUSTEE FEES
TRUSTEE FEES FROM FUND AND
NAME OF TRUSTEE FROM THE FUND(1) FUND COMPLEX(2)
- --------------- ------------------ ---------------
Nelson J. Darling, Jr. ........ $2,334 $10,618
William R. Gutow .............. 2,334 10,618
NOTES:
(1) For fiscal year ending June 30, 1995.
(2) For calendar year ended December 31, 1994. All Trustees served as Trustees
of 17 funds advised by MFS (having aggregate net assets at December 31, 1994
of approximately $143 million).
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(3)
YEARS OF SERVICE
----------------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
- --------------------------------------------------------------------------------
$2,100 $315 $525 $735 $1,050
2,190 329 548 767 1,095
2,280 342 570 798 1,140
2,370 356 593 830 1,185
2,460 369 615 861 1,230
2,550 383 638 893 1,275
(3) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
(800) 637-8730
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
c/o MFS Asset Management, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: 800 637-8730
MAILING ADDRESS:
P.O. Box 2281, Boston, MA 02107-9906
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston MA 02110
MFS(R) INSTITUTIONAL EMERGING
EQUITIES FUND
500 BOYLSTON STREET
BOSTON, MA 02116
[LOGO] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
11/95
<PAGE>
<PAGE>
[LOGO] M F S(SM) ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS YEAR ENDED
JUNE 30, 1995
MFS(R) EMERGING EQUITIES FUND
[Graphic omitted: art work:
Silhouette of two men talking in front of a large window.]
<PAGE>
MFS(R) EMERGING EQUITIES FUND
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, Massachusetts 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(Diversified Holding Company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, Massachusetts 02116-3741
Executive Vice President,
Capital Entertainment Management PORTFOLIO MANAGER
Company Christian Felipe*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
SHAREHOLDER SERVICE CENTER
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-637-2262
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
The past 12 months combined two very positive factors for the U.S. equity
market: strong corporate earnings gains of over 20%, and declining interest
rates. These two factors have accounted for an earnings-driven market. Companies
meeting or exceeding earnings estimates have been well rewarded in the
marketplace as price/earnings multiples have expanded, especially for the
fastest growing companies. The strongest sector for earnings gains and price
performance was technology. Steady growers, such as health care, or groups with
disappointing earnings such as retail, have been punished by investors.
Small-capitalization stocks posted positive returns for the year with the
Russell 2000 Total Return Index (an unmanaged index comprised of 2,000 of the
smallest U.S.-domiciled company common stocks traded on the New York Stock
Exchange, the American Stock Exchange and NASDAQ) gaining 20.07%.
The Fund posted a strong positive total return for the year ending June 30th
of +43.21% (including the reinvestment of distributions), outperforming the
Russell 2000 Index. A discussion of these results may be found in the Portfolio
Performance and Strategy section of this letter.
Economic Environment
In response to increasing evidence of economic weakness during the second
quarter, the Federal Reserve Board has reversed policy by lowering the federal
funds rate 0.25%. This marks the first time in three years that this rate has
been lowered, and brings to at least a temporary conclusion the Federal
Reserve's 18-month monetary-tightening initiative. Although inflation at the
consumer level has been trending higher this year at a 3 1/2% annualized rate,
recent evidence suggests that these pressures are beginning to moderate,
allowing the Federal Reserve to shift its policy focus toward sustaining
economic growth. Despite the economy's apparent lackluster performance in the
second quarter, we do not anticipate that the economy will lapse into recession.
Rather, we believe it will continue to expand at a more moderate, sustainable
pace, supported by lower prevailing interest rates and a healthy export sector.
Stock Market
The stock market has maintained its upward momentum as stock prices have
responded to the cessation of the Federal Reserve's monetary-tightening
initiative and the belief that gains in corporate earnings may remain
substantial. Although we expect growth to remain moderate, our outlook for
corporate earnings growth remains favorable. We have been de-emphasizing many
cyclical areas such as autos and basic materials because of their less
attractive earnings outlook and have been emphasizing growth areas such as
technology, health care, consumer and household products, and financial
services.
Portfolio Performance and Strategy
The Fund's favorable performance during the past year resulted primarily from
overweightings in two industry sectors which included some of our largest
holdings: technology, and leisure and entertainment. As we have mentioned in
previous reports, the technology sector continues to be very important to the
world's economies. Industrialized countries are using technology to improve
their competitive positions, enhance their products and services, and reduce
their costs. In addition, newly industrialized countries are using technology to
accelerate their entrance into the world economies. In this sector, we believe
the best opportunities are in software and networking companies. Thus, the Fund
continues to own Informix, Autodesk and Cadence Design. We also added to our
positions in Sybase and Compuware when their stock prices fell due to
disappointing earnings.
Many leisure and entertainment companies have continued to enjoy favorable
performance. Our holdings in the lodging, gaming and restaurant industries have
done particularly well. Lodging fundamentals continue to remain strong because
very few hotels were built in the second half of the 1980s, supply has remained
limited, and room rates and occupancies have trended higher. Gaming stocks have
rebounded because most of the capacity which has been added recently has been
quickly absorbed by burgeoning demand. The restaurant industry has rebounded
from what we believe were very depressed valuations. Hospitality Franchise
Systems in the lodging industry, Promus in the gaming and lodging industry, and
Applebee's in the restaurant industry have all performed well.
A factor which detracted from the Fund's performance during the past six
months has been its overweighting in the health care industry. Our holdings in
the nursing home industry and in health maintenance organizations (HMOs) have
been hurt by the Republican initiatives in Washington to cut Medicare. We
believe the worst-case scenario has been built into stock valuations already,
and we have added aggressively to HMOs such as Pacificare and to nursing homes
such as Integrated Health.
The environment for stocks this year has been very positive. Strong
corporate earnings, coupled with flat-to-declining interest rates, have driven
valuations higher. Even so, because of the strong earnings growth of many
smaller companies, valuations are still depressed based on historical
parameters. While we cannot predict when these companies will once again receive
favorable valuations, we believe that companies with rapid earnings growth will
eventually be recognized by the marketplace.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ Christian Felipe
A. Keith Brodkin Christian Felipe
Chairman and President Portfolio Manager
July 18, 1995
PORTFOLIO MANAGER PROFILE
Christian Felipe joined the MFS Research Department in 1986. A graduate of
U.C.L.A. and the University of Pennsylvania's Wharton School of Finance and
Commerce, he was named Investment Officer in 1987, Assistant Vice President -
Investments in 1988 and Vice President - Investments in 1989. Mr. Felipe has
served as Portfolio Manager of MFS Emerging Equities Fund since 1993.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995. The
Fund designates $112,290 as capital gain distributions.
PERFORMANCE SUMMARY
The information in this section illustrates the historical performance of MFS
Emerging Equities Fund in comparison to various market indicators. Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. You cannot
invest in an index. All results reflect the reinvestment of all dividends and
capital gains.
GROWTH OF A HYPOTHETICAL $5,000,000 INVESTMENT
(For the Period from July 1, 1993 to June 30, 1995)
Line graph representing the growth of a $5,000,000 investment for the period
from July 1, 1993 to June 30, 1995. The graph is scaled from $4,000,000 to
$9,000,000 in $1,000,000 segments. The years are marked from 1993 to 1995. There
are four lines drawn to scale. One is a solid line representing MFS Emerging
Equities Fund, a second line of short dashes represents the S&P 500, a third
line of medium dashes represents the Russell 2000 Index, and a fourth line of
long dashes represents the Consumer Price Index.
MFS Emerging Equities Fund $8,413,439
S&P 500 $6,389,500
Russell 2000 Index $6,268,000
Consumer Price Index $5,280,050
AVERAGE ANNUAL TOTAL RETURNS
6/16/93* -
1 Year 6/30/95
- ------------------------------------------------------------------------------
MFS Emerging Equities Fund +43.21% +30.16%
- ------------------------------------------------------------------------------
Russell 2000 Index +20.07% +11.96%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index +26.03% +13.05%
- ------------------------------------------------------------------------------
Consumer Price Index<+> + 3.04% + 2.77%
- ------------------------------------------------------------------------------
All results are historical and, therefore, are not an indication of future
results. The principal value and income return of an investment in a mutual fund
will vary with changes in market conditions, and shares, when redeemed, may be
worth more or less than their original cost. Fund results reflect the applicable
expense subsidy which is explained in the Notes to Financial Statements. Had the
subsidy not been in effect, the results would have been less favorable. The
subsidy may be rescinded by MFS at any time.
* Commencement of offering of shares. Benchmark comparisons are from July 1,
1993.
+ The Consumer Price Index is a popular measure of change in prices.
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1995
Common Stocks - 96.0%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Apparel and Textiles - 0.4%
Nine West Group, Inc.* 12,000 $ 438,000
- -----------------------------------------------------------------------------
Business Machines - 1.2%
Affiliated Computer Co.* 34,100 $ 1,040,050
National Instruments Corp.* 14,500 257,375
------------
$ 1,297,425
- -----------------------------------------------------------------------------
Business Services - 10.0%
BISYS Group, Inc.* 37,200 $ 827,700
CUC International, Inc.* 36,000 1,512,000
Ceridian Corp.* 44,400 1,637,250
Computer Sciences, Inc.* 30,000 1,706,250
FIserv, Inc.* 32,000 900,000
Franklin Quest Co.* 14,700 352,800
Global Directmail Corp.* 4,100 80,975
Interim Services, Inc.* 60,200 1,505,000
National Data Corp. 4,100 94,812
SPS Transaction Services Corp.* 54,000 1,869,750
Transaction Systems Architects, Inc., "A"* 8,700 224,025
------------
$ 10,710,562
- -----------------------------------------------------------------------------
Cellular Phones - 1.3%
Cellular Communications of Puerto Rico* 44,000 $ 1,347,500
- -----------------------------------------------------------------------------
Computer Software - 0.5%
CATS Software, Inc.* 1,100 $ 12,100
Discreet Logic, Inc.* 1,000 33,000
Network Peripherals, Inc.* 21,300 464,606
Seer Technologies, Inc.* 900 18,675
------------
$ 528,381
- -----------------------------------------------------------------------------
Computer Software - Personal Computers - 3.9%
Autodesk, Inc. 80,000 $ 3,440,000
Eagle Point Software Corp.* 600 10,200
Learning Co.* 9,200 330,625
Maxis, Inc.* 1,200 31,950
Softkey International, Inc.* 12,200 388,875
------------
$ 4,201,650
- -----------------------------------------------------------------------------
Computer Software - Systems - 13.8%
BDM International, Inc.* 2,000 $ 40,750
BMC Software, Inc.* 21,100 1,629,975
Cadence Design Systems, Inc.* 130,000 4,208,750
Compuware Corp.* 60,000 1,845,000
Datalogix International, Inc.* 1,100 26,812
HNC Software, Inc.* 700 14,875
Inference Corp., "A"* 600 8,475
Informix Corp.* 106,000 2,689,750
Keane, Inc.* 22,000 547,250
Structural Dynamics Research Corp.* 81,100 1,049,231
Sybase, Inc.* 53,800 1,580,375
System Software Associates, Inc. 52,000 1,040,000
UUNET Technologies, Inc.* 1,700 46,750
------------
$ 14,727,993
- -----------------------------------------------------------------------------
Consumer Goods and Services - 0.3%
Blyth Industries, Inc.* 5,800 $ 247,225
Toy Biz, Inc.* 1,000 18,125
------------
$ 265,350
- -----------------------------------------------------------------------------
Electronics - 8.3%
C.P. Clare Corp.* 1,300 $ 26,000
LSI Logic Corp.* 130,000 5,086,250
LTX Corp.* 54,000 479,250
Linear Technology Corp. 13,000 858,000
Oak Technology, Inc.* 10,300 378,525
Paradigm Technology, Inc.* 900 20,194
Tower Semiconductor Ltd.* 10,000 290,000
Ultratech Stepper, Inc.* 1,700 59,925
Xilinx, Inc.* 18,300 1,720,200
------------
$ 8,918,344
- -----------------------------------------------------------------------------
Entertainment - 4.9%
American Radio Systems Corp.* 5,100 $ 116,025
Casino America, Inc.* 23,100 349,387
Clear Channel Communications* 3,600 231,750
Grand Casinos, Inc.* 16,300 576,612
Heritage Media Corp., "A"* 20,300 586,162
Infinity Broadcasting Corp., "A"* 23,700 790,988
International Family Entertainment, Inc., "B"* 10,300 162,225
Mirage Resorts, Inc.* 36,000 1,102,500
National Gaming Corp.* 11,700 100,913
Promus Cos., Inc.* 24,100 939,900
Rio Hotel & Casino, Inc.* 14,800 203,500
Sinclair Broadcast Group, "A"* 2,000 56,000
Station Casinos, Inc.* 4,700 81,075
------------
$ 5,297,037
- -----------------------------------------------------------------------------
Financial Institutions - 4.1%
Advanta Corp., "B" 9,900 $ 373,725
Franklin Resources, Inc. 62,100 2,763,450
Student Loan Corp. 45,000 1,209,375
------------
$ 4,346,550
- -----------------------------------------------------------------------------
Insurance - 1.6%
Equitable of Iowa Cos. 52,900 $ 1,739,088
- -----------------------------------------------------------------------------
Machinery - 0.3%
Watts Industries, Inc., "A" 14,200 $ 355,888
- -----------------------------------------------------------------------------
Medical and Health Products - 0.2%
Amerisource Health Corp., "A"* 1,800 $ 41,063
Medisense, Inc.* 9,900 191,813
------------
$ 232,876
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 14.5%
American Oncology Resources, Inc.* 1,800 $ 49,950
Community Health Systems, Inc.* 64,700 2,191,713
Genesis Health Ventures, Inc.* 4,700 139,238
Health Management Assoc., Inc., "A"* 74,100 2,167,425
Healthsource, Inc.* 5,700 199,500
Integrated Health Services, Inc. 80,000 2,400,000
Lincare Holdings, Inc.* 13,900 369,219
Living Centers of America, Inc.* 38,000 1,030,750
Manor Care, Inc. 13,800 401,925
Mariner Health Group, Inc.* 25,400 285,750
Mid-Atlantic Medical Services, Inc.* 115,800 2,142,300
Pacificare Health Systems, Inc., "B"* 46,200 2,356,200
Surgical Care Affiliates, Inc. 92,900 1,776,713
------------
$ 15,510,683
- -----------------------------------------------------------------------------
Pollution Control - 0.4%
Western Waste Industries* 18,500 $ 372,313
- -----------------------------------------------------------------------------
Printing and Publishing - 2.3%
Belo (A.H.) Corp., "A" 32,200 $ 986,125
Nelson Thomas, Inc. 42,000 808,500
Pulitzer Publishing Co. 16,300 694,788
------------
$ 2,489,413
- -----------------------------------------------------------------------------
Restaurants and Lodging - 9.3%
Apple South, Inc. 1,700 $ 33,150
Applebee's International, Inc. 47,400 1,220,550
Brinker International, Inc.* 16,800 289,800
Buffets, Inc.* 61,900 851,125
DF&R Restaurants, Inc.* 8,400 185,850
Doubletree Corp.* 6,300 135,844
Hometown Buffet, Inc.* 11,750 133,656
Hospitality Franchise System, Inc.* 143,000 4,951,375
Promus Hotel Corp.*(S)(S) 11,500 253,000
ShoLodge, Inc.* 52,666 783,407
Sonic Corp.* 31,900 877,250
Taco Cabana, Inc., "A"* 35,900 197,450
------------
$ 9,912,457
- -----------------------------------------------------------------------------
Stores - 9.1%
Boise Cascade Office Products Corp.* 2,500 $ 55,625
Consolidated Stores Corp.* 103,900 2,168,912
Discount Auto Parts, Inc.* 18,300 464,362
Dollar Tree Stores, Inc.* 3,800 100,700
General Nutrition Cos., Inc.* 19,000 667,375
Gymboree Corp.* 18,000 523,125
Micro Warehouse, Inc.* 62,000 2,852,000
Mothers Work, Inc.* 17,200 249,400
Movie Gallery, Inc.* 5,800 203,362
Office Depot, Inc.* 77,350 2,175,469
Officemax, Inc.* 9,100 253,662
------------
$ 9,713,992
- -----------------------------------------------------------------------------
Telecommunications - 9.6%
ALC Communications Corp.* 80,000 $ 3,610,000
Bay Networks, Inc.* 31,900 1,319,862
Cabletron Systems, Inc.* 50,000 2,662,500
Equalnet Holding Corp.* 16,300 244,500
Glenayre Technologies, Inc.* 7,500 382,500
Highwaymaster Communications* 400 6,100
LCI International, Inc.* 15,000 459,375
Netmanage, Inc.* 16,000 272,000
Newbridge Networks Corp.* 10,100 356,025
Paging Network, Inc.* 11,950 409,287
Videoserver, Inc.* 1,000 39,000
Worldcom, Inc.* 19,674 531,198
------------
$ 10,292,347
- -----------------------------------------------------------------------------
Total Common Stocks (Identified Cost, $86,862,412) $102,697,849
- -----------------------------------------------------------------------------
Short-Term Obligations - 6.3%
- -----------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due 7/10/95 $1,880 $ 1,877,227
Federal Home Loan Bank, due 7/17/95 480 478,737
Federal Home Loan Bank, due 7/31/95 485 482,607
Ford Motor Credit Corp., due 7/03/95 3,900 3,898,657
- -----------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 6,737,228
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $93,599,640) $109,435,077
Other Assets, Less Liabilities - 2.3% (2,415,794)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $107,019,283
- -----------------------------------------------------------------------------
* Non-income producing security.
(S)(S)When-issued security. At June 30, 1995, the Fund had sufficient cash
and/or securities at least equal to the value of the when-issued
security.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
June 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $93,599,640) $109,435,077
Cash 66,869
Receivable for investments sold 1,197,944
Receivable for Fund shares sold 2,131,592
Dividends receivable 6,220
Receivable from investment adviser 168,512
Deferred organization expenses 3,964
Other assets 1,009
------------
Total assets $113,011,187
------------
Liabilities:
Payable for Fund shares reacquired $ 4,780,836
Payable for investments purchased 880,630
Payable for when-issued investments purchased 250,118
Payable to affiliates -
Management fee 2,240
Shareholder servicing agent fee 3,459
Accrued expenses and other liabilities 74,621
------------
Total liabilities $ 5,991,904
------------
Net assets $107,019,283
============
Net assets consist of:
Paid-in capital $ 84,799,305
Unrealized appreciation on investments 15,835,437
Accumulated undistributed net realized gain on investments 6,384,541
------------
Total $107,019,283
============
Shares of beneficial interest outstanding 6,516,769
============
Net asset value, redemption price and offering price per share
(net assets of $107,019,283 / 6,516,769 shares of beneficial
interest outstanding) $16.42
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended June 30, 1995
- ------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 288,770
Dividends 114,573
-----------
Total investment income $ 403,343
-----------
Expenses -
Management fee $ 540,536
Trustees' compensation 5,918
Shareholder servicing agent fee 3,612
Auditing fees 46,275
Custodian fee 27,539
Printing 22,669
Legal fees 5,565
Amortization of organization expenses 1,441
Miscellaneous 55,607
-----------
Total expenses $ 709,162
Reduction of expenses by investment adviser (168,512)
-----------
Net expenses $ 540,650
-----------
Net investment loss $ (137,307)
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) on investment
transactions $ 7,226,805
Change in unrealized appreciation 17,594,663
-----------
Net realized and unrealized gain on investments $24,821,468
-----------
Increase in net assets from operations $24,684,161
===========
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended June 30, 1995 1994
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment loss $ (137,307) $ (44,665)
Net realized gain on investments 7,226,805 1,333,284
Net unrealized gain (loss) on investments 17,594,663 (1,808,622)
------------ ------------
Increase (decrease) in net assets from
operations $ 24,684,161 $ (520,003)
------------ ------------
Distributions declared to shareholders -
From net investment income $ -- $ (2,129)
From net realized gain on investments (1,742,406) (251,261)
------------ ------------
Total distributions declared to
shareholders $ (1,742,406) $ (253,390)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 60,983,226 $ 25,044,402
Net asset value of shares issued to
shareholders in reinvestment of
distributions 1,687,224 236,286
Cost of shares reacquired (6,152,083) --
------------ ------------
Increase in net assets from Fund share
transactions $ 56,518,367 $ 25,280,688
------------ ------------
Total increase in net assets $ 79,460,122 $ 24,507,295
Net assets:
At beginning of period 27,559,161 3,051,866
------------ ------------
At end of period $107,019,283 $ 27,559,161
============ ============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------
Year Ended June 30, 1995 1994 1993<F1>
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.75 $10.17 $10.00
------ ------ ------
Income from investment operations<F5> -
Net investment income (loss)<F7> $(0.03) $(0.03) $ 0.01
Net realized and unrealized gain on
investments 5.04 1.82<F6> 0.16
------ ------ ------
Total from investment operations $ 5.01 $ 1.79 $ 0.17
------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ --<F2> $ --
From net realized gain on
investments (0.34) (0.21) --
------ ------ ------
Total distributions declared to
shareholders $(0.34) $(0.21) $ --
------ ------ ------
Net asset value - end of period $16.42 $11.75 $10.17
====== ====== ======
Total return 43.21% 17.50% 1.70%<F4>
Ratios (to average net assets)/Supplemental data<F7>:
Expenses 0.75% 0.78% 0.90%<F3>
Net investment income (loss) (0.19)% (0.27)% 2.24%<F3>
Portfolio turnover 86% 94% 0%
Net assets at end of period
(000 omitted) $107,019 $27,559 $3,052
<FN>
<F1> For the period from the commencement of investment operations, June 16,
1993 to June 30, 1993.
<F2> The per share distribution from net investment income was $0.00175.
<F3> Annualized.
<F4> Not annualized.
<F5> Per share data for the periods subsequent to June 30, 1993 is based on
average shares outstanding.
<F6> The per share data is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares
and the amount of per share realized and unrealized gains and losses at
such time.
<F7> The investment adviser did not impose a portion of its management fee for
the periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment loss $(0.07) $(0.11) --
Ratios (to average net assets):
Expenses 0.98% 1.54% 2.50%<F3>
Net investment income (loss) (0.42)% (1.02)% 0.64%<F3>
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Emerging Equities Fund (the Fund) is a diversified series of MFS
Institutional Trust (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are
not available are valued at last quoted bid prices. Short-term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of the Fund.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividend income is recorded on the ex-dividend date for dividends received in
cash. Dividend payments received in additional securities are recorded on the
ex-dividend date in an amount equal to the value of the security on such date.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of
net investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV. Foreign taxes have been provided for on interest and dividend income
earned on foreign investments in accordance with the applicable country's tax
rates and to the extent unrecoverable are recorded as a reduction of
investment income. Distributions to shareholders are recorded on the ex-
dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended June 30, 1995, $137,307 was reclassified
from accumulated net investment loss to accumulated net realized gain on
investments due to differences between book and tax accounting for net
investment losses and short-term capital gains. This change had no effect on
the net assets or net asset value per share.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of average daily net assets. The investment adviser did not impose a portion
of its fee, which is reflected as a reduction of expenses in the Statement of
Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS and MFS Service
Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is based on the
number of shareholder accounts of the Fund.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations,
aggregated $108,693,874 and $57,662,441, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $93,770,886
===========
Gross unrealized appreciation $19,646,163
Gross unrealized depreciation (3,981,972)
-----------
Net unrealized appreciation $15,664,191
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------
1995 1994
--------------------------- ---------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,431,790 $60,983,226 2,026,731 $25,044,402
Shares issued to shareholders in
reinvestment of distributions 123,788 1,687,224 19,242 236,286
Shares reacquired (384,807) (6,152,083) -- --
--------- ----------- --------- -----------
Net increase 4,170,771 $56,518,367 2,045,973 $25,280,688
========= =========== ========= ===========
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of MFS Emerging
Equities Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Emerging Equities Fund (one of
the series comprising MFS Institutional Trust) as of June 30, 1995, the
related statement of operations for the year then ended, the statement of
changes in net assets for the years ended June 30, 1995 and 1994, and the
financial highlights for each of the years in the three-year period ended June
30, 1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at June 30, 1995 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Emerging
Equities Fund at June 30, 1995, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 1995
---------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
PROSPECTUS
MFS(R) INSTITUTIONAL November 1, 1995
WORLDWIDE FIXED INCOME FUND Shares of Beneficial Interest
- -------------------------------------------------------------------------------
Page
----
1. Expense Summary .................................................. 2
2. The Fund ......................................................... 2
3. Condensed Financial Information .................................. 3
4. Investment Objective and Policies ................................ 4
5. Investment Techniques ............................................ 5
6. Additional Risk Factors .......................................... 9
7. Management of the Fund ........................................... 10
8. Information Concerning Shares of the Fund ........................ 11
Purchases .................................................... 11
Exchanges .................................................... 12
Redemptions .................................................. 13
Distributions ................................................ 13
Tax Status ................................................... 14
Net Asset Value .............................................. 14
Description of Shares, Voting Rights and Liabilities ......... 14
Performance Information ...................................... 15
Expenses ..................................................... 15
9. Shareholder Services ............................................. 16
MFS(R) INSTITUTIONAL WORLDWIDE FIXED INCOME FUND
500 Boylston Street, Boston, MA 02116 (617) 954-5000
MFS Institutional Worldwide Fixed Income Fund (the "Fund") is a series of MFS
Institutional Trust (the "Trust").
The investment objective of the Fund is to seek not only preservation, but also
growth of capital, together with moderate current income. 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 U.S. INVESTMENTS (see "Investment
Objective and Policies"). Shares of the Fund are sold to investors by the Trust.
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.
The Fund is designed exclusively for institutional investor clients of MFS and
MFS Asset Management, Inc. The minimum initial investment is generally $3
million per investor (see "Purchases").
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 November 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.
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.
<PAGE>
1. EXPENSE SUMMARY
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):
Management Fees (after applicable fee reduction)(1) ................ 0.42%
Other Expenses ..................................................... 0.23%
-----
Total Operating Expenses of the Fund
(after applicable fee reduction)(2) ............................... 0.65%
- ----------
(1) MFS has voluntarily agreed to waive its management fee and/or pay expenses
of the Fund in order to maintain total expenses of the Fund at no more than
0.65% per annum of the Fund's average daily net assets until June 30, 1997.
Absent this expense arrangement, Management Fees would have been 0.65% of
the Fund's average daily net assets. The arrangement may be terminated or
revised by MFS at any time.
(2) Percentages are based on fees incurred during the fiscal year ended June 30,
1995. Absent the expense arrangement, "Total Operating Expenses" would have
been 0.88% of the Fund's average daily net assets.
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated:
1 year ........................................................... $ 7
3 years .......................................................... $21
5 years .......................................................... $36
10 years .......................................................... $81
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 seven
separate series, one of which is the Fund. The Fund commenced operations in
September, 1992. Shares of the other series of the Trust are offered pursuant to
a separate prospectus. Shares of the Fund are continuously offered and sold by
the Trust 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 on the conditions and trends in the economy and
the financial marketplaces. The Fund also offers to buy back (redeem) its shares
from its shareholders at any time at net asset value.
3. CONDENSED FINANCIAL INFORMATION
The following per share information should be read in conjunction with the
financial statements included in the Fund's Annual Report to shareholders which
are incorporated by reference into the Statement of Additional Information in
reliance upon the report of the Fund's independent auditors, as experts in
accounting and auditing. The Fund's current independent auditors are Deloitte &
Touche LLP.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
YEAR ENDED JUNE 30,
-------------------------------------------
1995 1994 1993*
------- ------- -------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C>
Net asset value -- beginning of period ..................................... $ 9.64 $ 10.50 $ 10.00
------- ------- -------
Income from investment operations# --
Net investment income(S) ............................................... $ 0.65 $ 0.63 $ 0.17
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ................................................ 0.70 (0.63) 0.33
------- ------- -------
Total from investment operations ................................... $ 1.35 $ -- $ 0.50
------- ------- -------
Less distributions declared to shareholders --
From net investment income ............................................. $ (0.23) $ (0.31) $ --
In excess of net investment income ..................................... -- (0.55) --
(0.63) -- --
------- ------- -------
Total distributions declared to shareholders ....................... $ (0.86) $ (0.86) $ --
------- ------- -------
Net asset value -- end of period ........................................... $ 10.13 $ 9.64 $ 10.50
------- ------- -------
TOTAL RETURN ............................................................... 15.10% (0.57)% 5.00%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:(S)
Expenses ............................................................... 0.72% 0.75% 0.80%+
Net investment income .................................................. 6.66% 6.09% 5.53%+
PORTFOLIO TURNOVER ......................................................... 279% 212% 73%
NET ASSETS AT END OF PERIOD (000 OMITTED) .................................. $76,078 $42,364 $23,966
* For the period from the commencement of investment operations, September 30, 1992 to June 30, 1993.
+ Annualized.
# Per share data for the periods subsequent to June 30, 1993 is based on average shares outstanding.
(S) The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee had been incurred
by the Fund, the net investment income per share and ratios would have been:
Net investment income ........................................ $ 0.61 $ 0.58 $ 0.15
RATIOS (TO AVERAGE NET ASSETS):
Expenses ................................................. 1.14% 1.23% 1.48%+
Net investment income .................................... 6.23% 5.61% 4.85%+
</TABLE>
FURTHER INFORMATION ABOUT THE PERFORMANCE OF THE FUND IS CONTAINED IN THE
FUND'S ANNUAL REPORT TO SHAREHOLDERS, WHICH CAN BE OBTAINED FROM THE
SHAREHOLDER SERVICING AGENT WITHOUT CHARGE.
4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to seek not only
preservation, but also growth of capital, together with moderate current income.
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
through a professionally managed, internationally diversified portfolio
consisting primarily of debt securities and to a lesser extent equity
securities. The Fund attempts to provide investors with an opportunity to
enhance the value and increase the protection of their investment against
inflation and otherwise by taking advantage of investment opportunities in the
United States as well as in other countries where opportunities may be more
rewarding. It is believed that diversification of assets on an international
basis decreases the degree to which events in any one country, including the
United States, can affect the entire portfolio. Although the percentage of the
Fund's assets invested in securities issued abroad and denominated in foreign
currencies ("non-dollar securities") will vary depending on the state of the
economies of the principal countries of the world, their financial markets and
the relationship of their currencies to the U.S. dollar, under normal conditions
the Fund's portfolio is internationally diversified. However, for defensive
reasons or during times of international political or economic uncertainty or
turmoil, most or all of the Fund's investments may be in the United States.
Under normal economic and market conditions, at least 80% of the Fund's assets
are invested in debt securities, such as bonds, debentures, mortgage securities,
notes, commercial paper, obligations issued or guaranteed by a government or any
of its political subdivisions, agencies or instrumentalities, and certificates
of deposit, as well as debt obligations which may have a call on common stock by
means of a conversion privilege or attached warrants. U.S. Government Securities
also include interests in trusts or other entities representing interests in
obligations that are issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities. Debt securities in which the Fund may invest
may also include zero coupon bonds. Zero coupon bonds do not require the
periodic payment of interest and are issued at a significant discount from face
value. The discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity at a rate of interest
reflecting the market rate of the security at the time of issuance. Such
investments benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments may experience greater
volatility in market value than debt obligations which make regular payments of
interest. The Fund will accrue income on such investments for tax and accounting
purposes, which is distributable to shareholders.
Up to 20% of the Fund's assets may be invested in equity securities. When
unfavorable economic or market conditions exist, the Fund may, until favorable
conditions return, invest all or a portion of its assets in cash (or foreign
currency) or cash equivalents (such as certificates of deposit, bankers
acceptances and time deposits), commercial paper, short-term obligations,
preferred stock, repurchase agreements and obligations issued or guaranteed by
the U.S. or any foreign government or any of their agencies or
instrumentalities.
The Adviser will determine the amount of the Fund's assets to be invested in the
United States and the amount to be invested abroad. The U.S. assets will be
invested in high quality debt securities and the remainder of the assets will be
diversified among countries where opportunities for total return are expected to
be most attractive. It is currently expected that investments within foreign
countries will be primarily in government securities to minimize credit risks.
As a non-diversified series of the Trust, 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"). The Fund will not invest 25% or more of the value of its assets in the
securities of any one foreign government. The Fund's portfolio will be managed
actively and the asset allocations modified as the Adviser deems necessary.
The Fund will purchase non-dollar securities denominated in the currency of
countries where the interest rate environment as well as the general economic
climate provide an opportunity for declining interest rates and currency
appreciation. If interest rates decline, such non-dollar securities will
appreciate in value. If the currency also appreciates against the dollar, the
total investment in such non-dollar securities would be enhanced further.
Conversely, a rise in interest rates or decline in currency exchange rates would
adversely affect the Fund's return. Investments in non-dollar securities are
evaluated primarily on the strength of a particular currency against the dollar
and on the interest rate climate of that country. Currency is judged on the
basis of fundamental economic criteria (e.g., relative inflation levels and
trends, growth rate forecasts, balance of payments status, and economic
policies) as well as technical and political data. In addition to the foregoing,
interest rates are evaluated on the basis of differentials or anomalies that may
exist between different countries. The Fund may hold foreign currency received
in connection with investments in foreign securities when, in the judgment of
the Adviser, it would be beneficial to convert such currency into U.S. dollars
at a later date, based on anticipated changes in the relevant exchange rate. The
Fund may also hold foreign currency in anticipation of purchasing foreign
securities.
The Fund may invest in American Depositary Receipts ("ADRs"), which are
certificates issued by a U.S. depository (usually a bank) representing a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. Although ADRs are issued by a U.S. depository,
they are subject to many of the risks of foreign securities such as changes in
exchange rates and more limited information about foreign issuers. See the
Statement of Additional Information for further discussion of foreign
securities, ADRs and the holding of foreign currency, as well as the associated
risks.
The phrase "preservation of capital" when applied to a domestic investment
company is generally understood to imply that the portfolio is invested in very
low risk securities and that the major risk is loss of purchasing power through
the effects of inflation or major changes in interest rates. However, while the
Fund invests in securities which are believed to have minimal credit risk, an
error of judgment in selecting a currency or an interest rate environment could
result in a loss of capital.
It is contemplated that the Fund's long-term debt investments will consist
primarily of securities which are believed by the Adviser to be of relatively
high quality. If after the Fund purchases such a security, the quality of the
security deteriorates significantly, the security will be sold only if the
Adviser believes it is advantageous to do so.
The Fund may engage in certain investment techniques as described below under
the caption "Investment Techniques" and as described in the Statement of
Additional Information under the caption "Investment Policies and Restrictions."
The Fund's investments are subject to certain risks, as described in the
above-referenced sections of this Prospectus and the Statement of Additional
Information and as described below under the caption "Additional Risk Factors."
5. INVESTMENT TECHNIQUES
Consistent with its investment objective and policies, 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.
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 marketvalue 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 liquid and thus not subject to the Fund's limitations on investing
not more than 15% of its net assets in illiquid investments. 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 decreasing the level of liquidity 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.
EMERGING MARKET SECURITIES: The Fund may invest up to 5% of its net assets in
securities of issuers or governments located in emerging countries or regions
with relatively low gross national product per capita compared to the world's
major economies, and in countries or regions with the potential for rapid
economic growth (emerging markets). For these purposes, emerging markets will
include any country: (i) having an "emerging stock market" as defined by the
International Finance Corporation; (ii) with low- to middle-income economies
according to the International Bank for Reconstruction and Development (the
"World Bank"); (iii) listed in World Bank publications as developing; or (iv)
determined by the Adviser to be an emerging market as defined above. The Fund
may invest in securities of: (i) companies the principal securities trading
market for which is an emerging market country; (ii) companies organized under
the laws of, and with a principal office in, an emerging market country; (iii)
companies whose principal activities are located in emerging market countries;
or (iv) companies traded in any market that derive 50% or more of their total
revenue from either goods or services produced in an emerging market or sold in
an emerging market. See "Additional Risk Factors -- Emerging Markets" below.
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.
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 increasing its return and/or 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.
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
securities and other obligations underlying 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 a Fund investment exposure from one type of
investment to another. For example, if a Fund agreed to exchange payments in
dollars for payments in foreign currency, in each case based on a fixed rate,
the swap agreement would tend to decrease a 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 a 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 a
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions.
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 Trust's
portfolio transactions. From time to time, the Adviser may direct certain
portfolio transactions to broker-dealer firms which, in turn, have agreed to
pay a portion of the Fund's operating expenses (e.g., fees charged by the
custodian of the Fund's assets). For the fiscal year ended June 30, 1995, the
rate of portfolio turnover was 279%. Such a high turnover rate may involve
greater expenses, including higher brokerage and transaction costs, to the
Fund.
----------------
The policies described above are not fundamental and may be changed without
shareholder approval. Because of the Fund's international investment policies
and the risks discussed above, as well as other considerations, an investment in
shares of the Fund may not be appropriate for all investors, and an investment
in shares of the Fund should not be considered a complete investment program.
Each prospective purchaser should take into account his investment objectives as
well as his other investments when considering the purchase of shares of the
Fund.
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 indicated otherwise. 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.
6. ADDITIONAL RISK FACTORS
FOREIGN SECURITIES: Transactions involving foreign securities or foreign
currencies, and transactions entered into in foreign countries, involve
considerations and risks not typically associated with investing in U.S.
markets. Such investments may be favorably or unfavorably affected by changes in
interest rates, currency exchange rates and exchange control regulations, and
costs may be incurred in connection with conversions between various currencies.
The Fund may invest up to 100% (and expects generally to invest between 50% and
80%) of its total assets in foreign securities (not including American
Depositary Receipts). In addition, investments in foreign countries could be
affected by other factors generally not thought to be present in the United
States, including the possibility of heavy taxation, less publicly available
financial and other information, different or lesser regulatory protection,
political or social instability, limitations on the removal of funds or other
assets of the Fund, expropriation of assets, diplomatic developments adverse to
U.S. investments and difficulties in enforcing contractual obligations. U.S.
Government policies have in the past, through taxation and other restrictions,
discouraged certain investments abroad by U.S. investors such as the Fund. While
no such restrictions are currently in effect, they could be reinstituted. In
such event it might become necessary for the Fund to invest all or substantially
all of its assets in U.S. securities, or the Fund might be liquidated.
Over-the-counter transactions also involve certain risks which may not be
present in an exchange environment.
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 in losses to the Fund due to
subsequent declines in value of the portfolio security, a decrease in the level
of liquidity in the Fund's portfolio, 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, and in such markets
the Fund's bear the risk that the securities will not be delivered and that the
Fund's payments will not be returned. 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.
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.
OPTIONS, FUTURES CONTRACTS AND FORWARD CONTRACTS: Although the Fund will enter
into transactions in Futures Contracts, Options on Futures Contracts and Options
on Foreign Currencies for hedging purposes, and will enter into certain Option
transactions and certain Forward Contracts for hedging purposes, such
transactions nevertheless involve certain risks. For example, a lack of
correlation between the instrument underlying an option or Futures Contract and
the assets being hedged, or unexpected adverse price movements, could render the
Fund's hedging strategy unsuccessful and could result in losses. The Fund also
may enter into transactions in such instruments for other than hedging purposes,
which involves greater risk. In particular, such transactions may result in
losses for the Fund which are not offset by gains on other portfolio positions,
thereby reducing gross income. In addition, foreign currency markets may be
extremely volatile from time to time. Furthermore, there can be no assurance
that a liquid secondary market will exist for any contract purchased or sold,
and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses. The Fund may also be required or may
elect to receive delivery of the foreign currencies underlying Forward Contracts
or Options on Foreign Currencies, which may involve certain risks. In such
instances, the Fund may hold the foreign currency when, in the judgment of the
Adviser, it would be beneficial to convert such currency into U.S. dollars at a
later date, based on anticipated changes in the relevant exchange rate. Appendix
A to this Prospectus contains a description of the nature and trading mechanics
of Options, Futures Contracts, Options on Futures Contracts, Forward Contracts
and Options on Foreign Currencies, and the Statement of Additional Information
includes a discussion of the risks related to transactions therein.
Transactions in Options may be entered into by the Fund on United States
exchanges regulated by the SEC, in the over-the-counter market and on foreign
exchanges, while Forward Contracts may be entered into only in the
over-the-counter market. Futures Contracts and Options on Futures Contracts may
be entered into on United States exchanges regulated by the Commodity Futures
Trading Commission (the "CFTC") and on foreign exchanges. In addition, the
securities underlying options and Futures Contracts traded by the Fund will
include U.S. Government securities as well as foreign securities.
7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated August 7, 1992 (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative services,
as well as general office facilities. Leslie J. Nanberg, a Senior Vice President
of the Adviser, is the Fund's portfolio manager. Mr. Nanberg became the
portfolio manager of the Fund in October, 1992. Mr. Nanberg has been employed by
the Adviser since 1980. 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 0.65% of the Fund's average daily net assets.
Although this management fee is greater than that paid by many investment
companies, it is not greater than the management fees generally paid by funds
with similar investment objectives and policies.
For the fiscal year ended June 30, 1995, MFS received management fees under the
Advisory Agreement of $395,873 equivalent to 0.65% of the Fund's average daily
net assets. Due to the voluntary waiver of management fees, $222,036 was not
borne by the Fund. (See "Information Concerning Shares of the Fund -- Expenses"
below.)
MFS also serves as investment adviser to the other series of the Trust, each of
the MFS Funds and to MFS(R) Municipal Income Trust, MFS Multimarket Income
Trust, MFS Government Markets Income Trust, MFS Intermediate Income Trust, MFS
Charter Income Trust, MFS Special Value Trust, MFS Union Standard Trust, MFS
Variable Insurance Trust, MFS/Sun Life Series Trust, Sun Growth Variable Annuity
Fund, Inc. and seven variable accounts, each of which is a registered investment
company established by Sun Life Assurance Company of Canada (U.S.) ("Sun Life of
Canada (U.S.)") in connection with the sale of various fixed/ variable annuity
contracts. MFS and its wholly owned subsidiary, MFS Asset Management, Inc. also
provide investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $39.5 billion on behalf of approximately 1.7 million investor
accounts as of September 30, 1995. As of such date, the MFS organization managed
approximately $19.9 billion of assets invested in fixed income securities, $3
billion are invested in securities of foreign issuers and non-U.S. dollar
securities. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.), which
in turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life"). The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames,
Arnold D. Scott, John 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 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.
8. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
The Fund is designed exclusively for institutional investor clients of MFS and
MFS Asset Management, Inc. Shares of the Fund may be purchased directly from the
Fund 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 will be in "good
order" and will be 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 his 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 the 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
Worldwide 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 Worldwide Fixed Income Fund (Account No. 4230-
817-1) 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 MFS Asset Management, Inc.
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 by exchanging bonds or
other fixed income debt securities acceptable to the Fund for Fund shares. The
Fund need not accept any security offered for exchange unless it is consistent
with the Fund's investment objective and restrictions and is otherwise
acceptable to the Fund. Securities accepted in exchange for shares will be
valued in accordance with the Fund's usual valuation procedures. 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 (i.e., an established
account) may be exchanged for shares of any of the other 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 any other series of the Trust, 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" below). 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, he would incur brokerage
charges when he 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 such Exchange is restricted or to the extent otherwise
permitted by the Investment Company Act of 1940, as amended (the "1940 Act"), if
an emergency exists. "Good order" generally means that the stock power, whether
request for redemption, letter of instruction or share certificate must be
endorsed by the record owners(s) exactly as these letters are registered and the
signature(s) must be guaranteed in the manner set forth below under the caption
"Signature Guarantee". In addition, in some cases "good order" will require the
furnishing of additional documents. The Shareholder Servicing Agent may make
certain de minimus exceptions to the above requirements for redemptions.
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" below).
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.
SIGNATURE GUARANTEE: In order to protect shareholders to the greatest extent
possible against fraud, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent. With
respect to written requests for redemptions, no signature guarantee or evidence
that the individual executing the stock power, written request for redemption,
letter of instruction or certificate will be required if the amount of the
redemption proceeds does not exceed specified minimums established from time to
time by MFD and the proceeds are wired or mailed to a predesignated account or
address.
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 New York Stock Exchange is open for trading. This determination is made once
each 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. 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 in
"good order" 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 seven series of shares and has
reserved 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. 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.
PERFORMANCE INFORMATION
From time to time, the Fund will provide yield and total rate of return
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 yield and total rate of return, see the Statement of
Additional Information.
EXPENSES
The Trust pays the compensation of its 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 each 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
accounts; expenses of calculating the net asset value of shares of the Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses 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.
The Adviser has voluntarily agreed to waive its management fee and/or pay
expenses of the Fund in order to maintain total expenses of the Fund at no more
than 0.65% per annum of the Fund's average daily net assets from August 1, 1995
through June 30, 1997. This obligation to pay expenses 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. Prior to that
time, from April 1993 through July 31, 1995, the Adviser had agreed to waive its
management fees and/or pay expenses of the Fund in order to maintain total
expenses of the Fund at no more than 0.75% per annum of the Fund's average daily
net assets.
9. 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 November 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>
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
Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
[LOGO] M F S (R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) INSTITUTIONAL WORLDWIDE
FIXED INCOME FUND
500 Boylston Street
Boston, MA 02116
11/95
[LOGO] M F S (R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) INSTITUTIONAL WORLDWIDE
FIXED INCOME FUND
Prospectus
November 1, 1995
<PAGE>
[LOGO] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) INSTITUTIONAL STATEMENT OF
WORLDWIDE ADDITIONAL INFORMATION
FIXED INCOME FUND
November 1, 1995
- -------------------------------------------------------------------------------
Page
----
1. Definitions ..................................................... 2
2. Investment Policies and Restrictions ............................ 2
3. Management of the Fund .......................................... 9
Trustees .................................................... 9
Officers .................................................... 9
Investment Adviser .......................................... 9
Custodian ................................................... 10
Shareholder Servicing Agent ................................. 10
Distributor ................................................. 10
4. Portfolio Transactions and Brokerage Commissions ................ 10
5. Tax Status ...................................................... 11
6. Determination of Net Asset Value and Performance ................ 12
7. Description of Shares, Voting Rights and Liabilities ............ 14
8. Independent Auditors and Financial Statements ................... 14
Exhibit A -- Trustee Compensation Table ............................. 15
MFS(R) INSTITUTIONAL WORLDWIDE 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 November 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 MFS Asset Management, Inc. at (800) 343-
2923 Extension 5757.
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 seven
series, one of which is the
Fund.
"Fund" -- MFS Institutional Worldwide
Fixed Income Fund, a series
of MFS Institutional Trust.
"MFS" or the "Adviser" -- Massachusetts Financial
Services Company, a Delaware
corporation.
"Prospectus" -- The Prospectus, dated
November 1, 1995, of the
Fund.
2. INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES. The Fund seeks to achieve its investment objective through
a professionally managed, internationally diversified portfolio consisting
primarily of debt securities and to a lesser extent equity securities. Under
normal economic or market conditions at least 80% of the Fund's assets are
invested in debt securities. Up to 20% of the Fund's assets may be invested in
equity securities. The Prospectus contains a discussion of the various types of
securities in which the Fund may invest and certain risks involved in such
investments.
The percentage of the Fund's assets invested in securities issued abroad and
denominated in foreign currencies ("non-dollar securities") will vary depending
on the state of the economies of the principal countries of the world, their
financial markets and the relationship of their currencies to the U.S. dollar.
The Prospectus contains a discussion of the various risks associated with
investments in non-dollar securities. The Adviser will determine the amount of
the Fund's assets to be invested in the United States and the amount to be
invested abroad. The U.S. assets will be invested in high quality debt
securities and the remainder of the assets will be diversified among countries
where opportunities for total return are expected to be most attractive. It is
currently expected that investments within foreign countries will be primarily
in government securities to minimize credit risks. The Trust has registered as a
"non-diversified" investment company. As a "non-diversified" series of the
Trust, the Fund, subject to certain tax requirements, will be able to invest
more than 5% of its assets in the obligations of each of one or more foreign
government issuers. (A "diversified" investment company would be required under
the Investment Company Act of 1940, as amended, (the "1940 Act") to maintain at
least 75% of its assets in cash (including foreign currency), cash items, U.S.
Government securities and other securities, limited per issuer to blocks of less
than 5% of the investment company's total assets.) The Fund does not believe
that the credit risk inherent in the obligations of stable foreign governments
is significantly greater than that of U.S. Government obligations. The portfolio
will be managed actively and the asset allocations modified as the Adviser deems
necessary.
The Fund may invest in equity securities issued by foreign companies. The Fund
may invest up to 100% (and expects generally to invest between 50% and 80%) of
its total assets in foreign securities (excluding American Depositary Receipts).
As discussed in the Prospectus, investing in foreign securities generally
represents a greater degree of risk than investing in domestic securities, due
to possible exchange rate fluctuations, less publicly available information,
more volatile markets, less securities regulation, less favorable tax
provisions, war or expropriation. 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 the foreign currencies in which
such securities are denominated.
The Fund will purchase non-dollar securities denominated in the currency of
countries where the interest rate environment as well as the general economic
climate provide an opportunity for declining interest rates and currency
appreciation. If interest rates decline, such non-dollar securities will
appreciate in value. If the currency also appreciates against the dollar, the
total investment in such non-dollar securities would be enhanced further. (For
example, if United Kingdom bonds yield 14% during a year when interest rates
decline causing the bonds to appreciate by 5% and the pound rises 3% versus the
dollar, then the annual total return of such bonds would be 22%. This example is
illustrative only.) Conversely, a rise in interest rates or decline in currency
exchange rates would adversely affect the Fund's return.
Investments in non-dollar securities are evaluated primarily on the strength of
a particular currency against the dollar and on the interest rate climate of
that country. Currency is judged on the basis of fundamental economic criteria
(e.g., relative inflation levels and trends, growth rate forecasts, balance of
payments status and economic policies) as well as technical and political data.
In addition to the foregoing, interest rates are evaluated on the basis of
differentials or anomalies that may exist between different countries.
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. See "Portfolio
Transactions and Brokerage Commissions" below.
AMERICAN DEPOSITARY RECEIPTS. The Fund may also invest in American Depositary
Receipts ("ADRs"). ADRs are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. ADRs may be sponsored or
unsponsored. A sponsored ADR is issued by a depository which has an exclusive
relationship with the issuer of the underlying security. An unsponsored ADR may
be issued by any number of U.S. depositories. Under the terms of most sponsored
arrangements, deposi- taries agree to distribute notices of shareholder meetings
and voting instructions, and to provide shareholder communications and other
information to ADR holders at the request of the issuer of the deposited
securities. The depositary of an unsponsored ADR, on the other hand, is under no
obligation to distribute shareholder communications received from the issuer of
the deposited securities or to pass through voting rights to ADR holders in
respect of deposited securities. The Fund may invest in either type of ADR.
Although the U.S. investor holds a substitute receipt or ownership rather than
direct stock certificates, the use of the depository receipts in the United
States can reduce costs and delays as well as potential currency exchange and
other difficulties. The Fund may purchase securities in local markets and direct
delivery of these ordinary shares to the local depository of an ADR agent bank
in the foreign country. Simultaneously, the ADR agents create a certificate
which settles at the Fund's custodian in five days. The Fund may also execute
trades on the U.S. markets using existing ADRs. A foreign issuer of the security
underlying an ADR is generally not subject to the same reporting requirements in
the United States as a domestic issuer. Accordingly, the information available
to a U.S. investor will be limited to the information the foreign issuer is
required to disclose in its own country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying
security. ADRs may also be subject to exchange rate risks if the underlying
foreign securities are denominated in foreign currency.
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 primary U.S. Government securities dealers or institutions
which the Adviser has determined to be of comparable creditworthiness. The
securities that the Fund purchases and holds through its agent are U.S.
Government securities, the values of which are equal to or greater than the
repurchase price agreed to be paid by the seller. The repurchase price may be
higher than the purchase price, the difference being income to the Fund, or the
purchase and repurchase prices may be the same, with interest at a standard rate
due to the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the U.S.
Government securities.
The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, the Fund will have the right to liquidate the securities. If at the time
the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
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,
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. 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 Securities and Exchange Commission (the "SEC") has taken the
position that purchased over-the-counter options and assets used to cover
written over-the-counter options are illiquid and, therefore, together with
other illiquid securities, cannot exceed a certain percentage of the Fund's
assets (the "SEC illiquidity ceiling"). Although the Adviser disagrees with this
position, the Adviser intends to limit the Fund's writing of over-the-counter
options in accordance with the following procedure. Except as provided below,
the Fund intends to write over-the-counter options only with primary U.S.
Government securities dealers recognized by the Federal Reserve Bank of New
York. Also, the contracts the Fund has in place with such primary dealers will
provide that the Fund has the absolute right to repurchase an option it writes
at any time at a price which represents the fair market value, as determined in
good faith through negotiation between the parties, but which in no event will
exceed a price determined pursuant to a formula in the contract. Although the
specific formula may vary between contracts with different primary dealers, the
formula will generally be based on a multiple of the premium received by the
Fund for writing the option, plus the amount, if any, of the option's intrinsic
value (i.e., 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, a 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 10% of its gross assets, and then only
as a temporary measure for extraordinary or emergency purposes, or pledge,
mortgage or hypothecate its assets (taken at market value) to an extent
greater than 33 1/3% of its gross assets, in each case taken at the lower of
cost or market value and subject to a 300% asset coverage requirement (for
the purpose of this restriction, collateral arrangements with respect to
Options, Futures Contracts, Options on Futures Contracts, Forward Contracts
and Options on Foreign Currencies and payments of initial and variation
margin in connection therewith are not considered a pledge of assets);
(2) Underwrite securities issued by other persons except insofar as the
Trust may technically be deemed an underwriter under the Securities Act of
1933 in selling a portfolio security;
(3) Invest more than 25% of the market value of its total assets in
securities of issuers in any one industry;
(4) Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities (except gold,
and then subject to a limit of 10% of its gross assets) or commodity
contracts (except gold futures/forward contracts, Forward Contracts, Futures
Contracts, Options, Options on Futures Contracts and Options on Foreign
Currencies) in the ordinary course of its business. The Fund reserves the
freedom of action to hold and to sell real estate acquired as a result of
the ownership of securities;
(5) Make loans to other persons except through the lending of its
portfolio securities in accordance with, and to the extent permitted by, its
investment objective and policies and except through repurchase agreements.
Not more than 15% of the Fund's assets will be invested in repurchase
agreements maturing in more than seven days. For these purposes the purchase
of commercial paper or a portion of an issue of debt securities shall not be
considered the making of a loan;
(6) Purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of its total assets (taken at market
value) to be invested in the securities of such issuer, other than
securities issued or guaranteed by the U.S. Government, any foreign
government or any of their agencies or instrumentalities;
(7) Purchase voting securities of any issuer if such purchase, at the
time thereof, would cause more than 10% of the outstanding voting securities
of such issuer to be held by the Fund; or purchase securities of any issuer
if such purchase at the time thereof would cause more than 10% of any class
of securities of such issuer to be held by the Fund. For this purpose all
indebtedness of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class;
(8) Invest for the purpose of exercising control or management;
(9) Purchase securities issued by any closed-end investment company
except by purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the customary
broker's commission, or except when such purchase, though not made in the
open market, is part of a plan of merger or consolidation; provided,
however, that the Fund shall not purchase such securities if such purchase
at the time thereof would cause more than 10% of its total assets (taken at
market value) to be invested in the securities of such issuers, or more than
3% of the total outstanding voting securities of any closed-end investment
company to be held by the Fund. The Fund shall not purchase securities
issued by any open-end investment company;
(10) Invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years' continuous operation;
(11) Purchase or retain in its portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Fund, or is a partner, officer, Director or
Trustee of the Adviser, if after the purchase of the securities of such
issuer by the Fund one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities, or both, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or both;
(12) Purchase any securities, gold 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 transactions and except that the Fund may
make margin deposits in connection with Futures Contracts, Options on
Futures Contracts, Options and Options on Foreign Currencies; or
(13) 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.
Except with respect to Investment Restriction (1), these investment restrictions
are adhered to at the time of purchase or utilization of assets; a subsequent
change in circumstances will not be considered to result in a violation of
policy.
OTHER INVESTMENT POLICIES. The Fund has also adopted the following investment
policy which is not fundamental and may be changed by the Fund without approval
of its shareholders: the Fund may not invest in securities which are subject to
legal or contractual restrictions on resale, or for which there is no readily
available market (e.g., trading in the security is suspended or, in the case of
unlisted securities, market makers do not exist or will not entertain bids or
offers), unless the Board of Trustees has determined that such securities are
liquid based upon trading markets for a specific security, if more than 15% of
the Fund's assets (taken at market value) would be invested in such securities.
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
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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.
As of September 30, 1995, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
The Fund pays the compensation of any Trustee who is not affiliated with the
Adviser (who will receive from $1,250 to $1,925 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.
As of September 30, 1995, the Massachusetts Financial Services Company Pension
Plan, a defined benefit plan administered under the provisions of the Trust
Agreement for Massachusetts Financial Services Company Retirement Plans, a trust
established under the laws of The Commonwealth of Massachusetts, 500 Boylston
Street, Boston, MA, owned 7.12% of the outstanding shares of the Fund. As of
September 30, 1995, the Catholic Foreign Mission Society Common Fund, c/o MFS
Asset Management, Inc., 500 Boylston St., Boston, MA, owned 5.60% of the
outstanding shares of the Fund. As of September 30, 1995, the Archdiocesan Joint
Perpetual Care Fund, c/o MFS Asset Management, Inc., 500 Boylston St., Boston,
MA, owned 5.08% of the outstanding shares of the Fund. As of September 30, 1995,
the Beth Israel Hospital Endowment Fund, c/o MFS Asset Management, Inc., 500
Boylston St., Boston, MA, owned 5.69% of the outstanding shares of the Fund. As
of September 30, 1995, the Beth Israel Hospital Pooled Capital Fund, c/o MFS
Asset Management, Inc., 500 Boylston St., Boston, MA, owned 12.87% of the
outstanding shares of the Fund. As of September 30, 1995, The Defined Benefit
Plan of Cooperative Banks of Employees Retirement Association, c/o MFS Asset
Management, Inc., 500 Boylston St., Boston, MA, owned 9.31% of the outstanding
shares of the Fund. As of September 30, 1995, Palmer & Dodge Qualified Plans
Fund, c/o MFS Asset Management, Inc., 500 Boylston St., Boston, MA, owned 6.02%
of the outstanding shares of the Fund. As of September 30, 1995, The Common
Balanced Fund of the Joint Investment Trust of Christian Church Foundation,
Inc., c/o MFS Asset Management, Inc., 500 Boylston St., Boston, MA owned 13.61%
of the outstanding shares of the Fund. As of September 30, 1995, Elkem Metals
Company, P.O. Box 266, Pittsburg, PA, owned 14.03% of the outstanding shares of
the Fund. As of September 30, 1995, Bost & Co., Affiliated Publications, c/o One
Cabot Road, Medford, MA, owned 10.17% of the outstanding shares of the Fund. As
of September 30, 1995 Dallas Area Rapid Transit Master Trust, P.O. Box 660197,
Dallas TX, owned 5.94% of the outstanding shares of the Fund.
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 7, 1992 (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 0.65% of the Fund's average daily net
assets. The Adviser has voluntarily agreed to waive its management fees and/or
pay expenses of the Fund in order to maintain total expenses for the Fund at no
more than 0.65% of the Fund's average daily net assets from August 1, 1995
through June 30, 1997. Prior to August 1, 1995, the Adviser had voluntarily
waived its management fee and/or pay expenses of the Fund in order to maintain
total expenses for the Fund at no more than 0.75% of the Fund's average daily
net assets.
For the period from the commencement of operations on September 30, 1992 to June
30, 1993, for the fiscal year ended June 30, 1994 and for the fiscal year ended
June 30, 1995, MFS received management fees under the Advisory Agreement of
$54,122 (before a reduction of $49,073), $243,770 (before a reduction of
$153,944), and $395,873 (before a reduction of $222,036), respectively.
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, 1996, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's outstanding voting securities (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 April 26, 1995 (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 number of accounts in 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. For the fiscal year ended June 30, 1995, the Fund paid the Shareholder
Servicing Agent $2,442 under the Agency Agreement.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of the Fund pursuant to a Distribution Agreement
dated 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 MFS Financial
Services, Inc., 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 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, swaps and
related transactions and gold 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
includable 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 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. If the Fund does not
qualify or elect to "pass through" to the Fund's shareholders foreign income
taxes paid by it, shareholders will not be able to claim any deduction or credit
for any part of the foreign income taxes paid by the Fund.
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.
Distributions of the Fund that are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities (but generally
not from capital gains realized upon the disposition of such obligations) may be
exempt from state and local taxes in certain states. In other states, arguments
can be made on the basis of a U.S. Supreme Court decision to the effect that
such distributions should be exempt from state and local taxes. The Fund intends
to advise shareholders of the extent, if any, to which its distributions consist
of such interest. Shareholders should consult their tax advisers regarding the
possible exclusion of that portion of such distributions for state and local
income tax purposes.
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; Presidents' 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 FSI, the Fund's
principal underwriter, prior to the close of that business day.
The Trustees annually review the appropriateness of the time of day as of which
the net asset value is computed.
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.
The aggregate total rate of return for the Fund for fiscal year ended June 30,
1994 was -.57%. The aggregate total rate of return for the period from
commencement of investment operations (September 30, 1992) to June 30, 1994 was
4.40% (on a non-annualized basis). The average annual total rate of return for
the Fund for the same period was 2.49%.
Total rate of return figures would have been lower if fee waivers were not in
place.
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. The
Fund's yield for the 30-day period ended June 30, 1994 was 6.38%. Had certain
fee waivers not been in place, the yield of the Fund for the 30-day period ended
June 30, 1994 would have been 6.20%
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 re- ports.
-- 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 Ex- change.
-- 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 two 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 AUDITORS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's Independent Auditors, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the SEC.
The Portfolio of Investments at June 30, 1995, the Statement of Assets and
Liabilities, at June 30, 1995, the Statement of Operations for the year ended
June 30, 1995, the Statement of Changes in Net Assets for the year ended June
30, 1995, June 30, 1994 and for the period September 30, 1992 (commencement of
operations) to June 30, 1993, the Notes to the Financial Statements and the
Independent Auditors' Report, each of which is included in the Annual Report to
shareholders of the Fund, are incorporated by reference into this Statement of
Additional Information and have been so incorporated in reliance upon the report
of Deloitte & Touche LLP, independent auditors, as experts in accounting and
auditing. A copy of the Annual Report accompanies this Statement of Additional
Information.
<PAGE>
EXHIBIT A
MFS INSTITUTIONAL WORLDWIDE FIXED INCOME FUND
TRUSTEE COMPENSATION TABLE
TOTAL TRUSTEE FEES
TRUSTEE FEES FROM FUND AND
NAME OF TRUSTEE FROM THE FUND(1) FUND COMPLEX(2)
- --------------------------------------------------------------------------------
Nelson J. Darling, Jr. .................. $2,334 $10,618
William R. Gutow ........................ 2,334 10,618
NOTES:
(1) For fiscal year ending June 30, 1996.
(2) For calendar year ended December 31, 1994. All Trustees served as Trustees
of 17 funds advised by MFS (having aggregate net assets at December 31, 1994
of approximately $143 million).
ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(3)
YEARS OF SERVICE
-----------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
- -------------------------------------------------------------------------------
$2,100 $315 $525 $735 $1,050
2,190 329 548 767 1,095
2,280 342 570 798 1,140
2,370 356 593 830 1,185
2,460 369 615 861 1,230
2,550 383 638 893 1,275
(3) Other funds in the MFS fund complex provide similar retirement benefits to
the Trustees.
<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 2281, Boston, MA 02107-9906
INDEPENDENT AUDITORS
Deloitte & Touche, LLP
125 Summer Street, Boston, MA 02110
MFS(R) INSTITUTIONAL
WORLDWIDE FIXED
INCOME FUND
500 BOYLSTON STREET
BOSTON, MA 02116
[LOGO] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
11/95
<PAGE>
<PAGE>
[logo] MFS(SM) ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS YEAR ENDED
JUNE 30, 1995
MFS(R) WORLDWIDE FIXED INCOME FUND
[Graphic omitted: art work: Silhouette of two men talking in front of a large
window.]
<PAGE>
MFS(R) WORLDWIDE FIXED
INCOME FUND
TRUSTEES INVESTMENT ADVISER
A. Keith Brodkin* Massachusetts Financial Services Company
Chairman and President 500 Boylston Street
Boston, Massachusetts 02116-3741
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises DISTRIBUTOR
(Diversified Holding Company) MFS Fund Distributors, Inc.
500 Boylston Street
William R. Gutow Boston, Massachusetts 02116-3741
Executive Vice President,
Capital Entertainment PORTFOLIO MANAGER
Management Company Leslie J. Nanberg*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
SHAREHOLDER SERVICE CENTER
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-637-2262
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
World bond markets have performed well over the past 12 months. The rally in the
bond markets reflects a lowering of growth expectations on a worldwide basis and
a recognition by investors that last year's bond market selloff was the result
of overestimated growth prospects and a misjudgment of the inflationary risk
posed by this growth.
For the 12 months ended June 30, 1995, the Fund provided a total return of
+15.10% (including the reinvestment of distributions). This compares to a return
of +18.79% for the Salomon Brothers World Government Bond Index, an unmanaged,
market-value-weighted index which includes straight-issue bonds from the
complete universes of 14 government sectors with remaining maturities of at
least one year. The Fund's relative performance was negatively impacted by its
shorter durations during the first half of 1995, particularly in the U.S., where
we underestimated the degree of the slowdown in economic growth. Although we did
benefit from an overweighting in both Australia and Japan, this did not fully
offset the generally defensive positions we had maintained for most of the first
half of the year in other markets.
The Japanese bond market posted the best returns during the past 12 months
(14.4% in local currency terms and almost 33% in U.S. dollar terms). The
economic situation in Japan is bleak, as the sharp appreciation of the yen has
hurt export earnings and has helped push Japanese unemployment to a record 3.2%.
It is estimated that bad debt held by Japanese banks exceeds $450 billion,
suggesting that the banking crisis there exceeds that of the U.S. at its worst.
Prospects for the near term do not look very promising. The strong yen is
forcing exporters to move production capacity outside of Japan, while weak
political leadership has eliminated any prospect of effective policy solutions.
In fact, the backlog of government spending programs is already so long that any
new initiatives are unlikely to impact growth.
From the portfolio's perspective, we have benefited from an overweighted
position in Japanese bonds and our exposure to the yen. Despite the fact that
10-year Japanese government bonds yield only 3%, we still feel they offer good
investment potential because of our expectation that Japanese consumer prices
will continue to decline to about -2% this year.
In Europe, we see divergent trends between the core and non-core countries.
In the core German economy, the consumer sector continues to be very weak, and
the strong deutsche mark is beginning to pressure exporters' current earnings
and future expansion plans. Inflation has been trending lower and the reduced
pace of money supply growth should allow for a Bundesbank easing in interest
rates later this year. A similar pattern can be seen in other core European
economies. The traditional non-core high-yield markets, however, are in a very
different position. While each of these countries faces certain specific
problems, the primary policy focus in all of them relates to currency
devaluations which provide strong stimulus to export growth. Lower currency
values, however, have led to upward inflationary pressures, forcing central
banks into the unpopular position of raising interest rates, even as
unemployment remains high. These countries all have large amounts of debt
outstanding and rate increases have only added to the cost of government debt
service. During the year, we underweighted the high-yield markets in favor of
the core. Exposure to the United Kingdom was recently eliminated because of
political uncertainty, and French exposure was reduced for much the same reason.
Over the past 12 months, performance in local currency terms did not differ
dramatically between the core and non-core markets. For example, German bonds
returned 7.85%, the Netherlands 8.8%, Spain 7.3%, and Sweden 7.3%. The return
pattern was very different, however, with the core markets doing better early in
the period and the non-core markets rebounding during the past quarter.
In U.S. dollar terms, returns were very different. Taking into account
currency fluctuations, German bonds returned 24%, the Netherlands 25.3%, Spain
16.6%, and Sweden 13.2%. In general, the portfolio benefited from having the
bulk of its European bond exposure hedged into deutsche marks. As mentioned
above, however, we did underperform the market by having a somewhat shorter
duration and by not moving quickly enough back into the high-yield markets
during the past quarter.
The slowing in the dollar-bloc countries has been most apparent in the U.S.
and Canada. In the U.S., last year's strong growth led to a quick buildup in
inventories. Now, though, consumer retrenchment in response to higher interest
rates is resulting in an inventory correction which could lead to negative
second-quarter growth. While we view this slowdown as temporary, it was
troubling enough that the Federal Reserve Board lowered the federal funds rate
in early July.
Canada depends on exports for a large portion of gross domestic product
growth and the bulk of these exports go to the U.S. As a result, Canada's
slowdown has been exacerbated by U.S. consumers' behavior. With the slowdown in
Canada and the widening yield differential between Canada and the U.S., we
believe this market will begin to outperform the U.S. in coming months and,
thus, we have added Canadian bonds to the portfolio. Although in the past the
Bank of Canada has used periods of currency strength as opportunities to lower
short-term interest rates, we would expect generally stable monetary policies in
the dollar-bloc countries for the next several months.
As we began 1995, we had a fairly constructive view of the U.S. dollar. The
Federal Reserve had raised rates aggressively early in the year, ensuring its
credibility as an inflation fighter. What became apparent, however, was that the
U.S. dollar was not responding in a traditional fashion to this tighter monetary
policy. Instead, the dollar was impacted by the repatriation of capital by
Japanese exporters and investors as well as portfolio rebalancing by Asian and
European central banks, all of whom were selling dollars. As a result, we
reduced our exposure to the U.S. currency in favor of the deutsche mark and the
yen. This was helpful for portfolio performance early in 1995; however, some of
this incremental return was reversed during periods of central bank intervention
in the second quarter.
Currently, we are neutrally weighted in European currencies and somewhat
underweighted in terms of the yen. While our longer-term view is that a
continued overhang of dollars will lead to further weakness for the U.S.
currency, the depreciation to date suggests a near-term rebound is possible. Our
European currency exposure has been concentrated in deutsche marks and Dutch
guilders, given the uncertainties associated with the other European currencies.
In the dollar bloc, we have maintained an overweighted exposure to the New
Zealand dollar, which has performed well over the past year.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/A. Keith Brodkin /s/Leslie J. Nanberg
A. Keith Brodkin Leslie J. Nanberg
Chairman and President Portfolio Manager
July 18, 1995
PORTFOLIO MANAGER PROFILE
Leslie Nanberg joined MFS in 1980 as a member of the Fixed Income Department. A
graduate of the University of Illinois, Northwestern University and the
Northwestern University Graduate School of Management, he was named Assistant
Vice President - Investments in 1981, Vice President - Investments in 1983 and
Senior Vice President in 1986. Mr. Nanberg has senior responsibilty for all
fixed-income assets under MFS management. He has served as Portfolio Manager for
MFS Worldwide Fixed Income Fund since its inception in 1992.
TAX FORM SUMMARY
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995. The
Fund designates $1,947,873 as capital gain distributions.
PERFORMANCE SUMMARY
The information below illustrates the historical performance of MFS Worldwide
Fixed Income Fund in comparison to various market indicators. Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. You cannot
invest in an index. All results reflect the reinvestment of all dividends and
capital gains.
GROWTH OF A HYPOTHETICAL $5,000,000 INVESTMENT
(For the Period from September 30, 1992* to June 30, 1995)
Line graph representing the growth of a $5,000,000 investment for the period
from September 30, 1992 to June 30, 1995. The graph is scaled from $4,500,000 to
$7,000,000 in $500,000 segments. The years are marked from 1993 to 1995. There
are four lines drawn to scale. One is a solid line representing MFS Worldwide
Fixed Income Fund, a second line of short dashes represents the Salomon Brothers
World Government Bond Index, a third line of medium dashes represents the J.P.
Morgan Global Government Bond Index, and a fourth line of long dashes represents
the Consumer Price Index.
MFS Worldwide Fixed Income Fund $6,008,194
Salomon Brothers World Government Bond Index $6,523,300
J.P. Morgan Global Government Bond Index $6,350,300
Consumer Price Index $5,396,500
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
9/30/92<F1> -
1 Year 6/30/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS Worldwide Fixed Income Fund +15.10% + 6.91%
- -----------------------------------------------------------------------------------------------------------
J.P. Morgan Global Government Bond Index +17.44% + 9.08%
- -----------------------------------------------------------------------------------------------------------
Salomon Brothers World Government Bond Index +18.79% +10.15%
- -----------------------------------------------------------------------------------------------------------
Consumer Price Index<F2> + 3.04% + 2.81%
- -----------------------------------------------------------------------------------------------------------
All results are historical and, therefore, are not an indication of future results. The principal value and income return of an
investment in a mutual fund will vary with changes in market conditions, and shares, when redeemed, may be worth more or less than
their original cost. Fund results reflect the applicable expense subsidy which is explained in the Notes to Financial Statements.
Had the subsidy not been in effect, the results would have been less favorable. The subsidy may be rescinded by MFS at any time.
<FN>
<F1> Commencement of offering of shares.
<F2> The Consumer Price Index is a popular measure of change in prices.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS - June 30, 1995
<TABLE>
<CAPTION>
Bonds - 68.7%
- --------------------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations - 20.2%
U.S. Treasury Notes, 6.875s, 1997 $ 6,385 $ 6,488,756
U.S. Treasury Notes, 7.75s, 1999 3,460 3,690,298
U.S. Treasury Notes, 6.75s, 2000 650 669,702
U.S. Treasury Notes, 7.125s, 2000 690 720,726
U.S. Treasury Notes, 7.25s, 2004 1,945 2,078,408
Stripped Principal Payments, 0s, 2019 8,700 1,715,031
- --------------------------------------------------------------------------------------------------------
Total U.S. Treasury Obligations (Identified Cost, $14,860,753) $ 15,362,921
- --------------------------------------------------------------------------------------------------------
Foreign Denominated - 48.5%
Australia - 6.3%
Commonwealth of Australia, 6.25s, 1999 AUD 2,970 $ 1,968,525
Commonwealth of Australia, 12s, 2001 3,500 2,859,359
-----------
$ 4,827,884
- --------------------------------------------------------------------------------------------------------
Canada - 3.0%
Government of Canada, 9.75s, 2001 CAD 2,800 $ 2,246,322
- --------------------------------------------------------------------------------------------------------
Denmark - 4.5%
Danish Government Bullet, 6s, 1999 DKK 13,200 $ 2,284,606
Kingdom of Denmark, 9s, 1998 3,400 651,882
Kingdom of Denmark, 9s, 2000 2,430 466,535
-----------
$ 3,403,023
- --------------------------------------------------------------------------------------------------------
France - 5.5%
Government of France, 8s, 1998 FRF 2,900 $ 615,659
Government of France, 7s, 1999 5,030 1,033,604
Government of France, 7.75s, 2000 11,930 2,516,696
-----------
$ 4,165,959
- --------------------------------------------------------------------------------------------------------
Germany - 10.1%
German Unity Fund, 8.5s, 2001 DEM 4,330 $ 3,404,157
Republic of Germany, 8.5s, 2000 3,090 2,430,412
Republic of Germany, 7.25s, 2002 775 571,156
Republic of Germany, 6.5s, 2003 120 84,096
Treuhandanstalt Obligationen, 6.375s, 1999 1,600 1,171,056
-----------
$ 7,660,877
- --------------------------------------------------------------------------------------------------------
Ireland - 2.1%
Republic of Ireland, 9.75s, 1998 IEP 150 $ 255,102
Republic of Ireland, 9s, 2001 140 234,192
Republic of Ireland, 9.25s, 2003 650 1,096,381
-----------
$ 1,585,675
- --------------------------------------------------------------------------------------------------------
Italy - 4.6%
Republic of Italy, 8.5s, 1999 ITL 2,830,000 $ 1,564,278
Republic of Italy, 9.5s, 1999 1,450,000 808,590
Republic of Italy, 8.5s, 2004 1,605,000 784,929
Republic of Italy, 9.5s, 2005 725,000 375,655
-----------
$ 3,533,452
- --------------------------------------------------------------------------------------------------------
Netherlands - 7.6%
Dutch State Loan, 6.25s, 1998 NLG 240 $ 157,330
Dutch State Loan, 7s, 1999 740 494,147
Dutch State Loan, 7.5s, 1999 920 626,542
Netherlands Government, 7.75s, 2000 3,300 2,262,321
Netherlands Government, 7.75s, 2005 3,340 2,264,901
-----------
$ 5,805,241
- --------------------------------------------------------------------------------------------------------
New Zealand Dollars - 1.5%
Government of New Zealand, 8s, 1995 NZD 1,740 $ 1,157,497
- --------------------------------------------------------------------------------------------------------
United Kingdom - 3.3%
United Kingdom Treasury, 7s, 2001 GBP 1,700 $ 2,527,897
- --------------------------------------------------------------------------------------------------------
Total Foreign Denominated (Identified Cost, $36,535,400) $ 36,913,827
- --------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $51,396,153) $ 52,276,748
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 29.8%
- --------------------------------------------------------------------------------------------------------
U.S. Dollar Denominated - 27.2%
Federal Home Loan Mortgage Corp., due 7/05/95 $ 5,225 $ 5,221,607
Federal Home Loan Mortgage Corp., due 7/06/95 2,980 2,977,562
Federal Home Loan Mortgage Corp., due 7/07/95 2,275 2,272,778
Federal Home Loan Mortgage Corp., due 7/20/95 900 897,198
Federal Home Loan Mortgage Corp., due 8/04/95 4,200 4,176,755
Federal National Mortgage Assn., due 7/31/95 235 233,849
Ford Motor Credit Corp., due 7/03/95 2,800 2,799,036
Kellogg Co., due 7/13/95 2,100 2,095,863
-----------
Total U.S. Dollar Denominated $ 20,674,648
Foreign Denominated - 2.6%
New Zealand Dollars
New Zealand Treasury Bills, due 12/20/95 NZD 2,250 $ 1,440,024
New Zealand Treasury Bills, due 3/20/96 1,011 631,151
-----------
Total Foreign Denominated $ 2,071,175
- --------------------------------------------------------------------------------------------------------
Total Short-Term Obligations (Identified Cost, $22,745,823) $ 22,745,823
- --------------------------------------------------------------------------------------------------------
Call Options Purchased - 1.4%
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Canadian Dollars
August/1.34 CAD 2,765 $ 1,425
Deutsche Marks
July/1.385 DEM 11,401 68,579
Italian Lire/Deutsche Marks
September/1143.9 ITL 1,830,240 7,321
Japanese Bonds
July/110.164 JPY 288,000 151,200
July/112.844 590,000 129,800
August/109.274 387,000 207,432
August/113.763 387,000 41,796
September/108.284023 397,000 161,976
September/108.577 232,000 134,560
September/111.15 456,000 145,008
- --------------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $493,267) $ 1,049,097
- --------------------------------------------------------------------------------------------------------
Put Options Purchased - 0.2%
- --------------------------------------------------------------------------------------------------------
British Pounds
September/1.5305 GBP 2,627 $ 15,217
Deutsche Marks
July/1.415 DEM 11,415 14,474
Deutsche Marks/British Pounds
July/2.29 869 2
Japanese Bonds
August/108.985 JPY 232,000 233
Japanese Yen
July/85.25 JPY 818,320 70,375
Japanese Yen/Deutsche Marks
September/63 589,030 29,451
- --------------------------------------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $201,816) $ 129,752
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $74,837,059) $ 76,201,420
- --------------------------------------------------------------------------------------------------------
Call Options Written - (0.6)%
- --------------------------------------------------------------------------------------------------------
Japanese Bonds
July/110.2 JPY 288,000 $ (150,624)
August/109.3 387,000 (207,432)
Japanese Yen
August/80 767,925 (23,037)
March 1996/78 305,002 (85,095)
- --------------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $423,385) $ (466,188)
- --------------------------------------------------------------------------------------------------------
Put Options Written - (0.2)%
- --------------------------------------------------------------------------------------------------------
Australian Dollars
September/0.705 AUD 3,279 $ (48,192)
British Pounds
September/1.530 GBP 2,626 (15,032)
Deutsche Marks
August/1.50 DEM 7,017 (3,109)
September/1.465 11,818 (33,978)
September/1.49 6,312 (9,725)
Italian Lire/Deutsche Marks
September/1227.5 ITL 1,964,000 (13,748)
Japanese Bonds
September/108.284023 JPY 397,000 (16,277)
September/108.577 232,000 (6,032)
Japanese Yen
March 1996/93 363,656 (25,092)
- --------------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $412,420) $ (171,185)
- --------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.7% $ 514,233
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 76,078,280
- --------------------------------------------------------------------------------------------------------
</TABLE>
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Dutch Guilders
ESP = Spanish Pesetas NZD = New Zealand Dollars
FRF = French Francs SEK = Swedish Kronor
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
June 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $74,837,059) $ 76,201,420
Cash 62,599
Foreign currency, at value (identified cost, $3,216) 3,709
Net receivable for forward foreign currency exchange
contracts purchased 3,090,458
Interest receivable 1,325,129
Receivable from investment adviser 202,991
Deferred organization expenses 3,621
Other assets 620
------------
Total assets $ 80,890,547
------------
Liabilities:
Written options outstanding, at value
(premiums received, $835,805) $ 637,373
Net payable for forward foreign currency exchange contracts
sold 3,819,692
Net payable for forward foreign currency exchange contracts 277,711
Payable to affiliates -
Management fee 1,364
Shareholder servicing agent fee 2,258
Accrued expenses and other liabilities 73,869
------------
Total liabilities $ 4,812,267
------------
Net assets $ 76,078,280
============
Net assets consist of:
Paid-in capital $ 73,488,154
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 552,946
Accumulated undistributed net realized gain on investments
and foreign currency transactions 2,149,194
Accumulated distributions in excess of net investment income (112,014)
------------
Total $ 76,078,280
============
Shares of beneficial interest outstanding 7,508,732
=========
Net asset value, redemption price and offering price
per share (net assets of $76,078,280 / 7,508,732 shares
of beneficial interest outstanding) $10.13
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended June 30, 1995
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 3,885,884
----------
Expenses -
Management fee $ 395,873
Trustees' compensation 5,918
Shareholder servicing agent fee 2,442
Auditing fees 66,000
Custodian fee 49,639
Printing 27,365
Legal fees 6,110
Amortization of organization expenses 2,178
Miscellaneous 44,282
----------
Total expenses $ 599,807
Reduction of expenses by investment adviser (222,036)
----------
Net expenses $ 377,771
----------
Net investment income $ 3,508,113
----------
Realized and unrealized gain on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 513,047
Written option transactions 959,229
Foreign currency transactions 935,395
-----------
Net realized gain on investments and foreign currency
transactions $ 2,407,671
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 343,592
Written options 397,678
Translation of assets and liabilities in foreign currencies (936,277)
----------
Net unrealized gain on investments $ (195,007)
----------
Net realized and unrealized gain on investments and
foreign currency translation $ 2,212,664
----------
Increase in net assets from operations $ 5,720,777
===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
Year Ended June 30, 1995 1994
- ------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,508,113 $ 1,970,599
Net realized gain (loss) on investments and
foreign currency transactions 2,407,671 (1,082,332)
Net unrealized gain (loss) on investments and
foreign currency translation (195,007) (1,424,987)
------------ ------------
Increase (decrease) in net assets from
operations $ 5,720,777 $ (536,720)
------------ ------------
Distributions declared to shareholders -
From net investment income $ (1,092,709) $ (954,455)
From net realized gain on investments and
foreign currency transactions (2,993,073) --
In excess of net investment income -- (1,701,501)
------------ ------------
Total distributions declared to shareholders $ (4,085,782) $ (2,655,956)
------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 8,656,241 $ 21,150,123
Issued in connection with the acquisition of
MFS Investment Funds for
Employee Benefit Trusts 22,443,892 --
Net asset value of shares issued to
shareholders in reinvestment of
distributions 3,030,706 695,168
Cost of shares reacquired (2,051,722) (254,325)
------------ ------------
Increase in net assets from Fund share
transactions $ 32,079,117 $ 21,590,966
------------ ------------
Total increase in net assets $ 33,714,112 $ 18,398,290
Net assets:
At beginning of period 42,364,168 23,965,878
------------ ------------
At end of period (including accumulated
distributions in excess of net investment
income of $(112,014) and $(1,701,501),
respectively) $ 76,078,280 $ 42,364,168
============ ============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------
Year Ended June 30, 1995 1994 1993<F1>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.64 $ 10.50 $ 10.00
-------- ------- -------
Income from investment operations<F3> -
Net investment income<F4> $ 0.65 $ 0.63 $ 0.17
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.70 (0.63) 0.33
-------- ------- -------
Total from investment operations $ 1.35 $ -- $ 0.50
-------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.23) $ (0.31) $ --
In excess of net investment income -- (0.55) --
From net realized gain on investments and foreign
currency transactions (0.63) -- --
-------- ------- -------
Total distributions declared to shareholders $ (0.86) $ (0.86) $ --
-------- ------- -------
Net asset value - end of period $ 10.13 $ 9.64 $ 10.50
======== ======= =======
Total return 15.10% (0.57)% 5.00%
Ratios (to average net assets)/Supplemental data<F4>:
Expenses 0.72% 0.75% 0.80%<F2>
Net investment income 6.66% 6.09% 5.53%<F2>
Portfolio turnover 279% 212% 73%
Net assets at end of period (000 omitted) $ 76,078 $42,364 $23,966
<FN>
<F1> For the period from the commencement of investment operations, September
30, 1992 to June 30, 1993.
<F2> Annualized.
<F3> Per share data for the periods subsequent to June 30, 1993 is based on
average shares outstanding.
<F4> The investment adviser did not impose a portion of its management fee for
the periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and the ratios would have been:
Net investment income $ 0.61 $ 0.58 $ 0.15
Ratios (to average net assets):
Expenses 1.14% 1.23% 1.48%<F2>
Net investment income 6.23% 5.61% 4.85%<F2>
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Worldwide Fixed Income Fund (the Fund) is a non-diversified series of MFS
Institutional Trust (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues and forward contracts, are
valued on the basis of valuations furnished by dealers or by a pricing service
with consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short- term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Non-U.S. dollar denominated short-term obligations are valued at amortized cost
as calculated in the base currency and translated into U.S. dollars at the
closing daily exchange rate. Futures contracts, options and options on futures
contracts listed on commodities exchanges are valued at closing settlement
prices. Over-the-counter options are valued by brokers through the use of a
pricing model which takes into account closing bond valuations, implied
volatility and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of
operations of the Fund.
Written Options - The Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying security may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will enter into forward
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
It may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the Fund may enter into
contracts with the intent of changing the relative exposure of the Fund's
portfolio of securities to different currencies to take advantage of anticipated
changes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the contract
settlement date.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to the
extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. During the year ended June 30, 1995, undistributed net investment income
and paid-in capital decreased and accumulated undistributed realized gains
increased by $825,917, $1,526,489 and $2,352,406, respectively, due to
differences between book and tax accounting for currency transactions. This
change had no effect on the net assets or the net asset value per share.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of
average daily net assets. The investment adviser did not impose a portion of its
fee, which is reflected as a reduction of expenses in the Statement of
Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS and MFS Service Center, Inc. (MFSC).
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is based on the
number of shareholder accounts of the Fund.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- ------------------------------------------------------------------------------
U.S. government securities $31,407,103 $23,472,633
=========== ===========
Investments (non-U.S. government securities) $91,745,629 $89,508,478
=========== ===========
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $74,822,570
===========
Gross unrealized appreciation $ 1,676,537
Gross unrealized depreciation (297,687)
-----------
Net unrealized appreciation $ 1,378,850
===========
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------- --------------------------------
Year Ended June 30, Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 718,887 $ 8,656,241 2,069,023 $21,150,123
Shares issued in connection with the
acquisition of MFS Investment Funds
for Employee Benefit Trusts 2,275,548 22,443,892 -- --
Shares issued to shareholders in
reinvestment of
distributions 335,998 3,030,706 66,972 695,168
Shares reacquired (214,803) (2,051,722) (26,444) (254,325)
--------- ----------- ---------- -----------
Net increase 3,115,630 $32,079,117 2,109,551 $21,590,966
========= =========== ========= ===========
</TABLE>
(6) Financial Instruments
The Fund trades financial instruments with off-balance sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange contracts
and futures contracts. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered. A
summary of obligations under these financial instruments at June 30, 1995, is as
follows:
<TABLE>
<CAPTION>
Written Option Transactions 1995 Calls 1995 Puts
-------------------------------- ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ----------------------------------------------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD -
<S> <C> <C> <C> <C>
Deutsche Marks 20,727 $ 252,933 19,471 $ 69,418
Italian Lire/Deutsche Marks -- -- 2,295,205 11,416
Japanese Yen 176,841 28,118 320,000 60,857
Spanish Pesetas/Deutsche Marks -- -- 273,065 19,570
Options written -
Australian Dollars 1,994 14,794 7,768 95,063
British Pounds 2,815 55,254 2,626 44,337
British Pounds/Deutsche Marks -- -- 2,721 17,391
Canadian Dollars -- -- 6,359 28,775
Deutsche Marks 73,143 416,593 54,961 337,207
Deutsche Marks/British Pounds 802 5,209 6,286 21,489
Italian Lire/Deutsche Marks 8,004,109 55,734 5,790,422 33,728
Japanese Yen 3,476,167 837,464 3,280,046 366,060
Japanese Yen/Deutsche Marks 393,254 90,448 -- --
Spanish Pesetas/Deutsche Marks -- -- 251,443 15,306
Swedish Kronor/Deutsche Marks 6,023 4,548 8,326 5,214
Swiss Francs/Deutsche Marks 2,165 9,116 -- --
United States Dollars -- -- 3,100 40,930
Options terminated in closing transactions -
Australian Dollars (1,994) (14,794) (4,489) (55,994)
British Pounds (2,815) (55,254) -- --
British Pounds/Deutsche Marks -- -- (2,721) (17,391)
Canadian Dollars -- -- (6,359) (28,775)
Deutsche Marks (13,570) (128,049) (29,507) (204,282)
Deutsche Marks/British Pounds (802) (5,209) (6,286) (21,489)
Japanese Yen (1,728,240) (414,079) (2,607,390) (265,633)
Japanese Yen/Deutsche Marks (393,254) (90,448) -- --
Italian Lire/Deutsche Marks (6,177,913) (52,667) (4,277,169) (26,245)
Spanish Pesetas/Deutsche Marks -- -- (524,508) (34,875)
Swedish Kronor/Deutsche Marks (6,023) (4,548) -- --
United States Dollars -- -- (3,100) (40,930)
Options exercised -
Deutsche Marks (37,920) (265,060) -- --
Italian Lire/Deutsche Marks -- -- (1,844,458) (3,126)
Swiss Francs/Deutsche Marks (2,165) (9,116) -- --
Options expired -
Deutsche Marks (42,380) (276,417) (19,778) (50,387)
Italian Lire/Deutsche Marks (1,826,195) (3,067) -- --
Japanese Yen (176,842) (28,118) -- --
Swedish Kronor/Deutsche Marks -- -- (8,326) (5,214)
--------- -------- --------- --------
OUTSTANDING, END OF PERIOD 1,747,927 $423,385 2,987,708 $412,420
========= ======== ========= ========
OPTIONS OUTSTANDING AT END OF PERIOD
CONSIST OF -
Australian Dollars -- $ -- 3,279 $ 39,069
========= ======== ========= ========
British Pounds -- $ -- 2,626 $ 44,337
========= ======== ========= ========
Deutsche Marks -- $ -- 25,147 $151,956
========= ======== ========= ========
Italian Lire/Deutsche Marks -- $ -- 1,964,000 $ 15,773
========= ======== ========= ========
Japanese Yen 1,747,927 $423,385 992,656 $161,285
========= ======== ========= ========
At June 30, 1995, the Fund had sufficient cash and/or securities at least equal to the value of the written options.
</TABLE>
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange for at Value (Depreciation)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 7/05/95 - 9/27/95 AUD 12,611,696 $ 9,097,684 $ 8,939,982 $ 157,702
7/07/95 - 8/02/95 CAD 4,711,041 3,414,434 3,428,326 (13,892)
7/10/95 CHF 4,037,040 3,516,185 3,512,867 3,318
7/05/95 - 9/28/95 DEM 193,124,851 137,184,956 139,966,579 (2,781,623)
9/01/95 DKK 19,132,161 3,397,166 3,543,984 (146,818)
7/05/95 - 7/10/95 ESP 542,503,739 4,170,307 4,486,658 (316,351)
7/10/95 - 8/25/95 FRF 39,989,467 7,998,122 8,242,093 (243,971)
7/07/95 - 8/25/95 GBP 7,213,160 11,426,751 11,480,029 (53,278)
8/04/95 IEP 814,678 1,327,925 1,335,406 (7,481)
9/11/95 - 10/02/95 ITL 10,766,923,303 6,518,268 6,527,909 (9,641)
7/05/95 - 9/25/95 JPY 3,382,927,186 39,806,470 40,104,306 (297,836)
9/01/95 - 9/26/95 NLG 9,002,607 5,719,659 5,843,052 (123,393)
7/24/95 - 9/12/95 NZD 5,279,242 3,502,666 3,511,152 (8,486)
7/13/95 - 8/16/95 SEK 28,372,180 3,914,802 3,892,745 22,057
----------- ----------- ---------
$240,995,395 $244,815,088 $(3,819,692)
============ ============ ===========
Purchases 7/05/95 - 8/25/95 AUD 3,138,564 $ 2,331,711 $ 2,227,765 $ (103,946)
7/07/95 - 8/01/95 CAD 1,376,041 995,852 1,001,411 5,559
7/10/95 CHF 4,037,040 3,400,781 3,512,867 112,086
7/05/95 - 10/06/95 DEM 199,015 141,712,911 144,235,772 2,522,861
9/08/95 - 9/28/95 DKK 24,632,684 4,523,517 4,560,910 37,393
7/05/95 - 7/10/95 ESP 493,201,043 3,912,561 4,079,072 166,511
7/10/95 - 8/02/95 FRF 19,994,733 3,904,127 4,122,358 218,231
7/07/95 - 8/25/95 GBP 7,519,147 11,851,518 11,966,924 115,406
9/11/95 - 9/14/95 ITL 4,715,827,476 2,818,784 2,862,507 43,723
7/05/95 - 9/22/95 JPY 5,216,232,539 61,911,387 61,818,921 (92,466)
9/08/95 - 9/15/95 NZD 3,468,374 2,289,619 2,304,181 14,562
7/13/95 - 8/16/95 SEK 28,372,180 3,842,207 3,892,745 50,538
----------- ----------- -----------
$243,494,975 $246,585,433 $ 3,090,458
============ ============ ===========
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
and closed forward foreign currency exchange contracts excluded above amounted
to a net payable of $277,711 at June 30, 1995.
At June 30, 1995, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
(7) Acquisitions
At the close of business on March 31, 1995, the Fund acquired all of the assets
and liabilities of MFS Investment Funds for Employee Benefit Trusts. The
acquisition was accomplished by a tax-free exchange of 2,275,548 shares of the
Fund (valued at $22,443,892) for all of the assets, subject to all of the
liabilities of MFS Investment Funds for Employee Benefit Trusts. MFS Investment
Funds for Employee Benefit Trusts then converted all of its outstanding shares
for the shares of the Fund and distributed the shares to its shareholders. MFS
Investment Funds for Employee Benefit Trusts' net assets on that date
($22,443,892), including $1,685,495 of unrealized appreciation, were combined
with those of the Fund. The aggregate net assets of the Fund after the
acquisition were $72,126,481.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Institutional Trust and Shareholders of MFS Worldwide
Fixed Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of MFS Worldwide Fixed Income Fund (one of the
series comprising MFS Institutional Trust) as of June 30, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended June 30, 1995 and 1994, and the financial highlights
for each of the years in the three year period ended June 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at June
30, 1995 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Worldwide Fixed
Income Fund at June 30, 1995, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 1995
---------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
MFS INSTITUTIONAL EMERGING EQUITIES FUND
INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
For the period from June 16, 1993 to June 30, 1993
and for the two years ended June 30, 1995:
Financial Highlights
INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
At June 30, 1995:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended June 30, 1995:
Statement of Operations*
For the two years in the period ended June 30, 1995:
Statement of Changes in Net Assets*
- --------------------------------
*Incorporated by reference to the Fund's Annual Report to Shareholders dated
June 30, 1995 which was filed with the Securities and Exchange Commission on
August 29, 1995.
MFS INSTITUTIONAL WORLDWIDE FIXED INCOME FUND
INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
For the period from September 30, 1992 to June 30,
1993 and the two years ended June 30, 1995:
Financial Highlights
INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
At June 30, 1995:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended June 30, 1995:
Statement of Operations*
For the two years in the period ended June 30, 1995:
Statement of Changes in Net Assets*
- --------------------------------
* Incorporated by reference to the Fund's Annual Report to Shareholders dated
June 30, 1995 which was filed with the Securities and Exchange Commission
on August 29, 1995.
(B) EXHIBITS ON BEHALF OF MFS INSTITUTIONAL TRUST
1 (a) Declaration of Trust, dated September 13, 1990. (1)
(b) Certificate of Amendment to Declaration of Trust, dated
June 1, 1992. (1)
(c) Amendment No. 2 to the Declaration of Trust, dated August
13, 1992. (1)
(d) Amendment to Declaration of Trust - Designation of Series,
dated May 16, 1995. (1)
(e) Amendment to Declaration of Trust - Designation of Series,
dated August 29, 1995. (2)
2 (a) Amended and Restated By-Laws, dated June 1, 1992; filed
herewith.
(b) Amendment No. 1 to Amended and Restated By-Laws, dated
October 14, 1993; filed herewith.
3 Not Applicable.
4 Form of Share Certificate for Class A, Class B and Class C
Shares. (4)
5 (a) Investment Advisory Agreement between MFS Emerging
Equities Fund and Massachusetts Financial Services Company,
as adviser, dated August 7, 1992; filed herewith.
(b) Investment Advisory Agreement between MFS Worldwide Fixed
Income Fund and Massachusetts Financial Services Company,
as adviser, dated August 7, 1992; filed herewith.
(c) Investment Advisory Agreement between the Registrant, on
behalf of MFS Emerging Markets Fixed Income Fund, and
Massachusetts Financial Services Company, as adviser. (1)
(d) Form of Investment Advisory Agreement between the
Registrant, on behalf of MFS Institutional Broad Market
Fixed Income Fund, and Massachusetts Financial Services
Company, as adviser. (2)
(e) Form of Investment Advisory Agreement between the
Registrant, on behalf of MFS Institutional Research Fund,
and Massachusetts Financial Services Company, as adviser.
(2)
(f) Form of Investment Advisory Agreement between the
Registrant, on behalf of MFS Institutional Mid-Cap Growth
Fund, and Massachusetts Financial Services Company, as
adviser. (2)
(g) Form of Investment Advisory Agreement between the
Registrant, on behalf of MFS Institutional International
Equity Fund, and Massachusetts Financial Services Company,
as adviser. (2)
6 Not Applicable.
7 Not Applicable.
8 (a) Custodian Agreement between the Registrant and State
Street Bank and Trust Company, dated July 31, 1995. (2)
(b) Form of Amendment to Custodian Contract dated November 30,
1995. (2)
9 (a) Form of Amended and Restated Shareholder Servicing
Agent Agreement between Registrant and MFS Service Center,
Inc. as Shareholder Servicing Agent dated November 30, 1995
(2)
(b) Form of Exchange Privilege Agreement between the MFS
Institutional Trust, on behalf of each of its series, and
MFS Fund Distributors, Inc. (1)
(c) Dividend Disbursing Agency Agreement between the Registrant
and State Street Bank and Trust Company, dated October 31,
1990; filed herewith.
10 Consent and Opinion of Counsel filed with Registrant's Rule
24f-2 Notice for the fiscal year ended June 30, 1995 on
August 29, 1995.
11 Consent of Deloitte & Touche LLP; filed herewith.
12 Not Applicable.
13 (a) Investment representation letter from initial
shareholder of MFS Emerging Markets Fixed Income Fund. (1)
(b) Form of Investment representation letter from initial
shareholder of MFS Institutional Broad Market Fixed Income
Fund, MFS Institutional Research Fund, MFS Institutional
Mid-Cap Growth Fund and MFS Institutional Equity Fund (2)
14 Not Applicable.
15 Distribution Agreement by and between MFS Institutional
Trust and MFS Fund Distributors, Inc., dated June 15, 1994;
filed herewith.
16 Schedule of Computation for Performance Quotations -
Aggregate Total Rate of Return, Average Annual Total Rate
of Return and Yield Calculations. (3)
17 Financial Data Schedules for MFS Institutional Emerging
Equities Fund and MFS Institutional Worldwide Fixed Income
Fund; filed herewith.
Power of Attorney dated August 12, 1994; filed herewith.
(1)Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A filed with the SEC via EDGAR
on May 18, 1995.
(2)Incorporated by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A filed with the SEC via EDGAR
on September 15, 1995.
(3)Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915
and 811-4096) Post-Effective Amendment No. 26 filed with the SEC via EDGAR on
February 22, 1995.
(4)Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915
and 811-4096) Post-Effective Amendment No. 28 filed with the SEC via EDGAR on
July 28, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
MFS INSTITUTIONAL EMERGING EQUITIES FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 29
(without par value) (as of September 31, 1995)
MFS INSTITUTIONAL WORLDWIDE FIXED INCOME FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 14
(without par value) (as of September 31, 1995)
MFS EMERGING MARKETS FIXED INCOME FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 2
(without par value) (as of September 31, 1995)
MFS INSTITUTIONAL BROAD MARKET FIXED INCOME FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 0
(without par value) (as of September 31, 1995)
MFS INSTITUTIONAL RESEARCH FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 0
(without par value) (as of September 31, 1995)
MFS INSTITUTIONAL MID-CAP GROWTH FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 0
(without par value) (as of September 31, 1995)
MFS INSTITUTIONAL INTERNATIONAL EQUITY FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 0
(without par value) (as of September 31, 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
MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds: Massachusetts Investors Trust, Massachusetts
Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS Government
Securities Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has three series: MFS Managed Sectors Fund, MFS Cash Reserve Fund and MFS World
Asset Allocation Fund), MFS Series Trust II (which has four series: MFS Emerging
Growth Fund, MFS Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold
& Natural Resources Fund), MFS Series Trust III (which has two series: MFS High
Income Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has
four series: MFS Money Market Fund, MFS Government Money Market Fund, MFS
Municipal Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series:
MFS Total Return Fund and MFS Research Fund), MFS Series Trust VI (which has
three series: MFS World Total Return Fund, MFS Utilities Fund and MFS World
Equity Fund), MFS Series Trust VII (which has two series: MFS World Governments
Fund and MFS Value Fund), MFS Series Trust VIII (which has two series: MFS
Strategic Income Fund and MFS World Growth Fund), MFS Series Trust IX (which has
three series: MFS Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited
Maturity Fund), MFS Series Trust X (which has four series: MFS Government
Mortgage Fund, MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign
and Colonial International Growth Fund and MFS/Foreign and Colonial
International Growth & Income Fund), and MFS Municipal Series Trust (which has
19 series: MFS Alabama Municipal Bond Fund, MFS Arkansas Municipal Bond Fund,
MFS California Municipal Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia
Municipal Bond Fund, MFS Louisiana Municipal Bond Fund, MFS Maryland Municipal
Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi Municipal Bond
Fund, MFS New York Municipal Bond Fund, MFS North Carolina Municipal Bond Fund,
MFS Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond Fund,
MFS Tennessee Municipal Bond Fund, MFS Texas Municipal Bond Fund, MFS Virginia
Municipal Bond Fund, MFS Washington Municipal Bond Fund, MFS West Virginia
Municipal Bond Fund and MFS Municipal Income Fund) (the "MFS Funds"). The
principal business address of each of the aforementioned Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
MFS also serves as investment adviser of the following no-load,
open-end Funds: MFS Institutional Trust ("MFSIT") (which has seven series), MFS
Variable Insurance Trust ("MVI") (which has twelve series) and MFS Union
Standard Trust ("UST") (which has two series). The principal business address of
each of the aforementioned Funds is 500 Boylston Street, Boston, Massachusetts
02116.
In addition, MFS serves as investment adviser to the following
closed-end Funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the aforementioned Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL"), Sun Growth Variable Annuity Funds, Inc. ("SGVAF"), Money Market
Variable Account, High Yield Variable Account, Capital Appreciation Variable
Account, Government Securities Variable Account, World Governments Variable
Account, Total Return Variable Account and Managed Sectors Variable Account. The
principal business address of each is One Sun Life Executive Park, Wellesley
Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company organized
under the laws of the Republic of Ireland and a subsidiary of MFS, whose
principal business address is 41-45 St. Stephen's Green, Dublin 2, Ireland,
serves as investment adviser to and distributor for MFS International Fund
(which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Government Fund and MFS International Funds-Charter Income
Fund) (the "MIL Funds"). The MIL Funds are organized in Luxembourg and qualify
as an undertaking for collective investments in transferable securities (UCITS).
The principal business address of the MIL Funds is 47, Boulevard Royal, L-2449
Luxembourg.
MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund and MFS Meridian U.S. Equity Fund (collectively the "MFS Meridian
Funds"). Each of the MFS Meridian Funds is organized as an exempt company under
the laws of the Cayman Islands. The principal business address of each of the
MFS Meridian Funds is P.O. Box 309, Grand Cayman, Cayman Islands, British West
Indies.
MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned subsidiary
of MFS, serves as distributor for certain life insurance and annuity contracts
issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFSIT, MVI and UST.
MFS Asset Management, Inc. ("AMI"), a wholly owned subsidiary of MFS,
provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold
D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the Chairman, Mr.
Shames is the President, Mr. Scott is a Senior Executive Vice President and
Secretary, Bruce C. Avery, William S. Harris, William W. Scott, Jr., and
Patricia A. Zlotin are Executive Vice Presidents, James E. Russell is a Senior
Vice President and the Treasurer, Stephen E. Cavan is a Senior Vice President,
General Counsel and an Assistant Secretary, Joseph W. Dello Russo is a Senior
Vice President and Chief Financial Officer, Robert T. Burns is a Vice President
and an Assistant Secretary of MFS, and Mary Kay Doherty is a Vice President and
Assistant Treasurer.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS SERIES TRUST VI
MFS SERIES TRUST X
MFS GOVERNMENT LIMITED MATURITY FUND
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is the Assistant Treasurer, James R. Bordewick, Jr., Vice President and
Associate General Counsel of MFS, is the Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice President of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost is the Assistant Treasurer, and James R. Bordewick,
Jr., is the Assistant Secretary.
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T. Swanson,
Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is the Assistant Treasurer, and James R.
Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A. Dennis and
Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is
the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D. Laupheimer,
Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L. Schechter and
David R. King, Vice Presidents of MFS, are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS UNION STANDARD TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, and James O. Yost, is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott and
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is
the President, Thomas J. Cashman, Jr., a Senior Vice President of MFS, is a
Senior Vice President, Stephen E. Cavan is a Director, Senior Vice President and
the Clerk, James R. Bordewick, Jr. is a Director, Vice President and an
Assistant Clerk, Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo is
the Treasurer and James E. Russell is the Assistant Treasurer.
MIL-UK
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E. Cavan
is a Director and the Secretary, Ziad Malek is the President, Joseph W. Dello
Russo is the Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle and Richard W. S. Baker are Directors, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary, and
Ziad Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker, Arnold D. Scott and Jeffrey L.
Shames are Directors, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James R. Bordewick, Jr., is the Assistant Secretary, James O. Yost is
the Assistant Treasurer, and Ziad Malek is a Senior Vice President.
MFD
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, William W. Scott, Jr., an Executive Vice
President of MFS, is the President, Stephen E. Cavan is the Secretary, Robert T.
Burns is the Assistant Secretary, Joseph W. Dello Russo is the Treasurer, and
James E. Russell is the Assistant Treasurer.
CIAI
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery is
the Vice President, Joseph W. Dello Russo is the Treasurer, James E. Russell is
the Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T. Burns
is the Assistant Secretary.
MFSC
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Joseph A. Recomendes, a Senior Vice President
of MFS, is Vice Chairman and a Director, Janet A. Clifford is the Executive Vice
President, Joseph W. Dello Russo is the Treasurer, James E. Russell is the
Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T. Burns is
the Assistant Secretary.
AMI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L. Shames,
and Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President and
a Director, Leslie J. Nanberg is a Senior Vice President, a Managing Director
and a Director, Carol A. Corley, John A. Gee and Brianne Grady are Senior Vice
Presidents and Managing Directors, Joseph W. Dello Russo is the Treasurer, James
E. Russell is the Assistant Treasurer and Robert T. Burns is the Secretary.
RSI
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery are
Directors, Arnold D. Scott is the Chairman and a Director, Douglas C. Grip, a
Senior Vice President of MFS, is the President, Joseph W. Dello Russo is the
Treasurer, James E. Russell is the Assistant Treasurer, Stephen E. Cavan is the
Secretary, Robert T. Burns is the Assistant Secretary and Sharon A. Brovelli is
a Senior Vice President.
In addition, the following persons, Directors or officers of MFS, have
the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive Park,
Wellesley Hills, Massachusetts Director,
Sun Life Insurance and Annuity Company of
New York, 67 Broad Street, New York, New
York
John R. Gardner President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Gardner is also an
officer and/or Director of various
subsidiaries and affiliates of Sun Life)
John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King Street
West, Toronto, Ontario, Canada (Mr. McNeil
is also an officer and/or Director of
various subsidiaries and affiliates of Sun
Life)
Joseph W. Dello Russo Director of Mutual Fund Operations, The
Boston Company, Exchange Place, Boston,
Massachusetts (prior to August, 1994)
ITEM 29. DISTRIBUTORS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal
business address of each of these persons is 500 Boylston Street, Boston,
Massachusetts 02116.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The 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
Institutional Emerging Markets Fixed Income Fund, which need not be certified,
within four to six months from the effective date of the Registrant's
post-effective amendment No. 7, filed with the SEC on May 18, 1995.
(c) The Registrant undertakes to file a post-effective amendment to
this registration statement, in order to file financial statements for the MFS
Institutional Broad Market Fixed Income Fund, MFS Institutional Research Fund,
MFS Institutional Mid-Cap Growth Fund and MFS Institutional International Equity
Fund, which need not be certified, within four to six months from the effective
date of Post-Effective Amendment No. 8 filed with the SEC on September 15, 1995.
(d) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its latest annual report to shareholders upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 26th day of October, 1995.
MFS INSTITUTIONAL TRUST
By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on October 26, 1995.
SIGNATURE TITLE
A. KEITH BRODKIN* Chairman, President (Principal
A. Keith Brodkin Executive Officer) and Trustee
W. THOMAS LONDON* Treasurer (Principal Financial Officer
W. Thomas London and Principal Accounting Officer)
WILLIAM R. GUTOW* Trustee
William R. Gutow
NELSON J. DARLING, JR.* Trustee
Nelson J. Darling, Jr.
*By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
as Attorney-in-fact
Executed by James R. Bordewick, Jr.
on behalf of those indicated pursuant
to a Power of Attorney dated
August 12, 1994; filed herewith.
<PAGE>
POWER OF ATTORNEY
MFS INSTITUTIONAL TRUST
The undersigned, Trustees and officers of MFS Institutional Trust (the
"Registrant"), hereby severally constitute and appoint A. Keith Brodkin, W.
Thomas London, Stephen E. Cavan and James R. Bordewick, Jr., and each of them
singly, as true and lawful attorneys, with full power to them and each of them
to sign for each of the undersigned, in the names of, and in the capacities
indicated below, any Registration Statement and any and all amendments thereto
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission for the
purpose of registering the Registrant as a management investment company under
the Investment Company Act of 1940 and/or the shares issued by the Registrant
under the Securities Act of 1933 granting unto our said attorneys, and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary or desirable to be done in the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
In WITNESS WHEREOF, the undersigned have hereunto set their hand on
this 12th day of August, 1994.
Signatures Title(s)
A. KEITH BRODKIN Chairman of the Board; Trustee; and
A. Keith Brodkin Principal Executive Officer
NELSON J. DARLING, JR. Trustee
Nelson J. Darling, Jr.
WILLIAM R. GUTOW Trustee
William R. Gutow
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
2 (a) Amended and Restated By-Laws, dated June 1, 1992.
(b) Amendment No. 1 to Amended and Restated By-Laws, dated
October 14, 1993.
5 (a) Investment Advisory Agreement between MFS Emerging Equities
Fund and Massachusetts Financial Services
Company, as adviser, dated August 7, 1992.
(b) Investment Advisory Agreement between MFS Worldwide Fixed
Income Fund and Massachusetts Financial Services Company, as
adviser, dated August 7, 1992.
9 (c) Dividend Disbursing Agency Agreement between the Registrant
and State Street Bank and Trust Company, dated October 31,
1990.
11 Consent of Deloitte & Touche LLP.
15 Distribution Agreement by and between MFS
Institutional Trust and MFS Fund Distributors,
Inc., dated June 15, 1994.
27 Financial Data Schedules for MFS Institutional Emerging
Equities Fund and MFS Institutional Worldwide Fixed Income
Fund.
EXHIBIT NO. 99.2(a)
BY-LAWS
OF
MFS INSTITUTIONAL TRUST
Dated September 13, 1990
Amended and Restated June 1, 1992
<PAGE>
BY-LAWS
OF
MFS Institutional Trust
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Investment Adviser", "Majority
Shareholder Vote", "1940 Act", "Shareholder", "Shares", "Transfer Agent",
"Trust", "Trust Property" and "Trustees" have the respective meanings given them
in the Declaration of Trust of MFS Institutional Trust (formerly, Public Funds
Invesestment Trust, dated September 13, 1990, as amended from time to time.
ARTICLE II
OFFICES
Section l. Principal Office. Until changed by the Trustees, the
principal office of the Trust in The Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within the Commonwealth as the Trustees may from time
to time determine.
ARTICLE III
SHAREHOLDERS
Section l. Meetings. Meetings of the Shareholders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request of Shareholders holding in the aggregate not less than ten
percent (10%) of the outstanding Shares having voting rights, such request
specifying the purpose or purposes for which such meeting is to be called. Any
such meeting shall be held within or without The Commonwealth of Massachusetts
on such day and at such time as the Trustees shall designate. The holders of a
majority of outstanding Shares entitled to vote present in person or by proxy
shall constitute a quorum at any meeting of the Shareholders, except that where
any provision of law, the Declaration or these By-laws permit or require that
holders of any series shall vote as a series, then a majority of the aggregate
number of Shares of that series entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that series. In the
absence of a quorum, a majority of outstanding Shares entitled to vote present
in person or by proxy may adjourn the meeting from time to time until a quorum
shall be present.
Section 2. Notice of Meetings. Notice of all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
address as recorded on the register of the Trust, mailed at least (ten) 10 days
and not more than (sixty) 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice. No notice need be given
to any Shareholder who shall have failed to inform the Trust of his current
address or if a written waiver of notice, executed before or after the meeting
by the Shareholder or his attorney thereunto authorized, is filed with the
records of the meeting.
Section 3. Record Date for Meetings. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than sixty (60) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purpose.
Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the Clerk,
or with such other officer or agent of the Trust as the Clerk may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
vote of a majority of the Trustees, proxies may be solicited in the name of one
or more Trustees or one or more of the officers of the Trust. Only Shareholders
of record shall be entitled to vote. Each full Share shall be entitled to one
vote and fractional Shares shall be entitled to a vote of such fraction. When
any Share is held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Share, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
Section 5. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairman or
by any one of the Trustees at the time being in office. Notice of the time and
place of each meeting other than regular or stated meetings shall be given by
the Secretary or an Assistant Secretary, or the Clerk or an Assistant Clerk or
by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be telegraphed, cabled,
or wirelessed or sent by facsimile or other electronic means to each Trustee at
his business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, which
telephone conference meeting shall be deemed to have been held at a place
designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if all the Trustees consent to the
action in writing and the written consents are filed with the records of the
Trustees' meetings. Such consents shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) Trustees to hold office at the
pleasure of the Trustees which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to the Executive
Committee except those powers which by law, the Declaration or these By-Laws
they are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time, the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation a Committee
may elect its own Chairman.
Section 2. Meeting, Quorum and Manner of Acting. The Trustees may (i)
provide for stated meetings of any Committee, (ii) specify the manner of calling
and notice required for special meetings of any Committee, (iii) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (iv) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (v) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
Section 3. Advisory Board. The Trustees may appoint an Advisory Board
to consist in the first instance of not less than three (3) members. Members of
such Advisory Board shall not be Trustees or officers and need not be
Shareholders. A member of such Advisory Board shall hold office for such period
as the Trustees may by resolution provide. Any member of such board may resign
therefrom by a written instrument signed by him which shall take effect upon
delivery to the Trustees. The Advisory Board shall have no legal powers and
shall not perform the functions of Trustees in any manner, such Advisory Board
being intended merely to act in an advisory capacity. Such Advisory Board shall
meet at such times and upon such notice as the Trustees may by resolution
provide.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
Chairman, a President, a Treasurer and a Clerk, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, a
Secretary and one or more Assistant Secretaries, one or more Assistant
Treasurers, and one or more Assistant Clerks. The Trustees may delegate to any
officer or committee the power to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these By-Laws, the Chairman, the President,
the Treasurer and the Secretary shall hold office until his respective successor
shall have been duly elected and qualified, and all other officers shall hold
office at the pleasure of the Trustees. The Clerk and Treasurer or the Clerk and
Secretary or all three may be the same person. A Vice President and the
Treasurer or a Vice President and the Clerk and the Secretary may be the same
person, but the offices of Vice President, Clerk and Treasurer shall not be held
by the same person. Except as above provided, any two offices may be held by the
same person. Any officer may be, but none need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any officer or agent appointed by any officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Chairman may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and any Committees of the Trustees, the Chairman shall at all times
exercise a general supervision and direction over the affairs of the Trust. The
Chairman shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. The Chairman shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The Chairman shall have such other powers and duties as,
from time to time, may be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of the President. In the absence or
disability of the Chairman, the President shall perform all the duties and may
exercise any of the powers of the Chairman, subject to the control of the
Trustees. The President shall perform such other duties as may be assigned to
him from time to time by the Trustees or the Chairman.
Section 6. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to such custodian
as the Trustees may employ pursuant to Article X hereof. The Treasurer shall
render a statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required to do so by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
Section 8. Powers and Duties of the Clerk. The Clerk shall keep the
minutes of all meetings of the Shareholders in proper books provided for that
purpose; he shall have custody of the seal of the Trust; he shall have charge of
the Share transfer books, lists and records unless the same are in the charge of
the Transfer Agent. He or the Secretary shall attend to the giving and serving
of all notices by the Trust in accordance with the provisions of these By-Laws
and as required by law; and subject to these By-Laws, he shall in general
perform all duties incident to the office of Clerk and such other duties as from
time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of The Secretary. The Secretary, if any,
shall keep the minutes of all meetings of the Trustees. He shall perform such
other duties and have such other powers in addition to those specified in these
By-Laws as the Trustees shall from time to time designate. If there be no
Secretary or Assistant Secretary, the Clerk shall perform the duties of
Secretary.
Section 10. Powers and Duties of Assistant Treasurers. In the absence
or disability of the Treasurer, any Assistant Treasurer designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Treasurer. Each Assistant Treasurer shall perform such other duties as from
time to time may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if required to do so
by the Trustees, in such sum and with such surety or sureties as the Trustees
shall require.
Section 11. Powers and Duties of Assistant Clerks. In the absence or
disability of the Clerk, any Assistant Clerk designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Clerk. The
Assistant Clerks shall perform such other duties as from time to time may be
assigned to them by the Trustees.
Section 12. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them by the Trustees.
Section 13. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of July in
each year and shall end on the last day of June in the succeeding year,
provided, however, that the Trustees may from time to time change the fiscal
year.
<PAGE>
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed,
cabled or wirelessed for the purposes of these By-Laws when it has been
delivered to a representative of any telegraph, cable or wireless company with
instruction that it be telegraphed, cabled or wirelessed. Any notice shall be
deemed to be given at the time when the same shall be mailed, telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times
employ a bank or trust company having a capital, surplus and undivided profits
of at least five million dollars ($5,000,000.00) as custodian with authority as
its agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in the Declaration, these By-Laws and the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same
upon written order;
(ii) to receive and receipt for any monies due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and accounts
of the Trust and furnish clerical and accounting services; and
(v) if authorized to do so by the Trustees, to compute the net
income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all Trust Property held by it as specified in such
vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least five million dollars ($5,000,000.00)
or such foreign banks and securities depositories as meet the requirements of
applicable provisions of the 1940 Act or the rules and regulations thereunder.
Section 2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodian.
Section 3. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
Section 4. Provisions of Custodian Contract. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled, and shall
order the same to be delivered by the custodian only upon completion of a sale,
exchange, transfer, pledge, or other disposition thereof, and upon receipt by
the custodian of the consideration therefor or a certificate of deposit or a
receipt of an issuer or of its Transfer Agent, all as the Trustees may generally
or from time to time require or approve, or to a successor custodian; and the
Trustees shall cause all funds owned by the Trust or to which it may become
entitled to be paid to the custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in payment of
expenses, including management compensation, and liabilities of the Trust,
including distributions to Shareholders, or to a successor custodian; provided,
however, that nothing herein shall prevent delivery of securities for
examination to the broker selling the same in accord with the "street delivery"
custom whereby such securities are delivered to such broker in exchange for a
delivery receipt exchanged on the same day for an uncertified check of such
broker to be presented on the same day for certification.
(b) In case of the resignation, removal or inability to serve of any
such custodian, the Trust shall promptly appoint another bank or trust company
meeting the requirements of this Article X as successor custodian. The agreement
with the custodian shall provide that the retiring custodian shall, upon receipt
of notice of such appointment, deliver the funds and property of the Trust in
its possession to and only to such successor, and that pending appointment of a
successor custodian, or a vote of the Shareholders to function without a
custodian, the custodian shall not deliver funds and property of the Trust to
the Trust, but may deliver all or any part of them to a bank or trust company
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus and undivided profits (as shown in its last published
report) of at least $5,000,000, as the property of the Trust to be held under
terms similar to those on which they were held by the retiring custodian.
ARTICLE XI
SALE OF SHARES OF THE TRUST
The Trustees may from time to time issue and sell or cause to be issued
and sold Shares for cash or other property, which shall in every case be paid or
delivered to the Custodian as agent of the Trust before the delivery of any
certificate for such shares. The Shares, including additional Shares which may
have been repurchased by the Trust (herein sometimes referred to as "treasury
shares"), may not be sold at a price less than the net asset value thereof (as
defined in Article XII hereof) determined by or on behalf of the Trustees next
after the sale is made or at some later time after such sale.
No Shares need be offered to existing Shareholders before being offered
to others. No Shares shall be sold by the Trust (although Shares previously
contracted to be sold may be issued upon payment therefor) during any period
when the determination of net asset value is suspended by declaration of the
Trustees pursuant to the provisions of Article XII hereof. In connection with
the acquisition by merger or otherwise of all or substantially all the assets of
an investment company (whether a regulated or private investment company or a
personal holding company), the Trustees may issue or cause to be issued Shares
and accept in payment therefor such assets at not more than market value in lieu
of cash, notwithstanding that the federal income tax basis to the Trust of any
assets so acquired may be less than the market value, provided that such assets
are of the character in which the Trustees are permitted to invest the funds of
the Trust.
The Trustees, in their sole discretion, may cause the Trust to redeem
all of the Shares of the Trust held by any Shareholder if the value of such
Shares is less than a minimum amount established from time to time by the
Trustees.
ARTICLE XII
NET ASSET VALUE OF SHARES
Section 1. Time of Determination. The net asset value of each Share
outstanding shall be determined by the Trustees on each business day (which term
shall, wherever it appears in these By-Laws, be deemed to mean each day when the
New York Stock Exchange is open for trading) as of the close of regular trading
on the New York Stock Exchange. The power and duty to determine net asset value
may be delegated by the Trustees from time to time to one or more of the
Trustees or officers of the Trust, to the other party to any contract entered
into pursuant to Section 4.1 of Article IV of the Declaration, or to the
custodian or a transfer agent. The Trustees may also determine or cause to be
determined the net asset value as of any particular time in addition to the
closing time of each business day. Such additional or interim determination may
be made either by appraisal or by calculation or estimate. Any such calculation
or estimate shall be based on changes in the market value of representative or
selected securities or on changes in recognized market averages since the last
closing appraisal, and made in a manner which in the opinion of the Trustees
will fairly reflect the changes in the net asset value. At any time when the New
York Stock Exchange is closed (other than customary weekend and holiday
closings), the Trustees may cause the net asset value to be determined by
appraising all securities at last sale prices, or at not more than the current
asked nor less than the current bid prices, in the over-the-counter or other
markets, and all other assets at fair value in the best judgment of the
Trustees, and otherwise proceeding as above stated. For the purposes of Article
VII of the Declaration and Articles XI and XII hereof, any reference to the time
at which a determination of net asset value is made shall mean the time as of
which the determination is made.
Section 2. Suspension of Determination. The Trustees may declare a
suspension of the determination of net asset value to the extent permitted by
the 1940 Act and rules, regulations and orders promulgated by the Commission
thereunder.
Section 3. Computation. The net asset value of each Share of any series
as of any particular time shall be the quotient (adjusted to the nearer cent)
obtained by dividing the value, as of such time, of the net assets of the Trust
allocated or belonging to such series (i.e., the value of the assets of the
Trust allocated or belonging to such series less the liabilities of the Trust
attributable to such series exclusive of capital and surplus) by the total
number of Shares of such series outstanding (exclusive of treasury shares) at
such time. In determining the net asset value of each share of any series:
A. Assets allocated or belonging to, and liabilities attributable to,
such series shall be determined as provided in Section 6.9 of the Declaration.
B. The assets of the Trust shall be deemed to include (a) all cash on
hand, on deposit or on call, including any interest accrued thereon, (b) all
bonds, debentures, bills and notes and accounts receivable and other evidences
of indebtedness, (c) all shares of stock, subscription rights, warrants, and
other securities, other than its own Shares, (d) all stock and cash dividends or
distributions receivable by the Trust which have been declared and are
ex-dividend to shareholders of record at or before the time as of which the net
asset value is being determined, (e) all interest accrued on any
interest-bearing securities owned by the Trust, and (f) all other property of
every kind and nature including prepaid expenses, the value of such assets to be
determined as follows:
(i) The value of any cash on hand, on deposit or on call, bills
and notes and accounts receivable, prepaid expenses, cash dividends and
interest declared or accrued as aforesaid and not yet received, shall
be deemed to be the face amount thereof unless the Trustees shall have
determined that any such item is not worth the face amount thereof, in
which event the value thereof shall be determined in good faith by or
at the direction of the Trustees;
(ii) The value of any security which is listed or dealt in upon
the New York Stock Exchange or upon the American Stock Exchange shall
be determined by taking the latest sale price (or, lacking any sales
not less than the closing bid price nor more than the closing asked
price therefor) at the time as of which the net asset value is being
determined, all as reported by any report in common use or authorized
by the New York Stock Exchange or the American Stock Exchange, as the
case may be; provided, however, that prices on such Exchanges need not
be used to determine the value of debt securities owned by the Trust
if, in the opinion of the Trustees, some other method would more
accurately reflect the fair market value of such debt securities;
(iii) The value of any security which is not listed or dealt in on
either of such Exchanges shall be determined in the manner described in
the next preceding paragraph if listed or dealt in on any other
Exchange;
(iv) The value of any security not listed or dealt in on any
Exchange and for which market quotations are readily available shall be
determined by taking not less than the closing bid price nor more than
the closing asked price therefor on the date as of which the net asset
value is being determined; and
(v) In the case of any security or other property for which no
price quotations are available as above provided, the value thereof
shall be determined from time to time in such manner as the Trustees
shall from time to time provide by resolution.
B. The liabilities of the Trust shall be deemed to include (a) all
bills, notes and accounts payable, (b) all administrative expenses payable
and/or accrued, (c) all contractual obligations for the payment of money or
property, including the amount of any unpaid dividends upon the Shares, declared
to Shareholders of record at or before the time as of which the net asset value
is being determined, (d) all reserves authorized or approved by the Trustees for
taxes or contingencies, and (e) all other liabilities of the Trust of whatsoever
kind and nature except liabilities represented by outstanding Shares and capital
surplus of the Trust.
C. For the purposes of this Article XII
(i) Shares sold shall be deemed to become outstanding immediately
after the close of business on the day on which the contract of sale is
made, and the sale price thereof (less commission, if any, and less any
stamp or other tax payable by the Trust in connection with the issuance
thereof) shall thereupon be deemed an asset of the Trust.
(ii) Shares tendered for purchase by the Trust under Section 7.1
of Article VII of the Declaration shall be deemed to be outstanding at
the close of business on the day as of which the purchase price is
determined, and thereafter they shall be deemed treasury stock and,
until paid, the price thereof shall be deemed a liability of the Trust.
(iii) Credits and contractual obligations payable to the Trust in
foreign currency and liabilities and contractual obligations payable by
the Trust in foreign currency shall be taken at the current cable rate
of exchange as nearly as practicable at the time as of which the net
asset value is computed.
(iv) Portfolio securities owned by the Trust which the Trustees or
their delegate shall, pursuant to Section 7.3 of Article VII of the
Declaration, have selected for distribution in redemption or repurchase
of Shares tendered to it pursuant to Section 7.1 of Article VII of the
Declaration at any time shall be included in determining the price of
such Shares, and thereafter neither such securities nor such Shares
shall be included in determinations of net asset value pursuant to this
Article XII.
ARTICLE XIII
DIVIDENDS AND DISTRIBUTIONS
Section 1. Limitations on Distributions. The total of distributions to
Shareholders of a particular series paid in respect of any one fiscal year,
subject to the exceptions noted below, shall, when and as declared by the
Trustees be approximately equal to the sum of (A) the net income, exclusive of
the profits or losses realized upon the sale of securities or other property, of
such series for such fiscal year, determined in accordance with generally
accepted accounting principles (which, if the Trustees so determine, may be
adjusted for net amounts included as such accrued net income in the price of
Shares of such series issued or repurchased), but if the net income of such
series exceeds the amount distributed by less than one cent per share
outstanding at the record date for the final dividend, the excess shall be
treated as distributable income of such series for the following fiscal year;
and (B), in the discretion of the Trustees, an additional amount which shall not
substantially exceed the excess of profits over losses on sales of securities or
other property allocated or belonging to such series for such fiscal year. The
decision of the Trustees as to what, in accordance with generally accepted
accounting principles, is income and what is principal shall be final, and
except as specifically provided herein the decision of the Trustees as to what
expenses and charges of the Trust shall be charged against principal and what
against income shall be final, all subject to any applicable provisions of the
1940 Act and rules, regulations and orders of the Commission promulgated
thereunder. For the purposes of the limitation imposed by this Section 1, Shares
issued pursuant to Section 2 of this Article XIII shall be valued at the amount
of cash which the Shareholders would have received if they had elected to
receive cash in lieu of such Shares.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give to the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes. Any payment made to
Shareholders pursuant to clause (B) of this Section 1 shall be accompanied by a
written statement showing the source or sources of such payment, and the basis
of computation thereof.
Section 2. Distributions Payable in Cash or Shares. The Trustees shall
have power, to the fullest extent permitted by the laws of The Commonwealth of
Massachusetts but subject to the limitation as to cash distributions imposed by
Section 1 of this Article XIII, at any time or from time to time to declare and
cause to be paid distributions payable at the election of any Shareholder of any
series (whether exercised before or after the declaration of the distribution)
either in cash or in Shares of such series, provided that the sum of (i) the
cash distribution actually paid to any Shareholder and (ii) the net asset value
of the Shares which that Shareholder elects to receive, in effect at such time
at or after the election as the Trustees may specify, shall not exceed the full
amount of cash to which that Shareholder would be entitled if he elected to
receive only cash. In the case of a distribution payable in cash or Shares at
the election of a Shareholder, the Trustees may prescribe whether a Shareholder,
failing to express his election before a given time shall be deemed to have
elected to take Shares rather than cash, or to take cash rather then Shares, or
to take Shares with cash adjustment of fractions.
Section 3. Stock Dividends. Anything in these By-Laws to the contrary
notwithstanding, the Trustees may at any time declare and distribute pro rata
among the Shareholders of any series a "stock dividend" out of either authorized
but unissued Shares of such series or treasury Shares of such series or both.
ARTICLE XIV
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be adopted (a) by Majority Shareholder Vote, or (b) by the
Trustees, provided, however, that no By-Law may be altered, amended, adopted or
repealed by the Trustees if such alteration, amendment, adoption or repeal
requires, pursuant to law, the Declaration or these By-Laws, a vote of the
Shareholders.
EXHIBIT NO. 99.2(b)
Certificate of Assistant Secretary
The undersigned, being the Assistant Secretary of MFS Institutional Trust, a
Massachusetts business trust (the "Trust"), hereby certifies that the following
is a copy of the vote, adopted by the Board of Trustees of the Trust on February
11, 1993, and that such vote remains in full force and effect on the date
hereof:
VOTED: That Section 4 of Article III of the By-Laws of the Trust be, and it
hereby is, amended to include the following sentence:
The placing of a Shareholder's name on a proxy pursuant to telephonic
or electronically transmitted instructions obtained pursuant to
procedures reasonably designed to verify that such instructions have
been authorized by such Shareholder shall constitute execution of such
proxy by or on behalf of such Shareholder.
IN WITNESS WHEREOF, I have hereunder set my hand this 14th day of October 1993.
JAMES R. BORDEWICK, JR.
James R. Bordewick, Jr.
Assistant Secretary
EXHIBIT NO. 99.5(a)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 7th day of August, 1992, by and
between MFS INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"),
on behalf of MFS EMERGING EQUITIES FUND, a series of the Trust (the "Fund"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940 divided into separate series of shares; and
WHEREAS, the Adviser is willing to provide business services to the Trust with
respect 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 Fund 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
for the Fund and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated 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, as amended (the "1940 Act") and the Rules,
Regulations and orders thereunder, and to the Fund's then-current Prospectus and
Statement of Additional Information (collectively, the "Prospectus"). 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
portfolio securities of the Fund 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
Trust as to the deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser is directed to seek for the Fund execution
at the most reasonable price by responsible brokerage firms at reasonably
competitive commission rates. In fulfilling this requirement the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty, created by
this Agreement or otherwise, solely by reason of its having caused the Fund to
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish at its
own expense investment advisory and administrative services, office space,
equipment and clerical personnel necessary for servicing the investments of the
Fund and maintaining its organization, and investment advisory facilities and
executive and supervisory personnel for managing the investments and effecting
the portfolio transactions of the Fund. The Adviser shall arrange, if desired by
the Fund, 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 Trust on behalf of the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of shares of the Fund; expenses of shareholders' meetings;
and expenses relating to the issuance, registration and qualification of shares
of the Fund and the preparation, printing and mailing of prospectuses for such
purposes (except to the extent that any Distribution Agreement to which the
Trust is a party provides that another party is to pay some or all of such
expenses); all such expenses to be allocated among the respective series of the
Trust as provided in Section 6.9 of the Declaration.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered and the
facilities provided, the Fund shall pay to the Adviser an investment advisory
fee computed and paid monthly at an annual rate of .75% of the Fund's average
daily net assets of the Fund for its then-current fiscal year. If the Adviser
shall serve for less than the whole of any period specified in this Article 3,
the compensation to the Adviser will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not deal
with itself, or with the Trustees of the Trust or the Trust's principal
underwriter, if any, as principals in making purchases or sales of securities or
other property for the account of the Trust, except as permitted by the 1940 Act
and the Rules, Regulations or orders thereunder, will not take a long or short
position in the shares of the Trust except as permitted by the Declaration, and
will comply with all other provisions of the Declaration and the By-Laws and the
then-current Prospectus of the Fund relative to the Adviser and its directors
and officers.
ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management of
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its duties and
obligations hereunder. As used in this Section 5, the term "Adviser" shall
include directors, officers and employees of the Adviser as well as that
corporation itself.
ARTICLE 6. Activities of the Adviser. The services of the Adviser to the Fund
are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Trust agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Trust, each
of the Trust and 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 Trust as a shareholder or otherwise.
ARTICLE 7. Duration, Termination and Amendment of this Agreement. This Agreement
shall become effective on the date first above written and shall govern the
relations between the parties hereto thereafter, and shall remain in force with
respect to the Fund until August 1, 1994 on which date it will terminate with
respect to the Fund unless its continuance after August 1, 1994 is "specifically
approved at least annually" (i) by the vote of a majority of the Trustees of the
Trust who are not "interested persons" of the Trust or of the Adviser at a
meeting specifically called for the purpose of voting on such approval, and (ii)
by the Board of Trustees of the Trust, or by "vote of a majority of the
outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any penalty
by the Trustees or by "vote of a majority of the outstanding voting securities"
of the Fund, or by the Adviser, in each case on not more than sixty days' nor
less than thirty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment."
This Agreement may be amended only if such agreement is approved by "vote of a
majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually," "vote of a majority of the
outstanding voting securities" of the Fund, "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 1940
Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered in their names and on their behalf by the undersigned, thereunto duly
authorized, all as of the day and year first written above. The undersigned
Trustee of the Trust has executed this Agreement not individually, but as
Trustee under the Declaration and the obligations of this Agreement are not
binding upon any of the Trustees or shareholders of the Trust, individually, but
bind only the Trust estate.
MFS INSTITUTIONAL TRUST
on behalf of
MFS EMERGING EQUITIES FUND
By: STEPHEN E. CAVAN
Stephen E. Cavan
Secretary
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: ARTHUR D. BOND, JR.
Arthur D. Bond, Jr.
Senior Executive Vice
President and Chief Financial Officer
EXHIBIT NO. 99.5(b)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 7th day of August, 1995, by and
between MFS INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"),
on behalf of MFS WORLDWIDE 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 an open-end investment company registered under the
Investment Company Act of 1940 divided into separate series of shares; and
WHEREAS, the Adviser is willing to provide business management services to the
Trust 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 Fund 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
for the Fund and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated 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, as amended (the "1940 Act") and the Rules,
Regulations and orders thereunder, and to the Fund's then-current Prospectus and
Statement of Additional Information (collectively, the "Prospectus"). 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
portfolio securities of the Fund shall be exercised. Should the Trustees at any
time, however, make any definite determination as to the investment policy and
notify the Adviser thereof in writing, the Adviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination shall be revoked. The Adviser shall
take, on behalf of the Fund, all actions which it deems necessary to implement
the investment policies determined as provided above, and in particular to place
all orders for the purchase or sale of portfolio securities for the Fund's
account with brokers or dealers selected by it, and to that end, the Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to the deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser is directed to seek for the Fund execution
at the most reasonable price by responsible brokerage firms at reasonably
competitive commission rates. In fulfilling this requirement the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty, created by
this Agreement or otherwise, solely by reason of its having caused the Fund to
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
ARTICLE 2. Allocation of Charges and Expenses. The Adviser shall furnish at its
own expense investment advisory and administrative services, office space,
equipment and clerical personnel necessary for servicing the investments of the
Fund and maintaining its organization, and investment advisory facilities and
executive and supervisory personnel for managing the investments and effecting
the portfolio transactions of the Fund. The Adviser shall arrange, if desired by
the Fund, 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); all such expenses to be allocated among the respective series of
the Trust as provided in Section 6.9 of the Declaration.
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 .75% of the Fund's average
daily net assets on an annualized basis. If the Adviser shall serve for less
than the whole of any period specified in this Article 3, the compensation
payable to the Adviser with respect to the Fund will be prorated.
ARTICLE 4. Covenants of the Adviser. The Adviser agrees that it will not deal
with itself, or with the Trustees of the Trust or the Trust's principal
underwriter, if any, as principals in making purchases or sales of securities or
other property for the account of the 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 5. Limitation of Liability of the Adviser. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management of
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties 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 6. 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 Trust agrees that if the
Adviser shall for any reason no longer serve as the Adviser to the Trust, each
of the Trust and 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 7. Duration, Termination and Amendment of this Agreement. This Agreement
shall become effective as of the day and year first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force with respect to the Fund until August 1, 1994 on which date it will
terminate with respect to the Fund unless its continuance after August 1, 1994
is "specifically approved at least annually" (i) by the vote of a majority of
the Trustees of the Trust who are not "interested persons" of the Trust or of
the Adviser at a meeting specifically called for the purpose of voting on such
approval, and (ii) by the Board of Trustees of the Trust, or by "vote of a
majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without the payment of any penalty
by the Trustees or by "vote of a majority of the outstanding voting securities"
of the Fund, or by the Adviser, in each case on not more than sixty days' nor
less than thirty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment."
This Agreement may be amended only if such amendment is approved by "vote of a
majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually," "vote of a majority of the
outstanding voting securities," "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered in their names and on their behalf by the undersigned, thereunto duly
authorized, and their respective seals to be hereto affixed, all as of the day
and year first above written. The undersigned Trustee of the Trust has executed
this Agreement not individually, but as Trustee under the Declaration and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of the Trust, individually, but bind only the Trust estate.
MFS INSTITUTIONAL TRUST
on behalf of
MFS WORLDWIDE FIXED INCOME FUND
By: STEPHEN E. CAVAN
Stephen E. Cavan
Secretary
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: ARTHUR D. BOND, JR.
Arthur D. Bond, Jr.
Senior Executive Vice President, and
Chief Financial Officer
EXHIBIT NO. 99.9(c)
PUBLIC FUNDS INVESTMENT TRUST
October 31, 1990
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Dividend Disbursing Agency Agreement
Dear Sirs:
The above-listed fund (the "Trust") is an open-end registered
investment company organized as a Massachusetts business trust. The Trust has
selected you to act as its Dividend Disbursing Agent and you hereby agree to act
as such Agent and perform the duties and functions thereof in the manner and on
the conditions hereinafter set forth. Accordingly, the Trust individually hereby
agrees with you as follows:
1. Services to be Performed. As Dividend Disbursing Agent ("Agent"),
you shall be responsible for performing dividend and distribution disbursing
agent functions with regard to the Trust's shares of beneficial interest
("Shares"). The details of the operating standards and procedures to be followed
by you shall be determined from time to time by agreement between you and the
Trust.
2. Standard of Service. As Agent for the Trust, you agree to provide
service equal to at least that provided by you or others furnishing dividend and
distribution disbursing services to other open-end investment companies
("Standard") at a fee, as may be agreed to from time to time, comparable to the
fee paid you for your services hereunder. The Standard shall include at least
the following:
(a) Prompt processing of all matters requiring action by you;
(b) Prompt clearance of any daily volume backlog;
(c) Providing innovative services and technological improvements;
(d) Meeting the requirements of any governmental authority having
jurisdiction over you or the Trust; and
(e) Prompt reconciliation of all bank accounts under your control
belonging to the Trust.
If the Trust 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 shall then 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 (c) of this
paragraph 2. If at the end of such period the Trust remains reasonably of the
view that the service provided by you in the particulars specified, does not
meet the Standard, then the Trust may, by appropriate action, elect to terminate
this Agreement for cause upon 90 days notice to you. Upon termination hereof,
the Trust 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.
3. 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
Trust and that all such records and other data shall be furnished without
additional charge, except for actual processing costs, to the Trust in machine
readable as well as printed form immediately upon termination of this Agreement
or at the Trust's request. You shall safeguard and maintain the confidentiality
of the Trust's data and information supplied to you by the Trust and you shall
not transfer or disclose the Trust's data to any third party without the Trust's
prior written consent unless compelled to do so by order of a court or a
regulatory authority.
4. Fees. The fee, based upon check clearance and reconciliation work
performed hereunder, shall not be in excess of such amount as shall be agreed in
writing between us. Such fee shall be payable in monthly installments. 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 your expenses, which either you
or the Trust may require to be certified by a major accounting firm acceptable
to the parties. The party requesting such certification shall bear all expenses
thereof. In addition to the foregoing fee, you will be reimbursed by the Trust
for out-of-pocket expenses reasonably incurred by you on behalf of the Trust,
including but not limited to expenses for stationery, postage, telephone and
telegraph line and toll charges and similar items.
5. Record Keeping. You 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 or the Trust's transfer agent.
6. 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 Trust 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 Trust
hereunder. In addition, the Trust 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 given executed or orally
communicated by any person duly authorized by the Trust 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 Trust, 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 Trust may be asked
to indemnify you or hold you harmless, the Trust shall be advised of all
pertinent facts concerning the situation in question and you will use reasonable
care to identify and notify the Trust promptly concerning any situation which
presents or appears likely to present a claim for indemnification against the
Trust. The Trust shall have the option to defend you against any claim which may
be the subject of this indemnification, and in the event that the Trust so
elects such defense shall be conducted by counsel chosen by the Trust and
satisfactory to you and it will so notify you, and thereupon the Trust 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 Trust will be asked to indemnify you except with the Trust's prior
written consent. The obligations of the parties hereto under this paragraph
shall survive the termination of this Agreement.
7. Insurance. You will notify the Trust 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.
8. 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.
9. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
10. Use of a Sub-Dividend Disbursing 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 one or more
Sub-Dividend Disbursing Agents.
11. 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 2 hereof, this Agreement shall continue
indefinitely until terminated by 90 days' written notice given by the Trust to
you or by you to the Trust. Upon termination hereof, the Trust 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 Trust and provide all necessary
assistance in effectuating an orderly transition upon termination of the
Agreement.
12. Successor. In the event that in connection with termination a
successor to any of your duties or responsibilities hereunder is designated by
the Trust by written notice to you, you will, promptly upon such termination and
at the expense of the Trust, transfer to such successor an historical record of
dividends and disbursements and all other relevant books, records,
correspondence, and other data established or maintained by you under this
Agreement in form reasonably acceptable to the Trust (if such form differs from
the form in which you have maintained the same, the Trust 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
such data by such successor.
13. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. This
Agreement has been executed on behalf of the Trust by the undersigned not
individually, but in the capacity indicated, and the obligations of this
Agreement are not binding upon any of the Trustees or shareholders of the Trust
individually, but bind only the trust estate.
If you are in agreement with the foregoing, please sign the form of
acceptance on this letter and the accompanying counterpart of this letter and
return such counterpart to the Trust whereupon this letter shall become a
binding contract between the Trust and you, the Trust having already executed
this letter and its counterpart.
Very truly yours,
Public Trusts Investment Trust
By: ILLEGIBLE
(Illegible), Chairman
Attest
The foregoing is hereby accepted as of the date thereof
STATE STREET BANK AND TRUST COMPANY
BY: ILLEGIBLE
(Illegible)
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post Effective Amendment
No. 9 to Registration Statement No. 33-37615 of MFS Institutional Trust of our
reports each dated August 4, 1995 appearing in the annual reports to
shareholders for the year ended June 30, 1995 of MFS Institutional Worldwide
Fixed Income Fund (formerly MFS Worldwide Fixed Income Fund) and MFS
Institutional Emerging Equities Fund (formerly MFS Emerging Equities Fund),
series of MFS Institutional Trust, and to the references to us under the
headings "Condensed Financial Information" in the Prospectus and "Independent
Auditors and Financial Statements" in the Statement of Additional Information of
each Fund, all of which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 19, 1995
EXHIBIT NO. 99.15
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, as of this 15th day of June, 1994, by and
between MFS INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"),
on behalf of each series from time to time of the Trust (referred to
individually as a "Fund" and collectively as the "Funds") and MFS INVESTOR
SERVICES, INC., a Delaware corporation (the "Distributor");
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties hereto agree as follows:
l. The Trust grants to the Distributor the right, as agent of the
Trust, to sell Shares of Beneficial Interest, without par value, of the Funds
(the "Shares") upon the terms herein below set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use its
best efforts to find purchasers for Shares.
The Distributor shall have the right, as agent of the Trust, to order
from the Trust the Shares needed, but not more than the Shares needed (except
for clerical errors and errors of transmission) to fill unconditional orders for
Shares placed with the Distributor by investors as set forth in the current
prospectus and statement of additional information (collectively, the
"Prospectus") relating to the Shares. The price which shall be paid to the Trust
for the Shares so purchased shall be the net asset value on which such orders
were based. The Distributor shall notify the Custodian of the Trust, at the end
of each business day, or as soon thereafter as the orders placed with it have
been compiled, of the number of Shares and the prices thereof which have been
ordered through the Distributor since the end of the previous day.
The right granted to the Distributor to place orders for Shares with
the Trust shall be exclusive, except that said exclusive right shall not apply
to Shares issued in the event that an investment company (whether a regulated or
private investment company or a personal holding company) is merged or
consolidated with the Trust (or a Fund) or in the event that the Trust (or a
Fund) acquires by purchase or otherwise, all (or substantially all) the assets
or the outstanding shares of any such company; nor shall it apply to Shares
issued by the Trust (or a Fund) as a stock dividend or a stock split. The
exclusive right to place orders for Shares granted to the Distributor may be
waived by the Distributor by notice to the Trust in writing, either
unconditionally or subject to such conditions and limitations as may be set
forth in the notice to the Trust. The Trust hereby acknowledges that the
Distributor may render distribution and other services to other parties,
including other investment companies. In connection with its duties hereunder,
the Distributor shall also arrange for computation of performance statistics
with respect to the Trust and may arrange for publication of current price
information in newspapers and other publications.
2. The Shares may be sold through the Distributor to investors upon the
following terms and conditions:
The Distributor may place orders for Shares at the net asset value for
such Shares (as established pursuant to paragraph l above) on behalf of such
purchasers and under such circumstances as the Prospectus describes, provided
that such sales comply with Rule 22d-1 under the Investment Company Act of 1940
or any exemptive order granted by the Securities and Exchange Commission. The
Distributor may also place orders for Shares at net asset value on behalf of
persons reinvesting the proceeds of the redemption or resale of Shares or shares
of other investment companies for which the Distributor or its affiliate acts as
distributor or as otherwise provided in the Prospectus.
The net asset value of Shares shall be determined by the Trust or by an
agent of the Trust, as of the close of regular trading of the New York Stock
Exchange on each business day on which said Exchange is open, in accordance with
the method set forth in the governing instruments (as hereinafter defined) of
the Trust. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
hour or hours as may from time to time be agreed upon in writing by the Trust
and Distributor. The Trust shall have the right to suspend the sale of Shares
if, because of some extraordinary condition, the New York Stock Exchange shall
be closed, or if conditions obtaining during the hours when the Exchange is open
render such action advisable, or for any other reasons deemed adequate by the
Trust.
3. The Trust agrees that it will, from time to time, take all necessary
action to register the offering and sale of Shares under the Securities Act of
l933, as amended (the "Act"), and applicable state securities laws.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or shall
be an employee of the Trust. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in the Distributor, as
Directors, officers and employees, or otherwise and that Directors, officers and
employees of the Distributor are or may become similarly interested in the Trust
and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct and
the employment, control and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it
will use its best efforts in all respects duly to conform with the requirements
of all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
Shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person's acquiring any Shares,
which may be based upon the Act or any other statute or common law, on account
of any wrongful act of the Distributor or any of its employees (including any
failure to conform with any requirement of any state or federal law or the Rules
of Fair Practice of the NASD relating to the sale of Shares) or on the ground
that the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless any such act, statement or omission
was made in reliance upon information furnished to the Distributor by or on
behalf of the Trust, provided, however, that in no case (i) is the indemnity of
the Distributor in favor of any person indemnified to be deemed to protect the
Trust or any such person against any liability to which the Trust or any such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its or his duties or by reason of its or
his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Trust or upon such person (or after the Trust or such
person shall have received notice of such service on any designated agent), but
failure to notify the Distributor of any such claim shall not relieve it from
any liability which it may have to the Trust or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if the Distributor elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any such suit and retain such
counsel, the Trust or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Distributor does
not elect to assume the defense of any such suit, it shall reimburse the Trust
and such officers and Trustees or controlling person or persons, defendant or
defendants in such suit, for the reasonable fees and expenses of any counsel
retained by them. The Distributor agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any Shares.
Neither the Distributor nor any other person is authorized to give any
information or to make any representation on behalf of the Trust, other than
those contained in the registration statement or Prospectus filed with the
Securities and Exchange Commission under the Act (as said registration statement
or Prospectus may be amended or supplemented from time to time), covering the
Shares or other than those contained in periodic reports to shareholders of the
Trust.
5. The Trust will pay, or cause to be paid -
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required registration statement or Prospectus under the Act covering Shares
and all amendments and supplements thereto and any notices regarding the
registration of shares, and preparing and mailing to shareholders Prospectuses,
statements and confirmations and periodic reports (including the expense of
setting up in type any such registration statement, Prospectus or periodic
report);
(ii) the expenses (including auditing expenses) of qualification of
the Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Trust as a dealer or broker, in such states as shall be selected
by the Distributor and the fees payable to each such state with respect to
shares sold and for continuing the qualification therein until the Distributor
notifies the Trust that it does not wish such qualification continued;
(iii) the cost of preparing temporary or permanent certificates for
Shares;
(iv) all fees and disbursements of the transfer agent of the Trust;
(v) the cost and expenses of delivering to the Distributor at its
office in Boston, Massachusetts, all Shares purchased through it as agent
hereunder; and
(vi) all the federal and state issue and/or transfer taxes payable
upon the issue by or (in the case of treasury Shares) transfer from the Trust
of any and all Shares purchased through the Distributor hereunder.
The Distributor agrees that, after the Prospectus and periodic reports
have been set up in type, it will bear the expense (other than the cost of
mailing to shareholders of the Trust) of printing and distributing any copies
thereof which are to be used in connection with the offering of Shares to
investors. The Distributor further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the
Distributor for use in connection with the offering of the Shares for sale to
the public and any expenses of advertising in connection with such offering.
Nothing in this paragraph 5 shall be deemed to prohibit or conflict with any
payment by the Trust or any Fund to the Distributor pursuant to any Distribution
Plan adopted and in effect pursuant to Rule 12b-1 under the Investment Company
Act of 1940.
6. The Trust hereby authorizes the Distributor to repurchase, upon the
terms and conditions set forth in written instructions given by the Trust to the
Distributor from time to time, as agent of the Trust and for its account, such
Shares as may be offered for sale to the Trust from time to time.
(a) The Distributor shall notify in writing the Custodian of the
Trust, at the end of each business day, or as soon thereafter as the repurchases
have been compiled, of the number of Shares repurchased for the account of the
Trust since the last previous report, together with the prices at which such
repurchases were made, and upon the request of any officer or Trustee of the
Trust shall furnish similar information with respect to all repurchases made up
to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time. Unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Distributor, by telegraph or by written notice from the Trust. In
the event that the authorization of the Distributor is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the members of the Board of Trustees of the Trust.
(c) The Distributor shall have the right to terminate the operation
of this paragraph 6 upon giving to the Trust thirty days' written notice
thereof.
(d) The Trust agrees to authorize and direct the Custodian to pay,
for the account of the Trust, the purchase price of any Shares so repurchased
against delivery of the certificates, if any, in proper form for transfer to the
Trust or for cancellation by the Trust.
(e) The Distributor shall receive no commission in respect of any
repurchase of Shares under the foregoing authorization and appointment as agent.
(f) The Trust agrees to reimburse the Distributor, from time to time
upon demand, for any reasonable expenses incurred in connection with the
repurchase of Shares pursuant to this paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts, any state or federal
tax laws, it shall notify the Distributor of the form of amendment which it
deems necessary or advisable and the reasons therefor. If the Distributor
declines to assent to such amendment, the Trust may terminate this Agreement
forthwith by written notice to the Distributor without payment of any penalty.
If, at any time during the existence of this Agreement, upon request by the
Distributor, the Trust fails (after a reasonable time) to make any changes in
its governing instruments or in its methods of doing business which are
necessary in order to comply with any requirements of federal or state laws or
regulations, laws or regulations of the Securities and Exchange Commission or of
a national securities association of which the Distributor is or may be a
member, relating to the sale of Shares, the Distributor may terminate this
Agreement forthwith by written notice to the Trust without payment of any
penalty.
8. The Distributor agrees that it will not take any long or short
positions in the Shares except as permitted by paragraphs l and 6 hereof.
Whenever used in this Agreement, the term "governing instruments" shall mean the
Declaration of Trust and the By-Laws of the Trust, as from time to time amended.
9. This Agreement shall become effective upon its execution and shall
continue in force until June 15, 1996 on which date it will terminate unless its
continuance after June 15, 1996, is specifically approved at least annually (i)
by the vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Trust or of the Distributor at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Trust. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of l940 and the Rules and
Regulations thereunder.
This Agreement may be terminated at any time by either party without
payment of any penalty on not more than sixty days' or less than thirty days'
written notice to the other party.
l0. This Agreement shall automatically terminate in the event of its
assignment.
11. The terms "vote of a majority of the outstanding voting
securities", "interested person" and "assignment" shall have the respective
meanings specified in the Investment Company Act of l940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
12. This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.
13. The undersigned officer of the Trust has executed the Agreement not
individually, but as an officer under the Trust's Declaration of Trust dated
September 1, 1993, and the obligations of the Agreement are not binding upon any
of the Trustees, officers or shareholders of the Trust individually, but bind
only the Trust estate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written on June 15, 1994.
MFS INSTITUTIONAL TRUST
By: A. KEITH BRODKIN
A. Keith Brodkin
Chairman and President
MFS INVESTOR SERVICES, INC.
By: WILLIAM W. SCOTT, JR.
William W. Scott, Jr.
President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS WORLDWIDE
FIXED INCOME FUND AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> MFS WORLDWIDE FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 74,760,118
<INVESTMENTS-AT-VALUE> 76,201,420
<RECEIVABLES> 4,618,578
<ASSETS-OTHER> 4,241
<OTHER-ITEMS-ASSETS> 66,308
<TOTAL-ASSETS> 80,890,547
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,812,267
<TOTAL-LIABILITIES> 4,812,267
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,488,154
<SHARES-COMMON-STOCK> 7,508,732
<SHARES-COMMON-PRIOR> 4,393,102
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 112,014
<ACCUMULATED-NET-GAINS> 2,149,194
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 552,946
<NET-ASSETS> (76,078,280)
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,885,884
<OTHER-INCOME> 0
<EXPENSES-NET> 377,771
<NET-INVESTMENT-INCOME> (3,508,113)
<REALIZED-GAINS-CURRENT> 2,407,671
<APPREC-INCREASE-CURRENT> (195,007)
<NET-CHANGE-FROM-OPS> 5,720,777
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,092,709)
<DISTRIBUTIONS-OF-GAINS> (2,993,073)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,994,435
<NUMBER-OF-SHARES-REDEEMED> 214,803
<SHARES-REINVESTED> 335,998
<NET-CHANGE-IN-ASSETS> 33,714,112
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 382,190
<OVERDISTRIB-NII-PRIOR> 1,701,501
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 395,873
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 599,807
<AVERAGE-NET-ASSETS> 52,717,576
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> 0.70
<PER-SHARE-DIVIDEND> (0.23)
<PER-SHARE-DISTRIBUTIONS> (0.63)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.13
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS EMERGING
EQUITIES FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> MFS EMERGING EQUITIES FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 93,599,640
<INVESTMENTS-AT-VALUE> 109,435,077
<RECEIVABLES> 3,504,268
<ASSETS-OTHER> 4,973
<OTHER-ITEMS-ASSETS> 66,869
<TOTAL-ASSETS> 113,011,187
<PAYABLE-FOR-SECURITIES> 1,130,748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,861,156
<TOTAL-LIABILITIES> 5,991,904
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,799,305
<SHARES-COMMON-STOCK> 6,516,769
<SHARES-COMMON-PRIOR> 2,345,998
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,384,541
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,835,437
<NET-ASSETS> (107,019,283)
<DIVIDEND-INCOME> 114,573
<INTEREST-INCOME> 288,770
<OTHER-INCOME> 0
<EXPENSES-NET> 540,650
<NET-INVESTMENT-INCOME> 137,307
<REALIZED-GAINS-CURRENT> 7,226,805
<APPREC-INCREASE-CURRENT> 17,594,663
<NET-CHANGE-FROM-OPS> 24,684,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,742,406)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,431,790
<NUMBER-OF-SHARES-REDEEMED> 384,807
<SHARES-REINVESTED> 123,788
<NET-CHANGE-IN-ASSETS> 79,460,122
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,037,449
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,037,449)
<GROSS-ADVISORY-FEES> 540,536
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 709,162
<AVERAGE-NET-ASSETS> 72,085,841
<PER-SHARE-NAV-BEGIN> 11.75
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 5.04
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.34
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.42
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
