<PAGE>
As filed with the Securities and Exchange Commission on January 26, 1996
1933 Act File No. 33-68310
1940 Act File No. 811-7992
- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 5
MFS UNION STANDARD 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 January 28, 1996 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
its Shares of Beneficial Interest, without par value, under the Securities
Act of 1933. The Registrant filed a Rule 24f-2 Notice for its fiscal year
ended September 30, 1995 on November 16, 1995.
- ---------------------------------------------------------------------------
<PAGE>
MFS UNION STANDARD TRUST
MFS UNION STANDARD EQUITY FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------------------- ----------------
<S> <C> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Condensed Financial Information *
(b) * *
(c), (d) Information Concerning Shares of *
the Fund - Performance Information
4 (a) The Trust and the Fund; Investment *
Objective and Policies; Investment
Techniques
(b), (c) Investment Objective and Policies; *
Investment Techniques
5 (a) The Trust and the Fund; Management *
of the Fund - Investment Adviser
(b) Front Cover Page; Management of *
the Fund - Investment Adviser; Back
Cover Page
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------------------- ----------------
<S> <C> <C>
(c) Management of the Fund - Investment *
Adviser
(d) * *
(e) Management of the Fund - Shareholder *
Servicing Agent; Back Cover Page
(f) Expense Summary; Condensed Financial *
Information
(g) 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; Information Concerning
Shares of the Fund - Purchases;
Information Concerning Shares of the
Fund - Exchanges
(b), (c), (d) * *
(e) Shareholder Services *
(f) Information Concerning Shares of the *
Fund - Distributions; Shareholder
Services - Distribution Options
(g) Information Concerning Shares of the *
Fund - Tax Status; Information
Concerning Shares of the Fund -
Distributions
7 (a) Front Cover Page; Management of the *
Fund - Distributor; Back Cover Page
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------------------- ----------------
<S> <C> <C>
(b) Information Concerning Shares of the *
Fund - Purchases; Information
Concerning Shares of the Fund -
Net Asset Value
(c) Information Concerning Shares of the *
Fund - Exchanges; Shareholder
Services
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases; Shareholder Services
(e) Information Concerning Shares of the *
Fund - Distribution Plan; Expense
Summary
(f) Information Concerning Shares of the *
Fund - Distribution Plan
8 (a) Information Concerning Shares of the *
Fund - Redemptions
(b), (c), (d) Information Concerning Shares of the *
Fund - Redemptions
9 * *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------------------- ----------------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * General Information and
Definitions
13 (a) * Investment Objective and
Policies
(b), (c) * Investment Objective and
Policies; Investment
Restrictions
(d) * *
14 (a), (b) * Management of the Fund -
Trustees; Management of
the Fund - Officers
(c) * Management of the Fund -
Trustees; Management of
the Fund - Officers;
Appendix A
15 (a) * *
(b), (c) * Management of the Fund -
Trustees; Management of
the Fund -Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser;
Management of the Fund -
Trustees; Management of
the Fund - Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------------------- ----------------
<S> <C> <C>
(c) * *
(d) * Management of the Fund -
Investment Adviser
(e) * Portfolio Transactions and
Brokerage Commissions
(f) Information Concerning Shares Distribution Plan
of the Fund - Distribution Plan
(g) * *
(h) * Management of the Fund -
Custodian; Independent
Auditors and Financial
Statements; Back Cover
Page
(i) * Management of the Fund -
Shareholder Servicing
Agent
17 (a), (b), (c),
(d), (e) * Portfolio Transactions and
Brokerage Commissions
18 (a) Information Concerning Shares of Description of Shares,
the Fund - Description of Shares, Voting Rights and
Voting Rights and Liabilities Liabilities
(b) * *
19 (a) Information Concerning Shares of *
the Fund - Purchases
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------------------- ----------------
<S> <C> <C>
(b) Information Concerning Shares of Determination of Net Asset
the Fund - Net Asset Value; Value; Performance
Information Concerning Shares Information - Net Asset
of the Fund - Purchases Value
(c) * *
20 * Tax Status
21 (a), (b) * Management of the Fund -
Distributor; Distribution
Plan
(c) * *
22 (a) * *
(b) * Determination of Net Asset
Value; Performance
Information
23 * Independent Auditors and
Financial Statements
</TABLE>
_____________________________
* Not Applicable
** Contained in Annual Report (for the MFS Union Standard Equity Fund)
<PAGE>
<TABLE>
<S> <C>
PROSPECTUS
February 1,
1996
MFS-REGISTERED TRADEMARK- Shares of
UNION Beneficial
STANDARDSM EQUITY FUND Interest
</TABLE>
- --------------------------------------------------------------------------------
MFS UNION STANDARDSM TRUST
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
MFS Union StandardSM Equity Fund (the "Equity Fund" or the "Fund") is a series
of MFS Union StandardSM Trust (the "Trust"), a professionally managed no-load,
open-end, investment management company. The Trust is designed to permit pension
plans to invest in companies which meet certain labor sensitivity criteria
selected for inclusion in the ACS Labor Sensitivity IndexSM (the "LSISM") and to
make economically targeted investments. The LSI is a common stock index
comprised of companies selected based on labor sensitivity criteria.
The Fund seeks long-term growth of capital that, net of Fund expenses, exceeds
the performance of the LSI primarily by investing in the equity securities of
companies included in the LSI and by investing in equity securities where such
investment is consistent with an economically targeted investment strategy.
Dividend and interest income, if any, is incidental to the Fund's objective of
long-term growth of capital.
The minimum initial investment generally is $3 million per account (see
"Purchases"). The Fund's investment adviser and distributor are Massachusetts
Financial Services Company ("MFS" or the "Adviser") and MFS Fund Distributors,
Inc. ("MFD"), respectively, both of which are located at 500 Boylston Street,
Boston, Massachusetts 02116.
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 ("SAI"), dated February 1,
1996, as amended or supplemented from time to time, which contains more detailed
information about the Trust and the Fund. The SAI is incorporated into this
Prospectus by reference. See page 17 for a further description of the
information set forth in the SAI. A copy of the SAI may be obtained without
charge by contacting the Shareholder Servicing Agent (see back cover for address
and phone number).
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.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C>
1. Expense Summary............................................................................................ 3
2. Condensed Financial Information............................................................................ 4
3. The Trust and the Fund..................................................................................... 4
4. Labor Sensitivity Index.................................................................................... 5
5. Investment Objective and Policies.......................................................................... 6
6. Investment Techniques...................................................................................... 7
7. Management of the Fund..................................................................................... 11
8. Information Concerning Shares of the Fund.................................................................. 12
Purchases.............................................................................................. 12
Exchanges.............................................................................................. 13
Redemptions............................................................................................ 13
Distribution Plan...................................................................................... 14
Distributions.......................................................................................... 15
Tax Status............................................................................................. 15
Net Asset Value........................................................................................ 15
Description of Shares, Voting Rights and Liabilities................................................... 16
Performance Information................................................................................ 16
Expenses............................................................................................... 16
9. Shareholder Services....................................................................................... 17
</TABLE>
2
<PAGE>
1. EXPENSE SUMMARY
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares (as
a percentage of offering price).................................... NONE
Maximum Sales Load Imposed on Reinvested Dividends.................. NONE
Deferred Sales Load................................................. NONE
Redemption Fee...................................................... NONE
Exchange Fee........................................................ NONE
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees..................................................... 0.65%
Rule 12b-1 Fees(1).................................................. 0.15%
Other Expenses (after expense reimbursement)(2)..................... 0.20%
Total Operating Expenses (after expense reimbursement)(2)........... 1.00%
</TABLE>
- --------------
(1) The Fund has adopted a Distribution Plan in accordance with Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act"), which
provides that it will pay distribution fees aggregating up to (but not
necessarily all of) 0.25% per annum of its average daily net assets. This
fee is set at 0.15% per annum of the average daily net assets of the Fund
for the current fiscal year.
(2) The Adviser has agreed to bear until December 31, 1998, subject to
reimbursement as described under "Information Concerning Shares of the Fund
-- Expenses," the Fund's expenses such that "Total Operating Expenses" does
not exceed 1.00% per annum of the average daily net assets of the Fund
during the current fiscal year and each fiscal year thereafter through
December 31, 1998. Otherwise, "Other Expenses" and "Total Operating
Expenses" for the Fund for the current fiscal year would be 0.32% and 1.12%
per annum, respectively. See "Information Concerning Shares of the Fund --
Expenses."
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in a Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):
<TABLE>
<CAPTION>
EQUITY
PERIOD FUND
------------------------------------------------------------------------ ------
<S> <C>
1 year.................................................................. $ 10
3 years................................................................. 32
5 years................................................................. 55
10 years................................................................ 122
</TABLE>
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. The 5% annual return used in the example is only for
illustration. More complete descriptions of the following Fund expenses are set
forth in the following sections: (i) management fees -- "Management of the Fund
- -- Investment Adviser" and (ii) Rule 12b-1 (I.E., distribution plan) fees --
"Distribution Plan."
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.
3
<PAGE>
2. CONDENSED FINANCIAL INFORMATION
The following information has been audited since the inception of the Fund and
should be read in conjunction with the financial statements included in the
Fund's Annual Report to shareholders which are incorporated by reference into
the SAI in reliance upon the report of the Fund's independent auditors given
upon their authority, as experts in accounting and auditing. The Fund's current
independent auditors are Deloitte & Touche LLP.
FINANCIAL HIGHLIGHTS
EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994*
---------------- ------------------
<S> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD):
Net asset value -- beginning of period.................... $ 9.64 $ 10.00
------- -------
Income from investment operations++ --
Net investment income**................................. $ 0.17 $ 0.12
Net realized and unrealized gain (loss) on
investments........................................... 2.14 (0.48)
------- -------
Total from investment operations...................... $ 2.31 $ (0.36)
------- -------
Less distributions declared to shareholders from net
investment income........................................ $ (0.10) $--
------- -------
Net asset value -- end of period.......................... $ 11.85 $ 9.64
------- -------
------- -------
Total return.............................................. 24.21% (3.60)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA**:
Expenses##.............................................. 1.00% 1.00%+
Net investment income................................... 1.58% 1.55%+
PORTFOLIO TURNOVER........................................ 125% 48%
NET ASSETS AT END OF PERIOD (000 OMITTED)................. $35,842 $22,184
</TABLE>
*For the period from the commencement of investment operations, January 14,
1994 to September 30, 1994.
+Annualized.
++Per share data is based on average shares outstanding.
##For fiscal years ended after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly. The ratio of net
expenses to average net assets is 1.00%.
**The investment adviser voluntarily agreed to maintain the expenses of the
Fund at not more than 1.00% of average daily net assets. If this agreement
had not been in effect, the net investment income per share and the ratios
would have been:
<TABLE>
<S> <C> <C>
Net investment income........................................... $0.16 $0.07
RATIOS (TO AVERAGE NET ASSETS):
Expenses##.................................................... 1.12% 1.64%
Net investment income......................................... 1.49% 0.91%
</TABLE>
3. THE TRUST AND THE FUND
The Trust is a no-load, open-end, investment management company designed to
permit pension plans to invest in companies which meet certain labor sensitivity
criteria selected for inclusion in the LSI and to make economically targeted
investments. The Trust was organized as a business trust under the laws of The
Commonwealth of Massachusetts on September 1, 1993. The Trust currently consists
of two diversified series or funds, the Equity Fund and the MFS Union Standard
Research Fund (the "Research Fund"), each of which represents a portfolio with
separate investment objectives and policies as described below. The Research
Fund is offered pursuant to a separate prospectus which may be obtained without
charge by contacting the Shareholder Servicing Agent (see back cover for address
and phone number).
Shares of the Fund are continuously sold to the public and the Fund then uses
the proceeds to buy securities for its portfolio. One hundred percent of the
amount invested in the Fund is used to purchase shares without the deduction of
any sales charge.
4
<PAGE>
The Fund offers to buy back (redeem) its shares from its shareholders at any
time at net asset value without the deduction of any redemption fee or sales
charge. See "Information Concerning Shares of the Fund -- Purchases" and
"--Redemptions" below.
The Trust's Board of Trustees provides broad supervision over the affairs of the
Fund. MFS is the Fund's investment adviser and is responsible for the management
of the Fund's assets, while the officers of the Trust are responsible for the
Fund's operations. MFS manages the Fund's portfolio from day to day in
accordance with its investment objective and policies. A majority of the Trust's
Trustees are not affiliated with MFS. American Capital Strategies Ltd. ("ACS")
administers the LSI for MFS but has no responsibility for rendering investment
advice to MFS or to the Fund.
4. LABOR SENSITIVITY INDEX
The LSI is a common stock index developed and maintained by ACS for use by the
Trust and represents the market weighted performance of common stocks of
companies which ACS and the Labor Advisory Board (as described below) determine
meet certain labor sensitivity criteria. The "Labor Sensitivity IndexSM" and the
"LSISM" are service marks of ACS. The LSI was established on the date the Fund
commenced investment operations (January 14, 1994) and, as of the date of this
Prospectus, is comprised of common stocks of approximately 551 companies which
meet certain quantitative and qualitative labor sensitivity criteria. The
criteria used in developing and maintaining the LSI involve the initial use of
quantitative guidelines and the subsequent use of qualitative guidelines applied
by ACS with the guidance of the Labor Advisory Board (the "Advisory Board"),
which is comprised of senior labor officials, senior managers of companies with
significant labor contracts, academics and other national labor leaders or
experts and has been established by ACS. The Advisory Board provides guidance to
ACS in the development, refinement and application of qualitative and
quantitative labor sensitivity criteria for the development and maintenance of
the LSI. MFS is not affiliated with ACS or the Advisory Board.
In selecting companies for inclusion in the LSI, ACS first compiles a list of
companies with labor agreements. The sources for this list include the research
departments of various international unions, publicly available documents, and
government reports. ACS then applies quantitative guidelines which, as of the
date of this Prospectus, measure the degree to which a company's workforce is
unionized. At its discretion, ACS may vary from time to time the labor
sensitivity factors it considers or change the emphasis it places on any
specific factor.
After ACS has applied the quantitative guidelines, the list is then reviewed by
the Advisory Board, which assists in the application of qualitative guidelines
which take into account a number of labor sensitivity criteria. The qualitative
factors considered include, as of the date of this Prospectus, whether the
company is manufacturing or has manufactured products on the boycott list of the
AFL-CIO or certain other unions, whether the company is or has been involved in
strikes or lock-outs, and whether the company has demonstrated patterns of
non-compliance with applicable labor or health and safety laws. The Advisory
Board also considers patterns of outsourcing and associated plant closings,
patterns of strikes or lockouts, the degree to which a company's labor relations
vary throughout different divisions, subsidiaries, or parts of their company and
the extent of foreign ownership of a company with a unionized workforce, and
will vary from time to time. This list and any subsequent updates are supplied
to MFS by ACS. MFS will purchase, for the Fund's portfolio, securities of
companies included in the LSI in accordance with its investment objective and
policies, but is under no obligation to purchase any securities of particular
companies included in the LSI. The LSI is updated at least quarterly by ACS. See
"Management of the Fund -- Index Manager" and "-- Advisory Board" below.
Like the Standard & Poor's 500 Index (the "S&P 500"), the LSI is a market
capitalization weighted index and reflects the reinvestment of dividends paid on
the common stocks that comprise the LSI. However, unlike certain other stock
indices, such as the S&P 500, the LSI is not a recognized yardstick or
measurement of investment performance. Because of the criteria applied in the
selection of companies to be included in the LSI, the LSI may exclude entirely
or under- or over-weight particular industry sectors relative to other stock
indices such as the S&P 500. The performance of the LSI may not correlate with
the performance of such other indices, such as the S&P 500, for certain periods.
5
<PAGE>
On January 14, 1994, the date that the Fund commenced investment operations, the
unit value of the LSI was established at 100. The unit value of the LSI will be
determined once monthly as of the last day of each month. As the investment
objective of the Fund is to provide long-term growth of capital that, net of
Fund expenses, exceeds the performance of the LSI, from time to time the Fund
will compare its total return for a given time period to the performance of the
LSI for the same time period. See "Investment Objective and Policies" and
"Information Concerning Shares of the Fund -- Performance Information" below.
The performance of the LSI shall be measured by comparing the unit value of the
LSI at the end of the time period to the unit value of the LSI at the beginning
of the time period.
The Fund intends to readjust its securities holdings periodically so that those
holdings will not include, to the extent reasonably practicable, the securities
of any company which has been excluded from the LSI. The Fund is not required to
sell a security which ceases to be contained in the LSI. The timing and extent
of adjustments in the holdings of the Fund will reflect the judgment of MFS as
to the appropriate balance as among the goal of excluding from its portfolio the
securities of any company which was included in the LSI but which has
subsequently been excluded from the LSI, the goal of seeking to achieve the
Fund's investment objective and the goal of minimizing transaction costs. The
Fund is not managed by MFS with the objective of correlating its holdings with
the composition of the LSI, but rather of investing in the securities of those
companies contained in the LSI possessing the best prospects for achieving the
Fund's investment objective. The selection of a company for investment by the
Fund does not constitute an endorsement or validation by the Fund or MFS of the
criteria applied by ACS and the Advisory Board in the development or maintenance
of the LSI. ACS does not determine the investment policies of the Fund or decide
which securities of companies included in the LSI the Fund will buy and sell.
Pursuant to a Proxy Services Agreement between ACS and the Trust, acting on
behalf of the Fund, ASC shall vote all proxies of companies included in the
Fund's portfolio consistent with proxy voting guidelines established by the
AFL-CIO, unless the Board of Trustees of the Trust directs otherwise. These
guidelines obligate ACS to make voting decisions consistent with the economic
best interests of shareholders of the Fund, and set forth considerations to be
taken into account by ACS with respect to certain types of proxy proposals.
5. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
long-term growth of capital that, net of Fund expenses, exceeds the performance
of the LSI. Dividend and interest income from portfolio securities, if any, is
incidental to the Fund's investment objective of long-term growth of capital.
Any investment involves risk and there can be no assurance that the Fund will
achieve its investment objective.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing, under normal market conditions, not less than 65% of its total assets
in equity securities (including preferred stock and securities convertible into
or exchangeable for common or preferred stock) of companies contained in the
LSI, and may invest up to 35% of its total assets in equity securities of
companies which are not contained in the LSI. The Fund's policy is to invest a
substantial proportion of its assets in equity securities of companies believed
by the Adviser to possess opportunities for long-term capital growth with
emphasis on progressive, well-managed companies.
Up to 10% of the Fund's total assets may be invested in equity securities where
such investment is consistent with an economically targeted investment strategy.
An economically targeted investment ("ETI") is an investment designed to produce
a competitive return, as measured against the Fund's other investments, as well
as to create collateral economic benefits for a targeted geographical area,
group of people or sector of the economy. Such collateral economic benefits may
include, for example, expanding employment opportunities, increasing the
availability of affordable housing, building or improving schools, health care
facilities or infrastructure, assisting minority- or women-owned businesses,
developing alternative energy systems, reducing pollution and increasing the tax
base. The Fund's ETI strategy is subject to its limitation on investments in
restricted securities. See "Investment Techniques -- Restricted Securities"
below.
6
<PAGE>
The Fund generally expects to be fully invested in equity securities of
companies contained in the LSI and ETI investments, except for cash and cash
equivalent investments and the investments and investment techniques described
below.
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 MFS is of the
opinion that such security no longer has an appropriate appreciation potential
or when another security appears to offer relatively greater appreciation
potential. Subject to tax requirements, 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. See "Investment Techniques -- Portfolio Trading"
below.
Although changes in the value of securities subsequent to their acquisition are
reflected in the net asset value of shares of the Fund, such changes may not
affect the income received by the Fund from such securities. However, the
dividends paid by the Fund, if any, will increase or decrease in relation to the
income received by the Fund from its investments, which would in any case be
reduced by the Fund's expenses before it is distributed to shareholders.
In addition, the use of options, futures contracts and options on futures
contracts (see "Investment Techniques" below) may result in the loss of
principal, particularly where such instruments are traded for other than hedging
purposes.
6. INVESTMENT TECHNIQUES
SHORT-TERM INVESTMENTS: The Fund may invest in cash or cash equivalents
including, but not limited to, obligations of banks (including certificates of
deposit, bankers' acceptances and repurchase agreements) with assets of $1
billion or more, commercial paper, short-term notes, U.S. Government securities
and related repurchase agreements. 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. During periods of unusual market conditions when MFS believes
that investing for temporary defensive purposes is appropriate, or in order to
meet anticipated redemption requests, a large portion or all of the assets of
the Fund may be invested in cash or cash equivalents.
LENDING OF SECURITIES: The Fund may make loans of its portfolio securities. Such
loans will usually be made only to member banks of the Federal Reserve System
and member firms (and subsidiaries thereof) of the New York Stock Exchange (the
"Exchange") and would be required to be secured continuously by collateral in
cash, U.S. Government securities or an irrevocable letter of credit maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. The Fund would continue to collect the equivalent of the
interest on the securities loaned and would also receive either interest
(through investment of cash collateral) or a fee (if the collateral is U.S.
Government securities). The value of securities loaned will not exceed 30% of
the value of the Fund's total assets.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn income on available cash or as a temporary defensive measure. Under a
repurchase agreement, a Fund acquires securities subject to the seller's
agreement to repurchase at a specified time and price. If the seller becomes
subject to a proceeding under the bankruptcy laws or its assets are otherwise
subject to a stay order, the Fund's right to liquidate the securities may be
restricted (during which time the value of the securities could decline). As
discussed in the SAI, the Fund has adopted certain procedures which are intended
to minimize risk. See "Investment Restrictions" in the SAI.
WHEN-ISSUED SECURITIES: In order to help ensure the availability of suitable
securities for its portfolio, the Fund may purchase securities on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
will be delivered to the Fund at a future date usually beyond customary
settlement time. It is expected that, under normal circumstances, the Fund will
take delivery of such securities. In general, the Fund does not pay for the
securities until received and does not start earning interest on the obligations
until the contractual settlement date. While awaiting delivery of the
obligations purchased on such bases, the Fund will establish a segregated
account consisting of cash, short-term money market instruments or high quality
debt securities equal to the amount of the commitments to purchase "when-issued"
securities. See the SAI for further information.
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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 limitation 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 the 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 those 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.
LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS: The Fund may invest a portion
of its assets in "loan participations" and other direct indebtedness. By
purchasing a loan participation, the Fund acquires some or all of the interest
of a bank or other lending institution in a loan to a corporate borrower. Many
such loans are secured, and most impose restrictive covenants which must be met
by the borrower. These loans are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate
activities. Such loans may be in default at the time of purchase. The Fund may
also purchase other direct indebtedness such as trade or other claims against
companies, which generally represent money owed by the company to a supplier of
goods and services. These claims may also be purchased at a time when the
company is in default. Certain of the loan participations and other direct
indebtedness acquired by the Fund may involve revolving credit facilities or
other standby financing commitments which obligate the Fund to pay additional
cash on a certain date or on demand.
The highly leveraged nature of many such loans and other direct indebtedness may
make such loans especially vulnerable to adverse changes in economic or market
conditions. Loan participations and other direct indebtedness may not be in the
form of securities or may be subject to restrictions on transfer, and only
limited opportunities may exist to resell such instruments. As a result, the
Fund may be unable to sell such investments at an opportune time or may have to
resell them at less than fair market value. For a further discussion of loan
participations, other direct indebtedness and the risks related to transactions
therein, see the SAI.
TRANSACTIONS IN OPTIONS AND FUTURES CONTRACTS: The Fund may enter into
transactions in options and futures contracts on a variety of instruments and
indices, in order to protect against declines in the value of portfolio
securities or increases in the cost of securities or other assets to be acquired
and, subject to applicable law, to increase the Fund's gross income. The types
of instruments to be purchased and sold by the Fund are described in the SAI,
which should be read in conjunction with the following section. In addition, the
SAI contains a further discussion of the nature of the transactions which may be
entered into and the risks associated therewith.
OPTIONS
OPTIONS ON SECURITIES -- The Fund may write (sell) covered call and put options
and purchase call and put options on securities. The Fund will write options on
securities for the purpose of increasing its return on such securities and/or to
protect 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 the portfolio security underlying
the option, or the increased cost of portfolio securities to be acquired. In
contrast, however, if the price of the underlying security moves adversely to
the Fund's position, the option may be exercised and the
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Fund will be required to purchase or sell the underlying 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.
By writing a call option on a security, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security, since
the holder will usually exercise the call option when the market value of the
underlying security exceeds the exercise price of the call. However, the Fund
retains the risk of depreciation in value of securities on which it has written
call options.
The Fund may also purchase put or call options in anticipation of market
fluctuations which may adversely affect the value of its portfolio or the prices
of securities that the Fund wants to purchase at a later date. In the event that
the expected market fluctuations 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 premium paid for a put or call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise or liquidation of the option, and, unless the price of the underlying
security changes sufficiently, the option may expire without value to the Fund.
OPTIONS ON STOCK INDICES -- The Fund may write (sell) covered call and put
options and purchase call and put options on stock indices. The Fund may write
options on stock indices 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, less related transaction costs,
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, less related
transaction costs. In addition, if the value of an underlying index moves
adversely to the Fund's option position, the option may be exercised, and the
Fund will experience a loss which may only be partially offset by the amount of
the premium received.
The Fund may also purchase put or call options on stock indices in order,
respectively, to hedge its investments against a decline in value or to attempt
to reduce the risk of missing a market or industry segment advance. The Fund's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
FUTURES CONTRACTS -- The Fund may purchase and sell futures contracts on stock
indices ("Futures Contracts"). The Fund will utilize Futures Contracts for
hedging and non-hedging purposes, subject to applicable law. For example,
purchases or sales of stock index futures contracts for hedging purposes are
used to attempt to protect the Fund's current or intended stock investments from
broad fluctuations in stock prices. In the event that an anticipated decrease in
the value of portfolio securities occurs as a result of a general stock market
decline or a general increase in interest rates, the adverse effects of such
changes may be offset, in whole or part, by gains on the sale of such Futures
Contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general rise in the stock market or a general decline in
interest rates may be offset, in whole or in part, by gains on stock index
futures contracts purchased by the Fund. 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"). Such investment strategies
will be used for hedging and non-hedging purposes, subject to applicable law.
Put and call Options on Futures Contracts may be traded by the Fund in order to
protect against declines in the values of portfolio securities or against
increases in the cost of securities to be acquired. Purchases of Options on
Futures Contracts may present less risk in hedging the portfolio of the Fund
than the purchase or sale of the underlying Futures Contracts since the
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potential loss is limited to the amount of the premium 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. In addition, if an option is exercised, the Fund
may suffer a loss on the transaction.
RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES CONTRACTS: Although the Fund will
enter into certain transactions in Futures Contracts, Options on Futures
Contracts and options for hedging purposes, such transactions do 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. "Cross hedging" transactions may
involve greater correlation risks. 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. As noted, the Fund may also enter into transactions in
such instruments for other than hedging purposes (subject to applicable law),
including speculative transactions, which involve greater risk. In particular,
in entering into such transactions, the Fund may experience losses which are not
offset by gains on other portfolio positions, thereby reducing its gross income.
In addition, the markets for such instruments may be extremely volatile from
time to time, as discussed in the SAI, which could increase the risks incurred
by the Fund in entering into such transactions.
Transactions in options may be entered into on U.S. exchanges regulated by the
SEC and in the over-the-counter market. Futures Contracts and Options on Futures
Contracts may be entered into on U.S. exchanges regulated by the Commodity
Futures Trading Commission (the "CFTC").
Transactions in options, Futures Contracts and Options on Futures Contracts
entered into for non-hedging purposes involve greater risk and could result in
losses which are not offset by gains on other portfolio assets. For example, the
Fund may sell Futures Contracts on an index of securities in order to profit
from any anticipated decline in the value of the securities comprising the
underlying index. In such instances, any losses on the Futures Contract will not
be offset by gains on any portfolio securities comprising such index, as might
occur in connection with a hedging transaction. The risks related to
transactions in options, Futures Contracts and Options on Futures Contracts
entered into by the Fund are set forth in greater detail in the SAI, which
should be reviewed in conjunction with the foregoing discussion.
-------------------
PORTFOLIO TRADING
The Fund intends to manage its portfolio by buying and selling securities in
accordance with its investment objective and policies. The Fund will engage in
portfolio trading if it believes a transaction, net of costs (including
custodian charges), will help in attaining its investment objective. For a
description of the strategies which may be used by the Fund in trading portfolio
securities, see "Portfolio Transactions and Brokerage Commissions" in the SAI.
Because the Fund's portfolio turnover rate is anticipated to exceed 100% during
its current fiscal year, transaction costs incurred by the Fund and the Fund's
realized capital gains and losses may be greater than that of a fund with a
lesser portfolio turnover rate.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. Consistent with the foregoing primary consideration, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD")
and such other policies as the Trustees may determine, MFS may consider sales of
shares of investment company clients of MFD as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. For a further
discussion of portfolio trading, see the SAI.
-------------------
The SAI includes a discussion of other investment policies and techniques and a
listing of specific investment restrictions which govern the Fund's investment
policies. Certain investment restrictions listed in the SAI may be changed
without
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shareholder approval unless indicated otherwise (see "Investment Restrictions"
in the SAI). 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.
7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- MFS manages the Fund pursuant to an Investment Advisory
Agreement dated December 8, 1993 (the "Advisory Agreement") with the Trust on
behalf of the Fund. MFS provides the Fund with overall investment advisory and
administrative services, as well as general office facilities. William S. Harris
is the portfolio manager of the Fund. Mr. Harris is an Executive Vice President
of the Adviser and has been a portfolio manager with the Adviser since June
1994. Mr. Harris has been employed by the Adviser since 1967. Subject to such
policies as the Trustees may determine, MFS makes investment decisions for the
Fund. For its services and facilities, MFS receives a management fee, computed
and paid monthly, in an amount equal to 0.65% per annum of the average daily net
assets of the Fund. For the fiscal year ended September 30, 1995, MFS received
fees under the Advisory Agreement of $193,107.
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS
Institutional Trust, MFS Variable Insurance Trust, MFS/Sun Life Series Trust,
Sun Growth Variable Annuity Fund, Inc. and seven variable accounts, each of
which is a registered investment company established by Sun Life Assurance
Company of Canada (U.S.) ("Sun Life of Canada (U.S.)") in connection with the
sale of 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 $42.2 billion on behalf of approximately 1.8 million investor
accounts as of December 31, 1995. As of such date, the MFS organization managed
approximately $17.8 billion of assets invested in equity securities and
approximately $20.6 billion of assets invested in fixed income securities.
Approximately $3.4 billion of the assets managed by MFS are invested in
securities of foreign issuers and non-U.S. dollar denominated securities of U.S.
issuers. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.), which in
turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada ("Sun
Life"). The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold D.
Scott, John D. McNeil and John R. Gardner. Mr. Brodkin is the Chairman, Mr.
Shames is the President and Mr. Scott is the Secretary and a Senior Executive
Vice President of MFS. Messrs. McNeil and Gardner are the Chairman and
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
here in 1973. The executive officers of MFS report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is the Chairman and
President and a Trustee of the Trust. W. Thomas London, Stephen E. Cavan, James
R. Bordewick, Jr. and James O. Yost, 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.
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<PAGE>
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.
INDEX MANAGER -- ACS, a Maryland corporation with offices at 3 Bethesda Metro
Center, Bethesda, Maryland 20814, develops, maintains and furnishes to MFS the
LSI pursuant to an agreement between MFS and ACS. Under this agreement, MFS pays
ACS a fee equal to 0.05% per annum, payable quarterly, of the aggregate average
daily net assets of the Fund, with a minimum quarterly fee of $82,500.
ADVISORY BOARD -- The Advisory Board, established by ACS, assists in the
development and maintenance of the LSI by applying qualitative labor sensitivity
criteria and assisting ACS in developing and refining quantitative labor
sensitivity criteria applied by ACS. The Advisory Board is comprised of senior
labor officials, senior managers of companies with significant labor contracts,
academics and other national labor leaders or experts.
8. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased directly through MFD in cash or in-kind
without a sales charge at their net asset value next determined after acceptance
of the purchase order by the Fund's Shareholder Servicing Agent in Boston. 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 is accepted upon receipt of
federal funds available for investment. Payment by federal funds sent by wire is
accepted immediately upon receipt and payment by check is accepted when federal
funds become available for investment, which generally occurs on the next
business day after receipt of a check. Therefore, a non-federal funds investment
will generally remain idle for one business day after receipt or until federal
funds otherwise become available for investment. 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 issue share certificates, but the Shareholder
Servicing Agent maintains an account for each shareholder and mails to each
shareholder a confirmation of each purchase or sale of shares in its account.
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. Any such restriction will be made by the Fund on a
prospective basis only, upon notice to the shareholder.
OPENING AN ACCOUNT: Payments by check should be made to the order of "MFS Union
Standard Trust-Equity Fund" and sent to the Trust as follows: MFS Service
Center, Inc., P.O. Box 1400, Boston, MA 02104-9985. Payments of federal funds
should be sent by wire to the custodian of the Fund as follows:
State Street Bank and Trust Company, Boston, MA 02101
ABA # 011000028
BNF = MFS Union Standard Trust-Equity Fund
Account # 99034795
OBI = (Your account as it will be registered)
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
must also mail the enclosed Account Application to the Shareholder Servicing
Agent.
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A shareholder purchasing shares by wire must first telephone the Shareholder
Servicing Agent toll-free at (800) 637-8730 to advise of its intended action and
to obtain a wire order number.
IN-KIND PURCHASES OF SECURITIES: Shares of the Fund may be purchased by
exchanging 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, policies 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 toll-free at (800) 637-8730 to advise of its intended action and
obtain instructions for an in-kind purchase.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (I.E., an
established account) may be exchanged for shares of the Research Fund (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, 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 and is subject to certain limitations, including certain
restrictions on purchases by market timer accounts described above (see
"Purchases" above).
REDEMPTIONS
A shareholder may withdraw all or any portion of the amount in its account on
any date on which the Fund is open for business by redeeming shares at their net
asset value. Since the net asset value of shares of the account fluctuates
redemptions, which are taxable transactions for non-exempt shareholders, are
likely to result in gains or losses to such shareholders. When a shareholder
withdraws an amount from its account, the shareholder is deemed to have tendered
for redemption a sufficient number of full and fractional shares in his account
to cover the amount withdrawn. The proceeds of a redemption or repurchase will
normally be available within seven days, except that for shares purchased, or
received in exchange for shares purchased, by check (including certified checks
or cashier's checks) payment of redemption proceeds may be delayed for 15 days
from the purchase date in an effort to assure that such check has cleared.
Payment of redemption proceeds may be delayed for up to seven days from the
redemption date if the Fund determines that such a delay would be in the best
interest of all its shareholders.
A. REDEMPTION BY MAIL -- Each shareholder may redeem all or any portion of the
shares in its account by mailing or delivering to the Shareholder Servicing
Agent (see back cover for address) a stock power with a written request for
redemption or a letter of instruction all in "good order" for transfer. Because
the shareholders of the Fund are pension plans, "good order" means that the
stock power, written request for redemption or letter of instruction must be
endorsed by a trustee or an authorized officer of the pension plan or an
authorized officer of the pension plan's custodian and the signature(s) must be
guaranteed in the manner set forth below under the caption "Signature Guarantee"
(unless the conditions set forth thereunder are satisfied). In addition, in some
cases "good order" requires that the pension plan or its custodian furnish
evidence of authority that the individual signing on the plan's behalf has
authority to so act. The Shareholder Servicing Agent may make certain DE MINIMIS
exceptions to the above requirements for redemption (see "Signature Guarantee"
below). Within seven days after receipt of a redemption request by the
Shareholder Servicing Agent in "good order," the Fund will normally make payment
in cash of the net asset value of the shares next determined after such
redemption request was
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<PAGE>
received, less the amount of any income tax required to be withheld, except
during any period in which the right of redemption is suspended or date of
payment is postponed because the Exchange is closed or trading on such Exchange
is restricted or to the extent otherwise permitted by the 1940 Act, if an
emergency exists.
B. REDEMPTION BY TELEPHONE -- Each shareholder may redeem an amount from its
account by telephoning the Shareholder Servicing Agent toll-free at (800)
637-8730. Shareholders wishing to avail themselves of this telephone redemption
privilege must so elect on their Account Application, designate thereon a
commercial bank and account number to receive the proceeds of such redemption,
sign the Account Application Form with the signature(s) guaranteed in the manner
set forth below under the caption "Signature Guarantee" and furnish evidence of
authority that the individual signing on the pension plan's behalf has authority
to so act. The proceeds of such a redemption, less the amount of any income tax
required to be withheld, are wired in federal funds to the designated account.
If a telephone redemption request is received by the Shareholder Servicing Agent
by the close of regular trading on the Exchange on any business day, shares will
be redeemed at the closing net asset value of the Fund on that day. Subject to
the conditions described in this section, proceeds of a redemption are normally
wired on the next business day following the date of receipt of the order for
redemption. The Shareholder Servicing Agent will not be responsible for any
losses resulting from unauthorized telephone transactions if it follows
reasonable procedures designed to verify the identity of the caller. The
Shareholder Servicing Agent will request personal or other information from the
caller, and will normally also record calls. Shareholders should verify the
accuracy of confirmation statements immediately after their receipt.
SIGNATURE GUARANTEE: In order to protect shareholders against fraud to the
greatest extent possible, 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 or
letter of instruction 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.
If MFS determines, in its sole discretion, that it would be detrimental to the
best interests of the remaining shareholders of the Fund or if requested by a
shareholder, 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 MFS in light of the Fund's objective
and will not generally represent a pro rata distribution of each security held
in the Fund's portfolio. If a shareholder received a distribution in-kind, it
would incur brokerage charges when converting the securities to cash.
DISTRIBUTION PLAN
The Trustees have adopted a distribution plan (the "Distribution Plan" or the
"Plan") for the Fund pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (the "Rule"), after having concluded that there is a reasonable
likelihood that the Plan would benefit the Fund and its shareholders.
The Distribution Plan provides that the Fund will pay MFD a distribution fee up
to (but not necessarily all of) 0.25% per annum of the Fund's average daily net
assets in order that MFD may pay expenses on behalf of the Fund related to the
distribution of shares. Payments under the Distribution Plan have been set for
an indefinite period of time at 0.15% per annum of the Fund's average daily net
assets. As contemplated by the Plan, MFD as the Fund's distributor, acts as an
agent of the Fund in connection with the offering of shares pursuant to the
Distribution Agreement with the Trust on behalf of the Fund. MFD receives such
fee as partial consideration for services performed and expenses incurred in the
performance of MFD's obligations under the Distribution Agreement.
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The types of expenses for which MFD may be compensated under the Plan include
compensation to and expenses of employees of MFD who engage in or support the
distribution of shares or who service shareholder accounts, preparation,
printing and mailing of prospectuses and statements of additional information to
other than existing shareholders, reports to shareholders such as semiannual and
annual reports, performance reports and newsletters, sales literature and other
promotional material to prospective investors, direct mail solicitation,
advertising and public relations, compensation of sales personnel, office
expenses (including rent and overhead), equipment, travel and telephone expenses
and such other expenses as may be approved from time to time by the Trustees and
as may be permitted by applicable statute, rule or regulation. If the
distribution fee received by MFD exceeds its expenses, MFD may realize a profit
from these arrangements. Expenses under the Plan will be reviewed quarterly and
the Plan will be reviewed and is subject to approval annually by the Trustees.
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. The Fund may make one or more distributions
during the calendar year to its shareholders from any net realized long-term or
short-term capital gains. Shareholders may elect to receive dividends and
capital gain distributions in either cash or additional shares of the Fund. 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 has elected to be treated and intends to elect to be, and to qualify each
year as, a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and to make distributions to its
shareholders in accordance with the timing requirements imposed by the Code. It
is expected that the Fund will not be required to pay any entity level federal
income or excise taxes.
The Fund's shareholders that are not liable for federal, state or local income
taxes, such as pension plans, will generally not have to pay federal income tax,
or any state and local income taxes, on the dividends and capital gain
distributions they receive from the Fund, whether paid in cash or additional
shares. Shareholders who are not tax-exempt entities will normally have to pay
U.S. federal income taxes, and any state and local income taxes, on the
dividends and capital gain distributions from the Fund, whether paid in cash or
additional shares. Such shareholders should consult their tax advisers before
making an investment in the Fund.
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 shareholder 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.
For individual shareholders a statement setting forth the federal income tax
status of all dividends and distributions for each calendar year will be sent
promptly after the end of such year.
NET ASSET VALUE
The net asset value per share of the Fund is determined each day during which
the Exchange is open for trading. This determination is made once each day as of
the close of regular trading on the Exchange by deducting the amount of the
Fund's
15
<PAGE>
liabilities from the value of the Fund's assets and dividing the difference by
the number of shares outstanding. Assets in the Fund's portfolio are valued on
the basis of their current values or otherwise at their fair values, as
described in the SAI. The net asset value of shares is effective for orders
accepted by MFD prior to its calculation.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund currently has one class of shares, entitled Shares of Beneficial
Interest (without par value). The Trust has reserved the right to create and
issue additional classes and series of shares, in which case each class of
shares of a series would participate equally in the earnings, dividends and
assets attributable to that class of that particular series. Shareholders are
entitled to one vote for each share held and shares of each series would be
entitled to vote separately to approve investment advisory agreements or changes
in investment restrictions, but shares of all series would vote together in the
election of Trustees and selection of accountants. Additionally, each series
will vote separately on any material increases in the fees under its
Distribution Plan or on any other matter that affects solely that series, but
will otherwise vote together with all other series on all other matters. The
Trust does not intend to hold annual shareholder meetings. The Declaration of
Trust provides that a Trustee may be removed from office in certain instances.
See "Description of Shares, Voting Rights and Liabilities" in the SAI.
Each share of the Fund represents an equal proportionate interest in the Fund
with each share, subject to the liabilities of the particular series. Shares
have no pre-emptive or conversion rights. Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders are entitled to
share PRO RATA in the net assets available for distribution to shareholders.
Shares will remain on deposit with the Shareholder Servicing Agent and
certificates will not be issued except in connection with pledges and
assignments and in certain other limited circumstances.
The 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 omission 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 for its
shares and may also quote fund rankings in the relevant fund category from
various sources, such as the Lipper Analytical Services, Inc. and Wiesenberger
Investment Companies Service. From time to time the Fund may also compare its
performance to the LSI. Total rate of return quotations will reflect the average
annual percentage change over stated periods in the value of an investment in
shares of the Fund with all distributions reinvested. The Fund's total rate of
return 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. 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 SAI. For further information
about the Fund's performance for the fiscal year ended September 30, 1995,
please see the Fund's Annual Report. A copy of the Annual Report may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover for
address and phone number). In addition to information provided in shareholder
reports, the Fund may, in its discretion, from time to time, make a list of all
or a portion of its holdings available to investors upon request.
EXPENSES
The Trust pays the compensation of the Trustees who are not officers of MFS and
all expenses of the Fund (other than those assumed by MFS or MFD) 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 redeeming shares and
servicing shareholder accounts; expenses of preparing, printing and mailing,
prospectuses, periodic reports, notices and proxy statements to
16
<PAGE>
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 Fund's Custodian, for all services to the Fund,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of shares of the Fund; and
expenses of shareholder meetings. Expenses relating to the issuance,
registration and qualification of shares of the Fund and the preparation,
printing and mailing of prospectuses 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 between the series in a manner
believed by management of the Trust to be fair and equitable.
Subject to termination or revision at the discretion of MFS, MFS has agreed to
bear until December 31, 1998 the foregoing expenses of the Trust such that the
Fund's aggregate operating expenses do not exceed 1.00% per annum of its average
daily net assets. Such payments by MFS are subject to reimbursement by the Fund,
which will be accomplished by the payment by the Fund of an expense
reimbursement fee to MFS computed and paid monthly at a percentage of its
average daily net assets for its then-current fiscal year, with a limitation
that immediately after such payment the aggregate operating expenses of the Fund
would not exceed 1.00% of its average daily net assets. The expense
reimbursement agreement terminates for the Fund on the earlier of the date on
which payments made thereunder by such Fund equal the prior payment of such
reimbursable expenses by MFS or December 31, 1998.
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.
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 distribution or redemption checks.
-------------------
The Fund's SAI, dated February 1, 1996, contains more detailed information about
the Trust and the Fund, including, but not
limited to, information related to (i) the investment objective, policies and
restrictions, (ii) the Trustees, officers and investment adviser, (iii)
portfolio trading, (iv) the Fund's shares, including rights and liabilities of
shareholders, (v) the tax status of dividends and distributions, (vi) the
Distribution Plan and (vii) the method used to calculate total rate of return
quotations.
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<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: 800-637-8730
MAILING ADDRESS:
P.O. Box 1400, Boston, MA 02104-9985
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
[LOGO]
MFS-Registered Trademark-
Union StandardSM Equity Fund
500 Boylston Street, Boston, MA 02116
USTE-1 2/96/900
MFS-Registered Trademark-
Union StandardSM
Equity Fund
[LOGO]
PROSPECTUS
FEBRUARY 1, 1996
<PAGE>
<TABLE>
<S> <C>
MFS-REGISTERED TRADEMARK- UNION STATEMENT OF
STANDARDSM EQUITY FUND ADDITIONAL INFORMATION
FEBRUARY 1, 1996
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
1. General Information and Definitions.................................................. 2
2. Investment Objective and Policies.................................................... 2
3. Investment Restrictions.............................................................. 9
4. Management of the Fund............................................................... 10
Trustees............................................................................. 10
Officers............................................................................. 10
Investment Adviser................................................................... 10
Custodian............................................................................ 11
Shareholder Servicing Agent.......................................................... 11
Distributor.......................................................................... 11
5. Portfolio Transactions and Brokerage Commissions..................................... 11
6. Tax Status........................................................................... 12
7. Determination of Net Asset Value; Performance Information............................ 13
8. Distribution Plan.................................................................... 14
9. Description of Shares, Voting Rights and Liabilities................................. 15
10. Independent Auditors and Financial Statements........................................ 15
Appendix A........................................................................... A-1
</TABLE>
MFS UNION STANDARDSM EQUITY FUND
A Series of MFS Union Standard Trust
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information ("SAI") sets forth information which
may be of interest to investors but which is not necessarily included in the
Fund's Prospectus, dated February 1, 1996. This SAI should be read in
conjunction with the Prospectus, a copy of which may be obtained without charge
by contacting the Shareholder Servicing Agent (see back cover for address and
phone number).
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
UST-13 2/95/370
<PAGE>
1. GENERAL INFORMATION AND DEFINITIONS
MFS Union StandardSM Trust (the "Trust") is a professionally managed open-end,
diversified, management investment company (a "mutual fund") designed for sale
to pension plans. The Trust currently consists of two separate series or funds:
MFS Union StandardSM Equity Fund (the "Equity Fund" or the "Fund") and MFS Union
StandardSM Research Fund (the "Research Fund"). This SAI relates only to the
Equity Fund. The Research Fund is offered pursuant to a separate prospectus and
statement of additional information which may be obtained by contacting the
Shareholder Servicing Agent (see back cover for address and phone number).
Additional funds may be created by the Trustees from time to time. The Fund
offers its shares pursuant to a prospectus dated February 1, 1996, as
supplemented or amended from time to time (the "Prospectus").
The Fund's investment adviser and distributor are, respectively, Massachusetts
Financial Services Company ("MFS" or the "Adviser") and MFS Fund Distributors,
Inc. ("MFD" or the "Distributor"), each a Delaware corporation.
2. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. The Fund's investment objective is to provide long-term
growth of capital that, net of Fund expenses, exceeds the performance of the
LSI. Any investment involves risk and there can be no assurance that the Fund
will achieve its objective.
INVESTMENT POLICIES. The investment policies of the Fund are described in the
Prospectus. In addition, certain of the Fund's investment policies are described
below.
LENDING OF SECURITIES
The Fund may seek to increase its income by lending portfolio securities. Such
loans will usually be made only to member banks of the Federal Reserve System
and to member firms (and subsidiaries thereof) of the New York Stock Exchange
(the "Exchange") and would be required to be secured continuously by collateral
in cash, U.S. Government securities or an irrevocable letter of credit
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. The Fund would have the right to call a loan and obtain
the securities loaned at any time on customary industry settlement notice (which
will usually not exceed five business 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 fail financially. However, the loans would be made only to
firms deemed by MFS to be of good standing, and when, in the judgment of MFS,
the consideration which could be earned currently from securities loans of this
type justifies the attendant risk. If MFS 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.
WHEN-ISSUED SECURITIES
The Fund may purchase securities on a "when-issued" or on a "forward delivery"
basis. It is expected that, under normal circumstances, the Fund will take
delivery of such securities. When the Fund commits to purchase a security on a
"when-issued" or on a "forward delivery" basis, it will set up procedures
consistent with the General Statement of Policy of the Securities and Exchange
Commission (the "SEC") concerning such purchases. Since that policy currently
recommends that an amount of the Fund's assets equal to the amount of the
purchase be held aside or segregated to be used to pay for the commitment, the
Fund will always have cash, short-term money market instruments or high quality
debt securities sufficient to cover any commitments or to limit any potential
risk. However, although each Fund does not intend to make such purchases for
speculative purposes and intends to adhere to the provisions of SEC policies,
purchases of securities on such bases may involve more risk than other types of
purchases. For example, the Fund may have to sell assets which have been set
aside in order to meet redemptions. Also, if the Fund determines it is necessary
to sell the "when-issued" or "forward delivery" securities before delivery, it
may incur a loss because of market fluctuations since the time the commitment to
purchase such securities was made. When the time comes to pay for "when-issued"
or "forward delivery" securities, the Fund will meet its obligations from the
then-available cash flow on the sale of securities, or, although it would not
normally expect to do so, from the sale of the "when-issued" or "forward
delivery" securities themselves (which may have a value greater or less than the
Fund's payment obligation).
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with sellers who are member firms
(or subsidiaries thereof) of the Exchange, members of the Federal Reserve
System, recognized primary U.S. Government securities dealers or institutions
which MFS 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, including accrued interest, 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 MFS has determined that the seller
is creditworthy, and MFS monitors the seller's creditworthiness on an ongoing
basis. Moreover, under such agreements, the value, including accrued interest,
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.
2
<PAGE>
LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS
The Fund may purchase loan participations and other direct indebtedness. In
purchasing a loan participation, the Fund acquires some or all of the interest
of a bank or other lending institution in a loan to a corporate borrower. Many
such loans are secured, although some may be unsecured. Such loans may be in
default at the time of purchase. Loans and other direct indebtedness that are
fully secured offer the Fund more protection than an unsecured loan in the event
of non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan or other direct
indebtedness would satisfy the corporate borrower's obligation, or that the
collateral can be liquidated.
These loans and other direct indebtedness are made generally to finance internal
growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other
corporate activities. Such loans and other direct indebtedness loans are
typically made by a syndicate of lending institutions, represented by an agent
lending institution which has negotiated and structured the loan and is
responsible for collecting interest, principal and other amounts due on its own
behalf and on behalf of the others in the syndicate, and for enforcing its and
their other rights against the borrower. Alternatively, such loans and other
direct indebtedness may be structured as a novation, pursuant to which the Fund
would assume all of the rights of the lending institution in a loan, or as an
assignment, pursuant to which the Fund would purchase an assignment of a portion
of a lender's interest in a loan or other direct indebtedness either directly
from the lender or through an intermediary. The Fund may also purchase trade or
other claims against companies, which generally represent money owed by the
company to a supplier of goods or services. These claims may also be purchased
at a time when the company is in default.
Certain of the loan participations and other direct indebtedness acquired by the
Fund may involve revolving credit facilities or other standby financing
commitments which obligate the Fund to pay additional cash on a certain date or
on demand. These commitments may have the effect of requiring the Fund to
increase its investment in a company at a time when the Fund might not otherwise
decide to do so (including at a time when the company's financial condition
makes it unlikely that such amounts will be repaid). To the extent that the Fund
is committed to advance additional funds, it will at all times hold and maintain
in a segregated account cash or other high grade debt obligations in an amount
sufficient to meet such commitments.
The Fund's ability to receive payment of principal, interest and other amounts
due in connection with these investments will depend primarily on the financial
condition of the borrower. In selecting the loan participations and other direct
indebtedness which the Fund will purchase, MFS will rely upon its own (and not
the original lending institution's) credit analysis of the borrower. As the Fund
may be required to rely upon another lending institution to collect and pass on
to the Fund amounts payable with respect to the loan and to enforce the Fund's
rights under the loan and other direct indebtedness, an insolvency, bankruptcy
or reorganization of the lending institution may delay or prevent the Fund from
receiving such amounts. In such cases, the Fund will evaluate as well the
creditworthiness of the lending institution and will treat both the borrower and
the lending institution as an "issuer" of the loan participation for purposes of
certain investment restrictions pertaining to the diversification of the Fund's
portfolio investments. The highly leveraged nature of many such loans and other
direct indebtedness may make such loans and other direct indebtedness especially
vulnerable to adverse changes in economic or market conditions. Investments in
such loans and other direct indebtedness may involve additional risk to the
Fund. For example, if a loan or other direct indebtedness is foreclosed, the
Fund could become part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral. In addition,
it is conceivable that under emerging legal theories of lender liability, the
Fund could be held liable as a co-lender. It is unclear whether loans and other
forms of direct indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the Fund
relies on MFS's research in an attempt to avoid situations where fraud and
misrepresentation could adversely affect the Fund. In addition, loan
participations and other direct investments may not be in the form of securities
or may be subject to restrictions on transfer, and only limited opportunities
may exist to resell such instruments. As a result, the Fund may be unable to
sell such investments at an opportune time or may have to resell them at less
than fair market value. To the extent that MFS determines that any such
investments are illiquid, the Fund will include them in the investment
limitations described below.
OPTIONS
OPTIONS ON SECURITIES--As noted in the Prospectus, the Fund may write covered
call and put options and purchase call and put options on securities. Call and
put options written by the Fund may be covered in the manner set forth below.
A call option written by the Fund is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash, short-term money market instruments or high quality debt
securities in a segregated account with its custodian. A put option written by
the Fund is "covered" if the Fund maintains cash, short-term money market
instruments or high quality debt securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written where the
exercise price of the put held is equal to or greater than the exercise price of
the put written or where the exercise price of the put held is less than the
exercise price of the put written if the difference is maintained by the Fund in
cash, short-term money market instruments or high quality debt 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. 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.
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
3
<PAGE>
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,
short-term money market instruments or high quality debt 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 cash or 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 repurchase 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 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. Buy-and-write transactions using in-the-money
call options may be used when it is expected that the price of the underlying
security will decline moderately during the option period. Buy-and-write
transactions using out-of-the-money call options may be used when it is expected
that the premiums received from writing the call option plus the appreciation in
the market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security alone. 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. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received, less related transaction costs. If the market price of the underlying
security declines or otherwise is below the exercise price, the Fund may elect
to close the position or retain the option until it is exercised, at which time
the Fund will be required to take delivery of the security at the exercise
price; the Fund's return will be the premium received from the put option minus
the amount by which the market price of the security is below the exercise
price, which could result in a loss. Out-of-the-money, at-the-money and
in-the-money put options may be used by the Fund in the same market environments
that 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, known as "straddles," with the same exercise price and expiration
date. 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 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 the security remains stable and neither the
call nor the put is exercised. In those instances 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 not
be undertaken by the Fund solely for hedging purposes, 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 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 purchase options for hedging purposes or to increase its return.
Put options may be purchased to hedge against a decline in the value of
portfolio securities. If such decline occurs, the put options will permit the
Fund to sell the 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 by 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 increase
occurs, the call option will permit the Fund to purchase the securities at the
exercise price, or to close out the options at a profit. The premium paid for
the call 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 sufficiently, the option may expire worthless to the
Fund.
OPTIONS ON STOCK INDICES--As noted in the Prospectus, the Fund may write (sell)
covered call and put options and purchase call and put options on stock indices.
In contrast to an option on a security, an option on a stock index provides the
holder with the right but not the obligation 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
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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 Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of MFS, are expected to be similar to those of the
underlying index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities in its portfolio. Where 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. The Fund may also cover call options on stock
indices by holding a call on the same index and in the same principal amount as
the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, short-term money market instruments or high quality debt securities in
a segregated account with its custodian. The Fund may cover put options on stock
indices by maintaining cash, short-term money market instruments or high quality
debt securities with a value equal to the exercise price in a segregated account
with its custodian, or by holding a put on the same stock index and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written or where the
exercise price of the put held is less than the exercise price of the put
written if the difference is maintained by the Fund in cash, short-term money
market instruments or high quality debt securities in a segregated account with
its custodian. Put and call options on stock indices may also be covered in such
other manner as may be in accordance with the rules of the exchange on which, or
the counterparty with which, the option is traded and applicable laws and
regulations.
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 the Fund correlate with changes in the value of the index, writing
covered put options on indices 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 Fund may also purchase put options on stock indices to hedge its investments
against a decline in value. By purchasing a put option on a stock index, 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 purchase of call options on stock indices 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 if the value of the index does not rise. The purchase of call
options on stock indices 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 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
indices, such as the Standard & Poor's 100 Index, or on indices 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. The composition of the index is changed periodically.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
FUTURES CONTRACTS--As noted in the Prospectus, the Fund may purchase and sell
futures contracts on stock indices ("Futures Contracts"). Such investment
strategies will be used for hedging purposes and for non-hedging purposes,
subject to applicable law.
A Futures Contract is a bilateral agreement providing for the purchase and sale
of a specified type and amount of a financial instrument, or for the making and
acceptance of a cash settlement, at a stated time in the future for a fixed
price. By its terms, a Futures Contract provides for a specified settlement date
on which 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. 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 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."
Purchases or sales of stock index futures contracts are used to attempt to
protect the Fund's current or intended stock investments from broad fluctuations
in stock prices. For example, the Fund may sell stock index 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
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portfolio securities may be offset, in whole or 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 stock index futures
contracts in order to gain rapid market exposure that may, in part or entirely,
offset increases in the cost of securities that the Fund intends to purchase. As
such purchases are made, the corresponding positions in stock index futures
contracts will be closed out. In a substantial majority of these transactions,
the Fund will purchase such securities upon 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--As noted in the Prospectus, the Fund may purchase
and write options to buy or sell futures contracts in which it may invest
("Options on Futures Contracts"). Such investment strategies will be used for
hedging purposes and for non-hedging purposes, subject to applicable law.
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 or, in
the case of certain options, on such date. Upon exercise of the option by the
holder, the contract market clearinghouse 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 initial and variation
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.
Options on Futures Contracts that are written or purchased by the Fund on U.S.
exchanges are traded on the same contract market as the underlying Futures
Contract, and, like Futures Contracts, are subject to regulation by the
Commodity Futures Trading Commission (the "CFTC") and the performance guarantee
of the exchange clearinghouse.
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 or securities in a segregated account with its
custodian. The Fund may cover the writing of put Options on Futures Contracts
(a) through sales of the underlying Futures Contract, (b) through segregation of
cash, short-term money market instruments or high quality debt securities in an
amount equal to the value of the security or index underlying the Futures
Contract, or (c) through the holding of a put on the same Futures Contract and
in the same principal amount as the put written where the exercise price of the
put held is equal to or greater than the exercise price of the put written or
where the exercise price of the put held is less than the exercise price of the
put written if the difference is maintained by the Fund in cash, short-term
money market instruments or high quality debt securities in a segregated account
with its custodian. Put and call Options on Futures Contracts may also be
covered in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations. Upon
the exercise of a call Option on a Futures Contract written by 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 writing of a call option on a Futures Contract for hedging purposes
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 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 the 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 instead
of 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 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 the Fund could purchase
call Options on Futures Contracts, rather than purchasing the underlying Futures
Contracts.
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS
RISK OF IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO. The Fund's abilities effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts and Options on
Futures Contracts 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. In the
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case of futures and options based on an index, the portfolio will not duplicate
the components of the index. 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.
For example, if the Fund purchases a put option on an index and the index
decreases less than the value of the hedged securities, the Fund would
experience a loss which is not completely offset by the put option. It is also
possible that there may be a negative correlation between the index or
obligation underlying an option or Futures Contract in which the Fund has a
position and the portfolio securities the Fund is attempting to hedge, which
could result in a loss on both the portfolio and the hedging instrument.
It should be noted that stock index 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 based on a broad market index. This
is due to the fact that 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. Nevertheless, where the Fund enters into transactions in options or
futures on narrow-based indices for hedging purposes, movements in the value of
the index should, if the hedge is successful, correlate closely with the portion
of the Fund's portfolio or the intended acquisitions being hedged.
The trading of Futures Contracts and options for hedging purposes 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 the options
and futures 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.
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 date of the Futures Contract or expiration
date of the option approaches.
Further, with respect to options on securities, options on stock indices 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. This could increase the extent of any loss suffered by
the Fund in connection with such transactions.
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. For example, where the Fund covers a
call option written on a stock index through segregation of securities, such
securities may not match the composition of the index, and the Fund may not be
fully covered. As a result, the Fund could be subject to risk of loss in the
event of adverse market movements.
The writing of options on securities, options on stock indices or Options on
Futures Contracts constitutes only a partial hedge against fluctuations in the
value of the Fund's portfolio. When the Fund writes an option, it will receive
premium income in return for the holder's purchase of the right to acquire or
dispose of the underlying obligation. In the event that the price of such
obligation does not rise sufficiently above the exercise price of the option, in
the case of a call, or fall below the exercise price, in the case of a put, the
option will not be exercised and the Fund will retain the amount of the premium,
less related transaction costs, which will constitute a partial hedge against
any decline that may have occurred in the Fund's portfolio holdings or any
increase in the cost of the instruments to be acquired.
Where the price of the underlying obligation moves sufficiently in favor of the
holder to warrant exercise of the option, however, and the option is exercised,
the Fund will incur a loss which may only be partially offset by the amount of
the premium it received. Moreover, by writing an option, the Fund may be
required to forgo the benefits which might otherwise have been obtained from an
increase in the value of portfolio securities or other assets or a decline in
the value of securities or assets to be acquired.
In the event of the occurrence of any of the foregoing adverse market events,
the Fund's overall return may be lower than if it had not engaged in the hedging
transactions.
The Fund may enter into transactions in options, Futures Contracts and Options
on Futures Contracts not only for hedging purposes, but also for non-hedging
purposes intended to increase portfolio returns. Non-hedging transactions in
such investments involve greater risks and may result in losses which may not be
offset by increases in the value of portfolio securities or declines in the cost
of securities to be acquired. The Fund will only write covered options, such
that cash or securities necessary to satisfy an option exercise will be
segregated at all times, unless the option is covered in such other manner as
may be in accordance with the rules of the exchange on which the option is
traded and applicable laws and regulations. Nevertheless, 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. Such transactions, therefore,
create an opportunity for increased return by providing the Fund with two
simultaneous premiums on the same security, but involve additional risk, since
the Fund may have an option exercised against it regardless of whether the price
of the security increases or decreases.
RISK OF A 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,
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<PAGE>
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 has insufficient cash
available to meet margin requirements, it will be necessary to liquidate
portfolio securities or other assets at a time when it is 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 portfolio,
and could result in trading losses.
The liquidity of a secondary market in a Futures Contract or option thereon may
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. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures or option positions and requiring
traders to make additional margin deposits. Prices have in the past moved the
daily limit on a number of consecutive trading days.
The trading of Futures Contracts and options is also subject to the risk of
trading halts, suspensions, exchange or clearinghouse equipment failures,
government intervention, insolvency of a brokerage firm or clearinghouse 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 or forward 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.
Where the Fund enters into such transactions 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 or other
assets held by the Fund or decreases in the prices of securities or other assets
the Fund intends to acquire. Where the Fund enters into such transactions 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 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). Further, the CFTC and the various contract markets have established
limits referred to as "speculative position limits" on the maximum net long or
net short position which any person may hold or control in a particular futures
or option contract. An exchange may order the liquidation of positions found to
be in violation of these limits and it may impose other sanctions or
restrictions. The Adviser does not believe that these trading and position
limits will have any adverse impact on the strategies for hedging the portfolio
of the Fund.
RISKS 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 security, index or Futures Contract.
POLICIES ON THE USE OF FUTURES AND OPTIONS ON FUTURES CONTRACTS. 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 restriction 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 or securities will
be deposited in a segregated account with the Fund's custodian so that the
amount so segregated will at all times equal the value of the Futures Contract,
thereby insuring that the leveraging effect of such Contract is minimized.
The staff of the SEC has taken the position that purchased over-the-counter
options and assets used to cover written over-the-counter options are illiquid
and, therefore, together with other illiquid securities held by a Fund, cannot
exceed 15% of the Fund's assets (the "SEC illiquidity ceiling"). Although MFS
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 as such by the Federal
Reserve Bank of New York. Also, the contracts the Fund has in place with such
primary dealers 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 generally is 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 test imposed by the SEC
staff. The Fund may also write over-the-counter options with non-primary dealers
and will treat the assets used to cover these options as illiquid for purposes
of such SEC illiquidity ceiling test.
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The Fund's limitations, policies and ratings restrictions are adhered to at the
time of purchase or utilization of assets; a subsequent change in circumstances
will not be considered to result in a violation of policy.
3. 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 SAI, means the lesser of (i) more than 50% of the outstanding shares of
the Trust or the Fund, as applicable, or (ii) 67% or more of the outstanding
shares of the Trust or the Fund, as applicable, present at a meeting if holders
of more than 50% of the outstanding shares of the Trust or the Fund, as
applicable, are represented in person or by proxy). Except for Investment
Restriction (1), these investment restrictions 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.
The Trust, on behalf of the Fund, may not:
(1)
borrow amounts in excess of 33 1/3% of its assets including
amounts borrowed;
(2)
underwrite securities issued by other persons except insofar
as the Fund may technically be deemed an underwriter under the Securities Act
of 1933 in selling a portfolio security;
(3)
purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein
and securities of companies, such as real estate investment trusts, which deal
in real estate or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts (excluding Options, Options on Futures
Contracts, Options on Stock Indices and any other type of option, and Futures
Contracts) in the ordinary course of its business. The Fund reserves the
freedom of action to hold and to sell real estate, mineral leases, commodities
or commodity contracts (including Options, Options on Futures Contracts,
Options on Stock Indices and any other type of option, and Futures Contracts)
acquired as a result of the ownership of securities;
(4)
issue any senior securities except as permitted by the
Investment Company Act of 1940 (the "1940 Act"). For purposes of this
restriction, collateral arrangements with respect to any type of option
(including Options on Futures Contracts, Options and Options on Stock
Indices), Forward Contracts and Futures Contracts and collateral arrangements
with respect to initial and variation margin are not deemed to be the issuance
of a senior security;
make loans to other(5) persons. For these purposes, the
purchase of short-term commercial paper, the purchase of a portion or all of an
issue of debt securities, the lending of portfolio securities, or the
investment of the Fund's assets in repurchase agreements, shall not be
considered the making of a loan; or
(6)
purchase any securities of an issuer of a particular industry,
if as a result, 25% or more of its gross assets would be invested in
securities of issuers whose principal business activities are in the same
industry (except obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities and repurchase agreements collateralized by
such obligations).
In addition, the Fund has adopted the following nonfundamental policies which
may be changed without shareholder approval. The Trust, on behalf of the Fund,
will not:
(1)
invest in illiquid investments, including securities subject to
legal or contractual restrictions on resale or for which there is no readily
available market (e.g., trading in the security is suspended, or, in the case
of unlisted securities, where no market exists) if more than 15% of the Fund's
net assets (taken at market value) would be invested in such securities.
Repurchase agreements maturing in more than seven days will be deemed to be
illiquid for purposes of the Fund's limitation on investment in illiquid
securities. Securities that are not registered under the Securities Act of
1933, as amended, and sold in reliance on Rule 144A thereunder, but are
determined to be liquid by the Trust's Board of Trustees (or its delegee),
will not be subject to this 15% limitation;
(2)
invest more than 5% of the value of the Fund's net assets,
valued at the lower of cost or market, in warrants. Included within such
amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York or American Stock Exchange.
Warrants acquired by the Fund in units or attached to securities may be deemed
to be without value;
(3)
purchase securities issued by any other investment
company in excess of the amount permitted by the 1940 Act, except when such
purchase is part of a plan of merger or consolidation;
(4)
purchase or retain securities of an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Fund, or is an officer or a director of the investment adviser of the
Fund, if one or more of such persons also owns beneficially more than 0.5% of
the securities of such issuer, and such persons owning more than 0.5% of such
securities together own beneficially more than 5% of such securities;
(5)
purchase any securities or evidences of interest therein on
margin, except that the Fund may obtain such short-term credit as may be
necessary for the clearance of any transaction and except that the Fund may
make margin deposits in connection with any type of option (including Options
on Futures Contracts, Options and Options on Stock Indices) and Futures
Contracts;
(6)
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;
(7)
invest more than 5% of its gross assets in companies which,
including predecessors, controlling persons, sponsoring entities, general
partners and guarantors, have a record of less than three years' continuous
operation or relevant business experience;
(8)
pledge, mortgage or hypothecate in excess of 33 1/3% of its
gross assets. For purposes of this restriction, collateral arrangements with
respect to any type of option (including Options on Futures Contracts, Options
and Options on Stock Indices), Futures Contracts and payments of initial and
variation margin in connection therewith, are not considered a pledge of
assets;
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(9)
purchase securities while borrowings from banks under a
line of credit or similar arrangement exceed 5% of the Fund's total assets;
(10)
purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (a) the purchase, ownership,
holding or sale of (i) warrants where the grantor of the warrants is the
issuer of the underlying securities or (ii) put or call options or
combinations thereof with respect to securities, indexes of securities,
Options on Futures Contracts or (b) the purchase, ownership, holding or sale
of contracts for the future delivery of securities or currencies; or
(11)
invest for the purpose of exercising control or management.
4. MANAGEMENT OF THE FUND
The Board of Trustees of the Trust provides broad supervision over the affairs
of the Fund. MFS 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 of the Trust 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
NELSON J. DARLING, JR.
Director or Trustee of several corporations or trusts, including Eastern
Enterprises (diversified holding company), Trustee
Address: 18 Tremont Street, Boston, Massachusetts
WILLIAM R. GUTOW -- Private Investor; Real Estate Consultant; Capitol
Entertainment (Blockbuster Video Franchise), Vice Chairman
Address: 3102 Maple Avenue, #100, Dallas, Texas
OFFICERS
W. THOMAS LONDON* -- Treasurer
Massachusetts Financial Services Company, Senior Vice President
STEPHEN E. CAVAN* -- Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, General Counsel
and Assistant Secretary
JAMES R. BORDEWICK, JR.* -- Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel
JAMES O. YOST* -- Assistant Treasurer
Massachusetts Financial Services Company, Vice President
- --------------
*"Interested persons" (as defined in the 1940 Act) of the Adviser, whose address
is 500 Boylston Street, Boston, Massachusetts 02116.
Mr. Brodkin and each officer holds comparable positions with certain affiliates
of MFS or with certain other funds of which MFS or a subsidiary is the
investment adviser or distributor. Messrs. Brodkin and Cavan are the Chairman
and the Secretary, respectively, of MFD and hold similar positions with certain
other MFS affiliates.
As of December 31, 1995, the Trustees and officers, as a group, owned less than
1% of the Fund's shares outstanding on that date.
As of December 31, 1995, U F C W Participating Food Ind. Employers Tri-State
Pension Fund, Pennsakauken, NJ, 08109-3377 was the record owner of 14.67% of the
outstanding shares of the Fund. As of December 31, 1995, C W A Pension & Death
Benefit Trust, Washington, D.C., 10001-2760 was the record owner of 14.51% of
the outstanding shares of the Fund. As of December 31, 1995, Maritime
Association I L A Pension Plan, Houston, TX, 77034-4537 was the record owner of
30.91% of the outstanding shares of the Fund. As of December 31, 1995, Savannah
ILA Employers Pension Plan was the record owner of approximately 6.24% of the
outstanding shares of the Fund. As of December 31, 1995, International
Longshoremens Assoc., Southeast Florida Ports Employers Pension Fund, Miami,
Florida 33132-1959 was the record owner of approximately 12.45% of the
outstanding shares of the Fund.
The Trust pays the compensation of the Trustees who are not officers of MFS (who
will each receive $1,300 annually plus $300 per meeting and $300 per committee
meeting attended). Set forth in Appendix A hereto is certain information
concerning the cash compensation paid to the Trustees.
The 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 of 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 pursuant to the Declaration of Trust, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.) which
in turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada.
MFS manages the assets of the Fund pursuant to an Investment Advisory Agreement
with the Trust dated as of December 8, 1993 (the "Advisory Agreement"). MFS
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, MFS makes investment decisions for the Fund. For these services
and facilities, the Adviser receives a management fee, computed and paid
monthly, in an amount equal to 0.65% per annum of the average daily net assets
of the Fund.
For the fiscal year ended September 30, 1995, MFS received fees under the
Advisory Agreement of $193,107.
In order to comply with the expense limitations of certain state securities
commissions, MFS will reduce its management fee or otherwise reimburse the Fund
for any expenses, exclusive of interest, taxes and brokerage commissions,
incurred by the Fund in any fiscal year to the extent such expenses exceed the
most restrictive of such state expense limitations. MFS will make appropriate
adjustments to such reductions and reimbursements in response to any amendment
or rescission of the various state requirements.
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MFS pays the compensation of the Trust's officers and of any Trustee who is an
officer of MFS. MFS 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 its portfolio
transactions and, in general, administering its affairs.
The Advisory Agreement with the Fund will remain in effect until December 8,
1996, and will continue in effect thereafter only if such continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's shares (as defined in "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 shares (as defined in "Investment
Restrictions") or by either party on not more than 60 days' nor less than 30
days' written notice. The Advisory Agreement for the Fund provides that if MFS
ceases to serve as the investment 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 other fund clients 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.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Trust'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 of the Custodian and may deal
with the Custodian as principal in securities transactions. The Custodian also
serves as the dividend and distribution disbursing agent of the Fund. The
Custodian has contracted with MFS for MFS to perform certain accounting
functions related to certain 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 an
Amended and Restated Shareholder Servicing Agent Agreement with the Trust on
behalf of the Fund, dated as of November 17, 1995 (the "Agency Agreement"). The
Shareholder Servicing Agent's responsibilities under the Agency Agreement
include administering and performing transfer agent functions and the keeping of
records in connection with the issuance, transfer and redemption of shares of
the Fund. For these services, the Shareholder Servicing Agent will receive a fee
based on the number of shareholder accounts, 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 for the Fund, has contracted with the Shareholder Servicing
Agent to administer and perform certain dividend and distribution disbursing
functions for the Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of the Fund pursuant to a Distribution Agreement
dated as of December 8, 1993 (the "Distribution Agreement").
The Distribution Agreement will remain in effect until December 8, 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.
5. PORTFOLIO TRANSACTIONS AND BROKERAGE
COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by
employees of MFS, who are appointed and supervised by its senior officers.
Changes in the Fund's investments are reviewed by the Board of Trustees. The
Fund's portfolio manager may serve other clients of MFS or any subsidiary of MFS
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. MFS has complete freedom as to the markets in and the broker-dealers
through which it seeks this result. MFS attempts to achieve this result by
selecting broker-dealers to execute portfolio transactions on behalf of the Fund
and other clients of MFS on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities, which are principally traded in the
over-the-counter market on a net basis through dealers acting for their own
account and not as brokers (where no stated commissions are paid but the prices
include a dealer's markup or markdown), MFS normally seeks to deal directly with
the primary market makers, unless in its opinion, better prices are 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 MFS 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 MFS. At present no other recapture arrangements are in effect.
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Under the Advisory Agreements and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, MFS may cause the Fund to pay a broker-dealer
which provides brokerage and research services to MFS 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 MFS 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 MFS'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 purchasing or selling securities, and the
availability 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 MFS, 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 MFS's other clients in part for providing advice as to the availability 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 MFS for no consideration other than
brokerage or underwriting commissions. Securities may be bought or sold from
time to time through such broker-dealers on behalf of the Fund. The Trustees
(together with the Trustees of the other MFS Funds) have directed MFS to
allocate a total of $23,100 of commission business from the various 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 MFS).
The investment management personnel of MFS attempt to evaluate the quality of
Research provided by brokers. Results of this effort are sometimes used by MFS
as a consideration in the selection of brokers to execute portfolio
transactions. However, MFS is unable to quantify the amount of commissions which
will be paid as a result of such Research because a substantial number of
transactions will be effected through brokers which provide Research but which
were selected principally because of their execution capabilities.
The management fee that the Fund pays to MFS will not be reduced as a
consequence of the receipt of brokerage and research services by MFS. 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 MFS 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 MFS in carrying out its obligations to the
Fund. While such services are not expected to reduce the expenses of MFS, MFS
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.
In certain instances there may be securities which are suitable for a Fund's
portfolio as well as for that of one or more of the other clients of MFS.
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, it is
believed that a Fund's ability to participate in volume transactions will
produce better executions for the Fund.
For the fiscal year ended September 30, 1995, the Fund paid total brokerage
commissions of $115,591. For the period from commencement of investment
operations on January 14, 1994 to September 30, 1994, the Fund paid total
brokerage commissions of $39,724.
6. TAX STATUS
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing 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. If the Fund should fail to qualify for treatment as a "regulated
investment company" in any year, the Fund would incur regular corporate federal
income tax upon its taxable income and Fund distributions would generally be
taxable as ordinary dividend income to non-exempt shareholders. The Fund will be
subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails
to distribute by the end of any calendar year substantially all of its ordinary
income for that year and capital gain net income for the one-year period ending
on October 31 of that year, plus certain other amounts. As long as the Fund
qualifies for treatment as a regulated investment company under the Code, it
will not be subject to any Massachusetts excise or income taxes.
Shareholders of the Fund who are not tax-exempt entities 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 ordinary
income and any distributions from net short-term capital gains, whether paid to
shareholders who are non tax-exempt entities in cash or additional shares, are
taxable to these shareholders as ordinary income for federal income tax
purposes. A
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portion of the Fund's ordinary income dividends (but none of its capital gains)
is normally eligible for the dividends-received deduction for corporations if
the recipient otherwise qualifies for that deduction with respect to its holding
of the Fund's shares. Availability of the deduction to 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 of net capital gains (I.E., the excess of the net long-term
capital gains over short-term capital losses), whether received in cash or
reinvested in additional shares, if designated as such by the Fund, are taxable
to non-exempt shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held their
shares. Fund dividends which are declared in October, November, or December, and
paid the following January will be taxable to non-tax-exempt shareholders as if
received on December 31 of the year in which they are declared.
Any Fund distribution will have the effect of reducing the per share net asset
value of shares in the Fund by the amount of the distribution. Shareholders
purchasing shares in the Fund shortly before the record date of any taxable
dividend or other distribution may thus pay the full price for the shares and
then effectively receive a portion of the purchase price back as a taxable
distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than twelve months and otherwise as 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.
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 and Futures Contracts will be subject to
special tax rules that may affect the amount, timing and character of Fund
income and distributions to shareholders. For example, certain positions held by
the Fund on the last business day of each taxable year will be marked to market
(I.E., treated as if closed out) on such day, and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by the Fund that substantially diminish its
risk of loss with respect to other positions in its portfolio will constitute
"straddles," and may be subject to special tax rules that could 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 and Futures Contracts to the extent necessary to
meet the requirements of Subchapter M of the Code.
Dividends and certain other payments to non-exempt persons who are not citizens
or residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% on any taxable dividends
or 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 applicable to such
claims. Distributions received from the Fund by Non-U.S. Persons also may be
subject to tax under the laws of their jurisdiction. The Fund is also required
in certain circumstances to apply backup withholding of 31% of taxable
dividends, and redemption proceeds paid to any individual or certain other
noncorporate 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 been subject to 30% withholding.
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 income taxes. The Fund intends to advise
non-tax-exempt shareholders of the extent, if any, to which its distributions
consist of such interest. Shareholders are urged to consult their tax advisors
regarding the possible exclusion of such portion of their dividends for state
and local income tax purposes as well as regarding other consequences of an
investment in the Fund.
7. DETERMINATION OF NET ASSET VALUE;
PERFORMANCE INFORMATION
NET ASSET VALUE
The net asset value per share of the Fund is determined each day during which
the Exchange is open for trading. As of the date of this SAI, the Exchange is
open for trading every weekday except for the following holidays (or the days on
which they are observed): New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day). This
determination is made once during each such day as of the close of regular
trading on the Exchange by deducting the amount of the Fund's liabilities from
the value of its assets and dividing the difference by the number of shares of
the Fund outstanding. Securities, Futures Contracts and options in a Fund's
portfolio (other than short-term obligations) for which the principal market is
one or more securities or commodities exchanges 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. Debt 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-sized trading in
similar groups of securities, yields, 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 to reflect more accurately the fair value of such securities.
Short-term obligations, if
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<PAGE>
any, in the Fund's portfolio are valued at amortized cost, which constitutes
fair value as determined by the Board of Trustees. Short-term securities with a
remaining maturity in excess of 60 days will be valued based upon dealer
supplied valuations. Portfolio securities and over-the-counter options, for
which there are no quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees. A
share's net asset value is effective for orders accepted by MFD, in its capacity
as the Fund's distributor, prior to its calculation.
PERFORMANCE INFORMATION
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 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. The Fund's
average annual total rate of return for the one-year period ended September 30,
1995 and for the period from January 14, 1994 (commencement of investment
operations) to September 30, 1995 was 24.21% and 11.11%, respectively. The
average annual total rate of return for the LSI for the one-year period ended
September 30, 1995 and for the period from January 14, 1994 to September 30,
1995 was 27.53% and 25.43%, respectively.
From time to time, the Fund may quote, and compare its performance to, the LSI.
In addition, from time to time the Fund may, as appropriate, quote Fund rankings
or reprint all or a portion of evaluations of fund performance and operations
appearing in various independent publications, including but not limited to the
following: Money, Fortune, U.S. News and World Report, Kiplinger's Personal
Finance, The Wall Street Journal, Barron's, Investors Business Daily, Newsweek,
Financial World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Salomon Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Advisor, Financial Planning on Wall Street, Standard and Poor's,
Individual Investor, THE 100 BEST MUTUAL FUNDS YOU CAN BUY by Gordon K.
Williamson, Consumer Price Index, and Sanford C. Bernstein & Co. Fund
performance may also be compared to the performance of other mutual funds
tracked by financial or business publications or periodicals. The Fund may also
quote evaluations mentioned in independent radio or television broadcasts and
may use charts and graphs to illustrate the past performance of various indices
such as those mentioned above and illustrations using hypothetical rates of
return to illustrate the effects of compounding and tax-deferral. The Fund may
advertise examples of the effects of periodic investment plans, including the
principle of dollar cost averaging. In such a program, an investor invests a
fixed dollar amount in a fund at periodic intervals, thereby purchasing fewer
shares when prices are high and more shares when prices are low. While such a
strategy does not assure a profit or guard against a loss in a declining market,
the investor's average cost per share can be lower than if fixed numbers of
shares are purchased at the same intervals.
MFS FIRSTS: MFS has a long history of innovations.
- -- 1924 -- Massachusetts Investors Trust is established as the first open-end
mutual fund in America.
- -- 1924 -- Massachusetts Investors Trust is the first mutual fund to make full
public disclosure of its operations in shareholder reports.
- -- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.
- -- 1933 -- Massachusetts Investors Trust is the first mutual fund to register
under the Securities Act of 1933 ("Truth in Securities Act" or "Full
Disclosure Act").
- -- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional shares
or in cash.
- -- 1976 -- MFS Municipal Bond Fund is among the first municipal bond funds
established.
- -- 1979 -- Spectrum becomes the first combination fixed/variable annuity with no
initial sales charge.
- -- 1981 -- MFS World Governments Fund is established as America's first globally
diversified fixed income mutual fund.
- -- 1984 -- MFS Municipal High Income Fund is the first open-end mutual fund to
seek high tax-free income from lower-rated municipal securities.
- -- 1986 -- MFS Managed Sectors Fund becomes the first mutual fund to target and
shift investments among industry sectors for shareholders.
- -- 1986 -- MFS Municipal Income Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.
- -- 1987 -- MFS Multimarket Income Trust is the first closed-end, multimarket
high income fund listed on the New York Stock Exchange.
- -- 1989 -- MFS Regatta becomes America's first non-qualified
market-value-adjusted fixed/variable annuity.
- -- 1990 -- MFS World Total Return Fund is the first global balanced fund.
- -- 1993 -- MFS World Growth Fund is the first global emerging markets fund to
offer the expertise of two sub-advisers.
- -- 1993 -- MFS becomes money manager of MFS Union Standard Trust, the first
Trust to invest solely in companies deemed to be union-friendly by an
advisory board of senior labor officials, senior managers of companies with
significant labor contracts, academics and other national labor leaders or
experts.
8. DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for the Fund (the "Distribution
Plan") pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Rule") after having concluded that there is a reasonable likelihood that the
Distribution Plan would benefit the Fund and its shareholders. The Distribution
Plan is designed to promote sales, thereby increasing the net assets of the
Fund. Such an increase may reduce the expense ratio to the extent the Fund's
fixed costs are spread over a larger net asset base. Also, an increase in net
assets may lessen the adverse effects that could result were the Fund required
to liquidate portfolio securities to meet redemptions.
14
<PAGE>
The Distribution Plan provides that the Fund will pay MFD a distribution fee up
to (but not necessarily all of) 0.25% per annum of the Fund's average daily net
assets. Payments under the Distribution Plan have been set for an indefinite
period of time at 0.15% per annum of the Fund's average daily net assets.
The Distribution Plan will remain in effect from year to year only if its
continuance is specifically approved at least annually by vote of both the
Trustees and a majority of the Trustees who are not "interested persons" or
financially interested parties to the Plan ("Distribution Plan Qualified
Trustees"). The Distribution Plan requires that the Fund and MFD each shall
provide to the Trustees, and the Trustees shall review, at least quarterly, a
written report of the amounts expended (and purposes therefor) under such Plan.
The Distribution Plan may be terminated at any time by vote of a majority of the
Distribution Plan Qualified Trustees or by vote of the holders of a majority of
the Fund's shares (as defined in "Investment Restrictions"). Agreements under
the Distribution Plan must be in writing, will be terminated automatically if
assigned, and may be terminated at any time without payment of any penalty, by
vote of a majority of the Distribution Plan Qualified Trustees or by vote of the
holders of a majority of the Fund's shares. The Distribution Plan may not be
amended to increase materially the amount of permitted distribution expenses
without the approval of a majority of the Fund's shares (as defined in
"Investment Restrictions") and may not be materially amended in any case without
a vote of the Trustees and a majority of the Distribution Plan Qualified
Trustees. No Trustee who is not an "interested person" has any financial
interest in the Distribution Plan or in any related agreement.
For the fiscal year ended September 30, 1995, the Fund incurred expenses under
the Distribution Plan of $44,473 (equal to 0.15% per annum of its average daily
net assets), all of which MFD retained. For the period from commencement of
investment operations on January 14, 1994 to September 30, 1994, the Fund
incurred expenses under the Distribution Plan of $14,882 (equal to 0.15% per
annum of its average daily net assets), all of which MFD retained.
9. 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) of one or
more separate series and to divide or combine the shares of any series into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests in that series. The Trustees have currently authorized
shares of the two series, the Equity Fund and the Research Fund. The Declaration
of Trust further authorizes the Trustees to classify or reclassify any series of
shares into one or more classes. The Trustees have no current intention to
classify more than one class of shares. Each share of a Fund represents an equal
proportionate interest in the assets of the Fund. Upon liquidation of the Fund,
shareholders of the Fund are entitled to share PRO RATA in the net assets of the
Fund available for distribution to shareholders. The Trust reserves the right to
create and issue additional series or classes of shares, in which case the
shares of each class would participate equally in the earnings, dividends and
assets allocable to that class of the particular series.
Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Although Trustees are not elected annually by the shareholders, shareholders
have under certain circumstances the right to remove one or more Trustees in
accordance with the provisions of Section 16(c) of the 1940 Act. No material
amendment may be made to the Declaration of Trust without the affirmative vote
of a majority of the Trust's shares. Shares have no pre-emptive or conversion
rights. Shares are fully paid and non-assessable. The Trust may enter into a
merger or consolidation, or sell all or substantially all of its assets (or all
or substantially all of the assets belonging to any series of the Trust), if
approved by the vote of the holders of two-thirds of the Trust's outstanding
shares voting as a single class, or of the affected series of the Trust, as the
case may be, except that if the Trustees of the Trust recommend such merger,
consolidation or sale, the approval by vote of the holders of a majority of the
Trust's or the affected series' outstanding shares (as defined in "Investment
Restrictions") will be sufficient. The Trust or any series of the Trust may also
be terminated (i) upon liquidation and distribution of its assets, if approved
by the vote of the holders of two-thirds of its outstanding shares, or (ii) by
the Trustees by written notice to the shareholders of the Trust of the affected
series. 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 Trust property for any shareholder held
personally liable for the obligations of the Trust. The Declaration of Trust
also provides that it shall maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, Trustees, officers, employees and agents covering
possible tort or 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.
10. 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 September 30, 1995, the Statement of Assets and
Liabilities at September 30, 1995, the Statement of Operations for the year
ended September 30, 1995, the Statement of Changes in Net Assets for the year
ended September 30, 1995 and the period ended September 30, 1994, the Notes to
Financial Statements and the Independent Auditors' Report, each of which is
included in the Annual Report to shareholders of the Fund, are incorporated by
reference into this SAI and have been so incorporated in reliance upon the
report of Deloitte & Touche LLP, independent certified public accountants, as
experts in accounting and auditing. A copy of the Annual Report accompanies this
SAI.
15
<PAGE>
APPENDIX A
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL TRUSTEE FEES
TRUSTEE FEES FROM THE FUND
NAME OF TRUSTEE FROM FUND(1) COMPLEX (2)
- -------------------------------------------------- ------------ ------------------
<S> <C> <C>
A. Keith Brodkin.................................. $ 0 $ 0
Nelson J. Darling................................. 3,100 15,858
William R. Gutow.................................. 3,100 15,858
</TABLE>
NOTES:
(1) For fiscal year ended September 30, 1995.
(2) For calendar year 1995. All Trustees receiving compensation served as
Trustees of 17 funds within the MFS Fund Complex (having aggregate net
assets at December 31, 1995, of approximately $306 million).
A-1
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 637-8730
MAILING ADDRESS
P.O. Box 1400, Boston, MA 02104-9985
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
MFS-REGISTERED TRADEMARK- UNION
STANDARDSM EQUITY FUND
500 Boylston Street
Boston, MA 02116
<PAGE>
MFS
UNION
STANDARD(SM)
EQUITY
FUND
Annual Report
September 30, 1995
[A picture of three American flags.]
<PAGE>
MFS UNION STANDARD(SM) EQUITY FUND
TRUSTEES SHAREHOLDER SERVICE CENTER
A. Keith Brodkin* MFS Service Center, Inc.
Chairman and President P.O. Box 1400
Boston, MA 02104-9985
Nelson J. Darling, Jr.
Trustee, Eastern Enterprises For general information, call toll free:
1-800-637-8730 any business day from
William R. Gutow 9 a.m. to 5 p.m. Eastern time.
Private Investor;
Senior Vice President,
Capitol Entertainment CUSTODIAN
State Street Bank and Trust Company
INVESTMENT ADVISER
Massachusetts Financial
Services Company AUDITORS
500 Boylston Street Deloitte & Touche LLP
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
William S. Harris*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
*Affiliated with the Investment Adviser
[Recycle Logo] This report is printed on recycled paper.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
For most of the 12 months ended September 30, 1995, the stock market made
impressive gains as investors reacted positively to the apparent success of the
Federal Reserve Board in engineering a "soft landing" of the domestic economy
through a more restrictive monetary policy. The Federal Reserve's credit
tightening measures in 1994 and early 1995 have resulted in a slowdown in
economic activity, marked by lower interest rates and low inflation.
For the year ended September 30, 1995, the Fund provided a total return of
+24.2%, compared to a total return over the same period of +27.5% for the ACS
Labor Sensitivity Index(SM) (the LSI(SM), an unmanaged index of common
stocks of companies selected on the basis of labor-sensitive criteria. A
discussion of the factors which contributed to the Fund's underperformance
relative to the LSI may be found in the Portfolio Performance and Strategy
section of this letter.
Economic Outlook
Moderate, but sustainable growth appears to be the hallmark of the economic
expansion's fifth year. After slowing earlier in the summer, homebuying was
making modest gains by September 30, although consumer spending was still
showing some areas of weakness. Businesses, meanwhile, continued to work off
excess inventories and reduce factory output. At the same time, overseas
economies, particularly those of Germany and Japan, have not recovered as
expected, limiting U.S. export growth. However, the Federal Reserve's consistent
and, so far, successful efforts to fight inflation seem to be giving consumers
and businesses enough confidence to help maintain 2 1/2% to 3% real (adjusted
for inflation) growth in gross domestic product, at least through 1995.
Interest Rates
Although the Federal Reserve implemented a one-quarter percentage point decrease
in short-term interest rates in July, the effects of its seven rate increases,
which began in early 1994 and ended in February of this year, are still being
felt throughout the economy. While there have been some increases in commodity
prices, companies have not been able to pass along most of those higher costs.
This is partly due to the need to keep fighting for market share, and also
because wages and benefits of U.S. workers are still growing at a pace that is
near, or perhaps below, the inflation rate, limiting consumer buying power. At
the end of July, the nation's employment cost index had risen at a rate of just
2.8% over the previous year, helping to contain cost pressures. At the same
time, however, the bond markets have apparently become convinced that economic
growth will be contained for the near future and have allowed long-term interest
rates to decline. Although previous monetary easing by the Federal Reserve has
been followed by additional rate reductions, prospects for further decreases in
the current environment are uncertain. Still, with long-term government bonds
yielding approximately 6.6%, in an environment of 2 1/2% to 3% inflation, real
rates of return in the fixed-income markets remain relatively attractive.
Stock Market
After several months of very strong performance in 1995, the stock market became
somewhat volatile in the last few weeks before September 30, as concerns about
selected earnings disappointments had a negative effect on stock prices. Still,
the longer-term outlook for a number of growth sectors, such as technology,
leisure and household products, remains favorable, as do the prospects for many
small-company stocks because of their growth potential relative to larger
companies. Also, companies' increasing emphasis on cost-containment, coupled
with their growing use of technology, has helped keep them competitive and
reasonably profitable. Finally, we have been watching with interest the recent
series of corporate mergers in such industries as banking, entertainment, health
care and consumer products. Unlike previous merger waves, which were often
intended to build conglomerates of loosely related or unrelated businesses, this
year's mergers of similar companies seem to be more rationally based on the goal
of helping the merged companies reduce costs and, in general, be more
competitive. Looking ahead, we believe these factors, along with a stabilizing
interest rate environment and a continuation of favorable earnings reports, will
help maintain the stock market's positive momentum.
Portfolio Performance and Strategy
While the Fund's returns lagged the LSI for the 12 months ended September 30,
much of that underperformance came during the Fund's first fiscal quarter, or
the last three months of 1994. This was partly the result of the Fund's
underweightings, relative to the LSI, of consumer staples and utility stocks.
For the first nine months of 1995, however, the Fund reported a total return of
+27.2%, compared with a +27.3% return for the LSI. Part of the reason for the
strength of the LSI versus the Fund is that over 20% of the LSI is made up of
General Electric, AT&T, Exxon, Coca-Cola, Philip Morris, and Merck. However,
these stocks, whose performance exceeded expectations in this year's strong
market, only represented 13% of the Fund's portfolio.
Going forward, our portfolio strategy -- like our economic assumptions --
has not changed materially since our last report in April. We believe the
economy will remain relatively sluggish in response to the Federal Reserve's
actions, with relatively low inflation and lower interest rates, but no
recession. Also, in addition to weakness in the automobile, housing and retail
industries cited in our last report, construction equipment and heavy truck
companies have reported substantially lower sales numbers than expected. If the
dollar continues to strengthen, exports may begin to suffer. Meanwhile, the
outlook for inflation remains positive, with the possible exception of food
prices; poor weather has resulted in reduced crop forecasts and left stocks of
surplus grain near record low levels. Based on these assumptions, we have
continued to reduce the portfolio's exposure to cyclical or economically
sensitive industries. At the same time, we have increased our positions in
interest-sensitive utilities, especially regional telephone companies such as
BellSouth and Ameritech, while adding to our positions in the leisure,
agriculture and aerospace industries.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin /s/ William S. Harris
A. Keith Brodkin William S. Harris
Chairman and President Portfolio Manager
October 13, 1995
<PAGE>
PORTFOLIO MANAGER PROFILE
William Harris joined the MFS Research Department in 1967 as an industry
specialist. A graduate of the University of Virginia, he was named Investment
Officer in 1969, Vice President - Investments in 1970, Senior Vice President in
1979 and Executive Vice President in 1982. Mr. Harris is a member of The
Boston Security Analysts Society, Inc.
OBJECTIVE AND POLICIES
The Fund's investment objective is to provide long-term growth of capital that,
net of Fund expenses, exceeds the performance of the ACS Labor Sensitivity Index
(the LSI). Dividend and interest income from portfolio securities, if any, is
incidental to long-term growth of capital.
The Fund invests primarily in equity securities of companies possessing
opportunities for long-term capital growth which are contained in the LSI. The
Fund may also invest in securities convertible into common or preferred stock.
PORTFOLIO CONCENTRATION AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Percent of Percent of
Five Largest Industries Net Assets Ten Largest Holdings Net Assets
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Food and Beverage Products 12.6 American Telephone & Telegraph Co. 3.7
- ------------------------------------------------ -------------------------------------------------
Utilities - Telephone 12.0 General Electric Co. 3.6
- ------------------------------------------------ -------------------------------------------------
Utilities - Electric 8.6 Exxon Corp. 3.0
- ------------------------------------------------ -------------------------------------------------
Oils 7.3 Coca-Cola Co. 2.9
- ------------------------------------------------ -------------------------------------------------
Consumer Goods and Services 6.7 Philip Morris Cos., Inc. 2.8
- ------------------------------------------------ -------------------------------------------------
Merck & Co., Inc. 2.7
-------------------------------------------------
BellSouth Corp. 2.5
-------------------------------------------------
Ameritech Corp. 2.2
-------------------------------------------------
Citicorp 2.0
-------------------------------------------------
du Pont (E.I.) de Nemours & Co., Inc. 1.9
-------------------------------------------------
</TABLE>
PERFORMANCE
The information on the following page illustrates the historical performance of
MFS Union Standard Equity 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.
<PAGE>
GROWTH OF A HYPOTHETICAL $5,000,000 INVESTMENT
(For the Period from February 1, 1994 to September 30, 1995)
Line graph representing the growth of a $5,000,000 investment for the period
from February 1, 1994 to September 30, 1995. The graph is scaled from $4,000,000
to $6,500,000 in $500,000 segments. The years are marked in 3-month segments
from 1990 to 1995. There are three lines drawn to scale. One is a solid line
representing MFS Union Standard Equity Fund, a second line of short dashes
represents the S&P 500, and a third line of medium-short dashes represents the
Consumer Price Index.
MFS Union Standard Equity Fund $5,863,570
S&P 500 $6,356,000
Consumer Price Index $5,239,500
AVERAGE ANNUAL TOTAL RETURNS
1/14/94*-
1 Year 9/30/95
- ------------------------------------------------------------------------------
MFS Union Standard Equity Fund +24.21% +11.11%
- ------------------------------------------------------------------------------
ACS Labor Sensitivity Index (LSI) +27.53% +14.17%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ +29.71% +15.48%
- ------------------------------------------------------------------------------
Consumer Price Index(S) + 2.54% + 2.85%
- ------------------------------------------------------------------------------
* Commencement of investment operations. Benchmark comparisons begin on
February 1, 1994 except for ACS LSI, which is from January 14, 1994.
+ The Standard & Poor's 500 Composite Index is a popular, unmanaged index of
common stock performance.
(S) The Consumer Price Index is a popular measure of change in prices.
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. Shares of the Fund have no initial
sales charge or contingent deferred sales charge but have annual fees and
expenses. All 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 the earlier of the date of repayment of reimbursement in its entirety,
or December 31, 1998.
<PAGE>
PORTFOLIO OF INVESTMENTS - September 30, 1995
Common Stocks and Warrants - 98.2%
- -----------------------------------------------------------------------------
Issuer Shares Value
- -----------------------------------------------------------------------------
Aerospace - 5.6%
Boeing Co. 6,000 $ 409,500
Lockheed Martin Corp. 9,000 604,125
McDonnell Douglas Corp. 8,000 662,000
Raytheon Co. 4,000 340,000
-----------
$ 2,015,625
- -----------------------------------------------------------------------------
Agricultural Products - 2.3%
AGCO Corp. 10,000 $ 455,000
Case Corp. 10,000 367,500
-----------
$ 822,500
- -----------------------------------------------------------------------------
Airlines - 2.4%
Northwest Airlines Corp. 10,000 $ 425,000
Southwest Airlines Co. 17,000 429,250
-----------
$ 854,250
- -----------------------------------------------------------------------------
Apparel and Textiles - 0.7%
Hartmarx Corp. 40,000 $ 240,000
- -----------------------------------------------------------------------------
Automotive - 1.3%
Ford Motor Co. 15,000 $ 466,875
- -----------------------------------------------------------------------------
Banks and Credit Companies - 3.6%
BankAmerica Corp. 10,000 $ 598,750
Citicorp 10,000 707,500
-----------
$ 1,306,250
- -----------------------------------------------------------------------------
Chemicals - 3.0%
du Pont (E.I.) de Nemours & Co., Inc. 10,000 $ 687,500
Monsanto Co. 4,000 403,000
-----------
$ 1,090,500
- -----------------------------------------------------------------------------
Consumer Goods and Services - 6.7%
Department 56, Inc.* 10,000 $ 467,500
Philip Morris Cos., Inc. 12,000 1,002,000
Seagrams Ltd. 10,000 358,750
Tyco International Ltd. 9,000 567,000
-------------
$ 2,395,250
- -----------------------------------------------------------------------------
Defense Electronics - 1.9%
Loral Corp. 12,000 $ 684,000
- -----------------------------------------------------------------------------
Electrical Equipment - 6.0%
General Electric Co. 20,000 $ 1,275,000
Honeywell, Inc. 12,000 514,500
Westinghouse Electric Corp. 25,000 375,000
-----------
$ 2,164,500
- -----------------------------------------------------------------------------
Entertainment - 3.9%
Circus Circus Enterprises, Inc.* 10,000 $ 280,000
Disney (Walt) Co. 7,500 430,313
Harrah's Entertainment, Inc.* 12,000 351,000
Mirage Resorts, Inc.* 10,000 328,750
-------------
$ 1,390,063
- -----------------------------------------------------------------------------
Food and Beverage Products - 12.6%
Campbell Soup Co. 7,100 $ 356,775
Coca-Cola Co. 15,000 1,035,000
General Mills, Inc. 10,000 557,500
Hershey Foods Corp. 7,500 482,813
Interstate Bakeries Corp. 20,000 422,500
Kellogg Co. 5,000 361,875
PepsiCo, Inc. 12,000 612,000
Ralston Purina Co. 12,000 694,500
-----------
$ 4,522,963
- -----------------------------------------------------------------------------
Forest and Paper Products - 1.1%
Scott Paper Co. 8,000 $ 388,000
- -----------------------------------------------------------------------------
Machinery - 2.9%
Deere & Co., Inc. 4,000 $ 325,500
Ingersoll Rand Co. 10,000 375,000
York International Corp. 8,100 341,212
-----------
$ 1,041,712
- -----------------------------------------------------------------------------
Medical and Health Products - 6.2%
American Home Products Corp. 8,000 $ 679,000
Johnson & Johnson 8,000 593,000
Merck & Co., Inc. 17,000 952,000
-----------
$ 2,224,000
- -----------------------------------------------------------------------------
Oils - 7.3%
Amoco Corp. 8,000 $ 513,000
Chevron Corp. 9,000 437,625
Exxon Corp. 15,000 1,083,750
Mobil Corp. 6,000 597,750
-----------
$ 2,632,125
- -----------------------------------------------------------------------------
Pollution Control - 1.1%
USA Waste Services, Inc.* 20,000 $ 390,000
- -----------------------------------------------------------------------------
Printing and Publishing - 1.1%
Pulitzer Publishing Co. 7,500 $ 388,125
- -----------------------------------------------------------------------------
Restaurants and Lodging - 1.3%
Promus Hotel Corp.* 20,100 $ 457,275
- -----------------------------------------------------------------------------
Stores - 1.4%
Federated Department Stores, Inc.* 18,000 $ 510,750
- -----------------------------------------------------------------------------
Supermarkets - 3.1%
Kroger Co.* 18,000 $ 614,250
Safeway, Inc. 12,000 501,000
-----------
$ 1,115,250
- -----------------------------------------------------------------------------
Utilities - Electric - 8.6%
Cinergy Corp. 20,000 $ 557,500
DPL, Inc. 20,000 462,500
FPL Group, Inc. 12,000 490,500
Illinova Corp. 20,000 542,500
Nipsco Industries, Inc. 16,000 558,000
Pinnacle West Capital Corp. 18,000 472,500
-----------
$ 3,083,500
- -----------------------------------------------------------------------------
Utilities - Gas - 2.0%
Pacific Enterprises 18,000 $ 452,250
Panhandle Eastern Corp. 10,000 272,500
-----------
$ 724,750
- -----------------------------------------------------------------------------
Utilities - Telephone - 12.0%
American Telephone & Telegraph Co. 20,000 $ 1,315,000
Ameritech Corp. 15,000 781,875
BellSouth Corp. 12,000 877,500
Frontier Corp. 20,000 532,500
GTE Corp. 10,000 392,500
SBC Communications, Inc. 7,000 385,000
-----------
$ 4,284,375
- -----------------------------------------------------------------------------
Total Common Stocks and Warrants (Identified Cost,
$29,305,231) $35,192,638
- -----------------------------------------------------------------------------
Short-Term Obligation - 0.8%
- -----------------------------------------------------------------------------
Principal Amount
(000 Omitted)
- -----------------------------------------------------------------------------
Federal Home Loan Bank, due 10/04/95,
at Amortized Cost $ 300 $ 299,860
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $29,605,091) $35,492,498
Other Assets, Less Liabilities - 1.0% 349,414
- -----------------------------------------------------------------------------
Net Assets - 100.0% $35,841,912
- -----------------------------------------------------------------------------
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
September 30, 1995
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $29,605,091) $35,492,498
Cash 94,038
Receivable for investments sold 2,611,381
Dividends receivable 60,800
Deferred organization expenses 19,100
Other assets 299
-----------
Total assets $38,278,116
-----------
Liabilities:
Payable for investments purchased $ 2,414,567
Payable to affiliates -
Management fee 1,656
Distribution fee 292
Accrued expenses and other liabilities 19,689
-----------
Total liabilities $ 2,436,204
-----------
Net assets $35,841,912
===========
Net assets consist of:
Paid-in capital $28,923,445
Unrealized appreciation on investments 5,887,407
Accumulated undistributed net realized gain on investments 636,154
Accumulated undistributed net investment income 394,906
-----------
Total $35,841,912
===========
Shares of beneficial interest outstanding 3,023,850
===========
Net asset value, offering price, and redemption price per
share (net assets of $35,841,912 / 3,023,850 shares of
beneficial interest outstanding) $11.85
======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations
- ------------------------------------------------------------------------------
Year Ended September 30, 1995
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 704,104
Interest 58,430
----------
Total investment income $ 762,534
----------
Expenses -
Management fee $ 193,107
Trustees' compensation 6,200
Shareholder servicing agent fee 1,306
Distribution fee 44,473
Auditing fees 31,900
Printing 28,856
Custodian fee 17,072
Amortization of organization expenses 4,949
Legal fees 1,523
Miscellaneous 2,071
----------
Total expenses $ 331,457
Reduction of expenses by investment adviser (25,470)
Fees paid indirectly (9,478)
----------
Net expenses $ 296,509
----------
Net investment income $ 466,025
----------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) on investment
transactions $ 806,897
Change in unrealized appreciation on investments 5,900,373
----------
Net realized and unrealized gain on investments $6,707,270
----------
Increase in net assets from operations $7,173,295
==========
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Period Ended
September 30, 1995 September 30, 1994*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations - $ 466,025 $ 153,346
Net investment income
Net realized gain (loss) on investments 806,897 (170,743)
Net unrealized gain (loss) on investments 5,900,373 (12,966)
----------- -----------
Increase (decrease) in net assets from operations $ 7,173,295 $ (30,363)
----------- -----------
Distributions declared to shareholders from net investment income $ (224,465) $ --
----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 9,572,700 $22,212,350
Net asset value of shares issued to shareholders in reinvestment of distributions 224,465 --
Cost of shares reacquired (3,088,531) (47,539)
----------- -----------
Increase in net assets from Fund share transactions $ 6,708,634 $22,164,811
----------- -----------
Total increase in net assets $13,657,464 $22,134,448
Net assets:
At beginning of period 22,184,448 50,000
----------- -----------
At end of period (including accumulated undistributed net investment income of $394,906 $35,841,912 $22,184,448
and $153,346, respectively) =========== ===========
*For the period from the commencement of investment operations, January 14,
1994 to September 30, 1994.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights
- ------------------------------------------------------------------------------
Year Ended Period Ended
September 30, 1995 September 30, 1994*
- ------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 9.64 $10.00
------- ------
Income from investment operations++-
Net investment income** $ 0.17 $ 0.12
Net realized and unrealized gain
(loss) on investments 2.14 (0.48)
------- ------
Total from investment operations $ 2.31 $(0.36)
------- ------
Less distributions declared to
shareholders from net investment income $ (0.10) $ --
------- ------
Net asset value - end of period $ 11.85 $ 9.64
======= ======
Total return 24.21% (3.60)%
Ratios (to average net assets)/
Supplemental data**:
Expenses## 1.00% 1.00%+
Net investment income 1.58% 1.55%+
Portfolio turnover 125% 48%
Net assets at end of period (000 omitted) $35,842 $22,184
*For the period from the commencement of investment operations, January 14,
1994 to September 30, 1994.
+Annualized.
++Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly. The ratio of net
expenses to average net assets is 1.00%.
**The investment adviser voluntarily agreed to maintain the expenses of the Fund
at not more than 1.00% of average daily net assets. If this agreement had not
been in effect, the net investment income per share and the ratios would have
been:
Net investment income $0.16 $0.07
Ratios (to average net assets):
Expenses## 1.12% 1.64%+
Net investment income 1.49% 0.91%+
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Union Standard Equity Fund (the Fund) is a diversified series of MFS Union
Standard 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. 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.
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.
Fees Paid Indirectly - The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
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. 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.
(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. Under a temporary expense reimbursement
agreement with MFS, MFS has voluntarily agreed to bear all of the Fund's
operating expenses until December 31, 1998. The Fund in turn will pay MFS an
expense reimbursement fee not greater than 1.00% of average daily net assets.
To the extent that the expense reimbursement fee exceeds the Fund's actual
expenses, the excess will be applied to the amount paid by MFS in prior years.
At September 30, 1995, the aggregate unreimbursed expenses owed to MFS by the
Fund amounted to $87,141, including $25,470 incurred in the current year. The
Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain of the officers
and Trustees of the Fund are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC).
Distributor - MFD, a wholly owned subsidiary of MFS, is distributor of the
Fund. The Trustees have adopted a separate distribution plan pursuant to Rule
12b-1 of the Investment Company Act of 1940 as follows:
The distribution plan provides that the Fund will pay MFD up to 0.25% per
annum of the Fund's average daily net assets in order that MFD may pay
expenses on behalf of the Fund related to the distribution and servicing of
its shares. This rate has been set at 0.15% for an indefinite period.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated
based on the number of shareholder accounts in the Fund.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, aggregated $42,142,301 and $34,968,423,
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 $29,605,091
===========
Gross unrealized appreciation $ 6,015,717
Gross unrealized depreciation (128,310)
-----------
Net unrealized appreciation $ 5,887,407
===========
(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:
Year Ended Period Ended
September 30, 1995 September 30, 1994*
---------------------- ------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Shares sold 983,045 $9,572,700 2,301,136 $22,212,350
Shares issued to
shareholders in
reinvestment
of distributions 24,033 224,465 -- --
Shares reacquired (284,399) (3,088,531) (4,965) (47,539)
------- ---------- --------- -----------
Net increase 722,679 $6,708,634 2,296,171 $22,164,811
======= ========== ========= ===========
*For the period from commencement of investment operations, January 14, 1994
to September 30, 1994.
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the year ended September
30, 1995 was $356.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Union Standard Trust and Shareholders of MFS Union
Standard Equity Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Union Standard Equity Fund (one
of the series constituting MFS Union Standard Trust) as of September 30, 1995,
the related statement of operations for the year then ended, and the statement
of changes in net assets, and financial highlights for the year ended
September 30, 1995 and for the period from January 14, 1994 (the commencement
of investment operations) through September 30, 1994. 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 September 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 Union Standard
Equity Fund at September 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
November 3, 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>
MFS UNION STANDARD(SM)
EQUITY FUND
500 Boylston Street
Boston, MA 02116
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS INCLUDED IN PART A:
MFS UNION STANDARD EQUITY FUND
For the period from the commencement of investment of operations,
January 14, 1994 to September 30, 1994 and for the year ended
September 30, 1995:
Financial Highlights
FINANCIAL STATEMENTS INCLUDED IN PART B:
MFS UNION STANDARD EQUITY FUND
At September 30, 1995:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended September 30, 1995:
Statement of Operations*
For the period from the commencement of investment operations,
January 14, 1994 to September 30, 1994 and for the year ended
September 30, 1995:
Statement of Changes in Net Assets*
_____________________
* Incorporated by reference to the Fund's Annual Report to Shareholders
dated September 30, 1995 filed with the SEC via EDGAR on November 30, 1995.
(b) EXHIBITS
1 (a) Declaration of Trust, dated September 1, 1993. (4)
(b) Amendment to Declaration of Trust-Designation of Series,
dated September 1, 1993. (4)
(c) Amendment to Declaration of Trust - Abolishment of MFS
Union Standard Fixed Income Fund, a series of Shares of
Beneficial Interest and Establishment and Designation of
MFS Union Standard Research Fund, a series of Shares of
Beneficial Interest, dated August 29, 1995. (4)
<PAGE>
2 By-Laws, dated September 1, 1993. (4)
3 Not Applicable.
4 Form of Share Certificate. (3)
5 (a) Investment Advisory Agreement by and between MFS Union
Standard Trust on behalf of MFS Union Standard Equity
Fund and Massachusetts Financial Services Company,
dated December 8, 1993. (4)
(b) Investment Advisory Agreement by and between MFS Union
Standard Trust on behalf of MFS Union Standard Research
Fund and Massachusetts Financial Services Company, dated
November 17, 1995; filed herewith.
6 Distribution Agreement, dated December 8, 1993. (4)
7 Not Applicable.
8 (a) Custodian Agreement between Registrant and State Street
Bank and Trust Company, dated December 8, 1993; filed
herewith.
(b) Amendment to the Custodian Agreement, dated December 8,
1993. (4)
(c) Amendment to Custodian Contract, dated November 17, 1995;
filed herewith.
9 (a) Amended and Restated Shareholder Servicing Agent Agreement
between Registrant and MFS Service Center, Inc., dated
November 17, 1995; filed herewith.
(b) Proxy Services Agreement between MFS Union Standard Trust
and American Capital Strategies Ltd., dated December 8,
1993; filed herewith.
(c) Dividend Disbursing Agency Agreement between Registrant
and State Street Bank and Trust Company, dated December 8,
1993. (4)
(d) Loan Agreement by and among the Banks named therein, the
MFS Funds named therein, and The First National Bank of
Boston dated as of February 21, 1995. (2)
<PAGE>
10 24f-2 Opinion and Consent of Counsel was filed with the
Securities and Exchange Commission on November 16, 1995.
11 Consent of Deloitte & Touche; filed herewith.
12 Not Applicable.
13 Investment Representation Letter, dated November 19,
1993. (4)
14 Not Applicable.
15 (a) Distribution Plan for MFS Union Standard Equity Fund,
dated December 8, 1993. (4)
(b) Distribution Plan for MFS Union Standard Research Fund,
dated November 17, 1995; filed herewith.
16 Schedule of Computation for Performance Quotations - Total
Return. (1)
17 Financial Data Schedule on behalf of MFS Union Standard
Equity Fund; filed herewith.
18 Not Applicable.
Power of Attorney dated August 12, 1994. (4)
_________________________
(1) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the SEC
via EDGAR on February 22, 1995.
(2) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS Municipal
Income Trust (File No. 811-4841) filed with the SEC via EDGAR on
February 28, 1995.
(3) Incorporated by reference to 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.
(4) Incorporated by reference to Registrant's Post-Effective Amendment
No. 3 filed with the SEC via EDGAR on September 1, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
MFS UNION STANDARD EQUITY FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 18
(without part value) (as of December 29, 1995)
<PAGE>
MFS UNION STANDARD RESEARCH FUND
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 0
(without par value) (as of December 29, 1995)
ITEM 27. INDEMNIFICATION
Section 5.3 of the Registrant's Declaration of Trust provides that
every person who is or has been a Trustee or officer of the Registrant shall
be indemnified by the Registrant against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof. However,
Section 5.3 further provides that no indemnification shall be provided to a
Trustee or officer:
(i) against any liability to the Registrant or the shareholders of
the Registrant by reason of a final adjudication by the court
or other body before which the proceeding was brought that he
engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the
Registrant; or
(iii) in the event of a settlement involving a payment by a Trustee or
officer or other disposition not involving a final adjudication
as provided in paragraph (i) or (ii) above resulting in a
payment by a Trustee or officer, unless there has been either
a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
by the court or other body approving the settlement or other
disposition or by a reasonable determination, based upon a
review of readily available facts (as opposed to a full
trial-type inquiry) that he did not engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees (as
defined below) acting on the matter (provided that a
majority of the Disinterested Trustees then in office
act on the matter); or
(B) by written opinion of independent legal counsel.
<PAGE>
The term "Disinterested Trustee" is defined as one who is not an
interested person of the Registrant and against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or had been pending.
Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in Section 5.3 of the
Registrant's Declaration of Trust shall be advanced by the Registrant prior
to final disposition thereof upon receipt of an undertaking by or on behalf
of the recipient to repay such amount if it is ultimately determined that he
is not entitled to indemnification under Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Registrant shall be insured
against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then
in office act on the matter) or an independent legal counsel
in a written opinion, shall determine, based upon a review
of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
Section 9 of the Shareholder Servicing Agent Agreement between the
Registrant and MFS Service Center, Inc. ("MFSC") specifies that the
Registrant will indemnify MFSC against and hold MFSC 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 MFSC's bad faith or negligence, and arising out of, or in
connection with, MFSC's duties on behalf of the Registrant under such
Agreement. In addition, Section 9 provides that the Registrant will
indemnify MFSC against and hold MFSC 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
MFSC acting in accordance with any instructions reasonably believed by MFSC
to have been executed or orally communicated by any person duly authorized by
the Registrant or its principal underwriter, or as a result of acting in
accordance with written or oral advice reasonably believed by MFSC to have
been given by counsel for the Registrant, or as a result of acting in
accordance with any instrument or share certificate reasonably believed by
MFSC 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 MFSC's gross negligence or bad faith).
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser and distributor will be insured as of the
effective date of this Registration Statement under an errors and omissions
liability insurance policy. The Registrant and its officers are also insured
under the fidelity bond required by Rule 17g-1 under the Investment Company
Act of 1940, as amended.
<PAGE>
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 eight series: MFS Managed Sectors Fund, MFS Cash Reserve
Fund, MFS World Asset Allocation Fund, MFS Aggressive Growth Fund, MFS
Research Growth and Income Fund, MFS Core Growth Fund, MFS Equity Income Fund
and MFS Special Opportunities 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 & Colonial
International Growth Fund and MFS/Foreign & Colonial International Growth and
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.
<PAGE>
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-Global Governments 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.
<PAGE>
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,
<PAGE>
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,
Daniel E. McManus, Assistant Vice President of MFS, is an Assistant 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.
<PAGE>
MFS VARIABLE INSURANCE TRUST
MFS UNION STANDARD TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown
and Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary,
W. Thomas London is the Treasurer, James O. Yost, is the Assistant Treasurer
and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A. Zlotin,
Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is the Assistant Treasurer and James R. Bordewick, Jr., is
the Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, and James O. Yost,
is the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott and
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is
the President, Thomas J. Cashman, Jr., a Senior Vice President of MFS, is a
Senior Vice President, Stephen E. Cavan is a Director, Senior Vice President
and the Clerk, James R. Bordewick, Jr. is a Director, Vice President and an
Assistant Clerk, Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo
is the Treasurer and James E. Russell is the Assistant Treasurer.
<PAGE>
MIL-UK
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E.
Cavan is a Director and the Secretary, Ziad Malek is the President, Joseph W.
Dello Russo is the Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL 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.
<PAGE>
AMI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L. Shames,
and Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President
and a Director, Leslie J. Nanberg is a Senior Vice President, a Managing
Director and a Director, George F. Bennett, Carol A. Corley, John A. Gee,
Brianne Grady and Kevin R. Parke are Senior Vice Presidents and Managing
Directors, Joseph W. Dello Russo is the Treasurer, James E. Russell is the
Assistant Treasurer and Robert T. Burns is the Secretary.
RSI
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery are
Directors, Arnold D. Scott is the Chairman and a Director, Douglas C. Grip, a
Senior Vice President of MFS, is the President, Joseph W. Dello Russo is the
Treasurer, James E. Russell is the Assistant Treasurer, Stephen E. Cavan is
the Secretary, Robert T. Burns is the Assistant Secretary and Sharon A.
Brovelli is a Senior Vice President.
In addition, the following persons, Directors or officers of MFS,
have the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive Park,
Wellesley Hills, Massachusetts
Director, Sun Life Insurance and Annuity
Company of New York, 67 Broad Street, New
York, New York
John R. Gardner President and a Director, Sun Life Assurance
Company of Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada (Mr.
Gardner is also an officer and/or Director of
various subsidiaries and affiliates of Sun
Life)
John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King Street
West, Toronto, Ontario, Canada (Mr. McNeil is
also an officer and/or Director of various
subsidiaries and affiliates of Sun Life)
Joseph W. Dello Russo Director of Mutual Fund Operations, The Boston
Company, Exchange Place, Boston,
Massachusetts (until August, 1994)
<PAGE>
ITEM 29. DISTRIBUTORS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal
business address of each of these persons is 500 Boylston Street, Boston,
Massachusetts 02116.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in whole or
in part, at the office of the Registrant and the following locations:
NAME ADDRESS
---- -------
Massachusetts Financial 500 Boylston Street
Services Company Boston, MA 02116
MFS Fund Distributors, Inc. 500 Boylston Street
Boston, MA 02116
State Street Bank and State Street South
Trust Company 5-West
North Quincy, MA 02171
MFS Service Center, Inc. 500 Boylston Street
Boston, MA 02116
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.
<PAGE>
(b) The Registrant undertakes to file a post-effective amendment,
in order to file financial statements on behalf of the MFS Union Standard
Research Fund (the "Research Fund"), which need not be certified, within four
to six months from the effective date of the commencement of investment
operations of the Research Fund.
(c) The registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities
being Registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 26th day of January, 1996.
MFS UNION STANDARD 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 January 26, 1996.
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
<PAGE>
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, incorporated by reference to the
Registrant's Post-Effective Amendment
No. 3 filed electronically with the
Securities and Exchange Commission on
September 1, 1995.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
5 (b) Investment Advisory Agreement by and between MFS
Union Standard Trust on behalf of MFS Union
Standard Research Fund and Massachusetts Financial
Services Company, dated November 17, 1995.
8 (a) Custodian Agreement between Registrant and State
Street Bank and Trust Company, dated December 8,
1993.
(c) Amendment to Custodian Contract, dated November
17, 1995.
9 (a) Amended and Restated Shareholder Servicing Agent
Agreement between Registrant and MFS Service
Center, dated November 17, 1995.
(b) Proxy Services Agreement between MFS Union
Standard Trust and American Capital Strategies Ltd.,
dated December 8, 1993.
11 Consent of Deloitte & Touche.
15 (b) Distribution Plan for MFS Union Standard Research
Fund, dated November 17, 1995.
17 Financial Data Schedule on behalf of MFS Union
Standard Equity Fund.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MFS UNION STANDARD EQUITY FUND AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 29,605,091
<INVESTMENTS-AT-VALUE> 35,492,498
<RECEIVABLES> 2,672,181
<ASSETS-OTHER> 19,399
<OTHER-ITEMS-ASSETS> 94,038
<TOTAL-ASSETS> 38,278,116
<PAYABLE-FOR-SECURITIES> 2,414,567
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,637
<TOTAL-LIABILITIES> 2,436,204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,923,445
<SHARES-COMMON-STOCK> 3,023,850
<SHARES-COMMON-PRIOR> 2,301,171
<ACCUMULATED-NII-CURRENT> 394,906
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 636,154
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,887,407
<NET-ASSETS> 35,841,912
<DIVIDEND-INCOME> 704,104
<INTEREST-INCOME> 58,430
<OTHER-INCOME> 0
<EXPENSES-NET> 296,509
<NET-INVESTMENT-INCOME> 466,025
<REALIZED-GAINS-CURRENT> 806,897
<APPREC-INCREASE-CURRENT> 5,900,373
<NET-CHANGE-FROM-OPS> 7,173,295
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 224,465
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 983,045
<NUMBER-OF-SHARES-REDEEMED> 284,399
<SHARES-REINVESTED> 24,033
<NET-CHANGE-IN-ASSETS> 13,657,464
<ACCUMULATED-NII-PRIOR> 153,346
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 170,743
<GROSS-ADVISORY-FEES> 193,107
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 331,457
<AVERAGE-NET-ASSETS> 29,569,628
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 2.14
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT NO. 99.5(b)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 17th day of November, 1995 by
and between MFS UNION STANDARD TRUST, a Massachusetts business trust (the
"Trust") on behalf of MFS UNION STANDARD RESEARCH FUND, a series of the Trust
(the "Fund"), and Massachusetts Financial Services Company, a Delaware
corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business management services to
the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and Agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1: DUTIES OF THE ADVISER. The Adviser shall provide the Fund
with such investment advice and supervision as the latter may from time to
time consider necessary for the proper management of its funds. The Adviser
shall act as Adviser to the Fund and as such shall furnish continuously an
investment program and shall determine from time to time what securities
shall be purchased, sold or exchanged and what portion of the assets of the
Fund shall be held uninvested, subject always to the restrictions of the
Trust's Declaration of Trust, dated September 1, 1993 and By-Laws, as amended
from time to time (respectively, the "Declaration" and the "By-Laws"), and to
the provisions of the Investment Company Act of 1940. Should the Trustees at
any time, however, make any definite determination as to investment policy
and notify the Adviser thereof in writing, the Adviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Adviser
shall take, on behalf of the Fund, all actions which it deems necessary to
implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio
securities for the Fund's account with brokers or dealers selected by it, and
to that end the Adviser is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such orders, the
Adviser is directed to seek for the Fund execution at the most favorable
price by responsible brokerage firms at reasonably competitive commission
rates. In fulfilling this requirement the Adviser shall not be deemed to
have acted unlawfully or to have breached any duty, created by this Agreement
or otherwise, solely by reason of its having caused the Fund to pay a broker
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
<PAGE>
responsibilities with respect to the Fund and to other clients of the Adviser
as to which the Adviser exercises investment discretion.
The Adviser may from time to time enter into sub-investment advisory
agreements with one or more investment advisers with such terms and
conditions as the Adviser may determine, provided that such sub-investment
advisory agreements have been approved in accordance with applicable
provisions of the Investment Company Act of 1940. Subject to the provisions
of Article 6, the Adviser shall not be liable for any error of judgment or
mistake of law by any sub-adviser or for any loss arising out of any
investment made by any sub-adviser or for any act or omission in the
execution and management of the Fund by any sub-adviser.
ARTICLE 2: ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Fund and maintaining the Trust's organization, and
investment advisory facilities and executive and supervisory personnel for
managing the investments and effecting the portfolio transactions of the
Fund. The Adviser shall arrange, if desired by the Trust, for Directors,
officers and employees of the Adviser to serve as Trustees, officers or
agents of the Trust if duly elected or appointed to such positions and
subject to their individual consent and to any limitations imposed by law.
It is understood that the Trust will pay all of its own expenses including,
without limitation, compensation of Trustees not affiliated with the Adviser,
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Trust, fees and expenses of independent
auditors, of legal counsel and of any transfer agent, registrar or dividend
disbursing agent of the Trust, expenses of repurchasing and redeeming shares
and servicing shareholder accounts, expenses of preparing, printing and
mailing stock certificates, prospectuses, periodic reports, notices and proxy
statements to shareholders and to governmental officers and commissions,
brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions, insurance premiums, fees and
expenses of the custodian for all services to the Trust, including
safekeeping of funds and securities, keeping of books and accounts and
calculation of the net asset value of shares of the Fund, expenses of
shareholder meetings, and expenses relating to the issuance, registration and
qualification of shares of the Trust.
ARTICLE 3: COMPENSATION OF THE ADVISER. For the services to be
rendered and the facilities to be furnished as provided in Articles 1 and 2
above, the Fund shall pay to the Adviser an investment advisory fee computed
and paid monthly at the annual rate of 0.60% of the Fund's average daily net
assets.
The Adviser agrees to pay until December 31, 2000, expenses of the
Trust (except for fees paid under this Agreement or the Fund's Distribution
Plan) such that the Fund's aggregate operating expenses shall not exceed
1.00% per annum of the average daily net assets of the Fund; PROVIDED,
HOWEVER, that this obligation may be terminated or revised at any time by the
Adviser without the consent of the Fund by notice in writing from the Adviser
to the Fund, provided that such termination or revision will not be effective
with respect to the fiscal year within which such notice is given. Such
payments by the Adviser are subject to reimbursement by the Fund, which will
be accomplished by the payment by the Fund of an expense reimbursement fee to
the Adviser computed and paid monthly at a percentage of the average daily
net assets of the Fund for its then current fiscal
1
<PAGE>
year, with a limitation that immediately after such payment the aggregate
operating expenses of the Fund would not exceed 1.00% of its average daily
net assets. This expense reimbursement terminates for the Fund on the
earlier of the date on which payments made thereunder by such Fund equal the
prior payment of such reimbursable expenses by the Adviser or December 31,
2000.
If the Adviser shall serve for less than the whole of any period
specified in this Article 3, the compensation to the Adviser shall be
prorated.
ARTICLE 4: SPECIAL SERVICES. Should the Trust have occasion to
request the Adviser to perform services not herein contemplated or to request
the Adviser to arrange for the services of others, the Adviser will act for
the Trust upon request to the best of its ability, with compensation for the
Adviser's services to be agreed upon with respect to each such occasion as it
arises.
ARTICLE 5: COVENANTS OF THE ADVISER. The Adviser agrees that it will
not deal with itself, or with the Trustees of the Trust or the Underwriter as
principals in making purchases or sales of securities or other property for
the account of the Fund, will not take a long or short position in the shares
of the Fund except as provided by the Declaration, and will comply with all
other provisions of the Declaration and By-Laws relative to the Adviser and
its Directors and officers.
ARTICLE 6: LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Article
6, the term "Adviser" shall include Directors, officers and employees of the
Adviser as well as the corporation itself.
ARTICLE 7: ACTIVITIES OF THE ADVISER. The services of the Adviser to
the Trust are not to be deemed to be exclusive, the Adviser being free to
render services to others. The Adviser may permit other fund clients to use
the words "Massachusetts Financial" or "MFS" in their names. The Trust
agrees that if the Adviser shall for any reason no longer serve as the
Adviser to the Trust, the Trust and the Fund will each change its name so as
to delete the words "Massachusetts Financial" or "MFS". It is understood
that Trustees, officers, and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or
may become similarly interested in the Fund and that the Adviser may be or
become interested in the Fund as a shareholder or otherwise.
ARTICLE 8: DURATION, TERMINATION AND AMENDMENTS OF THIS AGREEMENT.
This Agreement shall become effective on the date of its execution and shall
govern the relations between the parties hereto thereafter, and shall remain
in force until November 17, 1997, on which date it will terminate unless its
continuance after November 17, 1997, is specifically approved at least
annually (i) by the vote of a majority of the Trustees of the Trust who are
not interested persons of the Trust or of the Adviser at a meeting
specifically called for the purpose of voting on such approval, and (ii) by
the Trustees of the Trust, or by vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in
a manner consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder.
2
<PAGE>
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, on not more than sixty days' nor
less that thirty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by vote of a
majority of the outstanding voting securities of the Fund.
ARTICLE 9. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's
Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts. The Adviser acknowledges that the obligations
of or arising out of this Agreement are not binding upon any of the Trust's
trustees, officers, employees, agents or shareholders individually, but are
binding solely upon the assets and property of the Trust. If this Agreement
is executed by the Trust on behalf of one or more series of the Trust, the
Adviser further acknowledges that the assets and liabilities of each series
of the Trust are separate and distinct and that the obligations of or arising
out of this Agreement are binding solely upon the assets or property of the
series on whose behalf the Trust has executed this Agreement.
ARTICLE 10: DEFINITIONS. The terms "vote of a majority of the
outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as my be granted
by the Securities and Exchange Commission under said Act.
ARTICLE 11: RECORD KEEPING. The Adviser will maintain records in a
form acceptable to the Fund and in compliance with the rules and regulations
of the Securities and Exchange Commission, including but not limited to
records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the rules thereunder, which at all times will be the property
of the Fund and will be available for inspection and use by the Fund.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed,
all as of the day and year first written above. The undersigned officers of
the Trust and the Adviser have executed this Agreement not individually, but
as officers of the Trust and the Adviser, respectively.
MFS UNION STANDARD TRUST
on behalf of
MFS UNION STANDARD RESEARCH FUND,
one of its series
By: A. KEITH BRODKIN
-----------------------------------------
A. Keith Brodkin
Chairman and Trustee, and not individually
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: JEFFREY L. SHAMES
-----------------------------------------
Jeffrey L. Shames
President, and not individually
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<PAGE>
EXHIBIT 99.8(a)
CUSTODIAN CONTRACT
Between
MFS UNION STANDARD TRUST
and
STATE STREET BANK AND TRUST COMPANY
MFS-Union Custody Agreement
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Trust Held by the Custodian . . . . . . . . . . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Payments for Shares . . . . . . . . . . . . . . . . . . . . 5
2.6 Investment and Availability of Federal Funds . . . . . . . . 5
2.7 Collection of Income . . . . . . . . . . . . . . . . . . . . 5
2.8 Payment of Trust Monies . . . . . . . . . . . . . . . . . . 6
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . . 7
2.10 Payments for Repurchases or Redemptions
of Shares of the Trust . . . . . . . . . . . . . . . . . . . 7
2.11 Appointment of Agents . . . . . . . . . . . . . . . . . . . 8
2.12 Deposit of Trust Assets in Securities System . . . . . . . . 8
2.12A Trust Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Segregated Account . . . . . . . . . . . . . . . . . . . . . 10
2.14 Ownership Certificates for Tax Purposes . . . . . . . . . . 11
2.15 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.16 Communications Relating to Trust Portfolio
Securities . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.17 Proper Instructions . . . . . . . . . . . . . . . . . . . . 11
2.18 Actions Permitted Without Express Authority . . . . . . . . 12
2.19 Evidence of Authority . . . . . . . . . . . . . . . . . . . 12
3. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and Net
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Opinion of Trust's Independent Accountants . . . . . . . . . . . . 13
6. Reports to Trust by Independent Public Accountants . . . . . . . . 13
7. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 14
8. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 14
9. Effective Period, Termination and Amendment . . . . . . . . . . . 15
10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 15
11. Interpretive and Additional Provisions . . . . . . . . . . . . . . 16
<PAGE>
12. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . 16
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 17
14. Delegation of Certain Custodial Duties to MFS . . . . . . . . . . 17
<PAGE>
CUSTODIAN CONTRACT
This Contract between MFS Union Standard Trust, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at 500 Boylston Street, Boston, Massachusetts 02116,
hereinafter called the "Trust", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Trust is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust intends to initially offer shares in two series, the
MFS Union Standard Equity Fund and the MFS Union Standard Fixed Income Fund
(such series together with all other series subsequently established by the
Trust and made subject to this Contract in accordance with paragraph 12,
being herein referred to as (the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Trust hereby employs the Custodian as the custodian of the assets
or the Portfolios of the Trust pursuant to the provisions of the Declaration
of Trust. The Trust agrees, on behalf of the Portfolios, to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolios from time to time, and the
cash consideration received by it for such new or treasury shares of
beneficial interest of the Trust representing interests in the Portfolios
("Shares") as may be issued or sold from time to time. The Custodian shall
not be responsible for any property of a Portfolio held or received by the
Portfolio and not delivered to the Custodian
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, but only in accordance with an
applicable vote by the Board of Trustees of the Trust on behalf of the
applicable Portfolio(s). The Custodian shall have no more or less
responsibility or liability to the Trust on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian.
<PAGE>
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
TRUST HELD BY THE CUSTODIAN
2.1 HOLDINQ SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.12A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Trust on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Portfolio:
3) In the case of a sale effected through a Securities System, in accordance
with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar offers
for securities of the Portfolio:
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.11 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian:
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<PAGE>
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian.
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian:
10) For delivery in connection with any loans of securities made by the
Portfolio BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Trust on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by the
Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Trust
on behalf of the Portfolio requiring a pledge of assets by the Trust
on behalf of the Portfolio, BUT ONLY against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Trust on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or
3
<PAGE>
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio;
13) For delivery in accordance with the provisions of any agreement among
the Trust on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio:
14) Upon receipt of instructions from the transfer agent ("Transfer Agent")
for the Trust, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described
from time to time in the currently effective prospectus and statement
of additional information of the Trust related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Trust on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the
Trust and certified by the Secretary or an Assistant Secretary, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the
applicable Portfolio or in the name of any nominee of the Trust on
behalf of the applicable Portfolio or of any nominee of the Custodian
which nominee shall be assigned exclusively to the applicable
Portfolio, UNLESS the Trust has authorized in writing the appointment
of a nominee to be used in common with other registered investment
companies having the same investment adviser as such Portfolio, or in
the name or nominee name of any agent appointed pursuant to Section
2.11 or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on
behalf of a Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts (the "Portfolio's Account or Accounts") in the name
of each Portfolio of the Trust, subject only to draft or order by the
Custodian acting
4
<PAGE>
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held by
the Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to
be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the
Board of Trustees of the Trust. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 PAYMENTS FOR SHARES. The Custodian shall receive from the distributor
for the Shares or from the Transfer Agent of the Trust and deposit into
each Portfolio's Account such payments as are received for Shares of
that Portfolio issued or sold from time to time by the Trust. The
Custodian will provide timely notification to the Trust on behalf of
each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
2.6 INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement
between the Trust on behalf of each applicable Portfolio and the
Custodian, the Custodian shall, upon the receipt of Proper Instructions
from the Trust on behalf of a Portfolio, 1) invest in such instruments
as may be set forth in such instructions on the same day as received
all federal funds received after a time agreed upon the Custodian and
the Trust; and 2) make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Trust and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.7 COLLECTION OF INCOME. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities
held hereunder to which each Portfolio shall be entitled either by law
or pursuant to custom in the securities business, and shall collect on
a timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or an agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the
5
<PAGE>
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Trust with such information or
data as may be necessary to assist the Trust in arranging for the
timely delivery to the Custodian of the income to which the Portfolio
is properly entitled.
2.8 PAYMENT OF TRUST MONIES. Upon receipt of Proper Instructions from the
Trust on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of securities for the account of the Portfolio but
only (a) against the delivery of such securities to the Custodian (or
any bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment Company Act of
1940, as amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof; or (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; or (d) in the case of repurchase
agreements entered into between the Trust on behalf of the Portfolio
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian alone with written evidence of the
agreement by the Custodian to repurchase such securities from the
Portfolio;
2) In connection with conversion, exchange or surrender of securities owned
by the Portfolio as set forth in Section 2.2 hereof:
3) For the redemption or repurchase of Shares issued by the Portfolio as set
forth in Section 2.10 hereof;
6
<PAGE>
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Trust whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Trust;
6) For payment of the amount of dividends received in respect of securities
sold short:
7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions from the Trust on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Trust signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary, setting forth the
purpose for which such payment is to be made, declaring such purpose to
be a proper purpose, and naming the person or persons to whom such
payment is to be made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for purchase of securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Trust on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Trust for such
securities to the same extent as if the securities had been received by
the Custodian EXCEPT that in the case of repurchase agreements entered
into by the Trust on behalf of a Portfolio with a bank which is a
member of the Federal Reserve System, the Custodian may transfer funds
to the account of such bank prior to the receipt of written evidence
that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary account of
the Custodian maintained with the Federal Reserve Bank of Boston or of
the safekeeping receipt, provided that such securities have in fact
been so transferred by book-entry.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE TRUST. From
such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the
Board of Trustees of the Trust pursuant thereto, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of
7
<PAGE>
their Shares. In connection with the redemption or repurchase of
Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection
with the redemption or repurchase of Shares of a Portfolio, the
Custodian shall honor checks drawn on the Custodian by a holder of
Shares or by an entity designated by the Trust acting on such holder's
behalf, which checks have been furnished by the Trust to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Trust and the Custodian.
2.11 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; PROVIDED, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12 DEPOSIT OF TRUST ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Custodian's Account") of the Custodian in the Securities System which
shall not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Portfolio
which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the
Portfolio upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Custodian's Account, and
(ii) the making of an entry
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<PAGE>
on the records of the Custodian to reflect such payment and transfer
for the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i) receipt of
advice from the Securities System that payment for such securities has
been transferred to the Custodian's Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. Copies of all advices from
the Securities System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for the Portfolio
by the Custodian and be provided to the Trust at its request. Upon
request, the Custodian shall furnish the Trust on behalf of the
Portfolio confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall furnish
to the Portfolio copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Trust for the Portfolio with any report
obtained by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities System;
5) The Custodian shall have received from the Trust on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the Custodian
shall be liable to the Trust for the benefit of the Portfolio for any
loss or damage to the Portfolio resulting from use of the Securities
System by reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their employees or
from failure of the Custodian or any such agent to enforce effectively
such rights as it may have against the Securities System; at the
election of the Trust, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that the
Trust has not been made whole for any such loss or damage.
2.12A TRUST ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
9
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1) No transaction relating to securities in the Direct Paper System will be
effected in the absence of Proper Instructions from the Trust on behalf
of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers:
3) The records of the Custodian with respect to securities of the Portfolio
which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the
Portfolio upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Trust on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Trust on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the Direct Paper System for the account of
the Portfolio;
6) The Custodian shall provide the Trust on behalf of the Portfolio with
any report on its system of internal accounting control as the Trust
may reasonably request from time to time.
2.13 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Trust on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Trust on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity
10
<PAGE>
Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written
by the Portfolio or commodity futures contracts or options
thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, BUT ONLY, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions from the Trust on
behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of each Portfolio held by it and in
connection with transfers of securities.
2.15 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of a Portfolio or a nominee of a Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted. The
Custodian shall promptly deliver to American Capital Strategies Ltd., a
Maryland corporation ("ACS"), on behalf of the applicable Portfolio,
such proxies and all proxy soliciting materials relating to such
securities, together with all proxies and proxy soliciting materials
relating to securities registered in the name of a Portfolio or a
nominee of a Portfolio which are received by the Custodian on behalf of
such Portfolio. All such materials shall be sent to ACS at the
following address: 3 Bethesda Metro Center, Suite 350; Bethesda,
Maryland 20814; Attn: Angela Lipscomb.
2.16 COMMUNICATIONS RELATING TO TRUST PORTFOLIO SECURITIES. The Custodian
shall transmit promptly to the Trust for each Portfolio all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by
the Trust on behalf of each Portfolio and the maturity of futures
contracts purchased or sold by each Portfolio) received by the
Custodian from issuers of the
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securities being held for the Portfolios. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the
Trust all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange
offer. If the Trust on behalf of a Portfolio desires to take
action with respect to any tender offer, exchange offer or any
other similar transaction, the Trust shall notify the Custodian
at least three business days prior to the date on which the
Custodian is to take such action.
2.17 PROPER INSTRUCTIONS. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person or
persons as the Board of Trustees shall have from time to time
authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the
purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. Upon receipt of
a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Trustees of the Trust accompanied by a
detailed description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such procedures
afford adequate safeguards for the Portfolios' assets.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Trust on behalf of each
applicable Portfolio:
1) make payments to itself or others for minor expenses of handing
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the
Trust on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolios, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolios except as otherwise
directed by the Board of Trustees of the Trust.
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2.19 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Trust. The Custodian may
receive and accept a certified copy of a vote of the Board of Trustees
of the Trust as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of
any action by the Board of Trustees pursuant to the Declaration of
Trust as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written notice
to the contrary.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Trust to
keep the books of account of each Portfolio and/or compute the net asset
value per share of the outstanding shares of each Portfolio or, if directed
in writing to do so by the Trust on behalf of the Portfolio, shall itself
keep such books of account and/or compute such net asset value per share. If
so directed, the Custodian shall also calculate daily the net income of a
Portfolio as described in the Trust's currently effective prospectus related
to such Portfolio and shall advise the Trust and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an
officer of the Trust to do so, shall advise the Transfer Agent periodically
of the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time in
the Trust's currently effective prospectus related to such Portfolio.
4. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Trust under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and
Rules 3la-1 and 3la-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules or procedures which may be applicable
to the Trust. All such records shall be the property of the Trust and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Trust and
employees and agents of the Securities and Exchange Commission.
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The Custodian shall, at the Trust's request, supply the Trust with a
tabulation of securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include certificate
numbers in such tabulations.
5. OPINION OF TRUST'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Trust on behalf
of each applicable Portfolio may from time to time request, to obtain from
year to year favorable opinions from the Trust's independent accountants with
respect to its activities hereunder in connection with the preparation of the
Trust's Form N-1A, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other requirements of such
Commission.
6. REPORTS TO TRUST BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Trust, on behalf of each of the
Portfolios at such times as the Trust may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Trust to provide
reasonable assurance that any material inadequacies would be disclosed by
such examination, and, if there are no such inadequacies, the reports shall
so state.
7. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Trust on behalf of each applicable Portfolio and the Custodian.
8. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party
or parties. The Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract and shall be indemnified by the
Trust for any action taken or
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omitted by it in the proper execution of instructions from the Trust. It
shall be entitled to rely on and may act upon advice of counsel for the Trust
on all matters and shall be without liability for any action reasonably taken
or omitted pursuant to such advice.
The Trust on behalf of a Portfolio agrees to indemnify and hold
harmless the Custodian and its nominee from and against all taxes, charges,
expenses, assessments, claims and liabilities (including counsel fees)
incurred or assessed against it or its nominee in connection with the
performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct
The Custodian is authorized to charge any account of the applicable
Portfolio for each such item and its fees. To secure any such authorized
charges and any advances of cash or securities made by the Custodian to or
for the benefit of a Portfolio for any purpose which results in the Portfolio
incurring an overdraft at the end or any business day or for extraordinary or
emergency purposes during any business day, the Trust on behalf of the
Portfolio hereby grants to the Custodian a security interest in and pledges
to the Custodian securities held for the Portfolio by the Custodian, in an
amount not to exceed five percent of the applicable Portfolio's gross assets,
the specific securities to be designated in writing from time to time by the
Trust on behalf of the Portfolio or its investment adviser (the "Pledged
Securities"). Should the Trust on behalf of the Portfolio fail to repay
promptly any advances of cash or securities, the Custodian shall be entitled
to use available cash and to dispose of the Pledged Securities as is
necessary to repay any such advances.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or mailing;
PROVIDED, however that the Custodian shall not with respect to a Portfolio
act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Trust have approved the initial use of a particular
Securities System by such Portfolio as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended; and PROVIDED FURTHER, however,
(a) that the Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and (b) that the Trust
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on behalf of one or more of the Portfolios may at any time by action of its
Board of Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Trust on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be
due as of the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
10. SUCCESSOR CUSTODIAN
If a successor custodian for the assets of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Trust, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of
each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Trust, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment Company Act of
1940, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian
on behalf of each applicable Portfolio and all instruments held by the
Custodian relative thereto and all other property held by it under this
Contract on behalf of each applicable Portfolio and to transfer to an account
of such successor custodian all of the securities of each such Portfolio held
in any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of
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termination hereof owing to failure of the Trust to procure the certified
copy of the vote referred to or of the Board of Trustees to appoint a
successor custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Trust on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional provisions shall be in
a writing signed by both parties and shall be annexed hereto, PROVIDED that
no such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of Trust of
the Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
12. ADDITIONAL FUNDS
In the event that the Trust establishes one or more series of Shares in
addition to the initial series with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio
hereunder.
13. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
14. DELEGATION OF CERTAIN CUSTODIAN DUTIES TO MFS.
The Custodian may delegate to Massachusetts Financial Services Company
("MFS") the performance of any or all of its duties hereunder relating to (i)
accounting for investments in currency and for financial instruments
(including, without limitation, options contracts, futures contracts, options
on futures contracts, options on foreign currency and forward foreign
currency exchange contracts) and (ii) federal and state regulatory
compliance. The Custodian shall compensate MFS for the performance of such
duties at such fee or fees as MFS shall
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determine to be equal to MFS's cost for performing such duties (the "MFS
Fees"). Following its payment of the MFS Fees to MFS, the Custodian shall
recover the amount of the MFS Fees from the Trust on such terms as the
Custodian and the Trust shall agree. MFS assumes responsibility for all
duties delegated to it by the Custodian pursuant to this Section 14, and the
Custodian may rely on MFS for the accuracy and correctness of the accounting
information provided by MFS to the Custodian pursuant to this Section 14.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative as
of the 8th day of December, 1993.
MFS UNION STANDARD TRUST
By A. KEITH BRODKIN
------------------------------
STATE STREET BANK AND TRUST COMPANY
By DONALD LOGUE
------------------------------
Executive Vice President
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EXHIBIT NO. 99.8(c)
AMENDMENT TO CUSTODIAN CONTRACT
Amendment to Custodian Contract between MFS Union Standard Trust, a business
trust organized and existing under the laws of The Commonwealth of
Massachusetts, having a principal place of business at 500 Boylston Street,
Boston, Massachusetts 02116 (hereinafter called the "Trust"), and State
Street Bank and Trust Company , a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston, Massachusetts
02110 (hereinafter called the "Custodian").
WHEREAS: The Trust and the Custodian are parties to a Custodian Contract
dated December 8, 1993, as amended (the "Custodian Contract");
WHEREAS: The Trust has established a series of Shares (MFS Union Standard
Research Fund (the "Series")) in addition to the initial series with respect
to which it desires to have the Custodian render services as custodian under
the terms of the Custodian Contract;
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto hereby amend the Custodian Contract
as follows:
1. Capitalized terms used herein without definition have the meanings
ascribed to them in the Custodian Contract.
2. Pursuant to Section 12 of the Custodian Contract, the Trust and the
Custodian hereby agree that the Custodian shall render services as custodian
under the terms of the Custodian Contract to the Series and that the Series
is hereby deemed a "Portfolio" as defined in the Custodian Contract.
3. A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Custodian
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. If this instrument is executed by the Trust on behalf of one or
more series of the Trust, the Custodian further acknowledges that the assets
and liabilities of each series of the Trust are separate and distinct and
that the obligations of or arising out of this instrument are binding solely
upon the assets or property of the series on whose behalf the Trust has
executed this instrument. If the Trust has executed this instrument on
behalf of more than one series of the Trust, the Custodian also agrees that
the obligations of each series hereunder shall be several and not joint, in
accordance with its proportionate interest hereunder, and the Custodian
agrees not to proceed against any series for the obligations of another
series.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
Custodian Contract to be executed in its name and behalf by its duly
authorized representatives and its seal to be hereunder affixed as of the
17th day of November, 1995.
ATTEST: MFS UNION STANDARD TRUST
By: JEAN M. BUCKLEY By: A. KEITH BRODKIN
------------------------- ---------------------------
Title: Chairman
---------------------------
ATTEST: STATE STREET BANK AND TRUST
COMPANY
By: PAMELA SMITH By: ALAN D. GREEN
------------------------- ---------------------------
Title: Senior Vice President
---------------------------
<PAGE>
EXHIBIT NO. 99.9(a)
MFS UNION STANDARD TRUST
500 Boylston Street
Boston, Massachusetts 02116
November 17, 1995
MFS Service Center, Inc.
500 Boylston Street
Boston, Massachusetts 02116
AMENDED AND RESTATED SHAREHOLDER SERVICING AGENT AGREEMENT
Dear Sir:
MFS Union Standard Trust, which is a Massachusetts business trust
(referred to as the "Trust") with two series, MFS Union Standard Equity Fund
and MFS Union Standard Research Fund (each a "Fund"), is an open-end
registered investment company. The Trust has selected you to act as its
Shareholder Servicing Agent and you hereby agree to act as such Agent and to
perform the duties and functions thereof in the manner and on the conditions
hereinafter set forth. Accordingly, the Trust hereby agrees with you as
follows:
1. THE FACILITY. You represent that you have the necessary computer
equipment, software and other office equipment ("Facility") adequate to
perform the services contemplated hereby for the Fund as well as for other
investment companies (such investment companies, together with the Fund, are
herein collectively referred to as the "MFS Funds") for which Massachusetts
Financial Services Company ("MFS") acts as investment adviser. The Facility
is presently located at 500 Boylston Street, Boston, Massachusetts, and is to
be dedicated solely to the performance of services for the MFS Funds,
provided that the Facility may be utilized to perform services for others
with the permission of the MFS Funds.
2. NAME. Unless otherwise directed in writing by MFS, you shall
perform the services contemplated hereby under the name "MFS Service Center,
Inc.", which name and any similar names and any logos of which shall remain
the property and under the control of MFS. Upon termination of this
Agreement, you shall cease to use such name or any similar name within a
reasonable period of time.
<PAGE>
3. SERVICES TO BE PERFORMED. As Shareholder Servicing Agent
("Agent"), you shall be responsible for administering and performing transfer
and dividend and distribution disbursing functions in connection with the
issuance, transfer and redemption of various classes of shares of beneficial
interest of the various series of the Trust existing from time to time
("Shares"). The details of the operating standards and procedures to be
followed by you shall be determined from time to time by agreement between
you and the Fund.
4. STANDARD OF SERVICE. As Agent for the Fund, you agree to provide
service equal to or better than that provided by you or others furnishing
shareholder services to other open-end investment companies ("Standard") at a
fee comparable to the fee paid you for your services hereunder. The Standard
shall include at least the following:
(a) Prompt reconciliation of any differences as to the number of
outstanding shares between various Facility records or between Facility
records and records of the Fund's custodian;
(b) Prompt processing of shareholder correspondence and of other
matters requiring action by you;
(c) Prompt clearance of any daily volume backlog;
(d) Providing innovative services and technological improvements;
(e) Meeting the requirements of any governmental authority having
jurisdiction over you or the Fund; and
(f) Prompt reconciliation of all bank accounts under your control
belonging to the Fund or MFS.
If any MFS Fund serviced by you is reasonably of the view that the
service provided by you does not meet the Standard, it shall give you written
notice specifying the particulars, and you then shall have 120 days in which
to restore the service so that it meets the Standard, except that such period
shall be 180 days with respect to meeting that portion of the Standard
described above in item (d) of this paragraph 4. If at the end of such
period the Fund remains reasonably of the view that the service provided by
you, in the particulars specified, does not meet the Standard, then the MFS
Fund or Funds having a majority of the accounts for which you are then Agent
may, by appropriate action (including the concurrence of a majority of the
Trustees of such MFS Fund or Funds, who are not interested persons of MFS),
elect to terminate this Agreement for cause as to all such Funds upon 90 days
notice to you. Upon termination hereof, the Fund shall pay you such
compensation as may be due to you as of the date of such termination, and
shall likewise reimburse you for any costs, expenses, and disbursements
reasonably incurred by you to such date in the performance of your duties
hereunder.
<PAGE>
5. PURCHASE OF FACILITY. In the event that you have given notice of
termination of this Agreement pursuant to the provisions of paragraph 14
hereof, or for cause as provided in paragraph 4 hereof, the MFS Funds shall
have the right, but shall not be required (a) to purchase the Facility and
assume the unexpired portion of any leases of equipment or real estate
relating to the Facility from you at a price equal to your estimated
unrecovered acquisition value (as supported by the schedules and records used
in determining monthly billings) of the machinery, equipment, software,
furniture, fixtures and leasehold improvements included in the Facility, and
(b) to negotiate with persons then employed by you in the operation of the
Facility and to hire all of them in connection with the purchase of the
Facility from you by the MFS Funds. You agree to release each such employee
from any contractual obligations such persons may have to you that may
interfere with such person's being hired at such time by the MFS Funds and
agree not to interfere with the negotiation and hiring of any such persons at
any such time. In the event that the MFS Funds have given notice of
termination of this Agreement pursuant to the provisions of paragraph 14
hereof, for reasons other than cause as defined in paragraph 4 hereof, the
MFS Funds shall purchase the Facility under the terms and conditions set
forth in subsections (a) and (b) of this paragraph 5.
You shall effect the transfer of the Facility pursuant to this
paragraph 5 upon the termination date specified in the notice, or at such
other time as shall be agreed upon by the parties hereto.
6. RIGHTS IN DATA AND CONFIDENTIALITY. You agree that all records,
data, files, input materials, reports, forms and other data received,
computed or stored in the performance of this Agreement are the exclusive
property of the Fund and that all such records and other data shall be
furnished without additional charge, except for actual processing costs, to
the Fund in machine readable as well as printed form immediately upon
termination of this Agreement or at the Fund's request. You shall safeguard
and maintain the confidentiality of the Fund's data and information supplied
to you by the Fund and you shall not transfer or disclose the Fund's data to
any third party without the Fund's prior written consent unless compelled to
do so by order of a court or regulatory authority.
7. FEES. The fee for your services hereunder shall not be in excess
of such amount as shall be agreed in writing between us (see Exhibit A
attached hereto). Such fee shall be payable in monthly installments of
one-twelfth of the annual fee. Such fee shall be subject to review at least
annually and fixed by the parties in good faith negotiation on the basis of a
statement of the expenses of the Facility prepared by you, which either you
or the Fund may require to be certified by a major accounting firm
acceptable to the parties. The party or parties requesting such
certification shall bear all expenses thereof. In addition to the foregoing
fee, you will be reimbursed by the Fund for out-of-pocket expenses reasonably
incurred by you on behalf of the Fund, including but not limited to expenses
for stationery (including business forms and checks), postage, telephone and
telegraph line and toll charges, and premiums for negotiable instrument
insurance and similar items.
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8. RECORD KEEPING. You will maintain records in a form acceptable to
the Fund and in compliance with the rules and regulations of the Securities
and Exchange Commission, including but not limited to records required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder, which at all times will be the property of the Fund and
will be available for inspection and use by the Fund.
9. DUTY OF CARE AND INDEMNIFICATION. You will at all times act in
good faith in performing your duties hereunder. You will not be liable or
responsible for delays or errors by reason of circumstances beyond your
control, including acts of civil or military authority, national emergencies,
labor difficulties, fire, mechanical breakdown beyond your control, flood or
catastrophe, acts of God, insurrection, war, riots or failure beyond your
control of transportation, communication or power supply. The Fund will
indemnify you against and hold you harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit not resulting from
your bad faith or negligence, and arising out of, or in connection with, your
duties on behalf of the Fund hereunder. In addition, the Fund will indemnify
you against and hold you harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit as a result of your acting
in accordance with any instructions reasonably believed by you to have been
executed or orally communicated by any person duly authorized by the Fund or
its Principal Underwriter, or as a result of acting in accordance with
written or oral advice reasonably believed by you to have been given by
counsel for the Fund, or as a result of acting in accordance with any
instrument or share certificate reasonably believed by you to have been
genuine and signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same (unless contributed to by
your gross negligence or bad faith). In any case in which the Fund may be
asked to indemnify you or hold you harmless, the Fund shall be advised of all
pertinent facts concerning the situation in question and you will use
reasonable care to identify and notify the Fund promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Fund. The Fund shall have the option to defend
you against any claim which may be the subject of this indemnification, and
in the event that the Fund so elects such defense shall be conducted by
counsel chosen by the Fund and satisfactory to you and it will so notify you,
and thereupon the Fund shall take over complete defense of the claim and you
shall sustain no further legal or other expenses in such situation for which
you seek indemnification under this paragraph, except the expense of any
additional counsel retained by you. You will in no case confess any claim or
make any compromise in any case in which the Fund will be asked to indemnify
you except with the Fund's prior written consent. The obligations of the
parties hereto under this paragraph shall survive the termination of this
Agreement.
If any officer of the Fund shall no longer be vested with authority to
sign for the Fund, written notice thereof shall forthwith be given to you by
the Fund and until receipt of such notice by it, you shall be fully
indemnified and held harmless by the Fund in recognizing and acting upon
certificates or other instruments bearing the signatures or facsimile
signatures of such officer.
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10. INSURANCE. You will notify the Fund should any of your insurance
coverage, as set forth on Exhibit A hereto, be changed for any reason, such
notification to include the date of change and reason or reasons therefor.
11. NOTICES. All notices or other communications hereunder shall be
in writing and shall be deemed sufficient if mailed to either party at the
addresses set forth in this Agreement, or at such other addresses as the
parties hereto may designate by notice to each other.
12. FURTHER ASSURANCES. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
13. USE OF A SUB- OR CO-TRANSFER AGENT. Notwithstanding any other
provision of this Agreement, it is expressly understood and agreed that you
are authorized in the performance of your duties hereunder to employ, from
time to time, one or more Sub-Transfer Agents and/or Co-Transfer Agents.
14. AMENDMENT AND TERMINATION. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing, which, except in the case of termination,
shall be signed by the party against which enforcement of such change, waiver
or discharge is sought. Except as otherwise provided in paragraph 4 hereof,
this Agreement shall continue indefinitely until terminated by 90 days'
written notice given by the Fund to you or by you to the Fund. Upon
termination hereof, the Fund shall pay you such compensation as may be due to
you as of the date of such termination, and shall likewise reimburse you for
any costs, expenses, and disbursements reasonably incurred by you to such
date in the performance of your duties hereunder. You agree to cooperate
with the Fund and provide all necessary assistance in effectuating an orderly
transition upon termination of this Agreement.
15. SUCCESSOR. In the event that in connection with termination a
successor to any of your duties or responsibilities hereunder is designated
by the Fund by written notice to you, you will, promptly upon such
termination and at the expense of the Fund, transfer to such successor a
certified list of the shareholders of the Fund (with name, address and tax
identification or Social Security number), an historical record of the
account of each shareholder and the status thereof, and all other relevant
books, records, correspondence, and other data established or maintained by
you under this Agreement in form reasonably acceptable to the Fund (if such
form differs from the form in which you have maintained the same, the Fund
shall pay any expenses associated with transferring the same to such form),
and will cooperate in the transfer of such duties and responsibilities,
including provision for assistance from your cognizant personnel in the
establishment of books, records and other data by such successor.
16. MISCELLANEOUS. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of
Massachusetts. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of
4
<PAGE>
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.
17. TRUST ONLY. A copy of the Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts. You
acknowledge that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. If this instrument is executed by the Trust on behalf of one or
more series of the Trust, you further acknowledge that the assets and
liabilities of each series of the Trust are separate and distinct and that
the obligations of or arising out of this instrument are binding solely upon
the assets or property of the series on whose behalf the Trust has executed
this instrument on behalf of more than one series of the Trust, you also
agree that the obligations of each series hereunder shall be several and not
joint, in accordance with its proportionate interest hereunder, and you agree
not to proceed against any series for the obligations of another series.
Very truly yours,
MFS UNION STANDARD TRUST
on behalf of its various series
A. KEITH BRODKIN
--------------------------------------
A. Keith Brodkin
Chairman
The foregoing is hereby accepted as of the date thereof.
MFS SERVICE CENTER, INC.
JANET A. CLIFFORD
- ------------------------------------
Janet A. Clifford
Executive Vice President
5
<PAGE>
As of January 1, 1995
EXHIBIT A TO SHAREHOLDER SERVICING AGENT AGREEMENT (THE
"AGREEMENT")
MFS UNION STANDARD TRUST
Pursuant to Section 7 of the Agreement, the fees to be paid by each
Fund to MFS Service Center, Inc. ("MFSC"), for MFSC's services as shareholder
servicing agent under the Agreement, are 0.0075% per annum of each Fund's
average daily net assets.
MFS UNION STANDARD TRUST
By: A. KEITH BRODKIN
-----------------------------------
A. Keith Brodkin
Chairman and President
MFS SERVICE CENTER, INC.
By: JOSEPH A. RECOMENDES
-----------------------------------
Joseph A. Recomendes
President
6
<PAGE>
EXHIBIT NO. 99.9(b)
PROXY SERVICES AGREEMENT
THIS PROXY SERVICES AGREEMENT is made this 8th day of December, 1993
by and between MFS Union Standard Trust, a Massachusetts business trust (the
"Trust") on behalf of its various series as currently in existence and as
established from time to time, and American Capital Strategies Ltd., a
Maryland corporation ("ACS").
W I T N E S S E T H :
WHEREAS, ACS and Massachusetts Financial Services Company, a Delaware
Corporation ("MFS"), have entered into a Services and Maintenance Agreement
dated September 1, 1993 (the "Services Agreement") pursuant to which ACS has
agreed, among other things, to develop, maintain and administer a list of
companies which will meet certain quantitative and qualitative guidelines
relating to a company's sensitivity to the U.S. labor movement (the "LSI"),
to establish and generally administer the activities of a Labor Advisory
Board (the "LAB") which will assist ACS with respect to the development,
refinement and application of such quantitative standards and in the
development and refinement of the LSI, and to calculate and furnish to MFS
the performance of the LSI; and
WHEREAS, the Trust and MFS intend to enter into an Investment Advisory
Agreement pursuant to which MFS will provide the Trust with certain business
management services as specified therein and which contemplates that ACS
shall perform certain proxy services on behalf of the Trust pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. EXERCISE OF PROXY RIGHTS. ACS shall determine, taking into
account the AFL-CIO Proxy Voting Guidelines attached hereto as Exhibit A to
the extent such Guidelines do not conflict with legal obligations to the
Trust's investors, the manner in which voting rights pertaining to the
Trust's portfolio securities (collectively, "Proxy Rights") shall be
exercised and shall duly exercise all Proxy Rights in a timely fashion;
PROVIDED, HOWEVER, that should the Board of Trustees of the Trust at any time
make any determination as to the exercise of any specific Proxy Right and
notify ACS thereof in writing (a "Trustee Determination"), ACS shall be bound
by such Trustee Determination for the period, if any, specified in such
notice or until similarly notified that such Trustee Determination has been
revoked or revised. The Trust shall cause its custodian, State Street Bank
and Trust Company ("State Street"), to provide ACS with such proxy material
and other correspondence necessary in order for ACS to exercise the Proxy
Rights (collectively, "Proxy Materials") promptly after its receipt of the
Proxy Materials. The Trust shall cause MFS to provide ACS with such
information as to portfolio holdings of the Trust as ACS may require in order
to make timely filings under Section 13(d) of the Securities Exchange Act of
1934 and the rules promulgated thereunder as required on account of ACS's
exercise (or right to exercise) the Proxy Rights.
1
<PAGE>
2. LIMITATION OF LIABILITY. ACS shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any act or failure
to act hereunder, except for willful misfeasance, bad faith or negligence in
the performance of its duties hereunder, or by reason of reckless disregard
of its obligations and duties hereunder.
3. TERMINATION. The term of this Agreement shall commence on the
date hereof and shall continue thereafter until the sooner to occur of (a)
the termination of the Services Agreement pursuant to its terms, or (b) the
30th day after written notice is provided by the Trust to ACS of the Trust's
intention to terminate this Agreement.
4. GOVERNING LAW. This Agreement shall be construed in accordance
with the internal laws of The Commonwealth of Massachusetts as such laws are
applicable to contracts that are entered into and are fully performed within
The Commonwealth of Massachusetts.
5. NOTICES. All notices required or permitted to be sent under this
Agreement shall be sent, if to ACS:
American Capital Strategies Ltd.
3 Bethesda Metro Center
Suite 350
Bethesda, MD 20814
Attention: Malon Wilkus
or if to the Trust, in care of:
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
Attention: Karen C. Jordan
or if to State Street:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: [ ]
or such other name or address as may be given in writing to the other party.
Any notice shall be deemed to be given or received on the third day after
deposit in the U.S. mails with the postage prepaid or when actually received,
whichever is earlier.
6. AMENDMENT. This Agreement may be amended, modified or
supplemented only pursuant to a written document signed on behalf of both
parties hereto.
7. ADDITIONAL SERIES. Unless written notice is given by the Trust to
ACS to the contrary, this Agreement shall apply to any future series of the
Trust.
2
<PAGE>
8. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and
assigns, but no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the prior written consent of the
other party. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give any person, firm or corporation, other than
the parties hereto, MFS and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above. The undersigned trustee of the
Trust has executed this Agreement not individually but as trustee under the
Trust's Declaration of Trust dated September 1, 1993, and the obligations of
this Agreement are not binding upon any of the trustees or shareholders of
the Trust individually but bind only the estate of the Trust.
MFS UNION STANDARD TRUST
By:
---------------------------------
[Illegible]
AMERICAN CAPITAL STRATEGIES, LTD.
By: MALON WILKUS
----------------------------------
Malon Wilkus
President
3
<PAGE>
EXHIBIT A
Chapter 2 - "Model Guidelines for Delegated Proxy Voting Responsibility" and
Chapter 3 - "ERISA Fiduciary Duty and Proxy Voting Guidelines: An Overview,"
from PENSIONS IN CHANGING CAPITAL MARKETS, AFL-CIO Employee Benefits
Department. (February 1993)
4
<PAGE>
EXHIBIT NO. 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 4 to Registration Statement No. 33-68310 of MFS Union Standard
Trust on behalf of MFS Union Standard Equity Fund of our report dated
November 3, 1995 appearing in the annual report to shareholders for the year
ended September 30, 1995 of MFS Union Standard Equity Fund, 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, both of which are part of such
Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 24, 1996
<PAGE>
EXHIBIT NO. 99.15(b)
MFS UNION STANDARD TRUST
MFS UNION STANDARD RESEARCH FUND
DISTRIBUTION PLAN
DISTRIBUTION PLAN with respect to the shares of beneficial interest of the
MFS UNION STANDARD RESEARCH FUND (the "Fund"), a series of MFS UNION STANDARD
TRUST (the "Trust"), a business trust organized and existing under the laws
of The Commonwealth of Massachusetts, dated November 17, 1995.
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940
(the "Act"); and
WHEREAS, a plan of distribution pursuant to Rule 12b-1 of the Act has been
adopted and approved by the Trustees of the Trust, including the Qualifying
Trustees (as defined below), and by the shareholders of the Fund; and
WHEREAS, the Trust intends to distribute the Shares of Beneficial Interest
(without par value) of the Fund (the "Shares") in part in accordance with
Rule 12b-1 under the Act ("Rule 12b-1"), and desires to adopt this
Distribution Plan (the "Plan") as a plan of distribution pursuant to such
Rule; and
WHEREAS, the Trust on behalf of the Fund and the other series, from time to
time, of the Trust has entered into a distribution agreement (the
"Distribution Agreement") in a form approved by the Board of Trustees of the
Trust (the "Board of Trustees") in the manner specified in Rule 12b-1, with
MFS Investor Services, Inc., a Delaware corporation, as distributor (the
"Distributor"), whereby the Distributor provides facilities and personnel and
renders services to the Fund in connection with the offering and distribution
of the Shares; and
WHEREAS, the Board of Trustees, in considering whether the Fund should adopt
and implement this Plan, has evaluated such information as it deemed
necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it
deemed necessary to form the basis for a decision to use assets of the Fund
for such purposes, and has determined that there is a reasonable likelihood
that the adoption and implementation of this Plan will benefit the Fund and
its shareholders;
NOW, THEREFORE, the Board of Trustees hereby adopts this Plan for the Fund as
a plan of distribution in accordance with Rule 12b-1 under the Act, on the
following terms and conditions:
<PAGE>
1. As specified in the Distribution Agreement, the Distributor shall
provide facilities, personnel and a program with respect to the offering and
sale of Shares. Among other things, the Distributor shall be responsible for
all expenses of printing (excluding typesetting) and distributing
prospectuses to prospective shareholders and providing such other related
services as are reasonably necessary in connection therewith.
2. The Distribution Fee (as defined below) may be applied by the
Distributor to any activities or expenses primarily intended to result in the
sale of the Fund's shares, including, but not limited to, compensation to and
expenses of employees of the Distributor who engage in or support the
distribution of shares or who service shareholder accounts, preparation,
printing and mailing of prospectuses and statements of additional information
to other than existing shareholders, reports to shareholders such as
semiannual and annual reports, performance reports and newsletters, sales
literature and other promotional material to prospective investors, direct
mail solicitation, advertising and public relations, compensation of sales
personnel, office expenses (including rent and overhead), equipment, travel
and telephone expenses and such other expenses as may be approved from time
to time by the Trustees and as may be permitted by applicable statute, rule
or regulation.
3. As partial consideration for the services performed and expenses
incurred in the performance of its obligations under the Distribution
Agreement and as specified in Section 2 hereof, the Trust on behalf of the
Fund shall pay the Distributor a distribution fee periodically at a rate up
to 0.25% per annum of the average daily net assets of the Fund (the
"Distribution Fee"). Such payments shall commence following the
effectiveness of the Distribution Agreement and shareholder approval of the
Plan but only upon notification by the Distributor to the Fund of the
commencement of the Plan (the "Commencement Date").
4. In addition to fees payable pursuant to Section 3 hereof, the
expenses permitted to be paid by the Fund pursuant to this Plan on or after
the Commencement Date shall include other distribution related expenses.
These other distribution related expenses may include, but are not limited
to, a commission and a payment to wholesalers and others employed by the
Distributor.
5. Nothing herein contained shall be deemed to require the Trust to
take any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the
responsibility for and control of the conduct of the affairs of the Fund.
6. This Plan shall become effective upon (a) approval by a vote of at
least a "majority of the outstanding voting securities" of the Shares, and
(b) approval by a vote of the Board of Trustees and vote of a majority of the
Trustees who are not "interested persons" of the Trust and who have no direct
or indirect financial interest in the operation of the Plan or in any of the
agreements related to the Plan (the "Qualified Trustees"), such votes to be
cast in person at a meeting called for the purpose of voting on this Plan.
7. This Plan shall continue in effect indefinitely; PROVIDED,
HOWEVER, that such continuance is subject to annual approval by a vote of the
Board of Trustees and a majority of the Qualified Trustees, such votes to be
cast in person at a meeting called for the purpose of voting on continuance
of this Plan.
8. This Plan may be amended at any time by the Board of Trustees;
provided that (a) any amendment to increase materially the amount to be spent
for the services described herein shall be
<PAGE>
effective only upon approval by a vote of a "majority of the outstanding
voting securities" of the Shares and (b) any material amendment of this Plan
shall be effective only upon approval by a vote of the Board of Trustees and
a majority of the Qualified Trustees, such votes to be cast in person at a
meeting called for the purpose of voting on such amendment. This Plan may be
terminated at any time by vote of a majority of the Qualified Trustees or by
a vote of a "majority of the outstanding voting securities" of the Shares.
9. The Distributor shall provide the Board of Trustees, and the Board
of Trustees shall review, at least quarterly, a written report of the amounts
expended under the Plan and the purposes for which such expenditures were
made.
10. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who
are not "interested persons" of the Trust.
11. For the purposes of this Plan, the terms "interested person" and
"majority of the outstanding voting securities" are used as defined in the
Act. In addition, for purposes of determining the fees payable to the
Distributor, the value of the Share's net assets shall be computed in the
manner specified in the Fund's then current prospectus for computation of the
net asset value of the Shares.
12. The Trust shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in Section 9 hereof (collectively
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made and each such Record shall be kept in an easily
accessible place for the first two years of said record keeping.
13. This Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts and the applicable provisions of the Act.
14. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall
not be affected thereby.
