<PAGE>
As filed with the Securities and Exchange Commission on January 28, 1998
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. 7
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 8
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, 1998 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
================================================================================
<PAGE>
MFS UNION STANDARD TRUST
on Behalf of 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>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART A PROSPECTUS CAPTION ADDITIONAL 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; Condensed
Financial Information
4 (a) The Trust and the Fund; *
Investment Objective and
Policies; Certain Securities and
Investment Techniques
(b), (c) Investment Objective and *
Policies; Certain Securities and
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
(c) Management of the Fund - *
Investment Adviser
(d) Management of the Fund - *
Administrator
(e) Management of the Fund - *
Shareholder Servicing Agent;
Back Cover Page
(f) Information Concerning the *
Fund - Expenses; Expense
Summary; Condensed
Financial Information
(g) Investment Techniques - *
Portfolio Trading
(h) Information Concerning Shares *
of the Fund - Expenses
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 and Repurchases;
Information Concerning Shares
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Purchases;
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
(h) * *
7 (a) Front Cover Page; Management *
of the Fund - Distributor; Back
Cover Page
(b) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Net Asset Value
(c) Information Concerning Shares *
of the Fund - Purchases,
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
(g) Expense Summary; Information *
Concerning Shares of the Funds - Purchases;
Information Concerning Shares of the Funds
- Exchanges; Information Concerning Shares
of the Funds Redemptions and Repurchases;
Information Concerning Shares of the Funds
- Distribution Plan; Information Concerning
Shares of the Funds - Distributions;
Information Concerning Shares of the Funds
- Performance Information; Shareholder
Services
8 (a), (b), (c), (d) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases; Shareholder
Services
9 * *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART B PROSPECTUS CAPTION ADDITIONAL INFORMATION
- ----------------- ------------------------------ ----------------------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * Definitions
13 (a) * Investment Objective
and Policies
(b), (c) * Investment Objective
and Policies; Certain
Securities and
Investment Techniques;
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;
Trustee Compensation
Table
15 (a) Information Concerning Shares
of the Fund; Description of
Shares, Voting Rights and
Liabilities
(b), (c) * Management of the
Fund - Trustee
Compensation Table
16 (a) Management of the Fund - Management of the
Investment Adviser Fund - Investment
Adviser; Management
of the Fund - Trustees;
Management of the
Fund - Officers
(b) Management of the Fund - Management of the
Investment Adviser Fund - Investment
Adviser
(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 Description of Shares,
of the Fund - Description of Voting Rights and
Shares, Voting Rights and Liabilities
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Service
of the Fund - Purchases;
Shareholder Services
(b) Information Concerning Shares Management of the
of the Fund - Net Asset Value; Fund - Distributor;
Information Concerning Shares Determination of Net
of the Fund - Purchases Asset Value;
Performance Information
(c) * *
20 * Tax Status
21 (a), (b) * Management of the
Fund - Distributor;
Distribution Plan
(c) * *
22 (a) * *
(b) * Determination of Net
Asset Value
23 * Independent Auditors
and Financial
Statements
</TABLE>
- -----------------------------
* Not Applicable
** Contained in Annual Report
<PAGE>
MFS UNION STANDARD EQUITY FUND
SUPPLEMENT TO THE FEBRUARY 1, 1998 PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUND'S
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION ("SAI"), DATED FEBRUARY 1,
1998, AND CONTAINS A DESCRIPTION OF CLASS I SHARES.
CLASS I SHARES ARE AVAILABLE FOR PURCHASE ONLY BY CERTAIN INVESTORS AS
DESCRIBED UNDER THE CAPTION "ELIGIBLE PURCHASERS" BELOW.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS I
<S> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund Shares
(as a percentage of offering price) ................................................ None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as applicable) ..................... None
ANNUAL OPERATING EXPENSES OF THE FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ...................................................................... 0.65%
Rule 12b-1 Fees ...................................................................... None
Other Expenses (after expense limitation)(1)(2) ...................................... 0.20%
---
Total Operating Expenses (after expense limitation)(2) ............................... 0.85%
- ------------
(1) The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the
amount of cash maintained by the Fund with its custodian and dividend disbursing agent, and may
enter into other such arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not reflected under "Other
Expenses."
(2) The Adviser has agreed to bear the Fund's expenses, subject to reimbursement by the Fund, such that
"Other Expenses" do not exceed 0.20% per annum of the average daily net assets during the current
fiscal year. Otherwise, "Other Expenses" and "Total Operating Expenses" on Class I shares would be
0.34% and 0.99%, respectively. See "Information Concerning Shares of the Fund -- Expenses" in the
Prospectus.
</TABLE>
EXAMPLE OF EXPENSES
--------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in Class I shares of the Fund, assuming (a) a 5% annual return and
(b) redemption at the end of each of the time periods indicated:
PERIOD CLASS I
------ -------
1 year ........................................ $ 9
3 years ....................................... 27
5 years ....................................... 47
10 years ....................................... 105
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. A more complete description of the Fund's
management fee is set forth under the caption "Management of the Fund" in the
Prospectus.
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.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following information has been audited 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 independent auditors are Deloitte
& Touche LLP.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
PERIOD ENDED
---------------------------------------------------- SEPTEMBER 30,
1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $13.85 $11.85 $ 9.64 $10.00
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.17 $ 0.18 $ 0.17 $ 0.12
Net realized and unrealized gain (loss)
on investments 4.01 2.25 2.14 (0.48)
------ ------ ------ ------
Total from investment operations $ 4.18 $ 2.43 $ 2.31 $(0.36)
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.19) $(0.15) $(0.10) $ --
From net realized gain on investments (1.41) (0.28) -- --
------ ------ ------ ------
Total distributions declared to
shareholders $(1.60) $(0.43) $(0.10) $ --
------ ------ ------ ------
Net asset value - end of period $16.43 $13.85 $11.85 $ 9.64
------ ------ ------ ------
Total return 32.51% 20.96% 24.21% (3.60)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses 0.97% 1.00% 1.00% 1.00%+
Net investment income 1.12% 1.36% 1.58% 1.55%+
Portfolio turnover 49% 81% 125% 48%
Average commission rate### $0.0589 $0.0562 $ -- $ --
Net assets at end of period (000 omitted) $68,527 $49,318 $35,842 $22,184
* For the period from the commencement of the Fund's investment operations, January 14, 1994, through September 30, 1994.
+ Annualized.
++ Not annualized.
# Per share data are 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.
### Average commission rate is calculated for funds with fiscal years beginning on or after September 1, 1995.
(S) Effective February 1, 1997, the investment adviser voluntarily agreed to maintain the other expenses of the Fund, which
include all Fund expenses except for the management fee and distribution and service fees, at not more than 0.20% of the
Fund's average daily net assets. Prior to February 1, 1997, the investment adviser voluntarily agreed to maintain the
expenses of the Fund at not more than 1.00% of the Fund's average daily net assets. To the extent actual expenses were
over this limitation, the net investment income per share and the ratios would have been:
Net investment income $ 0.15 $ 0.18 $ 0.16 $ 0.07
Ratios (to average net assets):
Expenses## 1.11% 1.03% 1.12% 1.64%+
Net investment income 0.98% 1.33% 1.49% 0.91%+
</TABLE>
ELIGIBLE PURCHASERS
Class I shares are available for purchase only by the following purchasers
("Eligible Purchasers"):
(i) certain retirement plans established for the benefit of employees of
Massachusetts Financial Services Company ("MFS"), the Fund's investment
adviser, and employees of MFS' affiliates;
(ii) any fund distributed by MFS Fund Distributors, Inc. ("MFD"), the Fund's
distributor, if the fund seeks to achieve its investment objective by
investing primarily in shares of the Fund and other funds distributed by
MFD;
(iii) any retirement plan, endowment or foundation which: (a) purchases shares
directly through MFD (rather than through a third party broker or dealer
or other financial intermediary); and (b) invests at least $3 million in
Class I shares of the Fund either alone or in combination with
investments in Class I shares of other MFS funds distributed by MFD
(additional investments may be made in any amount); provided that MFD
may accept purchases in smaller amounts if it believes, in its sole
discretion, that such entity will make additional investments which will
cause its total investment to equal or exceed $3 million, within a
reasonable period of time; and
(iv) bank trust departments which initially invest, on behalf of their trust
clients, at least $100,000 in Class I shares of the Fund (additional
investments may be made in any amount); provided that MFD may accept
smaller initial purchases if it believes, in its sole discretion, that
the bank trust department will make additional investments, on behalf of
its trust clients, which will cause its total investment to equal or
exceed $100,000 within a reasonable period of time.
In no event will the Fund, MFS, MFD or any of their affiliates pay any sales
commissions or compensation to any third party in connection with the sale of
Class I shares; the payment of any such sales commission or compensation would,
under the Fund's policies, disqualify the purchaser as an eligible investor of
Class I shares.
SHARE CLASSES OFFERED BY THE FUND
Four classes of shares of the Fund currently are offered for sale: Class A
shares, Class B shares, Class C shares and Class I shares. Class I shares are
available for purchase only by Eligible Purchasers, as defined above, and are
described in this Supplement. Class A shares, Class B shares and Class C shares
are described in the Fund's Prospectus and are available for purchase by the
general public.
Class A shares are offered at net asset value plus an initial sales charge
up to a maximum of 5.75% of the offering price (or a contingent deferred sales
charge (a "CDSC") of 1.00% upon redemption during the first year in the case of
purchases of $1 million or more and certain purchases by retirement plans), and
are subject to an annual distribution fee and service fee up to a maximum of
0.35% per annum. Class B shares are offered at net asset value without an
initial sales charge but are subject to a CDSC upon redemption (declining from
4.00% during the first year to 0% after six years) and an annual distribution
fee and service fee up to a maximum of 1.00% per annum; Class B shares convert
to Class A shares approximately eight years after purchase. Class C shares are
offered at net asset value without an initial sales charge but are subject to a
CDSC upon redemption of 1.00% during the first year and an annual distribution
fee and service fee up to a maximum of 1.00% per annum. Class I shares are
offered at net asset value without an initial sales charge or CDSC and are not
subject to a distribution or service fee. Class A, Class C and Class I shares do
not convert to any other class of shares of the Fund.
OTHER INFORMATION
Eligible Purchasers may only purchase Class I shares directly through MFD.
Class I shares do not have exchange privileges with any other MFS Fund. Eligible
Purchasers may redeem Class I shares of the Fund at net asset value.
Distributions paid by the Fund with respect to Class I shares generally will be
greater than those paid with respect to Class A shares, Class B shares and Class
C shares because expenses attributable to Class A shares, Class B shares and
Class C shares generally will be higher.
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the Fund's expenses such that the Fund's "Other Expenses," which
are defined to include all Fund expenses except for management fees, Rule 12b-1
fees, taxes, extraordinary expenses, brokerage, transaction costs and class
specific expenses do not exceed 0.20% per annum of its average daily net assets
(the "Maximum Percentage"). The obligation of MFS to bear these expenses
terminates on the last day of the Fund's fiscal year in which the Fund's "Other
Expenses" are less than or equal to the Maximum Percentage. The payments made by
MFS on behalf of the Fund under this arrangement are subject to reimbursement by
the Fund to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the Fund 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 Fund's "Other Expenses" will
not exceed the Maximum Percentage. This expense reimbursement by the Fund to MFS
terminates on the earlier of the date on which payments made by the Fund equal
the prior payment of such reimbursable expenses by MFS or December 31, 1998.
THE DATE OF THIS SUPPLEMENT IS FEBRUARY 1, 1998
<PAGE>
MFS(R) UNION STANDARD PROSPECTUS
EQUITY FUND FEBRUARY 1, 1998
CLASS A SHARES OF BENEFICIAL INTEREST
(A member of the CLASS B SHARES OF BENEFICIAL INTEREST
MFS Family of Funds(R)) CLASS C SHARES OF BENEFICIAL INTEREST
- -------------------------------------------------------------------------------
500 Boylston St., Boston, MA 02116 (617) 954-5000
MFS Union Standard(SM) Equity Fund (the "Fund") is a series of MFS Union
Standard(SM) Trust (the "Trust"), a professionally managed open-end, investment
management company. The Fund's investment objective is to provide long term
growth of capital. The Fund invests in companies which meet certain labor
sensitivity criteria selected for inclusion in the ACS Labor Sensitivity
Index(SM) (the "LSI(SM)") and may make economically targeted investments. The
LSI is a common stock index comprised of companies selected based on labor
sensitivity criteria. The minimum initial investment generally is $1,000 per
account (see "Information Concerning Shares of the Fund -- Purchases").
The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.
INVESTMENT PRODUCTS ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY,
AND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY FINANCIAL
INSTITUTION. SHARES OF MUTUAL FUNDS ARE SUBJECT TO INVESTMENT RISK, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED, AND WILL FLUCTUATE IN VALUE. YOU
MAY RECEIVE MORE OR LESS THAN YOU PAID WHEN YOU REDEEM YOUR SHARES.
This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information dated February 1, 1998, as amended or supplemented from time to time
(the "SAI"), which contains more detailed information about the Fund. The SAI is
incorporated into this Prospectus by reference. See page 36 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). The SEC maintains an Internet World Wide
Web site (http://www.sec.gov) that contains the SAI, materials that are
incorporated by reference into this Prospectus and the SAI, and other
information regarding the Fund. This Prospectus is available on the Adviser's
Internet World Wide Web site at http://www.mfs.com.
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
PAGE
----
1. Expense Summary .................................................... 3
2. Condensed Financial Information .................................... 5
3. The Fund ........................................................... 8
4. Labor Sensitivity Index ............................................ 8
5. Investment Objective and Policies .................................. 10
6. Certain Securities and Investment Techniques ....................... 11
7. Management of the Fund ............................................. 15
8. Information Concerning Shares of the Fund .......................... 17
Purchases ....................................................... 17
Exchanges ....................................................... 23
Redemptions and Repurchases ..................................... 25
Distribution Plan ............................................... 27
Distributions ................................................... 30
Tax Status ...................................................... 30
Net Asset Value ................................................. 31
Description of Shares, Voting Rights and Liabilities ............ 31
Performance Information ......................................... 32
Expenses ........................................................ 33
9. Shareholder Services ............................................... 34
Appendix A ............................................................ A-1
Appendix B ............................................................ B-1
<PAGE>
1. EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
Maximum Initial Sales Charge Imposed on
Purchases of Fund Shares (as a
percentage of public offering price) .. 5.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) ........................... See Below(1) 4.00% 1.00%
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ......................... 0.65% 0.65% 0.65%
Rule 12b-1 Fees ......................... 0.35%(2) 1.00%(3) 1.00%(3)
Other Expenses (after expense
limitation)(4)(5) ..................... 0.20% 0.20% 0.20%
---- ---- ----
Total Operating Expenses (after expense
limitation)(4) ......................... 1.20% 1.85% 1.85%
- ------------
(1) Purchases of $1 million or more and certain purchases by retirement plans
are not subject to an initial sales charge; however, a contingent deferred
sales charge (a "CDSC") of 1% will be imposed on such purchases in the event
of certain redemption transactions within 12 months following such purchases
(see "Information Concerning Shares of the Fund -- Purchases" below).
(2) The Fund has adopted a distribution plan for its shares in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") (the "Distribution Plan"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to Class A
shares. Distribution expenses paid under this Plan, together with the
initial sales charge, may cause long-term shareholders to pay more than the
maximum sales charge that would have been permissible if imposed entirely as
an initial sales charge. See "Information Concerning Shares of the Fund --
Distribution Plan" below.
(3) The Fund's Distribution Plan provides that it will pay distribution/ service
fees aggregating up to (but not necessarily all of) 1.00% per annum of the
average daily net assets attributable to Class B and Class C shares,
respectively. Distribution expenses paid under the Distribution Plan,
together with any CDSC payable upon redemption of Class B and Class C
shares, may cause long-term shareholders to pay more than the maximum sales
charge that would have been permissible if imposed entirely as an initial
sales charge. See "Information Concerning Shares of the Fund -- Distribution
Plan" below.
(4) The Adviser has agreed to bear the Fund's expenses, subject to reimbursement
by the Fund, such that "Other Expenses" do not exceed 0.20% per annum of the
average daily net assets of each such class during the current fiscal year.
Otherwise, "Other Expenses" on Class A, Class B and Class C shares would be
0.34% per annum and "Total Operating Expenses" on Class A, Class B and Class
C shares would be 1.34%, 1.99% and 1.99% per annum, respectively. See
"Information Concerning Shares of the Fund -- Expenses."
(5) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):
PERIOD CLASS A CLASS B CLASS C
------- ------------- -------------
(1) (1)
1 year ........................ $ 69 $ 59 $ 19 $ 29 $ 19
3 years ........................ 93 88 58 58 58
- ------------
(1) Assumes no redemption.
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. More complete descriptions of the following expenses are set
forth in the following sections of this Prospectus: (i) varying sales charges on
share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii)
management fee -- "Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution
plan) fees -- "Distribution Plan."
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
<PAGE>
2. CONDENSED FINANCIAL INFORMATION
The following information has been audited for the period ended September 30,
1997 and should be read in conjunction with the financial statements included in
the Fund's Annual Report to shareholders. The financial statements contained
therein are incorporated by reference into the SAI. The financial statements are
incorporated in reliance upon the report of the Fund's independent auditors,
given upon their authority, as experts in accounting and auditing. The Fund's
independent auditors are Deloitte & Touche LLP.
FINANCIAL HIGHLIGHTS
CLASS A SHARES
PERIOD ENDED
SEPTEMBER 30,
1997*
- ------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD):
Net asset value -- beginning of period ...................... $16.13
------
Income from investment operations# --
Net investment income(S) .................................. $ 0.03
Net realized and unrealized gain on investments ........... 0.24
------
Total from investment operations ........................ $ 0.27
------
Net asset value -- end of period ............................ $16.40
======
Total return(+) ............................................. 1.67%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## ................................................ 1.20%+
Net investment income ..................................... 0.86%+
PORTFOLIO TURNOVER .......................................... 49%
AVERAGE COMMISSION RATE ..................................... $0.0589
NET ASSETS AT END OF PERIOD (000 OMITTED) ................... $ 536
*For the period from the commencement of the Fund's offering of Class A
shares, August 8, 1997, through September 30, 1997.
+Annualized.
++Not Annualized.
(+)Total return for Class A shares does not include the applicable sales
charge. If the charge had been included, the result would have been lower.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
(S)The investment adviser voluntarily agreed to maintain the other expenses of
the Fund, which include all Fund expenses except for the management fee and
distribution and service fees, at not more than 0.20% of the Fund's average
daily net assets. To the extent actual expenses were over the limitation,
the net investment income per share and the ratios would have been:
Net investment income ................................... $ 0.03
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ............................................ 1.34%+
Net investment income ................................. 0.72%+
<PAGE>
FINANCIAL HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED
SEPTEMBER 30,
1997*
- -----------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD):
Net asset value -- beginning of period ......................... $16.24
------
Income from investment operations# --
Net investment loss .......................................... $(0.01)
Net realized and unrealized gain on investments .............. 0.20
------
Total from investment operations ........................... $ 0.19
------
Net asset value -- end of period ............................... $16.43
======
Total return ................................................... 1.17%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses ..................................................... 1.85%+
Net investment loss .......................................... (0.37)%+
PORTFOLIO TURNOVER ............................................. 49%
AVERAGE COMMISSION RATE ........................................ $0.0589
NET ASSETS AT END OF PERIOD (000 OMITTED) ...................... $ 17
*For the period from the commencement of the Fund's offering of Class B
shares, August 11, 1997, through September 30, 1997.
+Annualized.
++Not Annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
(S)The investment adviser voluntarily agreed to maintain the other expenses of
the Fund, which include all Fund expenses except for the management fee and
distribution and service fees, at not more than 0.20% of the Fund's average
daily net assets. To the extent actual expenses were over the limitation,
the net investment income per share and the ratios would have been:
Net investment loss ........................................ $(0.01)
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ............................................... 1.99%+
Net investment loss ...................................... (0.52%)+
<PAGE>
FINANCIAL HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED
SEPTEMBER 30,
1997*
- ------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD):
Net asset value -- beginning of period ......................... $16.24
------
Income from investment operations# --
Net investment income(S) ..................................... $ 0.01
Net realized and unrealized gain on investments .............. 0.18
------
Total from investment operations ........................... $ 0.19
------
Net asset value -- end of period ............................... $16.43
======
Total return ................................................... 1.17%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses ..................................................... 1.85%+
Net investment income ........................................ 0.63%+
PORTFOLIO TURNOVER ............................................. 49%
AVERAGE COMMISSION RATE ........................................ $0.0589
NET ASSETS AT END OF PERIOD (000 OMITTED) ...................... $ 4
*For the period from the commencement of the Fund's offering of Class C
shares, August 11, 1997, through September 30, 1997.
+Annualized.
++Not Annualized.
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid
indirectly.
(S)The investment adviser voluntarily agreed to maintain the other expenses of
the Fund, which include all Fund expenses except for the management fee and
distribution and service fees, at not more than 0.20% of the Fund's average
daily net assets. To the extent actual expenses were over the limitation,
the net investment income per share and the ratios would have been:
Net investment income ...................................... $ 0.01
RATIOS (TO AVERAGE NET ASSETS):
Expenses## ............................................... 1.99%+
Net investment income .................................... 0.49%+
<PAGE>
3. THE FUND
The Fund is a diversified series of the Trust, an open-end, investment
management company. The Fund invests in companies which meet certain labor
sensitivity criteria selected for inclusion in the LSI and may make economically
targeted investments. The Trust was organized as a business trust under the laws
of The Commonwealth of Massachusetts on September 1, 1993.
Three classes of shares of the Fund are currently offered for sale to the
general public. Class A shares are offered at net asset value plus an initial
sales charge up to a maximum of 5.75% of the offering price (or a CDSC of 1.00%
upon redemption during the first year in the case of certain purchases of $1
million or more and certain purchases by retirement plans) and are subject to an
annual distribution fee and service fee up to a maximum of 0.35% per annum.
Class B shares are offered at net asset value without an initial sales charge
but are subject to a CDSC upon redemption (declining from 4.00% during the first
year to 0% after six years) and an annual distribution fee and service fee up to
a maximum of 1.00% per annum. Class B shares will convert to Class A shares
approximately eight years after purchase. Class C shares are offered at net
asset value without an initial sales charge but are subject to a CDSC of 1.00%
upon redemption during the first year and an annual distribution fee and service
fee up to a maximum of 1.00% per annum. Class C shares do not convert to any
other class of shares of the Fund. In addition, the Fund offers an additional
class of shares, Class I shares, exclusively to certain institutional investors.
Class I shares are made available by means of a separate Prospectus Supplement
provided to institutional investors eligible to purchase Class I shares and are
offered at net asset value without an initial sales charge or CDSC upon
redemption and without an annual distribution and service fee.
The Fund's Board of Trustees provides broad supervision over the affairs of the
Fund. A majority of the Trustees of the Fund are not affiliated with the
Adviser. The Adviser is responsible for the management of the Fund's assets and
manages the Fund's portfolio from day to day in accordance with its investment
objective and policies. American Capital Strategies Ltd. ("ACS") administers the
LSI for MFS but has no responsibility for rendering investment advice to MFS or
to the Fund. The selection of investments and the way they are managed depend
upon the conditions and trends in the economy and the financial market places.
The Fund also offers to buy back (redeem) its shares from its shareholders at
any time at net asset value, less any applicable CDSC.
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 Index(SM)" and
the "LSI(SM)" 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 550 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 Composite Stock Price 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.
On January 14, 1994, the date that the Fund commenced investment operations, the
unit value of the LSI was established at 100, and as of December 31, 1997, the
unit value of the LSI was 111.95. The unit value of the LSI will be determined
once monthly as of the last day of each month. 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, with
respect to 65% of its total assets, those holdings will not include, to the
extent reasonably practicable, the securities of any company which has been
eliminated from the LSI, however, the Fund is not required to sell a security
which has been eliminated from 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 has been eliminated 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, ACS 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. Any investment involves risk and there can be no
assurance that the Fund will achieve its investment objective. To the extent
consistent with the Fund's objective of long term growth of capital, dividend
and interest income may be a consideration of the Fund when deciding whether to
purchase securities for its portfolio.
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 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 "Certain Securities and Investment Techniques --
Restricted Securities" below.
The use of options, futures contracts and options on futures contracts may
result in the loss of principal, particularly where such instruments are traded
for other than hedging purposes. See "Certain Securities and Investment
Techniques" below.
6. CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
Additional information about securities transactions and investment techniques
described below can be found under the caption "Investment Objectives, Policies
and Restrictions" in the SAI.
EQUITY SECURITIES: The Fund may invest in all types of equity securities,
including the following: common stocks, preferred stocks and preference stocks;
securities such as bonds, warrants or rights that are convertible into stocks;
and depository receipts for those securities. These securities may be listed on
securities exchanges, traded in various over-the-counter markets or have no
organized markets.
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 or a letter of credit). 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.
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 segregate liquid assets
sufficient to cover its commitments. Although the Fund does not intend to make
such purchases for speculative purposes, purchases of securities on such basis
may involve more risk than other types of purchases.
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"). A determination is made, 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, retains oversight of
the liquidity determinations, focusing on factors such as valuation, liquidity
and availability of information. Investing in Rule 144A securities 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.
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.
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.
However, the writing of options constitutes only a partial hedge, up to the
amount of the premium, less any transaction costs. In contrast, however, if the
price of the underlying security moves adversely to the Fund's position, the
option may be exercised and the 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
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 positions. 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 an portfolio securities comprising such index, as might occur in
connection with a hedging transaction.
--------------------
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.
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 Conduct
Rules of the National Association of Securities Dealers, Inc. 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 shareholder approval unless indicated otherwise (see "Investment
Restrictions" in the SAI). Except with respect to the Fund's policy on borrowing
and investing in illiquid securities, 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. Under the Advisory Agreement, MFS provides the Fund with
overall investment advisory services. Mitch Dynan is the portfolio manager of
the Fund. Mr. Dynan, a Vice President of the Adviser, has been employed as a
portfolio manager with the Adviser since June 1986 and has managed the Fund
since March 1, 1997. 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, 1997, MFS received fees under the Advisory Agreement of
$385,300.
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 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 Institutional Advisors,
Inc., provide investment advice to substantial private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under management of the MFS organization were approximately
$70.2 billion on behalf of approximately 2.7 million investor accounts as of
December 31, 1997. As of such date, the MFS organization managed approximately
$45.7 billion of assets in equity securities and approximately $20.2 billion in
fixed income portfolios and fixed income portfolios of MFS Institutional
Advisors, Inc. Approximately $4.0 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 subsidiary of Sun Life of Canada (U.S.),
Financial Services Holdings, Inc., 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 Donald A.
Stewart. 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 Stewart are the Chairman and the 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 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,
President and a Trustee of the Fund. W. Thomas London, James O. Yost, Ellen
M. Moynihan, Mark E. Bradley, Stephen E. Cavan, and James R. Bordewick, Jr.,
all of whom are officers of MFS, are officers of the Fund.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS. Some simultaneous
transactions are inevitable when several clients receive investment advice from
MFS, particularly when the same security is suitable for more than one client.
While in some cases this arrangement could have a detrimental effect on the
price or availability of the security as far as the Fund is concerned, in other
cases, however, it may produce increased investment opportunities for the Fund.
ADMINISTRATOR -- MFS provides the Fund with certain financial, legal,
compliance, shareholder communications and other administrative services
pursuant to a Master Administrative Services Agreement dated March 1, 1997, as
amended. Under this Agreement, the Fund pays MFS an administrative fee of up to
0.015% per annum of the Fund's average daily net assets. This fee reimburses MFS
for a portion of the costs it incurs to provide such services.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency,
certain dividend disbursing agency and other services for the Fund.
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
Class A, Class B and Class C shares of the Fund may be purchased at the public
offering price through any dealer. As used in the Prospectus and any appendices
thereto the term "dealer" includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner and any
other financial institutions having a selling agreement or other similar
agreement with MFD. Dealers may also charge their customers fees relating to
investments in the Fund.
This Prospectus offers Class A, Class B and Class C shares to the general public
which bear sales charges and distribution fees in different forms and amounts,
as described below:
CLASS A SHARES: Class A shares are generally offered at net asset value plus an
initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.
PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at
net asset value plus an initial sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE* AS
PERCENTAGE OF:
------------------------------------ DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
- ------------------ -------------- ---------- -----------------
<S> <C> <C> <C>
Less than $50,000 .............................. 5.75% 6.10% 5.00%
$50,000 but less than $100,000 ................. 4.75 4.99 4.00
$100,000 but less than $250,000 ................ 4.00 4.17 3.20
$250,000 but less than $500,000 ................ 2.95 3.04 2.25
$500,000 but less than $1,000,000 .............. 2.20 2.25 1.75
$1,000,000 or more ............................. None** None** See Below**
- --------------------
</TABLE>
*Because of rounding in the calculation of offering price, actual sales charges
may be more or less than those calculated using the percentages above.
**A CDSC will apply to such purchases, as discussed below.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 5% and MFD retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain other MFS Funds owned or
being purchased, the existence of an agreement to purchase additional shares
during a 13-month period (or 36-month period for purchases of $1 million or
more) or other special purchase programs. A description of the Right of
Accumulation, Letter of Intent and Group Purchase privileges by which the sales
charge may be reduced is set forth in the SAI.
PURCHASES SUBJECT TO A CDSC (but not subject to an initial sales charge). In
the following five circumstances, Class A shares are offered at net asset value
without an initial sales charge but subject to a CDSC, equal to 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested dividend and
capital gain distributions) or the total cost of such shares, in the event of a
share redemption within 12 months following the purchase:
(i) on investments of $1 million or more in Class A shares;
(ii) on investments in Class A shares by certain retirement plans subject
to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if, prior to July 1, 1996: (a) the Plan had established an
account with the Shareholder Servicing Agent and (b) the sponsoring
organization had demonstrated to the satisfaction of MFD that either
(i) the employer had at least 25 employees or (ii) the aggregate
purchases by the retirement plan of Class A shares of the MFS Funds
would be in an amount of at least $250,000 within a reasonable period
of time, as determined by MFD in its sole discretion;
(iii) on investments in Class A shares by certain retirement plans subject
to ERISA, if: (a) the retirement plan and/or sponsoring organization
subscribes to the MFS FUNDamental 401(k) Program or any similar
recordkeeping system made available by the Shareholder Servicing Agent
(the "MFS Participant Recordkeeping System"); (b) the plan established
an account with the Shareholder Servicing Agent on or after July 1,
1996; and (c) the aggregate purchases by the retirement plan of Class
A shares of the MFS Funds will be in an aggregate amount of at least
$500,000 within a reasonable period of time, as determined by MFD in
its sole discretion;
(iv) on investments in Class A shares by certain retirement plans subject to
ERISA, if: (a) the plan established an account with the Shareholder
Servicing Agent on or after July 1, 1996 and (b) the plan has, at the
time of purchase, a market value of $500,000 or more invested in shares
of any class or classes of the MFS Funds. THE RETIREMENT PLAN WILL
QUALIFY UNDER THIS CATEGORY ONLY IF THE PLAN OR ITS SPONSORING
ORGANIZATION INFORMS THE SHAREHOLDER SERVICING AGENT PRIOR TO THE
PURCHASES THAT THE PLAN HAS A MARKET VALUE OF $500,000 OR MORE INVESTED
IN SHARES OF ANY CLASS OR CLASSES OF THE MFS FUNDS. THE SHAREHOLDER
SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE WHETHER
SUCH A PLAN QUALIFIES UNDER THIS CATEGORY; and
(v) on investments in Class A shares by certain retirement plans subject to
ERISA; if: (a) the plan establishes an account with the Shareholder
Servicing Agent on or after July 1, 1997; (b) such plans's records are
maintained on a pooled basis by the Shareholder Servicing Agent; and (c)
the sponsoring organization demonstrates to the satisfaction of MFD
that, at the time of purchase, the employer has at least 200 eligible
employees and the plan has aggregate assets of at least $2,000,000.
In the case of such purchases, MFD will pay commissions to dealers on new
investments in Class A shares made through such dealers as follows:
COMMISSION PAID BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT
--------------------------------- --------------------------
1.00% On the first $2,000,000, plus
0.80% Over $2,000,000 to $3,000,000, plus
0.50% Over $3,000,000 to $50,000,000, plus
0.25% Over $50,000,000
For purposes of determining the level of commissions to be paid to dealers with
respect to a shareholder's new investment in Class A shares, purchases for each
shareholder account (and certain other accounts for which the shareholder is a
record or beneficial holder) will be aggregated over a 12- month period
(commencing from the date of the first such purchase).
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" for
further discussion of the CDSC.
WAIVERS OF INITIAL SALES CHARGE AND CDSC. In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemptions of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus. In addition to these circumstances,
the CDSC imposed upon the redemption of Class A shares is waived with respect to
shares held by certain retirement plans qualified under Section 401(a) or 403(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), and subject to
ERISA, where:
(i) the retirement plan and/or sponsoring organization does not subscribe
to the MFS Participant Recordkeeping System; and
(ii) the retirement plan and/or sponsoring organization demonstrates to the
satisfaction of, and certifies to the Shareholder Servicing Agent that
the retirement plan has, at the time of certification or will have
pursuant to a purchase order placed with the certification, a market
value of $500,000 or more invested in shares of any class or classes
of the MFS Funds and aggregate assets of at least $10 million;
provided, however, that the CDSC will not be waived (i.e., it will be imposed)
(a) with respect to plans which establish an account with the Shareholder
Servicing Agent on or after November 1, 1997, in the event that the plan makes a
complete redemption of all of its shares in the MFS Funds, or (b) with respect
to plans which established an account with the Shareholder Servicing Agent prior
to November 1, 1997, in the event that there is a change in law or regulation
which results in a material adverse change to the tax advantaged nature of the
plan, or in the event that the plan and/or sponsoring organization: (i) becomes
insolvent or bankrupt; (ii) is terminated under ERISA or is liquidated or
dissolved; or (iii) is acquired by, merged into, or consolidated with any other
entity.
CLASS B SHARES: Class B shares are offered at net asset value without an initial
sales charge but subject to a CDSC upon redemption as follows:
CONTINGENT
YEAR OF REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
First .............................................. 4%
Second ............................................. 4%
Third .............................................. 3%
Fourth ............................................. 3%
Fifth .............................................. 2%
Sixth .............................................. 1%
Seventh and following .............................. 0%
The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividends or capital gain distributions.
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" for
further discussion of the CDSC.
Except as described below, MFD will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee payable under the Fund's
Distribution Plan (see "Distribution Plan" below) at a rate equal to 0.25% of
the purchase price of such shares. Therefore, the total amount paid to a dealer
upon the sale of Class B shares is 4% of the purchase price of the shares
(commission rate of 3.75% plus a service fee equal to 0.25% of the purchase
price).
Class B shares purchased by a retirement plan whose sponsoring organization
subscribes to the MFS Participant Recordkeeping System and which has established
its account with the Shareholder Servicing Agent on or after July 1, 1996 will
be subject to the CDSC described above, only under limited circumstances, as
explained below under "Waivers of CDSC." With respect to such purchases, MFD
pays an amount to dealers equal to 3.00% of the amount purchased through such
dealers (rather than the 4.00% payment described above), which is comprised of a
commission of 2.75% plus the advancement of the first year service fee equal to
0.25% of the purchase price payable under the Fund's Distribution Plan. As
discussed above, such retirement plans are eligible to purchase Class A shares
of the Fund at net asset value without an initial sales charge but subject to a
1% CDSC if the plan has, at the time of purchase, a market value of $500,000 or
more invested in shares of any class or classes of the MFS Funds. IN THIS EVENT,
THE PLAN OR ITS SPONSORING ORGANIZATION SHOULD INFORM THE SHAREHOLDER SERVICING
AGENT THAT THE PLAN IS ELIGIBLE TO PURCHASE CLASS A SHARES UNDER THIS CATEGORY;
THE SHAREHOLDER SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE
WHETHER SUCH A PLAN QUALIFIES UNDER THIS CATEGORY FOR THE PURCHASE OF CLASS A
SHARES.
WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon redemption
of Class B shares is waived. These circumstances are described in Appendix A to
this Prospectus. In addition to these circumstances, the CDSC imposed upon the
redemption of Class B shares is waived with respect to shares held by a
retirement plan whose sponsoring organization subscribes to the MFS Participant
Recordkeeping System and which has established an account with the Shareholder
Servicing Agent on or after July 1, 1996; provided, however, that the CDSC will
not be waived (i.e., it will be imposed) in the event that there is a change in
law or regulations which results in a material adverse change to the tax
advantaged nature of the plan, or in the event that the plan and/or sponsoring
organization: (i) becomes insolvent or bankrupt; (ii) is terminated under ERISA
or is liquidated or dissolved; or (iii) is acquired by, merged into, or
consolidated with, any other entity.
CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain
outstanding for approximately eight years will convert to Class A shares of the
Fund. Shares purchased through the reinvestment of distributions paid in respect
of Class B shares will be treated as Class B shares for purposes of the payment
of the distribution and service fees under the Fund's Distribution Plan. See
"Distribution Plan" below. However, for purposes of conversion to Class A
shares, all shares in a shareholder's account that were purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
(and which have not converted to Class A shares as provided in the following
sentence) will be held in a separate sub-account. Each time any Class B shares
in the shareholder's account (other than those in the sub-account) convert to
Class A shares, a portion of the Class B shares then in the sub-account will
also convert to Class A shares. The portion will be determined by the ratio that
the shareholder's Class B shares not acquired through reinvestment of dividends
and distributions that are converting to Class A shares bears to the
shareholder's total Class B shares not acquired through reinvestment. The
conversion of Class B shares to Class A shares is subject to the continuing
availability of a ruling from the Internal Revenue Service or an opinion of
counsel that such conversion will not constitute a taxable event for federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B shares to Class A shares will not occur
if such ruling or opinion is not available. In such event, Class B shares would
continue to be subject to higher expenses than Class A shares for an indefinite
period.
CLASS C SHARES: Class C shares are offered at net asset value without an initial
sales charge but are subject to a CDSC upon redemption of 1.00% during the first
year. Class C shares do not convert to any other class of shares of the Fund.
The maximum investment in Class C shares that may be made is $1,000,000 per
transaction.
The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividend and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividend or capital gain distributions.
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" below
for further discussion of the CDSC.
MFD will pay dealers 1.00% of the purchase price of Class C shares purchased
through dealers and, as compensation therefor, MFD will retain the 1.00% per
annum distribution and service fee paid under the Fund's Distribution Plan by
the Fund to MFD for the first year after purchase (see "Distribution Plan"
below).
Class C shares are not currently available for purchase by any retirement plan
qualified under Sections 401(a) or 403(b) of the Code, if the retirement plan
and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k) Plan
or another similar recordkeeping program made available by the Shareholder
Servicing Agent.
WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon redemption of
Class C shares is waived. These circumstances are described in Appendix A to
this Prospectus.
GENERAL: The following information applies to purchases of all classes of the
Fund's shares.
MINIMUM INVESTMENT. Except as described below, the minimum initial
investment is $1,000 per account and the minimum additional investment is $50
per account. Accounts being established for monthly automatic investments and
under payroll savings programs and tax-deferred retirement programs (other than
IRAs) involving the submission of investments by means of group remittal
statements are subject to a $50 minimum on initial and additional investments
per account. The minimum initial investment for IRAs is $250 per account and the
minimum additional investment is $50 per account. Accounts being established for
participation in the Automatic Exchange Plan are subject to a $50 minimum on
initial and additional investments per account. There are also other limited
exceptions to these minimums for certain tax-deferred retirement programs. Any
minimums may be changed at any time at the discretion of MFD. The Fund reserves
the right to cease offering its shares at any time.
SUBSEQUENT INVESTMENT BY TELEPHONE. Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-free
at (800) 225-2606. The minimum purchase amount is $50 and the maximum purchase
amount is $100,000. Shareholders wishing to avail themselves of this telephone
purchase privilege must so elect on their Account Application and designate
thereon a bank and account number from which purchases will be made. If a
telephone purchase request is received by the Shareholder Servicing Agent on any
business day prior to the close of regular trading on the Exchange (generally,
4:00 p.m., Eastern time), the purchase will occur at the closing net asset value
of the shares purchased on that day. The Shareholder Servicing Agent may be
liable for any losses resulting from unauthorized telephone transactions if it
does not follow reasonable procedures designed to verify the identity of the
caller. The Shareholder Servicing Agent will request personal or other
information from the caller, and will normally also record calls. Shareholders
should verify the accuracy of confirmation statements immediately after their
receipt.
RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserve the
right to reject or restrict any specific purchase or exchange request. In the
event that the Fund or MFD rejects an exchange request, neither the redemption
nor the purchase side of the exchange will be processed.
The Fund is not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Fund defines a "market
timer" as an individual, or organization acting on behalf of one or more
individudals, if (i) the individual or organization makes three or more exchange
requests out of the Fund per calender year and (ii) any one of such exchange
requests represents shares equal in value to 1/2 of 1% or more of the Fund's net
assets at the time of the request. Accounts under common ownership or control,
including accounts administered by market timers, will be aggregated for
purposes of this definition.
As noted above, the Fund and MFD each reserves the right to reject or restrict
any specific purchase and exchange request and, in addition, may impose specific
limitations with respect to market timers, including delaying for up to seven
days the purchase side of an exchange request by market timers or specifically
rejecting or otherwise restricting purchase or exchange requests by market
timers. In the event that any individual or entity is determined either by the
Fund or MFD, in its sole discretion, to be a market timer with respect to any
calendar year, the Fund and/or MFD will reject all exchange requests into the
Fund during the remainder of that calendar year. Other funds in the MFS Family
of Funds may have different and/or more restrictive policies with respect to
market timers than the Fund. These policies are disclosed in the prospectuses of
these other MFS Funds.
DEALER CONCESSIONS. Dealers may receive different compensation with respect
to sales of Class A, Class B and Class C shares. In addition, from time to time,
MFD may pay dealers 100% of the applicable sales charge on sales of Class A
shares of certain specified MFS Funds sold by such dealer during a specified
sales period. In addition, MFD or its affiliates may, from time to time, pay
dealers an additional commission equal to 0.50% of the net asset value of all of
the Class B and/or Class C shares of certain specified MFS Funds sold by such
dealer during a specified sales period. In addition, from time to time, MFD, at
its expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell or arrange for the sale of
shares of the Fund. Such concessions provided by MFD may include financial
assistance to dealers in connection with preapproved conferences or seminars,
sales or training programs for invited registered representatives and other
employees, payment for travel expenses, including lodging, incurred by
registered representatives and other employees for such seminars or training
programs, seminars for the public, advertising and sales campaigns regarding one
or more MFS Funds, and/or other dealer-sponsored events. From time to time, MFD
may make expense reimbursements for special training of a dealer's registered
representatives and other employees in group meetings or to help pay the
expenses of sales contests. Other concessions may be offered to the extent not
prohibited by state laws or any self-regulatory agency, such as the NASD.
SPECIAL INVESTMENT PROGRAMS. For shareholders who elect to participate in
certain investment programs (e.g., the Automatic Investment Plan) or other
shareholder services, MFD or its affiliates may either (i) give a gift of
nominal value, such as a hand-held calculator, or (ii) make a nominal charitable
contribution on their behalf.
RESTRICTIONS ON ACTIVITIES OF NATIONAL BANKS. The Glass-Steagall Act
prohibits national banks from engaging in the business of underwriting,
selling or distributing securities. Although the scope of the prohibition has
not been clearly defined, MFD believes that such Act should not preclude banks
from entering into agency agreements with MFD. If, however, a bank were
prohibited from so acting, the Trustees would consider what actions, if any,
would be necessary to continue to provide efficient and effective shareholder
services in respect of Shareholders who invested in the Fund through a
national bank. It is not expected that shareholders would suffer any adverse
financial consequence as a result of these occurrences. In addition, state
securities laws on this issue may differ from the interpretation of federal
law expressed herein and banks and financial institutions may be required to
register as broker-dealers pursuant to state law.
--------------------
A shareholder whose shares are held in the name of, or controlled by, a dealer
might not receive many of the privileges and services from the Fund (such as
Right of Accumulation, Letter of Intent and certain recordkeeping services) that
the Fund ordinarily provides.
EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of the same class of any of the
other MFS Funds at net asset value (if available for sale). Shares of one class
may not be exchanged for shares of any other class.
EXCHANGES AMONG MFS FUNDS (EXCLUDING MFS MONEY MARKET FUNDS): No initial sales
charges or CDSC will be imposed in connection with an exchange from shares of an
MFS Fund to shares of any other MFS Fund, except with respect to exchanges from
an MFS money market fund to another MFS Fund which is not an MFS money market
fund (discussed below). With respect to an exchange involving shares subject to
a CDSC, the CDSC will be unaffected by the exchange and the holding period for
purposes of calculating the CDSC will carry over to the acquired shares.
EXCHANGES FROM AN MFS MONEY MARKET FUND: Special rules apply with respect to the
imposition of an initial sales charge or a CDSC for exchanges from an MFS money
market fund to another MFS Fund which is not an MFS money market fund. These
rules are described under the caption "Exchanges" in the Prospectuses of those
MFS money market funds.
EXCHANGES INVOLVING THE MFS FIXED FUND: Class A shares of any MFS Fund held by
certain qualified retirement plans may be exchanged for units of participation
of the MFS Fixed Fund (a bank collective investment fund) (the "Units"), and
Units may be exchanged for Class A shares of any MFS Fund. With respect to
exchanges between Class A shares subject to a CDSC and Units, the CDSC will
carry over to the acquired shares or Units and will be deducted from the
redemption proceeds when such shares or Units are subsequently redeemed,
assuming the CDSC is then payable (the period during which the Class A shares
and the Units were held will be aggregated for purposes of calculating the
applicable CDSC). In the event that a shareholder initially purchases Units and
then exchanges into Class A shares subject to an initial sales charge of an MFS
Fund, the initial sales charge shall be due upon such exchange, but will not be
imposed with respect to any subsequent exchanges between such Class A shares and
Units with respect to shares on which the initial sales charge has already been
paid. In the event that a shareholder initially purchases Units and then
exchanges into Class A shares subject to a CDSC of an MFS Fund, the CDSC period
will commence upon such exchange, and the applicability of the CDSC with respect
to subsequent exchanges shall be governed by the rules set forth in this
paragraph above.
GENERAL: A shareholder should read the prospectus of the other MFS Fund into
which an exchange is made and consider the differences in objectives, policies
and restrictions before making any exchange. Exchanges will be made only after
instructions in writing or by telephone (an "Exchange Request") are received for
an established account by the Shareholder Servicing Agent in proper form (i.e.,
if in writing -- signed by the record owner(s) exactly as the shares are
registered; if by telephone -- proper account identification is given by the
dealer or shareholder of record) and each exchange must involve either shares
having an aggregate value of at least $1,000 ($50 in the case of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by the
Shareholder Servicing Agent) or all the shares in the account. If an Exchange
Request is received by the Shareholder Servicing Agent on any business day prior
to the close of regular trading on the Exchange (generally, 4:00 p.m., Eastern
time), the exchange will occur on that day if all the requirements set forth
above have been complied with at that time and subject to the Fund's right to
reject purchase orders. No more than five exchanges may be made in any one
Exchange Request by telephone. Additional information concerning this exchange
privilege and prospectuses for any of the other MFS Funds may be obtained from
dealers or the Shareholder Servicing Agent. For federal and (generally) state
income tax purposes, an exchange is treated as a sale of the shares exchanged
and, therefore, an exchange could result in a gain or loss to the shareholder
making the exchange. Exchanges by telephone are automatically available to most
non-retirement plan accounts and certain retirement plan accounts. For further
information regarding exchanges by telephone, see "Redemptions by Telephone."
The exchange privilege (or any aspect of it) may be changed or discontinued and
is subject to certain limitations, including certain restrictions on purchases
by market timers.
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the value of his account on any
date on which the Fund is open for business by redeeming shares at their net
asset value (a redemption) or by selling such shares to the Fund through a
dealer (a repurchase). Certain redemptions and repurchases are, however, subject
to a CDSC. See "Contingent Deferred Sales Charge" below. Because the net asset
value of shares of the account fluctuates, redemptions or repurchases, which are
taxable transactions, are likely to result in gains or losses to the
shareholder. When a shareholder withdraws an amount from his account, the
shareholder is deemed to have tendered for redemption a sufficient number of
full and fractional shares in his account to cover the amount withdrawn. The
proceeds of a redemption or repurchase will normally be available within seven
days, except for shares purchased or received in exchange for shares purchased
by check (including certified checks or cashier's checks). Payment of redemption
proceeds may be delayed for up to 15 days from the purchase date in an effort to
assure that such check has cleared.
REDEMPTION BY MAIL: Each shareholder may redeem all or any portion of the shares
in his account by mailing or delivering to the Shareholder Servicing Agent (see
back cover for address) a stock power with a written request for redemption or
letter of instruction, together with his share certificates (if any were
issued), all in "good order" for transfer. "Good order" generally means that the
stock power, written request for redemption, letter of instruction or
certificate must be endorsed by the record owner(s) exactly as the shares are
registered and the signature(s) must be guaranteed in the manner set forth below
under the caption "Signature Guarantee." In addition, in some cases "good order"
will require the furnishing of additional documents. The Shareholder Servicing
Agent may make certain de minimis exceptions to the above requirements for
redemption. Within seven days after receipt of a redemption request in "good
order" by the Shareholder Servicing Agent, the Fund will make payment in cash of
the net asset value of the shares next determined after such redemption request
was received, reduced by the amount of any applicable CDSC described above and
the amount of any income tax required to be withheld, except during any period
in which the right of redemption is suspended or date of payment is postponed
because the Exchange is closed or trading on such Exchange is restricted or to
the extent otherwise permitted by the 1940 Act if an emergency exists. See "Tax
Status" below.
REDEMPTION BY TELEPHONE: Each shareholder may redeem an amount from his account
by telephoning the Shareholder Servicing Agent toll-free at (800) 225-2606.
Shareholders wishing to avail themselves of this telephone redemption privilege
must so elect on their Account Application, designate thereon a bank and account
number to receive the proceeds of such redemption, and sign the Account
Application Form with the signature(s) guaranteed in the manner set forth below
under the caption "Signature Guarantee." The proceeds of such a redemption,
reduced by the amount of any applicable CDSC and the amount of any income tax
required to be withheld, are mailed by check to the designated account, without
charge, if the redemption proceeds do not exceed $1,000, and are wired in
federal funds to the designated account if the redemption proceeds exceed
$1,000. If a telephone redemption request is received by the Shareholder
Servicing Agent by the close of regular trading on the Exchange on any business
day, shares will be redeemed at the closing net asset value of the Fund on that
day. Subject to the conditions described in this section, proceeds of a
redemption are normally mailed or wired on the next business day following the
date of receipt of the order for redemption. The Shareholder Servicing Agent
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.
REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares through
his dealer (a repurchase), the shareholder can place a repurchase order with his
dealer, who may charge the shareholder a fee. IF THE DEALER RECEIVES THE
SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE EXCHANGE AND
COMMUNICATES IT TO MFD BEFORE THE CLOSE OF BUSINESS ON THE SAME DAY, THE
SHAREHOLDER WILL RECEIVE THE NET ASSET VALUE CALCULATED ON THAT DAY, REDUCED BY
THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO
BE WITHHELD.
CONTINGENT DEFERRED SALES CHARGE: Investments in Class A, Class B and Class C
shares ("Direct Purchases") will be subject to a CDSC for a period of: (i) with
respect to Class A and Class C shares, 12 months (however, the CDSC on Class A
shares is only imposed with respect to purchases of $1 million or more of Class
A shares or purchases by certain retirement plans of Class A shares); or (ii)
with respect to Class B shares, six years. Purchases of Class A shares made
during a calendar month, regardless of when during the month the investment
occurred, will age one month on the last day of the month and each subsequent
month. Class C shares and Class B shares purchased on or after January 1, 1993
will be aggregated on a calendar month basis -- all transactions made during a
calendar month, regardless of when during the month they have occurred, will age
one year at the close of business on the last day of such month in the following
calendar year and each subsequent year. Class B shares of the Fund purchased
prior to January 1, 1993, transactions will be aggregated on a calendar year
basis -- all transactions made during a calendar year, regardless of when during
the year they have occurred, will age one year at the close of business on
December 31 of that year and each subsequent year.
At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class of shares represented by Direct Purchases exceeds
the sum of the six calendar year aggregations (12 months in the case of
purchases of Class C shares and of purchases of $1 million or more of Class A
shares or purchases by certain retirement plans of Class A shares) of Direct
Purchases may be redeemed without charge ("Free Amount"). Moreover, no CDSC is
ever assessed on additional shares acquired through the automatic reinvestment
of dividends or capital gain distributions ("Reinvested Shares"). Therefore, at
the time of redemption of a particular class, (i) any Free Amount is not subject
to the CDSC and (ii) the amount of the redemption equal to the then-current
value of Reinvested Shares is not subject to the CDSC, but (iii) any amount of
the redemption in excess of the aggregate of the then-current value of
Reinvested Shares and the Free Amount is subject to a CDSC. The CDSC will first
be applied against the amount of Direct Purchases which will result in any such
charge being imposed at the lowest possible rate. The CDSC to be imposed upon
redemptions of shares will be calculated as set forth in "Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except as described in Appendix A hereto.
GENERAL: The following information applies to redemptions and repurchases of
all classes of the Fund's shares.
SIGNATURE GUARANTEE. In order to protect shareholders against fraud, the
Fund requires, in certain instances as indicated above, that the shareholder's
signature be guaranteed. In these cases the shareholder's signature must be
guaranteed by an eligible bank, broker, dealer, credit union, national
securities exchange, registered securities association, clearing agency or
savings association. Signature guarantees shall be accepted in accordance with
policies established by the Shareholder Servicing Agent. 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.
REINSTATEMENT PRIVILEGE. Shareholders of the Fund who have redeemed their
shares have a one-time right to reinvest the redemption proceeds in the same
class of shares of any of the MFS Funds (if shares of such Fund are available
for sale) at net asset value (with a credit for any CDSC paid) within 90 days of
the redemption pursuant to the Reinstatement Privilege. If the shares credited
for any CDSC paid are then redeemed within six years of the initial purchase in
the case of Class B shares or within 12 months of the initial purchase for Class
C Shares and certain Class A share purchases, a CDSC will be imposed upon
redemption. Such purchases under the Reinstatement Privilege are subject to all
limitations in the SAI regarding this privilege.
INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. Due to the relatively high cost of
maintaining small accounts, the Fund reserves the right to redeem shares in any
account for their then-current value if at any time the total investment in such
account drops below $500 because of redemptions or exchanges, except in the case
of accounts being established for monthly automatic investments and certain
payroll savings programs, Automatic Exchange Plan accounts and tax-deferred
retirement plans, for which there is a lower minimum investment requirement. See
"Purchases -- General -- Minimum Investment." Shareholders will be notified that
the value of their account is less than the minimum investment requirement and
allowed 60 days to make an additional investment before the redemption is
processed.
DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for Class A, Class B and Class C
shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the
"Distribution Plan"), after having concluded that there is a reasonable
likelihood that the Plan would benefit the Fund and its shareholders.
In certain circumstances, the fees described below may not be imposed or are
being waived. These circumstances, if any, are described below under the heading
"Current Level of Distribution and Service Fees."
FEATURES COMMON TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are common to each class of shares, as described below.
SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A, Class B
or Class C shares, as appropriate) (the "Designated Class") annually in order
that MFD may pay expenses on behalf of the Fund relating to the servicing of
shares of the Designated Class. The service fee is used by MFD to compensate
dealers which enter into a sales agreement with MFD in consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to shares of the Designated Class owned by investors for whom such
dealer is the dealer or holder of record. MFD may from time to time reduce the
amount of the service fees paid for shares sold prior to a certain date. Service
fees may be reduced for a dealer that is the holder or dealer of record for an
investor who owns shares of the Fund having an aggregate net asset value at or
above a certain dollar level. Dealers may from time to time be required to meet
certain criteria in order to receive service fees. MFD or its affiliates are
entitled to retain all service fees payable under the Distribution Plan for
which there is no dealer of record or for which qualification standards have not
been met as partial consideration for personal services and/or account
maintenance services performed by MFD or its affiliates to shareholder accounts.
DISTRIBUTION FEES. The Distribution Plan provides that the Fund may pay MFD
a distribution fee based on the average daily net assets attributable to the
Designated Class as partial consideration for distribution services performed
and expenses incurred in the performance of MFD's obligations under its
distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plan, as does the use
by MFD of such distribution fees. Such amounts and uses are described below in
the discussion of the provisions of the Distribution Plan relating to each class
of shares. While the amount of compensation received by MFD in the form of
distribution fees during any year may be more or less than the expense incurred
by MFD under its distribution agreement with the Fund, the Fund is not liable to
MFD for any losses MFD may incur in performing services under its distribution
agreement with the Fund.
OTHER COMMON FEATURES. Fees payable under the Distribution Plan are charged
to, and therefore reduce, income allocated to shares of the Designated Class.
The provisions of the Distribution Plan relating to operating policies as well
as initial approval, renewal, amendment and termination are substantially
identical as they relate to each class of shares covered by the Distribution
Plan.
FEATURES UNIQUE TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are unique to each class of shares, as described below.
CLASS A SHARES. Class A shares are generally offered pursuant to an initial
sales charge, a substantial portion of which is paid to or retained by the
dealer making the sale (the remainder of which is paid to MFD). See "Purchases
- -- Class A Shares" above. In addition to the initial sales charge, the dealer
also generally receives the ongoing 0.25% per annum service fee, as discussed
above.
The distribution fee paid to MFD under the Distribution Plan is equal, on an
annual basis, to 0.10% of the Fund's average daily net assets attributable to
Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commissions to dealers with respect to purchases
of $1 million or more and purchases by certain retirement plans of Class A
shares which are sold at net asset value but which are subject to a 1% CDSC for
one year after purchase). See "Purchases -- Class A Shares" above. In addition,
to the extent that the aggregate service and distribution fees paid under the
Distribution Plan do not exceed 0.35% per annum of the average daily net assets
of the Fund attributable to Class A shares, the Fund is permitted to pay such
distribution-related expenses or other distribution- related expenses.
CLASS B SHARES. Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class B Shares"
above. MFD will advance to dealers the first year service fee described above at
a rate equal to 0.25% of the purchase price of such shares and, as compensation
therefore, MFD may retain the service fee paid by the Fund with respect to such
shares for the first year after purchase. Dealers will become eligible to
receive the ongoing 0.25% per annum service fee with respect to such shares
commencing in the thirteenth month following purchase.
Under the Distribution Plan, the Fund pays MFD a distribution fee equal, on an
annual basis, to 0.75% of the Fund's average daily net assets attributable to
Class B shares. As noted above, this distribution fee may be used by MFD to
cover its distribution-related expenses under its distribution agreement with
the Fund (including the 3.75% commission it pays to dealers upon purchase of
Class B shares, as described under "Purchases -- Class B Shares" above).
CLASS C SHARES. Class C shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class C shares"
above. MFD will pay a commission to dealers of 1.00% of the purchase price of
Class C shares purchased through dealers at the time of purchase. In
compensation for this 1.00% commission paid by MFD to dealers, MFD will retain
the 1.00% per annum Class C distribution and service fees paid by the Fund with
respect to such shares for the first year after purchase, and dealers will
become eligible to receive from MFD the ongoing 1.00% per annum distribution and
service fees paid by the Fund to MFD with respect to such shares commencing in
the thirteenth month following purchase.
This ongoing 1.00% fee is comprised of the 0.25% per annum service fee paid to
MFD under the Distribution Plan (which MFD in turn pays to dealers), as
discussed above, and a distribution fee paid to MFD (which MFD also in turn pays
to dealers) under the Distribution Plan equal, on an annual basis, to 0.75% of
the Fund's average daily net assets attributable to Class C shares.
CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class B and
Class C distribution and service fees for its current fiscal year are 0.35%,
1.00% and 1.00% per annum, respectively.
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 same class
to which a distribution is made. See "Tax Status" and "Shareholder Services --
Distribution Options" below. Distributions paid by the Fund with respect to
Class A shares will generally be greater than those paid with respect to Class B
and Class C shares because expenses attributable to Class B and Class C shares
will generally be higher.
TAX STATUS
The Fund is treated as an entity separate from the other series of the Trust for
federal income tax purposes. In order to minimize the taxes the Fund would
otherwise be required to pay, the Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code. Because the Fund
intends to distribute all of its net investment income and net realized capital
gains to its shareholders in accordance with the timing requirements imposed by
the Code, it is not expected that the Fund will be required to pay any federal
income or excise taxes.
Shareholders of the Fund that are not tax-exempt entities normally will have to
pay federal income tax and any state or local income taxes, on the dividends and
capital gain distributions they receive from the Fund, whether the distribution
is paid in cash or reinvested in additional shares. A portion of the dividends
received from the Fund (but none of the Fund's capital gain distributions) may
qualify for the dividends received deduction for corporations. Shareholders that
are not liable for income taxes, such as pension plans, generally will not pay
taxes on Fund dividends or capital gain distributions. Non-tax-exempt
shareholders should consult their tax advisers before making an investment in
the Fund.
Shortly after the end of each calendar year, each non-tax-exempt shareholder
will be sent a statement setting forth the federal income tax status of all
dividends and capital gain distributions for that year, including the portion
taxable as ordinary income, the portion taxable as long-term capital gain (as
well as the category or categories under which such gain is taxable) the
portion, if any, representing a return of capital (which is free of current
taxes but which results in a basis reduction), and the amount, if any, of
federal income tax withheld. The information in this statement will designate
the portions of capital gain distributions that are subject to (1) the 20%
maximum rate of tax enacted that applies to non-corporate taxpayers' net capital
gain (i.e., the excess of net long-term capital gain over net short-term capital
loss) on securities held for more than 18 months, and (2) the 28% maximum tax
rate, applicable to such gain recognized on securities held for more than one
year and up to 18 months.
Fund distributions will reduce the Fund's net asset value per share. Nonexempt
shareholders who buy shares shortly before the Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
The Fund intends to withhold U.S. federal income tax at the rate of 30% (or any
lower rate permitted under an applicable treaty) on dividends and other payments
that are subject to such withholding, and that are made to persons who are
neither citizens nor residents of the U.S. The Fund is also required in certain
circumstances to apply backup withholding at the rate of 31% on dividends,
capital gain distributions and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. Backup withholding will not,
however, be applied to payments that have been subject to 30% withholding.
Prospective investors should read the Fund's Account Application for information
regarding backup withholding of federal income tax and should consult their own
tax advisers as to the tax consequences to them of an investment in the Fund.
NET ASSET VALUE
The net asset value per share of each class of shares of the Fund is determined
each day during which the Exchange is open for trading. This determination is
made once each day as of the close of regular trading on the Exchange by
deducting the amount of the liabilities attributable to the class from the value
of the assets attributable to the class and dividing the difference by the
number of shares of the class outstanding. Assets in the Fund's portfolio are
valued on the basis of their market or other fair value, as described in the
SAI. The net asset value per share of each class of shares is effective for
orders received by the dealer prior to its calculation and received by MFD prior
to the close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has three classes of shares which it offers to the general public,
entitled Class A, Class B and Class C Shares of Beneficial Interest (without par
value). The Fund also has a class of shares which it offers exclusively to
certain institutional investors, entitled Class I shares. Each share of a class
represents an equal proportionate interest in the Fund with each other share of
that class subject to any liabilities of the particular class. 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. Each class
of shares of the Fund will vote separately on any material increase in the fees
under the Distribution Plan or on any other matter that affects solely that
class of shares, but will otherwise vote together with all other classes of
shares of the Fund on all other matters. The Fund has reserved the right to
create series of shares and to issue additional classes of shares. 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 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. The Fund
does not intend to hold annual shareholder meetings. The Fund's Declaration of
Trust provides that a Trustee may be removed from office in certain instances
(see "Description of Shares, Voting Rights and Liabilities" in the SAI).
Shares have no pre-emptive or conversion rights (except as set forth above in
"Purchases -- Conversion of Class B Shares"). Shares are fully paid and
non-assessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed (e.g., fidelity bonding and errors and omissions insurance)
and the Fund itself was unable to meet its obligations.
As of December 31, 1997, Frank M. Vaccaro Consulting, UFCW Participating Food
Ind., Employers Tri-State Pension Fund, Fairway Corporate Center, 4350
Haddonfield Road, Ste. 311, Pennsauken, NJ owns of record 26% of the Fund's
shares and, therefore, controls such Fund.
PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of 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. Yield
quotations are based on the annualized net investment income per share allocated
to each class of the Fund over a 30-day period stated as a percent of the
maximum public offering price of that class on the last day of that period.
Yield calculations for Class B and Class C shares assume no CDSC is paid. The
current distribution rate for each class is generally based upon the total
amount of dividends per share paid by the Fund to shareholders of that class
during the past 12 months and is computed by dividing the amount of such
dividends by the maximum public offering price of that class at the end of such
period. Current distribution rate calculations for Class B and Class C shares
assume no CDSC is paid. The current distribution rate differs from the yield
calculation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income from option writing,
short-term capital gains, and return of invested capital, and is calculated over
a different period of time. Total rate of return quotations will reflect the
average annual percentage change over stated periods in the value of an
investment in a class of shares of the Fund made at the maximum public offering
price of shares of that class with all distributions reinvested and which will
give effect to the imposition of any applicable CDSC assessed upon redemptions
of the Fund's Class B and Class C shares. Such total rate of return quotations
may be accompanied by quotations which do not reflect the reduction in value of
the initial investment due to the sales charge or the deduction of a CDSC, and
which will thus be higher. The Fund offers multiple classes of shares which were
initially offered for sale to, and purchased by, the public on different dates
(the class "inception date"). The calculation of total rate of return for a
class of shares which has a later class inception date than another class of
shares of the Fund is based both on (i) the performance of the Fund's newer
class from its inception date and (ii) the performance of the Fund's oldest
class from its inception date up to the class inception date of the newer class.
See the SAI for further information on the calculation of total rate of return
for share classes with different class inception dates.
All performance quotations are based on historical performance and are not
intended to indicate future performance. Yield reflects only net portfolio
income as of a stated period of time and current distribution rate reflects only
the rate of distributions paid by the Fund over a stated period of time, while
total rate of return reflects all components of investment return over a stated
period of time. The Fund's quotations may from time to time be used in
advertisements, shareholder reports or other communications to shareholders. For
a discussion of the manner in which the Fund will calculate its total rate of
return, see the SAI. For further information about the Fund's performance for
the fiscal year ended September 30, 1997, 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: advisory and administrative securities; 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 shareholders and to governmental offiers 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 sole discretion of MFS, MFS has agreed
to bear the Fund's expenses such that the Fund's "Other Expenses," which are
defined to include all Fund expenses (after taking into effect any compensating
balance and offset arrangements) except for management fees, Rule 12b-1 fees,
taxes, extraordinary expenses, brokerage and transaction costs and class
specific expenses do not exceed 0.20% per annum of its average daily net assets
(the "Maximum Percentage"). The payments made by MFS on behalf of the Fund under
this arrangement are subject to reimbursement by the Fund to MFS, which will be
accomplished by the payment of an expense reimbursement fee by the Fund 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 Fund's "Other Expenses" will not exceed the Maximum Percentage. The
obligation of MFS to bear the Fund's other expenses pursuant to this
arrangement, and the Fund's obligation to pay the reimbursement fee to MFS
terminates on the earlier of the date on which payments made by the 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 (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account.
Cancelled checks, if any, will be sent to shareholders monthly. At the end of
each calendar year, each shareholder will receive information regarding the tax
status of reportable dividends and distributions for that year (see "Tax
Status").
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional
shares. This option will be assigned if no other option is specified;
-- Dividends in cash; capital gain distributions reinvested in additional
shares;
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the last business day of the month. Dividends and
capital gain distributions in amounts less than $10 will automatically be
reinvested in additional shares of the Fund. If a shareholder has elected to
receive dividends and/or capital gain distributions in cash, and the postal or
other delivery service is unable to deliver checks to the shareholder's address
of record or the shareholder does not respond to mailings from the Shareholder
Servicing Agent with regard to uncashed checks, such shareholder's distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares. Any request to change a
distribution option must be received by the Shareholder Servicing Agent by the
record date for a dividend or distribution in order to be effective for that
dividend or distribution. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the SAI) anticipates purchasing $50,000 or more of Class A shares
of the Fund alone or in combination with shares of any class of other MFS Funds
or the MFS Fixed Fund (a bank collective investment fund) within a 13- month
period (or 36-month period for purchases of $1 million or more), the shareholder
may obtain such shares at the same reduced sales charge as though the total
quantity were invested in one lump sum, subject to escrow arrangements and the
appointment of an attorney for redemptions from the escrow amount if the
intended purchases are not completed, by completing the Letter of Intent section
of the Account Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of Class A, Class B and Class C
shares of that shareholder in the MFS Funds or the MFS Fixed Fund (a bank
collective investment fund) reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic payments
based upon the value of his account. Each payment under a Systematic Withdrawal
Plan (a "SWP") must be at least $100, except in certain limited circumstances.
The aggregate withdrawals of Class B and Class C shares in any year pursuant to
a SWP will not be subject to a CDSC and are generally limited to 10% of the
value of the account at the time of the establishment of the SWP. The CDSC will
not be waived in the case of SWP redemptions of Class A shares which are subject
to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account on any day of the month. If the
shareholder does not specify a date, the investment will automatically occur on
the first business day of the month. Required forms are available from the
Shareholder Servicing Agent or investment dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds (and, in the case of Class C shares, for shares of MFS Money
Market Fund) if such funds are available for sale under the Automatic Exchange
Plan, a dollar cost averaging program. The Automatic Exchange Plan provides for
automatic monthly or quarterly exchanges of funds from the shareholder's account
in an MFS Fund for investment in the same class of shares of other MFS Funds
selected by the shareholder if such fund is available for sale. Under the
Automatic Exchange Plan, exchanges of at least $50 each may be made to up to six
different funds. A shareholder should consider the objectives and policies of a
fund and review its prospectus before electing to exchange money into such fund
through the Automatic Exchange Plan. No transaction fee is imposed in connection
with exchange transactions under the Automatic Exchange Plan. However, exchanges
from MFS Money Market Fund, MFS Government Money Market Fund or Class A shares
of MFS Cash Reserve Fund will be subject to any applicable sales charge. For
federal and (generally) state income tax purposes, an exchange is treated as a
sale of the shares exchanged and, therefore, could result in a capital gain or
loss to the shareholder making the exchange. See the SAI for further information
concerning the Automatic Exchange Plan. Investors should consult their tax
advisers for information regarding the potential capital gain and loss
consequences of transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of
shares regardless of fluctuating share offering prices, a shareholder should
consider his financial ability to continue his purchases through periods of low
price levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS -- Except as noted under "Purchases -- Class C
Shares," shares of the Fund may be purchased by all types of tax-deferred
retirement plans, including IRAs, SEP-IRA plans, 401(k) plans, 403(b) plans
and other corporate pension and profit-sharing plans. Investors should consult
with their tax advisers before establishing any of the tax-deferred retirement
plans described above.
--------------------
The Fund's SAI, dated February 1, 1998, as amended or supplemented from time to
time, contains more detailed information about the Fund, including, but not
limited to, information related to: (i) investment objective, policies and
restrictions; (ii) Trustees, officers and investment adviser; (iii) portfolio
transactions; (iv) the method used to calculate performance quotations of the
Fund; (v) various services and privileges provided for the benefit of
shareholders; (vi) the Distribution Plan; (vii) determination of net asset value
of shares of the Fund; and (viii) certain voting rights of shareholders.
<PAGE>
APPENDIX A
WAIVERS OF SALES CHARGES
This Appendix sets forth the various circumstances in which all applicable sales
charges are waived (Section I), the initial sales charge and the contingent
deferred sales charge ("CDSC") for Class A shares is waived (Section II), and
the CDSC for Class B and Class C shares is waived (Section III). As used in the
Prospectus and any appendices thereto, the term "dealer" includes any broker,
dealer, bank (including bank trust departments), registered investment adviser,
financial planner and any other financial institutions having a selling
agreement or other similar agreement with MFS Fund Distributors Inc. ("MFD").
I. WAIVERS OF ALL APPLICABLE SALES CHARGES
In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions of
Class A shares and on redemptions of Class B and Class C shares, as
applicable, is waived:
1. DIVIDEND REINVESTMENT
o Shares acquired through dividend or capital gain reinvestment; and
o Shares acquired by automatic reinvestment of distributions of
dividends and capital gains of any fund in the MFS Family of Funds
("MFS Funds") pursuant to the Distribution Investment Program.
2. CERTAIN ACQUISITIONS/LIQUIDATIONS
o Shares acquired on account of the acquisition or liquidation of
assets of other investment companies or personal holding companies.
3. AFFILIATES OF AN MFS FUND/CERTAIN DEALERS. Shares acquired by:
o Officers, eligible directors, employees (including retired employees)
and agents of MFS, Sun Life Assurance Company of Canada ("Sun Life")
or any of their subsidiary companies;
o Trustees and retired trustees of any investment company for which MFD
serves as distributor;
o Employees, directors, partners, officers and trustees of any sub-
adviser to any MFS Fund;
o Employees or registered representatives of dealers;
o Certain family members of any such individual and their spouses
identified above and certain trusts, pension, profit-sharing or other
retirement plans for the sole benefit of such persons, provided the
shares are not resold except to the MFS Fund which issued the shares;
and
o Institutional Clients of MFS or MFS Institutional Advisors, Inc.
("MFSI").
4. INVOLUNTARY REDEMPTIONS (CDSC WAIVER ONLY)
o Shares redeemed at an MFS Fund's direction due to the small size of a
shareholder's account. See "Redemptions and Repurchases -- General --
Involuntary Redemptions/ Small Accounts" in the Prospectus.
5. RETIREMENT PLANS (CDSC WAIVER ONLY). Shares redeemed on account of
distributions made under the following circumstances:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRA'S")
o Death or disability of the IRA owner.
SECTION 401(a) PLANS ("401(a) PLANS") AND SECTION 403(b) EMPLOYER
SPONSORED PLANS ("ESP PLANS")
o Death, disability or retirement of 401(a) or ESP Plan participant;
o Loan from 401(a) or ESP Plan;
o Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time);
o Termination of employment of 401(a) or ESP Plan participant
(excluding, however, a partial or other termination of the 401(a) or
ESP Plan);
o Tax-free return of excess 401(a) or ESP Plan contributions;
o To the extent that redemption proceeds are used to pay expenses (or
certain participant expenses) of the 401(a) or ESP Plan (e.g.,
participant account fees), provided that the 401(a) or ESP Plan
sponsor subscribes to the MFS FUNDamental 401(k) Plan or another
similar recordkeeping system made available by the Shareholder
Servicing Agent; and
o Distributions from a 401(a) or ESP Plan that has invested its assets
in one or more of the MFS Funds for more than 10 years from the later
to occur of: (i) January 1, 1993 or (ii) the date such 401(a) or ESP
Plan first invests its assets in one or more of the MFS Funds. The
sales charges will be waived in the case of a redemption of all of
the 401(a) or ESP Plan's shares in all MFS Funds (i.e., all the
assets of the 401(a) or ESP Plan invested in the MFS Funds are
withdrawn), unless immediately prior to the redemption, the aggregate
amount invested by the 401(a) or ESP Plan in shares of the MFS Funds
(excluding the reinvestment of distributions) during the prior four
years equals 50% or more of the total value of the 401(a) or ESP
Plan's assets in the MFS Funds, in which case the sales charges will
not be waived.
SECTION 403(b) SALARY REDUCTION ONLY PLANS ("SRO PLANS")
o Death or disability of SRO Plan participant.
6. CERTAIN TRANSFERS OF REGISTRATION (CDSC WAIVER ONLY). Shares
transferred:
o To an IRA rollover account where any sales charges with respect to
the shares being reregistered would have been waived had they been
redeemed; and
o From a single account maintained for a 401(a) Plan to multiple
accounts maintained by the Shareholder Servicing Agent on behalf of
individual participants of such Plan, provided that the Plan sponsor
subscribes to the MFS FUNDamental 401(k) Plan or another similar
recordkeeping system made available by the Shareholder Servicing
Agent.
7. LOAN REPAYMENTS
o Shares acquired pursuant to repayments by retirement plan
participants of loans from 401(a) or ESP Plans with respect to which
such Plan or its sponsoring organization subscribes to the MFS
FUNDamental 401(k) Program or the MFS Recordkeeper Plus Program (but
not the MFS Recordkeeper Program).
II. WAIVERS OF CLASS A SALES CHARGES
In addition to the waivers set forth in Section I above, in the following
circumstances the initial sales charge imposed on purchases of Class A
shares and the CDSC imposed on certain redemptions of Class A shares is
waived:
1. WRAP ACCOUNT INVESTMENTS AND FUND "SUPERMARKET" INVESTMENTS
o Shares acquired by investments through certain dealers (including
registered investment advisers and financial planners) which have
established certain operational arrangements with MFD which include a
requirement that such shares be sold for the sole benefit of clients
participating in a "wrap" account, mutual fund "supermarket" account
or a similar program under which such clients pay a fee to such
dealer.
2. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS
o Shares acquired by insurance company separate accounts.
3. RETIREMENT PLANS
ADMINISTRATIVE SERVICES ARRANGEMENTS
o Shares acquired by retirement plans or trust accounts whose third
party administrators or dealers have entered into an administrative
services agreement with MFD or one of its affiliates to perform
certain administrative services, subject to certain operational and
minimum size requirements specified from time to time by MFD or one
or more of its affiliates.
REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS
o Shares acquired through the automatic reinvestment in Class A shares
of Class A or Class B distributions which constitute required
withdrawals from qualified retirement plans.
Shares redeemed on account of distributions made under the following
circumstances:
IRA'S
o Distributions made on or after the IRA owner has attained the age of
59 1/2 years old; and
o Tax-free returns of excess IRA contributions.
401(a) PLANS
o Distributions made on or after the 401(a) Plan participant has
attained the age of 59 1/2 years old; and
o Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a Plan.
ESP PLANS AND SRO PLANS
o Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59 1/2 years old.
4. PURCHASES OF AT LEAST $5 MILLION (CDSC WAIVER ONLY)
o Shares acquired of Eligible Funds (as defined below) if the
shareholder's investment equals or exceeds $5 million in one or more
Eligible Funds (the "Initial Purchase") (this waiver applies to the
shares acquired from the Initial Purchase and all shares of Eligible
Funds subsequently acquired by the shareholder); provided that the
dealer through which the Initial Purchase is made enters into an
agreement with MFD to accept delayed payment of commissions with
respect to the Initial Purchase and all subsequent investments by the
shareholder in the Eligible Funds subject to such requirements as may
be established from time to time by MFD (for a schedule of the amount
of commissions paid by MFD to the dealer on such investments, see
"Purchases -- Class A Shares -- Purchases subject to a CDSC" above).
The Eligible Funds are all funds included in the MFS Family of Funds,
except for Massachusetts Investors Trust, Massachusetts Investors
Growth Stock Fund, MFS Municipal Bond Fund, MFS Municipal Limited
Maturity Fund, MFS Money Market Fund, MFS Government Money Market
Fund and MFS Cash Reserve Fund.
III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES
In addition to the waivers set forth in Section I above, in the following
circumstances the CDSC imposed on redemptions of Class B and Class C shares
is waived:
1. SYSTEMATIC WITHDRAWAL PLAN
o Systematic Withdrawal Plan redemptions with respect to up to 10% per
year (or 15% per year, in the case of accounts registered as IRAs
where the redemption is made pursuant to Section 72(t) of the
Internal Revenue Code of 1986, as amended), of the account value at
the time of establishment.
2. DEATH OF OWNER
o Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a
living trust for the benefit of the deceased individual.
3. DISABILITY OF OWNER
o Shares redeemed on account of the disability of the account owner if
shares are held either solely or jointly in the disabled individual's
name or in a living trust for the benefit of the disabled individual
(in which case a disability certification form is required to be
submitted to the Shareholder Servicing Agent).
4. RETIREMENT PLANS. Shares redeemed on account of distributions made
under the following circumstances:
IRA'S, 401(a) PLANS, ESP PLANS AND SRO PLANS
o Distributions made on or after the IRA owner or the 401(a), ESP or
SRO Plan participant, as applicable, has attained the age of 70 1/2
years old, but only with respect to the minimum distribution under
applicable Internal Revenue Code ("Code") rules.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS ("SAR-SEP PLANS")
o Distributions made on or after the SAR-SEP Plan participant has
attained the age of 70 1/2 years old, but only with respect to the
minimum distribution under applicable Code rules;
o Death or disability of a SAR-SEP Plan participant.
<PAGE>
APPENDIX B
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES, AUTHORITIES OR INSTRUMENTALITIES
FHA DEBENTURES are debentures issued by the Federal Housing Administration and
fully and unconditionally guaranteed by the U.S. Government.
GNMA CERTIFICATES are mortgage-backed securities, with timely payment guaranteed
by the full faith and credit of the U.S. Government which represent partial
ownership interests in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is also insured or guaranteed by the Federal
Housing Administration, the Veterans Administration or the Farmers Home
Administration.
FHLMC BONDS are bonds issued and guaranteed by the Federal Home Loan Mortgage
Corporation and are not guaranteed by the U.S. Government.
FNMA BONDS are bonds issued and guaranteed by the Federal National Mortgage
Association and are not guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS are short-term project notes and long-term bonds
issued by public housing and urban renewal agencies in connection with programs
administered by the Department of Housing and Urban Development of the U.S.
Government, the payment of which is guaranteed by the full faith and credit of
the U.S. Government.
SBA DEBENTURES are debentures issued and guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES are debentures backed by the Student Loan Marketing
Association and are not guaranteed by the U.S. Government.
TITLE XI BONDS are ship financing bonds issued under Title XI of the Merchant
Marine Act of 1936, as amended, and guaranteed by the Maritime Administration of
the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS are bonds issued by the
Washington Metropolitan Area Transit Authority and guaranteed by the full faith
and credit of the U.S. Government.
The list of securities set forth above does not purport to be an exhaustive
compilation of all debt obligations issued or guaranteed by U.S. Government
agencies, authorities or instrumentalities. The Fund reserves the right to
invest in debt obligations issued or guaranteed by U.S. Government agencies,
authorities or instrumentalities in addition to those listed above.
<PAGE>
Investment Adviser
Massachusetts Financial
Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
Custodian and Dividend
Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Shareholder Servicing Agent
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll-free: (800) 225-2606
Mailing Address:
P.O. Box 2281
Boston, MA 02107-9906
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
<PAGE>
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BULK RATE
[GRAPHIC OMITTED] U.S. POSTAGE
PAID
MFS
------------
MFS(R) UNION STANDARD EQUITY FUND
500 Boylston Street, Boston, MA 02116-3741
This is your fund's current prospectus. Please keep it with your financial
records because it provides important information about your investment.
USE-1-2/98/65M [Graphic Omitted]
<PAGE>
[GRAPHIC OMITTED]
MFS(R) UNION STANDARD(R) STATEMENT OF
EQUITY FUND ADDITIONAL INFORMATION
(A Member of the MFS Family of Funds(R)) February 1, 1998
- --------------------------------------------------------------------------------
Page
----
1. Definitions .................................................. 2
2. Investment Objective and Policies ............................ 2
3. Investment Restrictions ...................................... 8
4. Management of the Fund ....................................... 9
Trustees .................................................. 9
Officers .................................................. 9
Trustee Compensation Table ................................ 9
Investment Adviser ........................................ 10
Administrator ............................................. 10
Custodian ................................................. 10
Shareholder Servicing Agent ............................... 10
Distributor ............................................... 10
5. Portfolio Transactions and Brokerage Commissions ............. 11
6. Shareholder Services ......................................... 12
Investment and Withdrawal Programs ........................ 12
Exchange Privilege ........................................ 14
Tax-Deferred Retirement Plans ............................. 15
7. Tax Status ................................................... 15
8. Determination of Net Asset Value and Performance ............. 16
9. Distribution Plan ............................................ 18
10. Description of Shares, Voting Rights and Liabilities ......... 19
11. Independent Auditors and Financial Statements ................ 20
Appendix A -- Performance Information ........................ A-1
MFS UNION STANDARD(SM) EQUITY FUND
A Series of MFS(R) Union Standard(SM) Trust
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information, as amended or supplemented from time
to time (the "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, 1998. 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 last page for address and phone number).
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
1. DEFINITIONS
"Fund" -- MFS Union Standard(SM) Trust (the
"Trust") is a professionally
managed open-end, management
investment company (a "mutual
fund"). The Trust currently
consists of one series or fund: MFS
Union Standard(SM) Equity Fund (the
"Fund"). Additional funds may be
created by the Trustees from time
to time. The Fund offers its shares
pursuant to a prospectus dated
February 1, 1998, as supplemented
or amended from time to time (the
"Prospectus").
"MFS" or the "Adviser" -- Massachusetts Financial Services
Company, a Delaware corporation.
"MFD" -- MFS Fund Distributors, Inc., a
Delaware corporation.
"Prospectus" -- The Prospectus of the Fund, dated
February 1, 1998, as amended or
supplemented from time to time.
2. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. The Fund's investment objective is to provide long-term
growth of capital. 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 or a fee. 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 shold 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 liquid assets 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.
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 liquid assets in a segregated account with its
custodian. A put option written by the Fund is "covered" if the Fund maintains
liquid assets 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 liquid assets 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 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 liquid assets. 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 vlaue 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
if 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 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 siimilar 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 liquid assets in a segregated account with its custodian. The Fund
may cover put options on stock indices by maintaining liquid assets 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 liquid assets, 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 Composite Stock Price 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
Composite Stock Price 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 sotcks 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 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
Fund'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 Contract. (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 liquid assets 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 liquid assets 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 liquid assets 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 ability 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 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 assess 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, 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
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 describe 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, Options on Futures Contracts and
Options on Foreign Currencies traded on a CFTC-regulated exchange only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
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, after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into, and excluding, in
computing such 5%, the in-the-money amount with respect to an option that is
in-the-money at the time of purchase.
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.
----------------
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) and nonfundamental investment policy (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;
(5) make loans to other persons. For these purposes, the purchase of
short-term commercial paper, the purchase of a portion or all of an issue of
debt securities, the lending of portfolio securities, or the investment of
the Fund's assets in repurchase agreements, shall not be considered the
making of a loan; or
(6) purchase any securities of an issuer of a particular industry, if as a
result, 25% or more of its gross assets would be invested in securities of
issuers whose principal business activities are in the same industry (except
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements collateralized by such
obligations).
In addition, the Fund has adopted the following nonfundamental policies which
may be changed without shareholder approval. The 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; currently, the Fund does not intend to
invest more than 5% of its net assets in such securities;
(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;
(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;
(11) invest for the purpose of exercising control or management; or
(12) borrow, except as a temporary measure for extraordinary or emergency
purposes.
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 (born 8/4/35)
Massachusetts Financial Services Company, Chairman
NELSON J. DARLING, JR. (born 12/27/20)
Professional Trustee
Address: 27 School Street, Boston, Massachusetts
WILLIAM R. GUTOW (born 9/27/41)
Private Investor; Real Estate Consultant; Capitol Entertainment (Blockbuster
Video Franchise), Vice Chairman
Address: 3102 Maple Avenue, #100, Dallas, Texas
OFFICERS
W. THOMAS LONDON,* Treasurer (born 3/1/44)
Massachusetts Financial Services Company, Senior Vice President
JAMES 0. YOST,* Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Vice President
MARK E. BRADLEY,* Assistant Treasurer (born 11/23/59)
Massachusetts Financial Services Company, Vice President (since March 1997);
Putnam Investments, Vice President (from September 1994 until March 1997);
Ernst & Young, Senior Tax Manager (until September 1994).
ELLEN M. MOYNIHAN,* Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President (since September
1996); Deloitte & Touche LLP, Senior Manager (until September 1996).
STEPHEN E. CAVAN,* Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary
JAMES R. BORDEWICK, JR.,* Assistant Secretary (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and Associate
General Counsel
- ----------
*"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.
TRUSTEE COMPENSATION TABLE
The Trust pays the compensation of the Trustees who are not officers of MFS
(who will each receive $1,300 annually plus $150 per meeting and $150 per
committee meeting attended). Set forth below is certain information concerning
the cash compensation paid to the Trustees.
TRUSTEE FEES TOTAL TRUSTEE FEES
FROM FROM THE FUND
NAME OF TRUSTEE FUND(1) COMPLEX(2)
A. Keith Brodkin ................ $ O $ 0
Nelson J. Darling ............... 2,500 28,684
William R. Gutow ................ 2,500 28,684
NOTES:
(1) For fiscal year ended September 30, 1997.
(2) For calendar year 1997. All Trustees receiving compensation served as
Trustees of 18 funds within the MFS Fund Complex (having aggregate net
assets at December 31, 1997, of approximately $1.6 billion).
As of December 31, 1997, the Trustees and officers, as a group, owned less
than 1% of the Fund's shares outstanding on that date.
As of December 31, 1997, MLPF&S for the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E. 3rd Fl., Jacksonville, FL was the
owner of approximately 73.34% of Class A shares of the Fund. As of December
31, 1997, Donaldson Lufkin Jenrett Securities Corporation, Inc., P.O. Box
2052, Jersey City, New Jersey was the owner of approximately 13.40% and 81.50%
of Class A and Class B shares of the Fund, respectively. As of December 31,
1997, Painewebber for the benefit of UA Local 693 Plumbers Union, Attn: Lance
Moran, 3 Gregory Drive, South Burlington, VT was the owner of approximately
94.12% of Class C shares of the Fund.
As of December 31, 1997, the following owned more than 5% of the Fund's Class
I shares:
APPROXIMATE APPROXIMATE %
NUMBER OF OF OUTSTANDING
SHAREHOLDER SHARES OWNED SHARES OWNED
- ----------- ------------ --------------
Frank M. Vaccaro Consulting 1,304,027.20 28.27%
UFCW Participating Food Ind
Employer Tri-State Pension Fund
Fairway Corporate Center
4350 Haddonfield Rd. Ste. 311
Pennsauken, NJ
Morton Bahr President 771,211.32 16.72%
Barbara J Easterling Sec/Treas
CWA Pension & Death Benefit Trust
501 Third St. NW
RL Harrison, Attn: James C. Reid 539,995.86 11.71%
Savannah ILA Employers
Pension Plan
Box 1280, Savannah, GA
Bank of NY for the benefit of 270,416.54 5.86%
the Equity League Pension Trust
Fund, Amivest Corp
1 Wall Street, New York, NY
Bank of New York for the benefit 261,121.83 5.66%
of American Federation of
Musicians and Employers Pension
Fund
1 Wall Street, New York, NY
International Longshoremens 546,365.495 11.85%
Association
Southeast Florida Ports
Employers Pension Fund
33 NE 6th Street, Miami, FL
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 subsidiary of Sun Life of Canada (U.S.), which is
an indirect wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life").
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"). Under the Advisory Agreement, MFS provides the Fund with overall
investment advisory services. 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 years ended September 30, 1995, 1996 and 1997, MFS received
advisory fees under the Advisory Agreement of $193,107, $310,911 and $385,300,
respectively.
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 August 1,
1998, 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.
ADMINISTRATOR
MFS provides the Fund with certain financial, legal, compliance, shareholder
communications and other administrative services pursuant to a Master
Administrative Services Agreement dated March 1, 1997, as amended. Under this
Agreement, the Fund pays MFS an administrative fee of up to 0.015% per annum
of the Fund's average daily net assets. This fee reimburses MFS for a portion
of the costs it incurs to provide such services. For the period March 1, 1997
to September 30, 1997, MFS received fees under the Administrative Services
Agreement of $5,527.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery
of securities, determining income and collecting interest on the Fund's
investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily
net asset value of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities, including
repurchase agreements, issued by the Custodian and may deal with the Custodian
as principal in securities transactions.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, as amended, dated November 17, 1995 (the
"Agency Agreement") with the Fund. The Shareholder Servicing Agent's
responsibilities under the Agency Agreement include administering and
performing transfer agent functions and the keeping of records in connection
with the issuance, transfer and redemption of each class of shares of the
Fund. For these services, the Shareholder Servicing Agent will receive a fee
calculated as a percentage of the average daily net assets of the Fund at an
effective annual rate of 0.1125% attributable to Class A, Class B and Class C
shares, respectively. In addition, the Shareholder Servicing Agent will be
reimbursed by the Fund for certain expenses incurred by the Shareholder
Servicing Agent on behalf of the Fund. State Street Bank and Trust Company,
the dividend and distribution disbursing agent of the Fund, has contracted
with the Shareholder Servicing Agent to administer and perform certain
dividend disbursing agent functions for the Fund.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the
continuous offering of shares of the Fund pursuant to a Distribution
Agreement, dated December 8, 1993, as amended and restated July 30, 1997 (the
"Distribution Agreement") with the Fund. Prior to January 1, 1995, MFS
Financial Services, Inc. ("FSI"), another wholly owned subsidiary of MFS, was
the Fund's distributor. Where this SAI refers to MFD in relation to the
receipt or payment of money with respect to a period or periods prior to
January 1, 1995, such reference shall be deemed to include FSI, as the
predecessor in interest to MFD.
The Distribution Agreement will remain in effect until August 1, 1998 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.
CLASS A SHARES: MFD acts as agent in selling Class A shares of the Fund to
dealers. The public offering price of Class A shares of the Fund is their net
asset value next computed after the sale plus a sales charge which varies
based upon the quantity purchased. The public offering price of Class A shares
of the Fund is calculated by dividing net asset value of a Class A share by
the difference (expressed as a decimal) between 100% and the sales charge
percentage of offering price applicable to the purchase (see "Purchases" in
the Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS
Funds") and other Funds (as noted under Right of Accumulation) by any person,
including members of a family unit (e.g., husband, wife and minor children)
and bona fide trustees, and also applies to purchases made under the Right of
Accumulation or a Letter of Intent (see "Investment and Withdrawal Programs"
below). A group might qualify to obtain quantity sales charge discounts (see
"Investment and Withdrawal Programs" in this SAI).
Class A shares of the Fund may be sold at their net asset value to certain
persons or in certain instances as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others
with whom MFS, MFD and/or the Fund have business relationships, and because
the sales effort, if any, involved in making such sales is negligible.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The difference
between the total amount invested and the sum of (a) the net proceeds to the
Fund and (b) the dealer commission, is the commission paid to the distributor.
Because of rounding in the computation of offering price, the portion of the
sales charge paid to the distributor may vary and the total sales charge may
be more or less than the sales charge calculated using the sales charge
expressed as a percentage of offering price or as a percentage of the net
amount invested as listed in the Prospectus. In the case of the maximum sales
charge, the dealer retains 5% and MFD retains approximately 3/4 of 1% of the
public offering price. In addition, MFD pays a commission to dealers who
initiate and are responsible for purchases of $1 million or more as described
in the Prospectus.
CLASS B SHARES, CLASS C SHARES AND CLASS I SHARES: MFD acts as agent in
selling Class B shares, Class C shares and Class I shares to dealers. The
public offering price of Class B shares, Class C shares and Class I shares is
their net asset value next computed after the sale (see "Purchases" in the
Prospectus and the Prospectus Supplement to which Class I shares are offered).
GENERAL: On occasion, MFD may obtain brokers loans from various banks,
including the custodian banks for the MFS Funds, to facilitate the settlement
of sales of shares of the Fund to dealers. MFD may benefit from its temporary
holding of funds paid to it by investment dealers for the purchase of Fund
shares. Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change.
For the period from August 8, 1997 through September 30, 1997, MFD and certain
other financial institutions received net commissions on Class A shares of $82
and $649, respectively (as their concession of gross commissions of $731). The
Fund received $520,133, representing the aggregate net asset value of such
shares.
For the period from August 8, 1997 through September 30, 1997, the contingent
deferred sales charges ("CDSC") imposed on the redemption of Class A shares
were $0.
For the period from August 11, 1997 through September 30, 1997, the CDSC
imposed on the redemption of Class B and Class C shares were
$0 and $0, respectively.
The Distribution Agreement will remain in effect until August 1, 1998, 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 and, in either case, by a majority of the Trustees who
are not parties to the Distribution Agreement or interested persons of any
such party. The Distribution Agreement terminates automatically if it is
assigned and may be terminated without penalty by either party on not more
than 60 days' nor less than 30 days' notice.
5. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Specific decisions to purchase or sell securities for the Fund are made by a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. The Fund's portfolio manager may serve
other clients of the Adviser or any subsidiary of the Adviser in a similar
capacity.
The primary consideration in placing portfolio security transactions 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-dealer
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.
Under the Advisory Agreement 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 $50,980 of commission business from the various MFS
Funds to the Pershing Division of Donaldson, Lufkin & Jenrette as
consideration for the annual renewal of the certain publications provided by
Lipper Analytical Securities Corporation (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.
During the fiscal year ended September 30, 1997, the Fund acquired, retained
and owned securities by Bank of America Corp., a regular broker dealer of the
Fund in the amount of $1,334,288 as of September 30, 1997.
Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD") and such other
policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund and of the other investment company clients of MFD as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for that of one or more of the other clients of the
Adviser or any subsidiary of the Adviser. Investment decisions for the Fund
and for such other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold
for, other clients. Likewise, a particular security may be bought for one or
more clients when one or more other clients are selling that same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed by the Adviser to be equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of
the security as far as the Fund is concerned. In some cases, however, the Fund
believes that its ability to participate in volume transactions will produce
better executions for the Fund.
For the fiscal years ended September 30, 1997, 1996 and 1995, the Fund paid
total brokerage commissions of $79,561, $78,481 and $115,591, respectively on
total transactions of $58,340,428, $61,985,397 and $73,027,727, respectively.
6. SHAREHOLDER SERVICES
INVESTMENT AND WITHDRAWAL PROGRAMS -- The Fund makes available the following
programs designed to enable shareholders to add to their investment or
withdraw from it with a minimum of paper work. These are described below and
in certain cases, in the Prospectus. The programs involve no extra charge to
shareholders (other than a sales charge in the case of certain Class A share
purchases) and may be changed or discontinued at any time by a shareholder or
the Fund.
LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $50,000 or more of Class A shares of the Fund
alone or in combination with shares of Class B or Class C of the Fund or any
of the classes of other MFS Funds or MFS Fixed Fund (a bank collective
investment fund) within a 13-month period (or 36-month period, in the case of
purchases of $1 million or more), the shareholder may obtain Class A shares of
the Fund at the same reduced sales charge as though the total quantity were
invested in one lump sum by completing the Letter of Intent section of the
Account Application or filing a separate Letter of Intent application
(available from the Shareholder Servicing Agent) within 90 days of the
commencement of purchases. Subject to acceptance by MFD and the conditions
mentioned below, each purchase will be made at a public offering price
applicable to a single transaction of the dollar amount specified in the
Letter of Intent application. The shareholder or his dealer must inform MFD
that the Letter of Intent is in effect each time shares are purchased. The
shareholder makes no commitment to purchase additional shares, but if his
purchases within 13 months (or 36 months in the case of purchases of $1
million or more) plus the value of shares credited toward completion of the
Letter of Intent do not total the sum specified, he will pay the increased
amount of the sales charge as described below. Instructions for issuance of
shares in the name of a person other than the person signing the Letter of
Intent application must be accompanied by a written statement from the dealer
stating that the shares were paid for by the person signing such Letter.
Neither income dividends nor capital gain distributions taken in additional
shares will apply toward the completion of the Letter of Intent. Dividends and
distributions by other MFS Funds automatically reinvested in shares of the
Fund pursuant to the Distribution Investment Program also will not apply
toward completion of the Letter of Intent.
Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder
or to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month period or 36-month period, as
applicable), the shareholder will be notified and the escrowed shares will be
released.
If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released
by the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in
the premises.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when that shareholder's new
investment, together with the current offering price value of all holdings of
Class A, Class B and Class C shares of that shareholder in the MFS Funds or
the MFS Fixed Fund (a bank collective investment fund) reaches a discount
level. See "Purchases" in the Prospectus for the sales charges on quantity
discounts. For example, if a shareholder owns shares with a current offering
price value of $25,000 and purchases an additional $25,000 of Class A shares
of the Fund, the sales charge for the $25,000 purchase would be at the rate of
4.75% (the rate applicable to single transactions of $50,000). A shareholder
must provide the Shareholder Servicing Agent (or his investment dealer must
provide MFD) with information to verify that the quantity sales charge
discount is applicable at the time the investment is made.
SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-
free at (800) 225-2606. The minimum purchase amount is $50 and the maximum
purchase amount is $100,000. Shareholders wishing to avail themselves of this
telephone purchase privilege must so elect on their Account Application and
designate thereon a bank and account number from which purchases will be made.
If a telephone purchase request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), the purchase will occur at the closing
net asset value of the shares purchased on that day. The Shareholder Servicing
Agent may be liable for any losses resulting from unauthorized telephone
transactions if it does not follow reasonable procedures designed to verify
the identity of the caller. The Shareholder Servicing Agent will request
personal or other information from the caller, and will normally also record
calls. Shareholders should verify the accuracy of confirmation statements
immediately after their receipt.
DISTRIBUTION INVESTMENT PROGRAM: Distributions of dividends and capital
gains made by the Fund with respect to a particular class of shares may be
automatically invested in shares of the same class of one of the other MFS
Funds if shares of the fund are available for sale. Such investments will be
subject to additional purchase minimums. Distributions will be invested at net
asset value (exclusive of any sales charge) and will not be subject to a CDSC.
Distributions will be invested at the close of business on the payable date
for the distribution. A shareholder considering the Distribution Investment
Program should obtain and read the prospectus of the other fund and consider
the differences in objectives and policies before making any investment.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic
payments based upon the value of his account. Each payment under a Systematic
Withdrawal Plan ("SWP") must be at least $100, except in certain limited
circumstances. The aggregate withdrawals of Class B shares in any year
pursuant to a SWP generally are limited to 10% of the value of the account at
the time of the establishment of the SWP. SWP payments are drawn from the
proceeds of share redemptions held in the shareholder's account (which would
be a return of principal and, if reflecting a gain, would be taxable).
Redemptions of Class B and Class C shares will be made in the following order:
(i) to the extent necessary, any "Free Amount"; (ii) any "Reinvested Shares"
and (iii) to the extent necessary, the "Direct Purchase" subject to the lowest
CDSC (as such terms are defined in "Contingent Deferred Sales Charge" in the
Prospectus). The CDSC will be waived in the case of redemptions of Class B and
Class C shares pursuant to a SWP, but will not be waived in the case of SWP
redemptions of Class A shares which are subject to a CDSC. To the extent that
redemptions for such periodic withdrawals exceed dividend income reinvested in
the account, such redemptions will reduce and may eventually exhaust the
number of shares in the shareholder's account. All dividend and capital gain
distributions for an account with a SWP will be reinvested in additional full
and fractional shares of the Fund at the net asset value in effect at the
close of business on the record date for such distributions. To initiate this
service, shares having an aggregate value of at least $5,000 either must be
held on deposit by, or certificates for such shares must be deposited with,
the Shareholder Servicing Agent. With respect to Class A shares, maintaining a
withdrawal plan concurrently with an investment program would be
disadvantageous because of the sales charges included in share purchases and
the imposition of a CDSC on certain redemptions. The shareholder may deposit
into the account additional shares of the Fund, change the payee or change the
dollar amount of each payment. The Shareholder Servicing Agent may charge the
account for services rendered and expenses incurred beyond those normally
assumed by the Fund with respect to the liquidation of shares. No charge is
currently assessed against the account, but one could be instituted by the
Shareholder Servicing Agent on 60 days' notice in writing to the shareholder
in the event that the Fund ceases to assume the cost of these services. The
Fund may terminate any SWP for an account if the value of the account falls
below $5,000 as a result of share redemptions (other than as a result of a
SWP) or an exchange of shares of the Fund for shares of another MFS Fund. Any
SWP may be terminated at any time by either the shareholder or the Fund.
INVEST BY MAIL: Additional investments of $50 or more may be made at any
time by mailing a check payable to the Fund directly to the Shareholder
Servicing Agent. The shareholder's account number and the name of his
investment dealer must be included with each investment.
GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group (1) gives its endorsement or authorization to the
investment program so it may be used by the investment dealer to facilitate
solicitation of the membership, thus effecting economies of sales effort; (2)
has been in existence for at least six months and has a legitimate purpose
other than to purchase mutual fund shares at a discount; (3) is not a group of
individuals whose sole organizational nexus is as credit cardholders of a
company, policyholders of an insurance company, customers of a bank or broker-
dealer, clients of an investment adviser or other similar group; and (4)
agrees to provide certification of membership of those members investing money
in the MFS Funds upon the request of MFD.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares
of the other MFS Funds (if available for sale) under the Automatic Exchange
Plan. The Automatic Exchange Plan provides for automatic exchanges of funds
from the shareholder's account in an MFS Fund for investment in the same class
of shares of other MFS Funds selected by the shareholder. Under the Automatic
Exchange Plan, exchanges of at least $50 each may be made to up to six
different funds effective on the seventh day of each month or of every third
month, depending whether monthly or quarterly exchanges are elected by the
shareholder. If the seventh day of the month is not a business day, the
transaction will be processed on the next business day. Generally, the initial
exchange will occur after receipt and processing by the Shareholder Servicing
Agent of an application in good order. Exchanges will continue to be made from
a shareholder's account in any MFS Fund as long as the balance of the account
is sufficient to complete the exchanges. Additional payments made to a
shareholder's account will extend the period that exchanges will continue to
be made under the Automatic Exchange Plan. However, if additional payments are
added to an account subject to the Automatic Exchange Plan shortly before an
exchange is scheduled, such funds may not be available for exchanges until the
following month; therefore, care should be used to avoid inadvertently
terminating the Automatic Exchange Plan through exhaustion of the account
balance.
No transaction fee will be charged for exchanges in connection with the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market
Fund, MFS Government Money Market Fund and Class A shares of MFS Cash Reserve
Fund will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions
in writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record). Each Exchange Change Request (other than termination of participation
in the program) must involve at least $50. Generally, if an Exchange Change
Request is received by telephone or in writing before the close of business on
the last business day of a month, the Exchange Change Request will be
effective for the following month's exchange.
A shareholder's right to make additional investments in any of the MFS Funds,
to make exchanges of shares from one MFS Fund to another and to withdraw from
an MFS Fund, as well as a shareholder's other rights and privileges, are not
affected by a shareholder's participation in the Automatic Exchange Plan.
The Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding the Automatic Exchange Plan, including the treatment of
any CDSC, see "Exchange Privilege" below.
REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the
other MFS Funds (except MFS Money Market Fund, MFS Government Money Market
Fund and Class A shares of MFS Cash Reserve Fund in the case where the shares
are acquired through direct purchase or reinvested dividends) who have
redeemed their shares have a one-time right to reinvest the redemption
proceeds in the same class of shares of any of the MFS Funds (if shares of the
fund are available for sale) at net asset value (without a sales charge) and,
if applicable, with credit for any CDSC paid. In the case of proceeds
reinvested in shares of MFS Money Market Fund, MFS Government Money Market
Fund or Class A shares of MFS Cash Reserve Fund, the shareholder has the right
to exchange the acquired shares for shares of another MFS Fund at net asset
value pursuant to the exchange privilege described below. Such a reinvestment
must be made within 90 days of the redemption and is limited to the amount of
the redemption proceeds. If the shares credited for any CDSC paid are then
redeemed within six years of their initial purchase in the case of Class B
shares or within 12 months of the initial purchase of Class C shares and
certain Class A shares, a CDSC will be imposed upon redemption. Although
redemptions and repurchases of shares are taxable events, a reinvestment
within a certain period of time in the same fund may be considered a "wash
sale" and may result in the inability to recognize currently all or a portion
of a loss realized on the original redemption for federal income tax purposes.
Please see your tax adviser for further information.
EXCHANGE PRIVILEGE -- Subject to the requirements set forth below, some or all
of the shares in an account with the Fund for which payment has been received
by the Fund (i.e., an established account) may be exchanged for shares of the
same class of any of the other MFS Funds (if available for sale and if the
purchaser is eligible to purchase the Class of shares) at their net asset
value. Exchanges will be made only after instructions in writing or by
telephone (an "Exchange Request") are received for an established account by
the Shareholder Servicing Agent.
Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of
record), and each exchange must involve either shares having an aggregate
value of at least $1,000 ($50 in the case of retirement plan participants
whose sponsoring organizations subscribe to the MFS FUNDamental 401(k) Plan or
another similar 401(k) recordkeeping system made available by the Shareholder
Servicing Agent) or all the shares in the account. Each exchange involves the
redemption of the shares of the Fund to be exchanged and the purchase at net
asset value (i.e., without a sales charge) of shares of the same class of the
other MFS Fund. Any gain or loss on the redemption of the shares exchanged is
reportable on the shareholder's federal income tax return, unless both the
shares received and the shares surrendered in the exchange are held in a tax-
deferred retirement plan or other tax-exempt account. If the Exchange Request
is received by the Shareholder Servicing Agent prior to the close of regular
trading on the Exchange on any business day, the exchange usually will occur
on that day if all the requirements set forth above have been complied with at
that time. However, payment of the redemption proceeds by the Fund, and thus
the purchase of shares of the other MFS Fund, may be delayed for up to seven
days if the Fund determines that such a delay would be in the best interest of
all its shareholders. No more than five exchanges may be made in any one
Exchange Request by telephone. Investment dealers which have satisfied
criteria established by MFD may also communicate a shareholder's Exchange
Request to MFD by facsimile subject to the requirements set forth above.
No CDSC is imposed on exchanges among the MFS Funds, although liability for
the CDSC is carried forward to the exchanged shares. For purposes of
calculating the CDSC upon redemption of shares acquired in an exchange, the
purchase of shares acquired in one or more exchanges is deemed to have
occurred at the time of the original purchase of the exchanged shares.
Additional information with respect to any of the MFS Funds, including a copy
of its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should
obtain and read the prospectus of the other MFS Fund and consider the
differences in objectives and policies before making any exchange.
Shareholders of the other MFS Funds (except shares of MFS Money Market Fund,
MFS Government Money Market Fund and Class A shares of MFS Cash Reserve Fund
acquired through direct purchase and dividends reinvested prior to June 1,
1992) have the right to exchange their shares for shares of the MFS Funds,
subject to the conditions, if any, set forth in their respective prospectuses.
In addition, unitholders of the MFS Fixed Fund have the right to exchange
their units (except units acquired through direct purchases) for shares of the
Fund, subject to the conditions, if any, imposed upon such unitholders by the
MFS Fixed Fund.
Any state income tax advantages for investment in shares of each state-
specific series of MFS Municipal Series Trust may only benefit residents of
such states. Investors should consult with their own tax advisers to be sure
this is an appropriate investment, based on their residency and each state's
income tax laws.
The exchange privilege (or any aspect of it) may be changed or discontinued
and is subject to certain limitations (see "Purchases" in the Prospectus).
TAX-DEFERRED RETIREMENT PLANS -- Shares of the Fund may be purchased by
certain types of tax-deferred retirement plans. MFD makes available through
investment dealers plans and/or custody agreements for the following:
Individual Retirement Accounts (IRAs) (for individuals and their non-
employed spouses who desire to make limited contributions to a tax-deferred
retirement program and, if eligible, to receive a federal income tax
deduction for amounts contributed);
Simplified Employee Pension (SEP-IRA) Plans;
Retirement Plans Qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code");
403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and
Certain other qualified pension and profit-sharing plans.
The plan documents provided by MFD designate a trustee or custodian (unless
another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and capital gain distributions will be reinvested
automatically. For further details with respect to any plan, including fees
charged by the trustee, custodian or MFD, tax consequences and redemption
information, see the specific documents for that plan. Plan documents other
than those provided by MFD may be used to establish any of the plans described
above. Third party administrative services, available for some corporate
plans, may limit or delay the processing of transactions.
Investors should consult with their tax advisers before establishing any of
the tax-deferred retirement plans described above.
Class C shares are not currently available for purchase by any retirement plan
qualified under Code sections 401(a) or 403(b) if the retirement plan and/or
the sponsoring organization subscribe to the MFS FUNDamental 401(k) Plan or
another similar 401(a) or 403(b) recordkeeping program made available by the
Shareholder Servicing Agent.
7. 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 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 of the Fund's portfolio assets. Because the Fund intends to
distribute all of its net investment income and net realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code,
it is not expected that the Fund will be required to pay any federal income or
excise taxes. If the Fund should fail to qualify as a "regulated investment
company" in any year, the Fund would incur regular corporate federal income
tax upon its taxable income and Fund distributions would generally be taxable
as ordinary dividend income to non-exempt shareholders.
Tax-exempt shareholders generally will not pay taxes on Fund distributions.
Shareholders of the Fund that are not tax-exempt entities normally will have
to pay federal income tax and any state or local income taxes on the dividends
and capital gain distributions they receive from the Fund. Dividends from net
investment income and any distributions from net short-term capital gains are
taxable to non tax-exempt shareholders as ordinary income for federal income
tax purposes, whether the distributions are paid in cash or reinvested in
additional shares. A portion of the Fund's ordinary income dividends 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 federal alternative minimum tax or result in certain basis
adjustments.
Distributions of net capital gain (i.e., the excess of net long-term capital
gains over net short-term capital loss), whether paid in cash or in reinvested
additional shares, 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. Such capital gains may be taxable to
shareholders that are individuals, estates, or trusts at maximum rates of 20%,
25%, or 28% depending upon the source of the gains. Any Fund dividend or
capital gain distribution that is declared in October, November, or December
of any calendar year, that is payable to shareholders of record in such a
month, and that is paid the following January will be treated as if received
by the shareholders on December 31 of the year in which the dividend or
capital gain distribution is declared. The Fund will notify non-tax-exempt
shareholders regarding the federal tax status of its distributions after the
end of each calendar year.
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. Non-tax-exempt
shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss; a
long-term capital gain realized by an individual, estate or trust may be
eligible for reduced tax rates if the shares were held for more than 18
months. 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 disposition of shares may also be disallowed
under rules relating to wash sales. Gain may be increased (or loss reduced)
upon a redemption of Class A shares of the Fund within 90 days after their
purchase followed by any purchase (including purchases by exchange or by
reinvestment) without payment of an additional sales charge of Class A shares
of the Fund or of another MFS Fund (or any other shares of an MFS Fund
generally sold subject to a sales charge).
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders.
Any investment in zero coupon bonds and certain securities purchased at a
market discount will cause the Fund to recognize income prior to the receipt
of cash payments with respect to those securities. In order to distribute this
income and avoid a tax on the Fund, the Fund may be required to liquidate
portfolio securities that it might otherwise have continued to hold,
potentially resulting in additional taxable gain or loss to the Fund.
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 that day, and any gain or loss
associated with the positions (as well as gain or loss realized from actual
dispositions during that year of similar positions) will be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held by
the Fund that substantially diminish its risk of loss with respect to other
positions in its portfolio may constitute "straddles," and may be subject to
special tax rules that 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 which could 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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including and interest through an option, Futures Contract or short sale)
with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract,
or Futures Contract entered into by the Fund or a related person with respect
to the same or substantially similar property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of
the underlying property or substantially similar property will be deemed a
constructive sale.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% (or any lower rate
permitted under an applicable treaty) on taxable dividends and other payments
to Non-U.S. Persons that are subject to such withholding. Any amounts
overwithheld may be recovered by such persons by filing a claim for refund
with the U.S. Internal Revenue Service within the time period appropriate to
such claims. Distributions received from the Fund by Non-U.S. Persons also may
be subject to tax under the laws of their jurisdictions.
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.
The Fund is also required in certain circumstances to apply backup withholding
at the rate of 31% on taxable dividends and redemption proceeds paid to any
shareholder (including a Non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments
which have been subject to 30% withholding.
8. DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
NET ASSET VALUE: The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this SAI, such Exchange is open for trading every weekday except for
the following holidays or the days on which they are observed: New Year's Day,
Martin Luther King 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 such Exchange by deducting the amount of the liabilities
attributable to the class from the value of the assets attributable to the
class and dividing the difference by the number of shares of the class
outstanding. Securities, Futures Contracts and options in the 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 Stock
Market, 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 securities) in the Fund's
portfolio are valued on the basis of valuations furnished by a pricing service
which utilizes both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as institutional-
size trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data,
without exclusive reliance upon exchange or over-the-counter prices, since
such valuations are believed to reflect more accurately the fair value of such
securities. Short-term obligations, if any, in the Fund's portfolio are
valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees. Short-term obligations 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 such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees. A share's net asset value is
effective for orders received by the dealer prior to its calculation and
received by MFD prior to the close of that business day.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for
each class of shares for certain periods by determining the average annual
compounded rates of return over those periods that would cause an investment
of $1,000 (made with all distributions reinvested and reflecting the CDSC or
the maximum public offering price) to reach the value of that investment at
the end of the periods. The Fund may also calculate (i) a total rate of
return, which is not reduced by the CDSC (4% maximum for Class B shares and 1%
maximum for Class C shares) and therefore may result in a higher rate of
return, (ii) a total rate of return assuming an initial account value of
$1,000, which will result in a higher rate of return since the value of the
initial account will not be reduced by the sales charge applicable to Class A
shares (5.75% maximum), and/or (iii) total rates of return which represent
aggregate performance over a period or year-by-year performance, and which may
or may not reflect the effect of the maximum or other sales charge or CDSC.
The Fund offers multiple classes of shares which were initially offered for
sale to, and purchased by, the public on different dates (the class "inception
date"). The calculation of total rate of return for a class of shares which
has a later inception date than another class of shares of the Fund is based
both on (i) the performance of the Fund's newer class from its inception date
and (ii) the performance of the Fund's oldest class from its inception date up
to the class inception date of the newer class.
As discussed in the Prospectus, the sales charges, expenses and expense
ratios, and therefore the performance, of the Fund's classes of shares differ.
In calculating total rate of return for a newer class of shares in accordance
with certain formulas required by the SEC, the performance will be adjusted to
take into account the fact that the newer class is subject to a different
sales charge than the oldest class (e.g., if the newer class is Class A
shares, the total rate of return quoted will reflect the deduction of the
initial sales charge applicable to Class A shares; if the newer class is Class
B shares, the total rate of return quoted will reflect the deduction of the
CDSC applicable to Class B shares). However, the performance will not be
adjusted to take into account the fact that the newer class of shares bears
different class specific expenses than the oldest shares (e.g., Rule 12b-1
fees). Therefore, the total rate of return quoted for a newer class of shares
will differ from the return that would be quoted had the newer class of shares
been outstanding for the entire period over which the calculation is based
(i.e., the total rate of return quoted for the newer class will be higher than
the return that would have been quoted had the newer class of shares been
outstanding for the entire period over which the calculation is based if the
class specific expenses for the newer class are higher than the class specific
expenses of the oldest class, and the total rate of return quoted for the
newer class will be lower than the return that would be quoted had the newer
class of shares been outstanding for this entire period if the class specific
expenses for the newer class are lower than the class specific expenses of the
oldest class).
YIELD: Any yield quotation for a class of shares of the Fund is based on the
annualized net investment income per share of that class over a 30-day period.
The yield for each class of shares of the Fund is calculated by dividing the
net investment income per share allocated to that class earned during the
period by the maximum offering price per share of that class of the Fund on
the last day of that period. The resulting figure is then annualized. Net
investment income per share of a class is determined by dividing (i) the
dividends and interest allocated to that class during the period, minus
accrued expenses of that class for the period, by (ii) the average number of
shares of the class entitled to receive dividends during the period multiplied
by the maximum offering price per share on the last day of the period. The
yield calculation assumes no CDSC is paid. Yield quotations for each class of
shares is presented in Appendix A attached hereto under the heading
"Performance Quotations."
CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, is not indicative of the amounts which were or will be
paid to the Fund's shareholders. Amounts paid to shareholders of each class
are reflected in the quoted "current distribution rate" for that class. The
current distribution rate for a class is computed by dividing the total amount
of dividends per share paid by the Fund to shareholders of that class during
the past 12 months by the maximum public offering price of that class at the
end of such period. Under certain circumstances, such as when there has been a
change in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends during
the past 12 months. The current distribution rate differs from the yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income from option writing,
short-term capital gains and return of invested capital, and is calculated
over a different period of time. The Fund's current distribution rate
calculation for Class A shares assumes a maximum sales charge of 2.50%.
Current distribution rate quotations for each class of shares are presented in
Appendix A attached hereto under the heading "Performance Quotations."
GENERAL: 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.
From time to time, the Fund may use charts and graphs to illustrate the past
performance of various indices such as those mentioned above and illustrations
using hypothetical rates of return to illustrate the effects of compounding
and tax-deferral.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against a loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals.
From time to time, the Fund may discuss or quote its current portfolio manager
as well as other investment personnel, including such persons' views on: the
economy; securities markets; portfolio securities and their issuers;
investment philosophies, strategies, techniques and criteria used in the
selection of securities to be purchased or sold for the Fund; the Fund's
portfolio holdings; the investment research and analysis process; the
formulation and evaluation of investment recommendations; and the assessment
and evaluation of credit, interest rate, market and economic risks. and other
similar or related matters.
From time to time the Fund may also discuss or quote the views of its
distributor, its investment adviser and other financial planning, legal, tax,
accounting, insurance, estate planning and other professionals, or from
surveys, regarding individual and family financial planning. Such views may
include information regarding the following: retirement planning; tax
management strategies; estate planning; general investment techniques (e.g.,
asset allocation and disciplined saving and investing); business succession;
ideas and information provided through the MFS Heritage Planningsm program, an
inter-generational financial planning assistance program; issues with respect
to insurance (e.g., disability and life insurance and Medicare supplemental
insurance); issues regarding financial and health care management for elderly
family members; and other similar or related matters.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established as the first
open-end mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to
make full public disclosure of its operations in shareholder reports.
-- 1932 -- One of the first internal research departments is established
to provide in-house analytical capability for an investment
management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to
register under the Securities Act of 1933 ("Truth in Securities Act"
or "Full Disclosure Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to
allow shareholders to take capital gain distributions either in
additional shares or cash.
-- 1976 -- MFS(R) Municipal Bond Fund is among the first municipal bond
funds established.
-- 1979 -- Spectrum becomes the first combination fixed/ variable
annuity with no initial sales charge.
-- 1981 -- MFS(R) World Governments Fund is established as America's
first globally diversified fixed-income mutual fund.
-- 1984 -- MFS(R) Municipal High Income Fund is the first open-end
mutual fund to seek high tax-free income from lower-rated municipal
securities.
-- 1986 -- MFS(R) Managed Sectors Fund becomes the first mutual fund to
target and shift investments among industry sectors for shareholders.
-- 1986 -- MFS(R) Municipal Income Trust is the first closed-end,
high-yield municipal bond fund traded on the New York Stock Exchange.
-- 1987 -- MFS(R) Multimarket Income Trust is the first closed-end,
multimarket high income fund listed on the New York Stock Exchange.
-- 1989 -- MFS(R) Regatta becomes America's first non- qualified
market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS(R) World Total Return Fund is the first global balanced
fund.
-- 1993 -- MFS(R) World Growth Fund is the first global emerging markets
fund to offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes money manager of MFS(R) Union Standard Trust, the
first Trust to invest 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.
9. DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for Class A, Class B and Class C
shares (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
each respective class of shareholders. The provisions of the Distribution Plan
are severable with respect to each class of shares offered by the Fund. The
Distribution Plan is designed to promote sales, thereby increasing the net
assets of the Fund. Such an increase may reduce the Fund's expense ratio to
the extent 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. There is, however, no assurance that the net assets of the Fund
will increase or that the other benefits referred to above will be realized.
The Distribution Plan is described in the Prospectus under the caption
"Distribution Plan," which is incorporated herein by reference. The following
information supplements this Prospectus discussion.
SERVICE FEES: With respect to Class A shares, no service fees will be paid:
(i) to any dealer who is the holder or dealer of record for investors who own
Class A shares having an aggregate net asset value less than $750,000, or such
other amount as may be determined from time to time by MFD (MFD, however, may
waive this minimum amount requirement from time to time); or (ii) to any
insurance company which has entered into an agreement with the Fund and MFD
that permits such insurance company to purchase Class A shares from the Fund
at their net asset value in connection with annuity agreements issued in
connection with the insurance company's separate accounts. Dealers may from
time to time be required to meet certain other criteria in order to receive
service fees.
With respect to the Class B shares, except in the case of the first year
service fee, no service fees will be paid to any securities dealer who is the
holder or dealer of record for investors who own Class B shares having an
aggregate net asset value of less than $750,000 or such other amount as may be
determined by MFD from time to time. MFD, however, may waive this minimum
amount requirement from time to time. Dealers may from time to time be
required to meet certain other criteria in order to receive service fees.
MFD or its affiliates shall be entitled to receive any service fee payable
under the Distribution Plan for which there is no dealer of record or for
which qualification standards have not been met as partial consideration for
personal services and/or account maintenance services performed by MFD or its
affiliates for shareholder accounts.
DISTRIBUTION FEES: The purpose of distribution payments to MFD under the
Distribution Plan is to compensate MFD for its distribution services to the
Fund. MFD pays commissions to dealers as well as expenses of printing
prospectuses and reports used for sales purposes, expenses with respect to the
preparation and printing of sales literature and other distribution related
expenses, including, without limitation, the cost necessary to provide
distribution-related services, or personnel, travel, office expenses and
equipment.
DISTRIBUTION AND SERVICE FEES PAID DURING THE FUND'S LAST FISCAL YEAR. During
the period ended September 30, 1997, the Fund paid the following Distribution
Plan expenses:
AMOUNT OF AMOUNT OF AMOUNT OF
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEE PAID FEES RETAINED FEES RECEIVED
CLASSES OF SHARES BY FUND BY MFD BY DEALERS
- ----------------- ------------ ------------- ------------
Class A Shares .............. $137 $127 $10
Class B Shares .............. 5 5 0
Class C Shares .............. 1 1 0
GENERAL: The Distribution Plan will remain in effect until August 1, 1998,
and will continue in effect thereafter only if such continuance is
specifically approved at least annually by vote of both the Trustees and a
majority of the Trustees who are not "interested persons" or financially
interested parties of such Plan ("Distribution Plan Qualified Trustees"). The
Distribution Plan also requires that the Fund and MFD each shall provide the
Trustees, and the Trustees shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under such Plan. 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 respective class of the Fund's shares (as defined in "Investment
Restrictions"). All agreements relating to the Distribution Plan entered into
between the Fund or MFD and other organizations must be approved by the Board
of Trustees, including a majority of the Distribution Plan Qualified Trustees.
Agreements under 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 respective class 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 respective class of the Fund's shares (as defined in
"Investment Restrictions") or may not be materially amended in any case
without a vote of the Trustees and a majority of the Distribution Plan
Qualified Trustees. The selection and nomination of Distribution Plan
Qualified Trustees shall be committed to the discretion of the non-interested
Trustees then in office. No Trustee who is not an "interested person" has any
financial interest in the Distribution Plan or in any related agreement.
10. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial Interest (without par
value) of one or more separate series and to divide or combine the shares into
a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Fund. The Declaration of Trust
further authorizes the Trustees to classify or reclassify the shares of the
Fund into one or more classes. Pursuant thereto, the Trustees have authorized
the issuance of four classes of shares of the Fund, Class A, Class B and Class
C shares, as well as Class I shares. Each share of a class of the Fund
represents an equal proportionate interest in the assets of the Fund allocable
to that class. Upon liquidation of the Fund, the shareholders of each class of
the Fund are entitled to share pro rata in the Fund's net assets allocable to
such class available for distribution to its shareholders. The Trust reserves
the right to create and issue additional series of shares, in which case the
shares of each series would participate equally in the earnings, dividends and
assets of the particular series (subject to any class expenses) and each
series may be entitled to vote separately to approve investment advisory
agreements or changes in investment restrictions, but shareholders of all
series would vote together in the election of Trustees and the selection of
accountants. The Trust reserves the right to create additional classes of
shares.
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. To the extent any Fund's shareholder owns a controlling
percentage of the Fund's shares, such shareholder may affect the outcome of
such matters to a greater extent than other Fund shareholders (see Description
of Shares, Voting Rights and Liabilities' in the Prospectus). 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 merge or
consolidate with another organization 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 its
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 recommend such merger,
consolidation or sale, the approval by vote of the holders of a majority of
the Trust's or affected series outstanding shares (as defined in "Investment
Restrictions") will be sufficient. The Trust or a series of the Trust may be
terminated upon liquidation and distribution of its assets, if approved by the
vote of the holders of two-thirds of its outstanding shares or by the Trustees
by written notice. If not so terminated, the Fund 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 and other liabilities. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate insurance
existed and the Fund itself was unable to meet its obligations.
The 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.
11. INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Fund's independent auditors, providing audit
services, tax services, and assistance and consultation with respect to the
preparation of filings with the SEC.
The Portfolio of Investments and Statement of Assets and Liabilities at
September 30, 1997, the Statement of Operations for the year ended September
30, 1997, the Statement of Changes in Net Assets for each of the years in the
two-year period ended September 30, 1997, 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 in reliance upon the report of Deloitte & Touche LLP, independent
auditors, given upon their authority as experts in accounting and auditing. A
copy of the Annual Report accompanies this SAI.
<PAGE>
APPENDIX A
PERFORMANCE INFORMATION
The performance results and quotations below should not be considered as
representative of the performance of the Fund in the future since the net
asset value and public offering price of shares of the Fund will vary. See
"Determination of Net Asset Value and Performance" in the SAI.
PERFORMANCE RESULTS -- CLASS I SHARES
VALUE OF VALUE OF VALUE OF
INITIAL $10,000 CAPITAL GAIN REINVESTED
YEAR ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS TOTAL VALUE
---------- --------------- ------------- ---------- -----------
December 31, 1994 $ 9,320 $ 0 $ 97 $ 9,417
December 31, 1995 12,450 266 303 13,019
December 31, 1996 13,420 1,518 738 15,676
December 31, 1997 15,830 3,277 1,279 20,386
Explanatory Notes: The results in the table assume that income dividends and
capital gain distributions were invested in additional shares. No adjustment
has been made for any income taxes, if any, payable by shareholders.
PERFORMANCE QUOTATIONS
All performance quotations are as of September 30, 1997.
<TABLE>
ACTUAL
AVERAGE ANNUAL TOTAL RETURNS 30-DAY YIELD 30-DAY YIELD CURRENT
-------------------------------- (INCLUDING (WITHOUT DISTRIBUTION
1 YEAR 5 YEAR LIFE OF FUND ANY WAIVERS) ANY WAIVERS) RATE
------ ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fund Class A Shares with sales charge 24.69%(1) N/A 17.26%(1) 1.19% 0.97% N/A
Fund Class A Shares without sales charge 32.27%(1) N/A 19.14%(1) N/A N/A N/A
Fund Class B Shares with CDSC 28.51%(2) N/A 18.69%(2) N/A N/A N/A
Fund Class B Shares without CDSC 32.51%(2) N/A 19.20%(2) 0.72% 0.51% N/A
Fund Class C Shares with CDSC 32.51%(3) N/A 19.20%(3) N/A N/A N/A
Fund Class C Shares without CDSC 32.51% N/A 19.20%(3) 0.70% 0.50% N/A
Fund Class I Shares 32.51% N/A 19.20%(5) 1.53% 1.30% 1.13%(4)
- ----------
(1) Class A share performance includes the performance of the Fund's Class I shares for periods prior to the inception of
Class A shares on August 8, 1997. Sales charges, expenses and expense ratios and, therefore, performance for Class I
shares and Class A shares differ. Class A share performance has been adjusted to reflect that Class A shares generally
are subject to an initial sales charge (unless the performance quotation does not give effect to an initial sales
charge) whereas Class I shares generally do not incur a sales charge or CDSC. Class A share performance has not,
however, been adjusted to reflect differences in operating expenses (e.g. 12b-1 fees), which are not assessed on Class I
shares.
(2) Class B share performance includes the performance of the Fund's Class I shares for periods prior to the inception of
Class B shares on August 11, 1997. Sales charges, expenses and expense ratios, and therefore, performance for Class I
shares and Class B shares differ. Class B share performance has been adjusted to reflect that Class B shares generally
are subject to a CDSC (unless the performance quotation does not give effect to the CDSC) whereas Class I shares do not
incur a sales charge or CDSC. Class B share performance has not, however, been adjusted to reflect differences in
operating expenses (e.g., 12b-1 fees), which are not assessed on Class I shares.
(3) Class C share performance includes the performance of the Fund's Class I shares for the periods prior to the inception
of Class C shares on August 11, 1997. Sales charges, expenses and expense ratios, and therefore, performance for Class I
and Class C shares differ. Class C share performance has been adjusted to reflect that Class C shares generally are
subject to CDSC (unless the performance quotation does not give effect to the CDSC) whereas Class I shares do not incur
a sales charge or CDSC. Class C share performance has not, however, been adjusted to reflect differences in operating
expenses (e.g., 12b-1 fees), which are not assessed on Class I shares.
(4) The inception date for Class I shares was January 14, 1994.
(5) The current distribution rate for Class I shares is calculated by annualizing the last dividend.
</TABLE>
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606
MAILING ADDRESS
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street, Boston, MA 02116
[Logo]
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) UNION STANDARD(R) EQUITY FUND
500 Boylston Street
Boston, MA 02116
USE-13-2/97/525 [Graphic Omitted]
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Included in Part A:
For the period ended September 30, 1994 and the
three years ended September 30, 1997:
Financial Highlights
Financial Statements Included in Part B:
At September 30, 1997:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended September 30, 1997:
Statement of Operations*
For the years ended September 30, 1996 and
September 30, 1997:
Statement of Changes in Net Assets*
- ---------------------
* Incorporated by reference to the Fund's Annual Report to Shareholders dated
September 30, 1997 filed with the SEC via EDGAR on December 8, 1997.
(b) Exhibits
1 (a) Amended and Restated Declaration of Trust,
dated January 24, 1996. (6)
(b) Amendment to the Amended and Restated
Declaration of Trust, dated January 29, 1997 -
Abolishment of MFS Union Standard Research
Fund, a series of MFS Union Standard Trust.
(11)
(c) Certification of Amendment to the Declaration
of Trust, dated July 30, 1997 - Redesignation
of Series of Shares; filed herewith.
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. (5)
6 (a) Amended and Restated Master Distribution
Agreement, dated as of December 8, 1993 and
Amended and Restated as of July 30, 1997; filed
herewith.
(b) Dealer Agreement between MFS Fund Distributors,
Inc. ("MFD") and a dealer and the Mutual Fund
Agreement between MFD and a bank or NASD
affiliate as amended on April 11, 1997. (9)
7 Not Applicable.
8 (a) Custodian Agreement between Registrant and
State Street Bank and Trust Company, dated
December 8, 1993. (5)
(b) Amendment to the Custodian Agreement, dated
December 8, 1993. (4)
(c) Amendment to Custodian Contract, dated November
17, 1995. (5)
9 (a) Amended and Restated Shareholder Servicing
Agent Agreement, dated November 17, 1995
between Registrant and MFS and Form of
Amendment to Amended and Restated Shareholder
Servicing Agent Agreement, dated January 1,
1998; filed herewith.
(b) Proxy Services Agreement between MFS Union
Standard Trust and American Capital Strategies
Ltd., dated December 8, 1993. (5)
(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)
(e) Third Amendment, dated February 14, 1997 to
Loan Agreement, dated February 21, 1995 by and
among the Banks named therein, the MFS Funds
named therein and the First National Bank of
Boston, dated February 14, 1997. (10)
(f) Master Administrative Services Agreement, dated
March 1, 1997. (7)
(g) Exchange Privilege Agreement dated July 31,
1997. (12)
10 Consent and Opinion of Counsel, dated
January 27, 1998; filed herewith. 11 Consent
of Deloitte & Touche; filed herewith.
12 Not Applicable.
13 Investment Representation Letter, dated
November 19, 1993. (4)
14 (a) Forms for Individual Retirement Account
Disclosure Statement, as currently in effect.
(8)
(b) Forms 403(b) Custodial Account Agreement, as
currently in effect. (8)
(c) Forms for MFS Prototype Paired Defined
Contribution Plans as Trust Agreement, as
currently in effect. (8)
15 Master Distribution Plan pursuant to 12b-1
under the Investment Company Act of 1940,
effective July 30, 1997; 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 Plan pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940. (13)
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.
(5) Incorporated by reference to Registrant's Post-Effective Amendment No. 4
filed with the SEC via EDGAR on January 26, 1996.
(6) Incorporated by reference to Registrant's Post-Effective Amendment No. 5
filed with the SEC via EDGAR on January 28, 1997.
(7) Incorporated by reference to MFS/Sun Life Series Trust (File Nos. 2-83616
and 811-3732) Post-Effective Amendment No. 19, filed with the SEC via EDGAR
on March 18, 1997.
(8) Incorporated by reference to MFS Series Trust IX (File Nos. 2-50409 and
811-2464) Post-Effective Amendment No. 32 filed with the SEC via EDGAR on
August 28, 1995.
(9) Incorporated by reference to MFS Series Trust III (File Nos. 2-60491 and
811-2794) Post-Effective Amendment No. 24, filed with the SEC via EDGAR on
May 29, 1997.
(10) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and
811-4777) Post-Effective Amendment No. 28 filed with the SEC via EDGAR on
June 26, 1997.
(11) Incorporated by reference to Registrant's Post-Effective Amendment No. 6
filed with the SEC via EDGAR on June 24, 1997.
(12) Incorporated by reference to Massachusetts Investors Growth Stock Fund
(File Nos. 2-14677 and 811-859) Post-Effective Amendment No. 64 filed with
the SEC on October 29, 1997.
(13) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and
811-4777) Post-Effective Amendment No. 25 filed with the SEC on August 27,
1996.
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
<TABLE>
<S> <C> <C>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Class A Shares of Beneficial Interest 76
(without par value) (as of December 31, 1997)
Class B Shares of Beneficial Interest 30
(without par value) (as of December 31, 1997)
Class C Shares of Beneficial Interest 8
(without par value) (as of December 31, 1997)
Class I Shares of Beneficial Interest 23
(without par value) (as of December 31, 1997)
</TABLE>
ITEM 27. INDEMNIFICATION
Section 5.3 of the Registrant's Amended and Restated 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.
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 Amended and Restated 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.
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 thirteen 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, MFS Special
Opportunities Fund, MFS Convertible Securities Fund, MFS Blue Chip Fund, MFS New
Discovery Fund, MFS Science and Technology Fund and MFS Research International
Fund), MFS Series Trust II (which has three series: MFS Emerging Growth Fund,
MFS Large Cap Growth Fund and MFS Intermediate Income 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 Mid Cap Growth
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 International Growth Fund and MFS
International Growth and Income Fund), and MFS Municipal Series Trust (which has
16 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 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 Virginia 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 MFS Funds is 500 Boylston Street, Boston, Massachusetts 02116.
MFS also serves as investment adviser of the following 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"). 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 MFS Closed-End Funds is 500 Boylston Street, Boston,
Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL"), 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 (collectively, the "Accounts"). The principal business address
of MFS/SL is 500 Boylston Street, Boston, Massachusetts 02116. The principal
business address of each of the aforementioned Accounts is One Sun Life
Executive Park, Wellesley Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company organized
under the laws of Bermuda and a subsidiary of MFS, whose principal business
address is Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda, serves as
investment adviser to and distributor for MFS American Funds (which has six
portfolios: MFS American Funds-U.S. Equity Fund, MFS American Funds-U.S.
Emerging Growth Fund, MFS American Funds-U.S. High Yield Bond Fund, MFS American
Funds - U.S. Dollar Reserve Fund, MFS American Funds-Charter Income Fund and MFS
American Funds-U.S. Research 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, MFS
Meridian U.S. Equity Fund, MFS Meridian Research Fund, MFS Meridian U.S. High
Yield Fund and MFS Emerging Markets Debt 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 Institutional Advisors (Australia) Ltd. ("MFSI-Australia"), a private
limited company organized under the Corporations Law of New South Wales,
Australia whose current address is Level 37, Governor Phillip Tower, One Farrer
Place, Sydney, N5W2000, Australia, is involved primarily in investment
management and distribution of Australian superannuation unit trusts and acts as
an investment adviser to institutional accounts.
MFS Holdings Australia Pty Ltd. ("MFS Holdings Australia"), a private
limited company organized pursuant to the Corporations Law of New South Wales,
Australia whose current address is Level 37, Governor Phillip Tower, One Farrer
Place, Sydney, NSW2000 Australia, and whose function is to serve primarily as a
holding company.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI, UST and MFSIT.
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFSIT, MVI and UST.
MFS Institutional Advisors, Inc. ("MFSI"), 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, Donald A. Stewart 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., Patricia A.
Zlotin, John W. Ballen, Thomas J. Cashman, Jr., Joseph W. Dello Russo and Kevin
R. Parke are Executive Vice Presidents, Stephen E. Cavan is a Senior Vice
President, General Counsel and an Assistant Secretary, Robert T. Burns is a
Senior Vice President, Associate General Counsel and an Assistant Secretary of
MFS, and Thomas B. Hastings is a Vice President and Treasurer of MFS.
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, Ellen M. Moynihan
and Mark E. Bradley, Vice Presidents of MFS, are the Assistant Treasurers, James
R. Bordewick, Jr., Senior 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, Ellen M. Moynihan and Mark E.
Bradley are the Assistant Treasurers, and James R. Bordewick, Jr. is the
Assistant Secretary.
<PAGE>
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
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, Ellen M. Moynihan and Mark E.
Bradley are the Assistant Treasurers, 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, and Bernard Scozzafava, Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan, Assistant Vice President of MFS, and Daniel E. McManus, Vice
President of MFS, are Assistant Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers, 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, Ellen M. Moynihan and Mark E. Bradley are the Assistant Treasurers 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,
Ellen M. Moynihan and Mark E. Bradley are the Assistant Treasurers 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, 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, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers 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 and Geoffrey L. Schechter,
Vice Presidents of MFS, are Vice Presidents, Daniel E. McManus, Vice President
of MFS, is an Assistant Vice President, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E.
Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is the
Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS UNION STANDARD TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is
the Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E.
Bradley are the Assistant Treasurers 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, 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, Ellen M. Moynihan and Mark E.
Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is the
Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E.
Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is the
Assistant Secretary.
MFS/SUN LIFE SERIES TRUST
John D. McNeil, Chairman and Director of Sun Life Assurance Company of
Canada, is the Chairman, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.
MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT
John D. McNeil is the Chairman, Stephen E. Cavan is the Secretary, and
James R. Bordewick, Jr. is the Assistant Secretary.
MIL
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott, Jeffrey
L. Shames and Thomas J. Cashman, Jr. are Directors, 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, Executive Vice President and Chief Financial
Officer of MFS, is the Treasurer and Thomas B. Hastings is the Assistant
Treasurer.
MIL-UK
A. Keith Brodkin is the Chairman and a Director, Thomas J. Cashman, Jr.
is President and a Director, Arnold D. Scott and Jeffrey L. Shames are
Directors, Stephen E. Cavan is a Director and the Secretary, Joseph W. Dello
Russo is the Treasurer, Thomas B. Hastings is the Assistant Treasurer and Robert
T. Burns is the Assistant Secretary.
MFSI - AUSTRALIA
Thomas J. Cashman, Jr. is President and a Director, Graham E. Lenzer,
John A. Gee and David Adeseshian are Directors, Stephen E. Cavan is the
Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, and Robert T. Burns is the Assistant Secretary.
MFS HOLDINGS - AUSTRALIA
Jeffrey L. Shames is the President and a Director, A. Keith Brodkin,
Arnold D. Scott, Thomas J. Cashman, Jr., and Graham E. Lenzer are Directors,
Stephen E. Cavan is the Secretary, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant 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, Richard W. S. Baker and William F. Waters are
Directors, Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the Assistant
Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.
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, Jeffrey L. Shames
and William F. Waters are Directors, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James R. Bordewick, Jr. is the Assistant
Secretary and James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers.
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
Thomas B. Hastings is the Assistant Treasurer.
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
and Chief Information Officer of MFS, is Vice Chairman and a Director, Janet A.
Clifford is the President, Joseph W. Dello Russo is the Treasurer, Thomas B.
Hastings is the Assistant Treasurer, Stephen E. Cavan is the Secretary, and
Robert T. Burns is the Assistant Secretary.
MFSI
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 (who is an Executive Vice President of MFS) are Senior Vice
Presidents and Managing Directors, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer and Robert T. Burns is the
Secretary.
RSI
Arnold D. Scott is the Chairman and a Director, Martin E. Beaulieu is the
President, William W. Scott, Jr. and Bruce C. Avery are Directors, Joseph W.
Dello Russo is the Treasurer, Thomas B. Hastings is the Assistant Treasurer,
Stephen E. Cavan is the Secretary and Robert T. Burns is the Assistant
Secretary.
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
Donald A. Stewart President and a Director, Sun Life Assurance
Company of Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada (Mr.
Stewart is also an officer and/or Director of
various subsidiaries and affiliates of Sun Life)
John D. McNeil Chairman, Sun Life Assurance Company of Canada,
Sun Life Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. McNeil is also an officer
and/or Director of various subsidiaries and
affiliates of Sun Life)
Joseph W. Dello Russo Director of Mutual Fund Operations, The Boston
Company, Exchange Place, Boston, Massachusetts
(until August, 1994)
Item 29. Distributors
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal business
address of each of these persons is 500 Boylston Street, Boston, Massachusetts
02116.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office 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.
(b) 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.
(c) 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>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS
1 (c) Certification of Amendment to the Declaration of Trust,
dated July 30, 1997 - Redesignation of Series of Shares.
6 (a) Amended and Restated Master Distribution Agreement, dated as
of December 8, 1993 and Amended and Restated as of July 30,
1997.
9 (a) Amended and Restated Shareholder Servicing Agent Agreement,
dated November 17, 1995 between Registrant and MFS and Form
of Amendment to Amended and Restated Shareholder Servicing
Agent Agreement, dated January 1, 1998.
10 Consent and Opinion of Counsel, dated January 27, 1998.
11 Consent of Deloitte & Touche.
15 Master Distribution Plan pursuant to 12b-1 under the
Investment Company Act of 1940, effective July 30, 1997.
17 Financial Data Schedule on behalf of MFS Union Standard
Equity Fund.
<PAGE>
EXHIBIT NO. 99.1(c)
MFS UNION STANDARD TRUST
CERTIFICATION OF AMENDMENT
TO THE DECLARATION OF TRUST
REDESIGNATION, ESTABLISHMENT
AND DESIGNATION OF SHARES
The undersigned, being a majority of the Trustees of MFS Union Standard
Trust (the "Trust"), a business trust organized under the laws of The
Commonwealth of Massachusetts pursuant to an Amended and Restated Declaration of
Trust dated January 24, 1996 as amended (the "Declaration"), acting pursuant to
Sections 9.3(d) and 6.10 of the Declaration, do hereby divide the shares of MFS
Union Standard Equity Fund, a series of the Trust, to create three additional
classes of shares, within the meaning of Section 6.10, as follows:
1. Redesignate the existing class of shares as "Class I Shares";
2. Establish and designate three additional classes of shares within
the meaning of Section 6.10. The three other classes of shares are
designated "Class A Shares," "Class B Shares" and "Class C
Shares";
3. Class A Shares, Class B Shares, Class C Shares and Class I Shares
shall be entitled to all the rights and preferences accorded to
shares under the Declaration;
4. The purchase price of Class A Shares, Class B Shares, Class C
Shares and Class I Shares, the method of determination of the net
asset value of Class A Shares, Class B Shares, Class C Shares and
Class I Shares, the price, terms and manner of redemption of Class
A Shares, Class B Shares, Class C Shares and Class I Shares, any
conversion feature of Class B Shares, and the relative dividend
rights of holders of Class A Shares, Class B Shares, Class C
Shares and Class I Shares shall be established by the Trustees of
the Trust in accordance with the Declaration and shall be set
forth in the current prospectus and statement of additional
information of the Trust or any series thereof, as amended from
time to time, contained in the Trust's registration statement
under the Securities Act of 1933, as amended;
5. Class A Shares, Class B Shares, Class C Shares and Class I Shares
shall vote together as a single class except that shares of a
class may vote separately on matters affecting only that class and
shares of a class not affected by a matter will not vote on that
matter; and
6. A class of shares of any series of the Trust may be terminated by
the Trustees by written notice to the Shareholder of the class.
<PAGE>
IN WITNESS WHEREOF, a majority of the Trustees of the Trust have executed
this amendment, in one or more counterparts, all constituting a single
instrument, as an instrument under seal in The Commonwealth of Massachusetts, as
of this 30th day of July, 1997.
A. KEITH BRODKIN
- ----------------------
A. Keith Brodkin
76 Farm Road
Sherborn, MA 01770
NELSON J. DARLING, JR.
- ----------------------
Nelson J. Darling, Jr.
74 Beach Bluff Avenue
Swampscott, MA 01907
WILLIAM R. GUTOW
- ----------------------
William R. Gutow
3 Rue Du Lac Road
Dallas, TX 75230
<PAGE>
EXHIBIT NO. 99.6(a)
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
AMENDED AND RESTATED DISTRIBUTION AGREEMENT, dated as of December 8,
1993, and amended and restated this 30th day of July 1997, by and between MFS
UNION STANDARD TRUST, a Massachusetts business trust (the "Trust"), on behalf of
each series from time to time of the Trust (referred to individually as a "Fund"
and collectively as the "Funds") and MFS FUND DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor");
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties hereto agree as follows:
1. The Trust grants to the Distributor the right, as agent of the
Trust, to sell Shares of Beneficial Interest, without par value, of the Funds
(the "Shares") upon the terms herein below set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use its
best efforts to find purchasers for Shares.
The Distributor shall have the right, as agent of the Trust, to
order from the Trust the Shares needed, but not more than the Shares needed
(except for clerical errors and errors of transmission) to fill unconditional
orders for Shares placed with the Distributor by dealers, banks or other
financial institutions or investors as set forth in the current Prospectus and
Statement of Additional Information (collectively, the "Prospectus") relating to
the Shares. The price which shall be paid to the Trust for the Shares so
purchased shall be the net asset value used in determining the public offering
price on which such orders were based. The Distributor shall notify the
Custodian of the Trust, at the end of each business day, or as soon thereafter
as the orders placed with it have been compiled, of the number of Shares and the
prices thereof which have been ordered through the Distributor since the end of
the previous day.
The right granted to the Distributor to place orders for Shares with
the Trust shall be exclusive, except that said exclusive right shall not apply
to Shares issued in the event that an investment company (whether a regulated or
private investment company or a personal holding company) is merged or
consolidated with the Trust (or a Fund) or in the event that the Trust (or a
Fund) acquires by purchase or otherwise, all (or substantially all) the assets
or the outstanding shares of any such company; nor shall it apply to Shares
issued by the Trust (or a Fund) as a stock dividend or a stock split. The
exclusive right to place orders for Shares granted to the Distributor may be
waived by the Distributor by notice to the Trust in writing, either
unconditionally or subject to such conditions and limitations as may be set
forth in the notice to the Trust. The Trust hereby acknowledges that the
Distributor may render distribution and other services to other parties,
including other investment companies. In connection with its duties hereunder,
the Distributor shall also arrange for computation of performance statistics
with respect to the Trust and arrange for publication of current price
information in newspapers and other publications.
2. The Shares may be sold through the Distributor to dealers, banks
and other financial institutions having sales agreements with the Distributor,
upon the following terms and conditions:
The public offering price, i.e., the price per Share at which the
Distributor or dealers, banks or other financial institutions purchasing Shares
through the Distributor may sell Shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to the Shares,
including a sales charge (where applicable) not to exceed the amount permitted
by Article III, Section 26 of the National Association of Securities Dealers,
Inc.'s Rule of Fair Practice, as amended from time to time. The Distributor
shall retain the sales charge (where applicable) less any applicable dealer or
comparable discount. If the resulting public offering price does not come out to
an even cent, the public offering price shall be adjusted to the nearer cent. In
addition, the Trust agrees that the Distributor may impose certain contingent
deferred sales charges (where applicable) in connection with the redemption of
Shares, not to exceed 6% of the net asset value of Shares, and the Distributor
shall retain (or receive from the Trust, as the case may be) all such contingent
deferred sales charges.
The Distributor may place orders for Shares at the net asset value
for such Shares (as established pursuant to paragraph l above) on behalf of such
purchasers and under such circumstances as the Prospectus describes, provided
that such sales comply with Rule 22d-1 under the Investment Company Act of 1940
or any exemptive order granted by the Securities and Exchange Commission. The
Distributor may also place orders for Shares at net asset value on behalf of
persons reinvesting the proceeds of the redemption or resale of Shares or shares
of other investment companies for which the Distributor acts as Distributor or
as otherwise provided in the current Prospectus.
The net asset value of Shares shall be determined by the Trust or by
an agent of the Trust, as of the close of regular trading of the New York Stock
Exchange on each business day on which said Exchange is open, in accordance with
the method set forth in the governing instruments (as hereinafter defined) of
the Trust. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
hour or hours as may from time to time be agreed upon in writing by the Trust
and Distributor. The Trust shall have the right to suspend the sale of Shares
if, because of some extraordinary condition, the New York Stock Exchange shall
be closed, or if conditions obtaining during the hours when the Exchange is open
render such action advisable, or for any other reasons deemed adequate by the
Trust.
3. The Trust agrees that it will, from time to time, take all
necessary action to register the offering and sale of Shares under the
Securities Act of l933, as amended (the "Act"), and applicable state securities
laws.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or shall
be an employee of the Trust. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in the Distributor, as
Directors, officers and employees, or otherwise and that Directors, officers and
employees of the Distributor are or may become similarly interested in the Trust
and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct and
the employment, control and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it
will use its best efforts in all respects duly to conform with the requirements
of all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
Shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person's acquiring any Shares,
which may be based upon the Act or any other statute or common law, on account
of any wrongful act of the Distributor or any of its employees (including any
failure to conform with any requirement of any state or federal law or the Rules
of Fair Practice of the NASD relating to the sale of Shares) or on the ground
that the registration statement or Prospectus as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless any such act, statement or omission
was made in reliance upon information furnished to the Distributor by or on
behalf of the Trust, provided, however, that in no case (i) is the indemnity of
the Distributor in favor of any person indemnified to be deemed to protect the
Trust or any such person against any liability to which the Trust or any such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its or his duties or by reason of its or
his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Trust or upon such person (or after the Trust or such
person shall have received notice of such service on any designated agent), but
failure to notify the Distributor of any such claim shall not relieve it from
any liability which it may have to the Trust or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if the Distributor elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any such suit and retain such
counsel, the Trust or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Distributor does
not elect to assume the defense of any such suit, it shall reimburse the Trust
and such officers and Trustees or controlling person or persons, defendant or
defendants in such suit, for the reasonable fees and expenses of any counsel
retained by them. The Distributor agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any Shares.
Neither the Distributor nor any other person is authorized to give
any information or to make any representation on behalf of the Trust, other than
those contained in the registration statement or Prospectus filed with the
Securities and Exchange Commission under the Act (as said registration statement
or Prospectus may be amended or supplemented from time to time), covering the
Shares or other than those contained in periodic reports to shareholders of the
Trust.
5. The Trust will pay, or cause to be paid -
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required registration statement or Prospectus under the Act covering Shares
and all amendments and supplements thereto and any notices regarding the
registration of shares, and preparing and mailing to shareholders Prospectuses,
statements and confirmations and periodic reports (including the expense of
setting up in type any such registration statement, Prospectus or periodic
report);
(ii) the expenses (including auditing expenses) of
qualification of the Shares for sale, and, if necessary or advisable in
connection therewith, of qualifying the Trust as a dealer or broker, in such
states as shall be selected by the Distributor and the fees payable to each such
state with respect to shares sold and for continuing the qualification therein
until the Distributor notifies the Trust that it does not wish such
qualification continued;
(iii) the cost of preparing temporary or permanent certificates
for Shares;
(iv) all fees and disbursements of the transfer agent of the
Trust;
(v) the cost and expenses of delivering to the Distributor at
its office in Boston, Massachusetts, all Shares sold through it as Distributor
hereunder; and
(vi) all the federal and state issue and/or transfer taxes
payable upon the issue by or (in the case of treasury Shares) transfer from the
Trust of any and all Shares purchased through the Distributor hereunder.
The Distributor agrees that, after the Prospectus and periodic
reports have been set up in type, it will bear the expense (other than the cost
of mailing to shareholders of the Trust of printing and distributing any copies
thereof which are to be used in connection with the offering of Shares to
dealers, banks or other financial institutions or investors. The Distributor
further agrees that it will bear the expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it for
use by dealers, banks or other financial institutions in connection with the
offering of the Shares for sale to the public and expenses of advertising in
connection with such offering. The Distributor will also bear the expense of
sending confirmations and statements to dealers, banks and other financial
institutions having sales agreements with the Distributor. Nothing in this
paragraph 5 shall be deemed to prohibit or conflict with any payment by the
Trust or any Fund to the Distributor pursuant to any Distribution Plan adopted
as in effect pursuant to Rule 12b-1 under the Investment Company Act of 1940.
6. The Trust hereby authorizes the Distributor to repurchase, upon
the terms and conditions set forth in written instructions given by the Trust to
the Distributor from time to time, as agent of the Trust and for its account,
such Shares as may be offered for sale to the Trust from time to time; provided
the Distributor shall have the right, as stated above in paragraph 2 of this
Agreement, to retain (or to receive from the Trust, as the case may be) a
deferred sales charge not to exceed 6% of the net asset value of the Shares so
repurchased.
(a) The Distributor shall notify in writing the Custodian of
the Trust, at the end of each business day, or as soon thereafter as the
repurchases have been compiled, of the number of Shares repurchased for the
account of the Trust since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any Officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the
foregoing authorization at any time. Unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by an officer of the Distributor, by telegraph or by written notice from
the Trust. In the event that the authorization of the Distributor is, by the
terms of such notice, suspended for more than twenty-four hours or until further
notice, the authorization given by this paragraph 6 shall not be revived except
by action of a majority of the members of the Board of Trustees of the Trust.
(c) The Distributor shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty days' written
notice thereof.
(d) The Trust agrees to authorize and direct the Custodian to
pay, for the account of the Trust, the purchase price of any Shares so
repurchased against delivery of the certificates, if any, in proper form for
transfer to the Trust or for cancellation by the Trust.
(e) The Distributor shall receive no commission in respect of
any repurchase of Shares under the foregoing authorization and appointment as
agent, except in connection with contingent deferred sales charge as provided in
the current Prospectus relating to the Shares.
(f) The Trust agrees to reimburse the Distributor, from time to
time upon demand, for any reasonable expenses incurred in connection with the
repurchase of Shares pursuant to this paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts, any state or federal
tax laws, it shall notify the Distributor of the form of amendment which it
deems necessary or advisable and the reasons therefore. If the Distributor
declines to assent to such amendment, the Trust may terminate this Agreement
forthwith by written notice to the Distributor without payment of any penalty.
If, at any time during the existence of this Agreement, upon request by the
Distributor, the Trust fails (after a reasonable time) to make any changes in
its governing instruments or in its methods of doing business which are
necessary in order to comply with any requirements of federal or state laws or
regulations, laws or regulations of the Securities and Exchange Commission or of
a national securities association of which the Distributor is or may be a
member, relating to the sale of Shares, the Distributor may terminate this
Agreement forthwith by written notice to the Trust without payment of any
penalty.
8. The Distributor agrees that it will not take any long or short
positions in the Shares except as permitted by paragraphs l and 6 hereof.
Whenever used in this Agreement, the term "governing instruments" shall mean the
Declaration of Trust and the By-laws of the Trust, as from time to time amended.
9. This Agreement shall become effective on August 1, 1997 and shall
continue in force until August 1, 1998 on which date it will terminate unless
its continuance after August 1, 1998, is specifically approved at least annually
(i) by the vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Trust or of the Distributor at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of that Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of l940 and the Rules and
Regulations thereunder.
This Agreement may be terminated as to any Fund at any time by either
party without payment of any penalty on not more than sixty days' or less than
thirty days' written notice to the other party.
10. This Agreement shall automatically terminate in the event of its
assignment.
11. The terms "vote of a majority of the outstanding voting
securities", "interested person" and "assignment" shall have the respective
meanings specified in the Investment Company Act of l940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
12. This Agreement shall be governed by the laws of The Commonwealth
of Massachusetts.
13. A copy of the Declaration of Trust of the Trust is on file with
the Secretary of State of The Commonwealth of Massachusetts. The Distributor
acknowledges that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust. If this instrument is executed by the Trust on behalf of one or
more series of the Trust, the Distributor further acknowledges that the assets
and liabilities of each series of the Trust are separate and distinct and that
the obligations of or arising out of this instrument are binding solely upon the
assets or property of the series on whose behalf the Trust has executed this
instrument. If the Trust has executed this instrument on behalf of more than one
series of the Trust, the Distributor also agrees that the obligations of each
series hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Distributor agrees not to proceed
against any series for the obligations of another series.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above.
MFS UNION STANDARD TRUST
On behalf of MFS Union Standard Equity
Fund
By:
--------------------------------
A. Keith Brodkin as Trustee
and not individually
MFS FUND DISTRIBUTORS, INC.
By:
--------------------------------
William W. Scott, Jr.
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.
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.
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.
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.
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 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
<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
<PAGE>
EXHIBIT NO. 99.9(a)
MFS UNION STANDARD TRUST
500 BOYLSTON STREET O BOSTON O MASSACHUSETTS O 02116
(617) 954-5000
January 1, 1998
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Dear Sir/Madam:
This will confirm our understanding that Exhibit A to the Amended and
Restated Shareholder Servicing Agent Agreement between us, dated November 17,
1995, as amended, is hereby amended, effective immediately, to read in its
entirety as set forth on Attachment 1 hereto.
Please indicate your acceptance of the foregoing by signing below.
Sincerely,
MFS SERIES TRUST V
By: _____________________
W. Thomas London
Treasurer
Accepted and Agreed:
MFS SERVICE CENTER, INC.
By: ______________________
Joseph W. Dello Russo
Treasurer
<PAGE>
ATTACHMENT 1
January 1, 1998
EXHIBIT B TO THE SHAREHOLDER SERVICING AGENT AGREEMENT BETWEEN MFS
SERVICE CENTER, INC. ("MFSC") AND MFS UNION STANDARD TRUST (THE "FUND")
The fees to be paid by the Fund on behalf of its series with respect to
all shares of each series of the Fund to MFSC, for MFSC's services as
shareholder servicing agent, shall be 0.1125% of the average daily net assets of
the Fund.
<PAGE>
EXHIBIT NO. 99.10
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116-3741
(617) 954-5000
January 27, 1998
MFS Union Standard Trust
500 Boylston Street
Boston, MA 02116
Gentlemen:
I am a Senior Vice President and Associate General Counsel of
Massachusetts Financial Services Company, which serves as investment adviser to
MFS Union Standard Trust (the "Trust"), and the Assistant Secretary of the
Trust. I am admitted to practice law in The Commonwealth of Massachusetts. The
Trust was created under a written Declaration of Trust dated September 1, 1993,
as amended and restated January 1, 1996, executed and delivered in Boston,
Massachusetts (the "Declaration of Trust"). The beneficial interest thereunder
is represented by transferable shares without par value. The Trustees have the
powers set forth in the Declaration of Trust, subject to the terms, provisions
and conditions therein provided.
I am of the opinion that the legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
Under Article III, Section 3.4 and Article VI, Section 6.4 of the
Declaration of Trust, the Trustees are empowered, in their discretion, from time
to time to issue shares of the Trust for such amount and type of consideration,
at such time or times and on such terms as the Trustees may deem best. Under
Article VI, Section 6.1, it is provided that the number of shares of beneficial
interest authorized to be issued under the Declaration of Trust is unlimited.
By vote adopted on September 13, 1990, the Trustees of the Trust
determined to sell to the public the authorized but unissued shares of
beneficial interest of the Trust for cash at a price which will net the Trust
(before taxes) not less than the net asset value thereof, as defined in the
Trust's By-Laws, determined next after the sale is made or at some later time
after such sale.
The Trust has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933.
I am of the opinion that all necessary Trust action precedent to the
issue of all the authorized but unissued shares of beneficial interest of the
Trust, including the Shares, has been duly taken, and that all the Shares were
legally and validly issued, and when sold, will be fully paid and
non-assessable, assuming the receipt by the Trust of the cash consideration
therefor in accordance with the terms of the September 13, 1990 vote of the
Trustees, described above, except as described below. I express no opinion as to
compliance with the Securities Act of 1933, the Investment Company Act of 1940,
or applicable state "Blue Sky" or securities laws in connection with the sale of
the Shares.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation, or instrument entered into or executed by the
Trust or the Trustees. The Declaration of Trust provides for indemnification
out of the Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
I consent to your filing this opinion with the Securities and Exchange
Commission.
Very truly yours,
JAMES R. BORDEWICK, JR.
James R. Bordewick, Jr.
<PAGE>
EXHIBIT NO. 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 7 to Registration Statement No. 33-68310 of MFS Union Standard Trust on
behalf of MFS Union Standard Equity Fund of our report dated October 31, 1997
appearing in the annual report to shareholders for the year ended September 30,
1997 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 23, 1998
<PAGE>
EXHIBIT NO. 99.15
MFS FUNDS
MASTER DISTRIBUTION PLAN PURSUANT TO RULE 12B-1 UNDER THE
INVESTMENT COMPANY ACT OF 1940
Effective July 30, 1997
This Distribution Plan (the "Plan") has been adopted by each of the
registered investment companies identified from time to time on Exhibit A hereto
(the "Trust" or "Trusts"), severally and not jointly, pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "1940 Act"), and sets
forth the material aspects of the financing of the distribution of the classes
of shares representing interests in the same portfolio issued by the Trusts.
WITNESSETH:
WHEREAS, each Trust is engaged in business as an open-end management investment
company and is registered under the 1940 Act, some consisting of multiple
investment portfolios or series, each of which has separate investment
objectives and policies and segregated assets (the "Fund" or "Funds"); and
WHEREAS, each Fund intends to distribute its Shares of Beneficial Interest
(without par value) ("Shares") in accordance with Rule 12b-1 under the 1940 Act,
and desires to adopt this Distribution Plan as a plan of distribution pursuant
to such Rule; and
WHEREAS, each Fund presently offers multiple classes of Shares, some Funds
presently offering only certain classes of Shares to investors;
WHEREAS, each Trust has entered into a distribution agreement (the "Distribution
Agreement") in a form approved by the Board of Trustees of each Trust (the
"Board of Trustees") in the manner specified in Rule 12b-1, with MFS Fund
Distributors, Inc., a Delaware corporation, as distributor (the "Distributor"),
whereby the Distributor provides facilities and personnel and renders services
to each Fund in connection with the offering and distribution of Shares; and
WHEREAS, each Trust recognizes and agrees that the Distributor may retain the
services of firms or individuals to act as dealers (the "Dealers") of the Shares
in connection with the offering of Shares; and
WHEREAS, the Distribution Agreement provides that: (a) a sales charge may be
paid by investors who purchase Shares designated "Class A" and that the
Distributor and Dealers will receive such sales charge as partial compensation
for their services in connection with the sale of Class A Shares, and (b) the
Distributor may (but is not required to) impose certain deferred sales charges
in connection with the repurchase of Shares and the Distributor may retain or
receive from a fund, as the case may be, all such deferred sales charges; and
WHEREAS, the Board of Trustees of each Trust, in considering whether each 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 a 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; and
NOW THEREFORE, the Board of Trustees of each Trust hereby adopts this Plan for
each Fund as a plan of distribution in accordance with Rule 12b-1, relating to
the classes of Shares each Fund from time to time offers, on the following terms
and conditions:
1. SERVICES PROVIDED AND EXPENSES BORNE BY DISTRIBUTOR.
1.1. As specified in the Distribution Agreement, the Distributor
shall provide facilities, personnel and a program with respect
to the offering and sale of Shares. Among other things, the
Distributor shall be responsible for any commissions payable
to Dealers (including any ongoing maintenance commissions),
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.
1.2. The Distributor shall bear all distribution-related expenses
to the extent specified in the Distribution Agreement in
providing the services described in Section 1.1, including,
without limitation, the compensation of personnel necessary to
provide such services and all costs of travel, office expenses
(including rent and overhead), equipment, printing, delivery
and mailing costs.
2. DISTRIBUTION FEES AND SERVICE FEES.
2.1 Distribution and Service Fees Common to Each Class of Shares.
2.1.1. Service Fees. As partial consideration for the personal
services and/or account maintenance services performed by each
Dealer in the performance of its obligations under its dealer
agreement with the Distributor, each Fund shall pay each
Dealer a service fee periodically at a rate not to exceed
0.25% per annum of the portion of the average daily net assets
of the Fund that is represented by the Class of Shares that
are owned by investors for whom such Dealer is the holder or
dealer of record. That portion of the Fund's average daily net
assets on which the fees payable under this Section 2.1.1.
hereof are calculated may be subject to certain minimum amount
requirements as may be determined, and additional or different
dealer qualification standards that may be established, from
time to time, by the Distributor. The Distributor shall be
entitled to be paid any fees payable under this Section 2.1.1.
hereof with respect to Shares for which no Dealer of record
exists or qualification standards have not been met as partial
consideration for personal services and/or account maintenance
services provided by the Distributor to those Shares. The
service fee payable pursuant to this Section 2.1.1. may from
time to time be paid by a Fund to the Distributor and the
Distributor will then pay these fees to Dealers on behalf of
the Fund or retain them in accordance with this paragraph.
2.1.2. Distribution Fees. As partial consideration for the
services performed as specified in the Distribution Agreement
and expenses incurred in the performance of its obligations
under the Distribution Agreement, a Fund shall pay the
Distributor a distribution fee periodically at a rate based on
the average daily net assets of a Fund attributable to the
designated Class of Shares. The amount of the distribution fee
paid by the Fund differs with respect to each Class of Shares,
as does the use by the Distributor of such distribution fees.
2.2. Distribution Fees Relating to Class A Shares
2.2.1. It is understood that the Distributor may impose
certain deferred sales charges in connection with the
repurchase of Class A Shares by a Fund and the Distributor may
retain (or receive from the Fund, as the case may be) all such
deferred sales charges. Each Fund listed on Exhibit B hereto
shall pay the Distributor a distribution fee periodically at a
rate of 0.10% per annum of average daily net assets of the
Fund attributable to Class A Shares. Such payments shall
commence following shareholder approval of the Plan but only
upon notification by the Distributor to the Fund of the
commencement of the Plan (the "Commencement Date").
2.2.2. The aggregate amount of fees and expenses paid pursuant
to Sections 2.1. and 2.2. hereof shall not exceed 0.35% per
annum of the average daily net assets attributable to Class A
Shares of each Fund. No fees shall be paid pursuant to Section
2.2.1. hereof or this Section 2.2.2. to any insurance company
which has entered into an agreement with the Trust on behalf
of a Fund and the Distributor that permits such insurance
company to purchase Class A Shares from a Fund at their net
asset value in connection with annuity agreements issued in
connection with the insurance company's separate accounts.
2.3. Distribution Fees Relating to Class B Shares
2.3.1. It is understood that the Distributor may impose
certain deferred sales charges in connection with the
repurchase of Class B Shares by a Fund and the Distributor may
retain (or receive from the Fund, as the case may be) all such
deferred sales charges. As additional consideration for all
services performed and expenses incurred in the performance of
its obligations under the Distribution Agreement relating to
Class B Shares, a Fund shall pay the Distributor a
distribution fee periodically at a rate not to exceed 0.75%
per annum of the Fund's average daily net assets attributable
to Class B Shares.
2.3.2. Each Fund understands that agreements between the
Distributor and the Dealers may provide for payment of
commissions to Dealers in connection with the sale of Class B
Shares and may provide for a portion (which may be all or
substantially all) of the fees payable by a Fund to the
Distributor under the Distribution Agreement to be paid by the
Distributor to the Dealers in consideration of the Dealer's
services as a dealer of the Class B Shares. Except as
described in Section 2.1., nothing in this Plan shall be
construed as requiring a Fund to make any payment to any
Dealer or to have any obligations to any Dealer in connection
with services as a dealer of Class B Shares. The Distributor
shall agree and undertake that any agreement entered into
between the Distributor and any Dealer shall provide that,
except as provided in Section 2.1., such Dealer shall look
solely to the Distributor for compensation for its services
thereunder and that in no event shall such Dealer seek any
payment from the Fund.
2.4. Distribution Fees Relating to Class C Shares
2.4.1. It is understood that the Distributor may (but is not
required to) impose certain deferred sales charges in
connection with the repurchase of Class C Shares by a Fund and
the Distributor may retain (or receive from the Fund, as the
case may be) all such deferred sales charges. As additional
consideration for all services performed and expenses incurred
in the performance of its obligations under the Distribution
Agreement relating to Class C Shares, a Fund shall pay the
Distributor a distribution fee periodically at a rate not to
exceed 0.75% per annum of the Fund's average daily net assets
attributable to Class C Shares.
2.4.2. Each Fund understands that agreements between the
Distributor and the Dealers may provide for payment of
commissions to Dealers in connection with the sales of Class C
Shares and may provide for a portion (which may be all or
substantially all) of the fees payable by a Fund to the
Distributor under the Distribution Agreement to be paid to the
Dealers in consideration of the Dealer's services as a dealer
of the Class C Shares. Except as described in Section 2.1.,
nothing in this Plan shall be construed as requiring a Fund to
make any payment to any Dealer or to have any obligations to
any Dealer in connection with services as a dealer of Class C
Shares. The Distributor shall agree and undertake that any
agreement entered into between the Distributor and any Dealer
shall provide that, except as provided in Section 2.1., such
Dealer shall look solely to the Distributor for compensation
for its services thereunder and that in no event shall such
Dealer seek any payment from the Fund.
3. EXPENSES BORNE BY FUND. Each Fund shall pay all fees and expenses of
any independent auditor, legal counsel, investment adviser,
administrator, transfer agent, custodian, shareholder servicing agent,
registrar or dividend disbursing agent of the Fund; expenses of
distributing and redeeming Shares and servicing shareholder accounts;
expenses of preparing, printing and mailing prospectuses, shareholder
reports, notices, proxy statements and reports to governmental officers
and commissions and to shareholders of a Fund, except that the
Distributor shall be responsible for the distribution-related expenses
as provided in Section 1 hereof.
4. ACTION TAKEN BY THE TRUST. Nothing herein contained shall be deemed to
require a 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 a Fund.
5. EFFECTIVENESS OF PLAN. This Plan shall become effective upon (a)
approval by a vote of at least a "majority of the outstanding voting
securities" of each particular Class of Shares (unless previously so
approved), if adopted after any public offering of the Class of Shares
of the Fund affected by this Plan or the sale of such Shares to persons
who are not affiliated persons of the Fund, affiliated persons of such
persons, promoters of the Fund or affiliated persons of such promoters,
and (b) approval by a vote of the Board of Trustees and a vote of a
majority of the Trustees who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan (the "Qualified
Trustees"), such votes to be cast in person at a meeting called for the
purpose of voting on this Plan.
6. DURATION OF PLAN. This Plan shall continue in effect indefinitely;
provided however, that such continuance is "specifically approved at
least annually" by vote of both a majority of the Trustees of the Trust
and a majority of the Qualified Trustees, such votes to be cast in
person at a meeting called for the purpose of voting on the continuance
of this Plan. If such annual approval is not obtained, this Plan, with
respect to the classes of Shares with respect to which such approval
was not obtained, shall expire 12 months after the effective date of
the last approval.
7. AMENDMENTS OF PLAN. This Plan may be amended at any time by the Board
of Trustees; provided that this Plan may not be amended to increase
materially the amount of permitted expenses hereunder without the
approval of holders of a "majority of the outstanding voting
securities" of the affected Class of Shares and may not be materially
amended in any case without a vote of a majority of both the Trustees
and the Qualified Trustees. This Plan may be terminated at any time by
a vote of a majority of the Qualified Trustees or by a vote of the
holders of a "majority of the outstanding voting securities" of Shares.
8. REVIEW BY BOARD OF TRUSTEES. Each Fund and the Distributor shall
provide the Board of Trustees, and the Board of Trustees shall review,
at least quarterly, a written report of the amounts expended under this
Plan and the purposes for which such expenditures were made.
9. SELECTION AND NOMINATION OF QUALIFIED TRUSTEES. 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.
10. DEFINITIONS; COMPUTATION OF FEES. For the purposes of this Plan, the
terms "interested persons", "majority of the outstanding voting
securities" and "specifically approved at least annually" are used as
defined in the 1940 Act or the rules and regulations adopted
thereunder. All references herein to "Fund" shall be deemed to refer to
a Trust where such Trust does not have multiple portfolios or series.
In addition, for purposes of determining the fees payable to the
Distributor hereunder, (i) the value of a Fund's net assets shall be
computed in the manner specified in each Fund's then-current prospectus
and statement of additional information for computation of the net
asset value of Shares of the Fund and (ii) the net asset value per
Share of a particular class shall reflect any plan adopted under Rule
18f-3 under the 1940 Act.
11. RETENTION OF PLAN RECORDS. Each Trust shall preserve copies of this
Plan, and each agreement related hereto and each report referred to in
Section 8.1 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.
12. APPLICABLE LAW. This Plan shall be construed in accordance with the
laws of The Commonwealth of Massachusetts and the applicable provisions
of the 1940 Act.
13. SEVERABILITY OF PLAN. 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. The provisions of
this Plan are severable with respect to each Class of Shares offered by
a Fund and with respect to each Fund.
14. SCOPE OF TRUST'S OBLIGATION. A copy of the Declaration of Trust of each
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts. It is acknowledged that the obligations of or arising
out of this Plan 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 Plan is adopted by
the Trust on behalf of one or more series of the Trust, it is further
acknowledged 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 Plan are binding solely upon the assets or property of the
series on whose behalf the Trust has adopted this Plan. If the Trust
has adopted this Plan on behalf of more than one series of the Trust,
it is also acknowledged that the obligations of each series hereunder
shall be several and not joint, in accordance with its proportionate
interest hereunder, and no series shall be responsible for the
obligations of another series.
<PAGE>
EXHIBIT A
DATED: JULY 30, 1997
- -------------------------------------------------------------------------------
CLASSES OF SHARES
COVERED BY RULE 12B-1 DATE RULE 12B-1 PLAN
FUND PLAN ADOPTED
- -------------------------------------------------------------------------------
MFS Union Standard Equity Fund A, B, C July 30, 1997
- -------------------------------------------------------------------------------
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<PAGE>
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