[Federal Register Volume 64, Number 175 (Friday, September 10, 1999)]
[Notices]
[Pages 49252-49254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23609]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23989; 812-11384]


Massachusetts Investors Trust, et al.; Notice of Application

September 2, 1999.

AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under section 17(d) of the 
Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the 
Act.

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Summary of Application: Applicants seek to amend an existing order to 
permit additional entities to rely on the existing order, which permits 
certain registered investment companies to pool cash balances in a 
joint account for the purpose of investing in short-term investments.

Applicants: Massachusetts Investors Trust, MFS Series Trust I, MFS 
Series Trust II, MFS Series Trust III, MFS Series Trust IV, MFS Series 
Trust V, MFS Series Trust VI, MFS Series Trust VII, MFS Series Trust 
VIII, MFS Series Trust IX, MFS Series Trust X, MFS Series Trust XI, MFS 
Municipal Series Trust, MFS Growth Opportunities Fund, MFS Government 
Securities Fund, Massachusetts Investors Growth Stock Fund, MFS 
Government Limited Maturity Fund, MFS Institutional Trust, MFS 
Municipal Income Trust, MFS Intermediate Income Trust, MFS Multimarket 
Income Trust, MFS Government Markets Income Trust, MFS Charter Income 
Trust, MFS Special Value Trust, MFS/Sun Life Series Trust, MFS Variable 
Insurance Trust (the ``MFS Trusts''), Money Market Variable Account, 
High Yield Variable Account, Capital Appreciation Variable Account, 
Government Securities Variable Account, World Governments Variable 
Account, Total Return Variable Account, Managed Sectors Variable 
Account (the ``MFS Variable Funds'') (together with the MFS Trusts, the 
``MFS Funds''). MFS Meridian U.S. Government Bond Fund, MFS Meridian 
Global Government Fund, MFS Meridian Charter Income Fund, MFS Meridian 
Limited Maturity Fund, MFS Meridian U.S. Emerging Growth Fund, MFS 
Meridian Global Equity Fund, MFS Meridian Money Market Fund, MFS 
Meridian U.S. Equity Fund, MFS Meridian Research Fund, MFS Meridian 
Global Balanced Fund, MFS Meridian Global Growth Fund, MFS Meridian 
Emerging Markets Debt Fund, MFS Meridian U.S. High Yield Fund, MFS 
Meridian Global Asset Allocation Fund, MFS Meridian Strategic Growth 
Fund, MFS Meridian Research International Fund (the ``Meridian 
Funds''), MFS American Funds, Massachusetts Financial Services Company 
(``MFS''), MFS International Ltd. (``MIL''), Vertex Investment 
Management, Inc. (``Vertex'').

Filing Date: The application was filed on October 29, 1998. Applicants 
have agreed to file an amendment to the application, the substance of 
which is reflected in this notice, during the notice period.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on September 27, 
1999, and should be accompanied by proof of service on applicants, in 
the form of an affidavit, or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons may request 
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549-0609. Applicants: MFS Trust, MFS, and Vertex, 500 Boylston 
Street, Boston, MA 02116; MFS Variable Funds, One Sun Life Executive 
Park, Wellesley Hills, MA 02181; Meridian Funds, Maples and Calder, 
P.O. Box 309, Grand Cayman, Cayman Islands, British West-Indies; MFS 
American Funds, 47, Boulevard Royal, c/o State Street Luxembourg, S.A., 
L-2449 Luxembourg, Grand-Duchy of Luxembourg; MIL, Cedar House, 41 
Cedar Avenue, Hamilton HM12, Bermuda.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Staff Attorney, at 
(202) 942-0634, or Michael W. Mundt, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, 
D.C. 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. Each of the MFS Funds is an open-end or a closed-end management 
investment company registered under the Act. Each of the Meridian Funds 
is an open-end investment company incorporated as an exempt company 
under the laws of the Cayman Islands. Each of the MFS American Funds is 
an investment company established in Luxembourg. The Meridian Funds and 
the MFS American Funds are offered exclusively outside of the United 
States to non-United States residents and are collectively referred to 
as the ``Offshore Funds.''\1\
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    \1\ For purposes of the application, the term ``Offshore Funds'' 
includes other pooled investment vehicles advised by, or in the 
future advised by, MFS (or an entity controlling, controlled by, or 
under common control with MFS) offered exclusively outside of the 
United States to non-United States residents.
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    2. MFS, MIL, and Vertex are each registered as an investment 
adviser under the Investment Advisers Act of 1940. MFS is presently 
investment adviser to all of the MFS Funds, except for certain series 
of MFS Series Trust XI, and investment sub-adviser to all of the 
Offshore Funds. MIL serves as investment adviser to all of the Offshore 
Funds. Vertex serves as an investment adviser to certain series of MFS 
Series Trust XI. MIL and Vertex are each a wholly-owned subsidiary of 
MFS.
    3. Pursuant to a prior order, as amended previously (the ``Prior 
Order''),\2\ the MFS Funds are permitted to pool cash balances and 
reserves in a joint account (the ``Joint Account'') for the purpose of 
investing in certain short-term investments (``Short-Term 
Investments''). The requested order would amend the Prior Order to 
allow the Offshore Funds to participate in the Joint Account. 
Applicants propose to continue to operate the Joint Account in the same 
manner as permitted by the Prior Order.\3\
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    \2\ MFS Capital Development Fund, et al., Investment Company Act 
Release Nos. 19109 (Nov. 19, 1992) (notice) and 19158 (Dec. 16, 
1992) (order), as amended by Massachusetts Investors Trust, et al., 
Investment Company Act Release Nos. 20354 (Jun. 14, 1994) (notice) 
and 20395 (Jul. 12, 1994) (order).
    \3\ All entities that currently intend to rely on the requested 
order are named as applicants. Any entity that relies upon the 
requested order in the future will company with the terms and 
conditions contained in the application.
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    4. Applicants request that any relief granted also apply to (i) all 
existing or future series of the MFS Funds and the Offshore Funds; (ii) 
all existing or future registered management investment companies for 
which MFS (or an entity controlling, controlled by, or under common 
control with MFS) in the future acts as investment adviser or future 
Offshore Funds (``Future Funds,''

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together with the MFS Funds and the Offshore Funds, the ``Funds''); and 
(iii) any existing or future entity controlling, controlled by, or 
under common control with MFS that in the future serves as investment 
adviser to any Future Fund (together with MFS, MIL, and Vertex, the 
``Adviser'').
    5. The Funds will purchase Short-Term Investments through the Joint 
Account that are consistent with their investment objectives and 
policies.\4\ All Short-Term Investments constitute ``eligible 
securities,'' as defined in rule 2a-7 under the Act. The Offshore Funds 
will use the same systems and standards for evaluating and acquiring 
Short-Term Investments as the MFS Funds. Prior to participation by any 
Offshore Fund in the Joint Account, the board of directors of the 
Offshore Fund must make findings similar to those made by the boards of 
trustees/managers of the MFS Funds (together with the Offshore Funds' 
boards of directors, the ``Boards'').
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    \4\ The Funds will enter into ``hold-in-custody'' repurchase 
agreements (i.e., repurchase agreements where the counterparty or 
one of its affiliated persons may have possession of, or control 
over, the collateral subject to the agreement) only where cash is 
received late in the business day and otherwise would be unavailable 
for investment.
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Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such a person, acting as principal, for 
participating in any joint enterprise or arrangement in which that 
investment company is a participant, unless the SEC has issued an order 
authorizing the arrangement. In passing on these applications, the SEC 
considers whether the participation of the registered investment 
company in the proposed joint arrangement is consistent with the 
provisions, policies, and purposes of the Act and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants.
    2. Section 2(a)(3)(C) of the Act defines an ``affiliated person'' 
or another person to include any person directly or indirectly 
controlling, controlled by, or under common control with, the other 
person. Applicants state that the Funds may be considered ``affiliated 
persons'' because they may be deemed to be under the common control of 
the Adviser. Applicants state that the Offshore Funds, by participating 
with the other Funds in the Joint Account, and the Adviser, by 
administering the Joint Account, could be deemed to be ``joint 
participants'' in a transaction within the meaning of section 17(d). In 
addition, applicants state that each Joint Account could be deemed to 
be a ``joint enterprise or other joint arrangement'' within the meaning 
of rule 17d-1.
    3. Applicants submit that the proposed amendment to the Prior Order 
is consistent with the findings required by section 17(d) of the Act 
and rule 17d-1 for granting orders pursuant to rule 17d-1, including 
the finding that any Fund would participate in the Joint Account on a 
basis no different from or less advantageous than that of any other 
Fund. Applicants state that participation by the Offshore Funds in the 
Joint Account will not result in any conflicts of interest between any 
of the Funds or between a Fund and the Adviser. Applicants assert that 
the Offshore Funds will participate in the Joint Account on the same 
terms and conditions as the MFS Funds.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. The Joint Account will not be distinguishable from any other 
accounts maintained by a Fund at its custodian bank, except that monies 
from the Funds will be deposited in the Joint Account on a commingled 
basis. The Joint Account will not have a separate existence and will 
not have indicia of a separate legal entity. The sole function of the 
Joint Account will be to provide a convenient way of aggregating 
individual transactions which would otherwise require daily management 
by each Fund.
    2. Cash in the Joint Account will be invested in one or more of the 
following Short-Term Investments: (i) interest bearing or discounted 
commercial paper with a remaining maturity of 60 days or less; (ii) 
repurchase agreements, with maturities not to exceed 60 days, 
``collateralized fully,'' as that term is defined in rule 2a-7 under 
the Act, by U.S. Government Securities; (iii) U.S. Government 
Securities with remaining maturities of up to 60 days; (iv) tax-exempt 
variable rate demand notes (``VRDNs'') that have demand features 
providing for maturities of up to 30 days or one month; or (v) 
securities other than VRDNs exempt from federal and/or state income tax 
with remaining maturities of up to 60 days.
    3. Any investment made through the Joint Account will satisfy the 
investment criteria of all Funds participating in that investment.
    4. All assets held in the Joint Account will be valued on an 
amortized cost basis to the extent permitted by applicable SEC 
releases, rules, or orders.
    5. Each Fund valuing its net assets in reliance on rule 2a-7 under 
the Act will use the average maturity of the instruments in the Joint 
Account in which such Fund has an interest (determined on a dollar 
weighted basis) for the purpose of computing its average portfolio 
maturity with respect to its portion of the assets held in a Joint 
Account on that day.
    6. In order to assure that there will be no opportunity for any 
Fund to use any part of a balance of the Joint Account credited to 
another Fund, no Fund will be allowed to create a negative balance in 
the Joint Account for any reason. Each Fund's decision to invest in the 
Joint Account will be solely at the Fund's option. No Fund will be 
obligated to invest in the Joint Account or to maintain any minimum 
balance in the Joint Account. In addition, each Fund will retain the 
sole rights of ownership of any of its assets held through the Joint 
Account, including interest payable on such assets.
    7. The Adviser and the custodian of each Fund will maintain records 
documenting, for any given day, each Fund's aggregate investment in the 
Joint Account and each Fund's pro rata share of each investment made 
through the Joint Account. The records maintained for each Fund will be 
maintained in conformity with section 31 of the Act and rules and 
regulations thereunder. Each Offshore Fund will maintain and make 
available to the SEC, upon request, books and records containing 
information related to its participation in the Joint Account.
    8. Not every Fund participating in the Joint Account will 
necessarily have its cash invested in every Short-Term Investment held 
in the Joint Account. However, to the extent a Fund's cash is applied 
to a particular Short-Term Investment made through the Joint Account, 
the Fund will participate in and own a proportionate share of the 
investment, and the income earned or accrued thereon, based upon the 
percentage of the investment purchased with monies contributed by the 
Fund.
    9. The Adviser will administer the investments of the Joint Account 
as part of its duties under its existing or any future investment 
advisory agreements with the Funds and will not collect any additional 
fees for the management of the Joint Account.
    10. Each Board will adopt procedures pursuant to which the Joint 
Account will operate, which will be reasonably designed to provide that 
the requirements of the application will be met. Each Board will make 
and approve such changes as it deems necessary to ensure that such 
procedures are

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followed. In addition, each Board will determine, no less frequently 
than annually, that the Joint Account has been operated in accordance 
with the proposed procedures and will permit a Fund to continue to 
participate therein only if it determines that there is a reasonable 
likelihood that the Fund and its shareholders will benefit from the 
Fund's continued participation.
    11. The administration of the Joint Account will be within the 
fidelity bond coverage required by section 17(g) of the Act and rule 
17g-1 under the Act.
    12. Short-Term Investments held in the Joint Account generally will 
not be sold prior to maturity except if: (i) the Adviser believes the 
investment no longer presents minimal credit risks; (ii) the investment 
no longer satisfies the investment criteria of all participating Funds 
in the investment because of a downgrading or otherwise; or (iii) in 
the case of a repurchase agreement, the counterparty defaults. A Fund 
may, however, sell any Short-Term Investment (or any fractional portion 
thereof) prior to the maturity of the investment if the cost of such 
transaction will be borne solely by the selling Fund and the 
transaction will not adversely affect other Funds participating in the 
Short-Term Investment. In no case would an early termination by less 
than all participating Funds be permitted if it would reduce the 
principal amount or yield received by other Funds participating in a 
particular Short-Term Investment or otherwise adversely affect the 
other participating Funds. Each Fund participating in the Joint Account 
will be deemed to have consented to such sale and partition of the 
investments in the Joint Account.
    13. Short-Term Investments held through a Joint Account with a 
remaining maturity of more than seven days, as calculated pursuant to 
rule 2a-7 under the Act, will be considered illiquid and will be 
subject to the restriction that a Fund may not invest more than 15% or, 
in the case of a money market fund, more than 10% (or, in either case, 
such other percentage as set forth by the SEC from time to time) of its 
net assets in illiquid securities, if the Fund cannot sell the 
instrument, or the Fund's fractional interest in the instrument, 
pursuant to the preceding condition, or if the investment would 
otherwise be considered illiquid if held by a money market fund.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-23609 Filed 9-9-99; 8:45 am]
BILLING CODE 8010-01-M