94-14937. Massachusetts Investors Trust, et al.; Notice of Application  

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    [FR Doc No: 94-14937]
    
    
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    [Federal Register: June 20, 1994]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    [Release No. IC-20354; 812-8848]
    
     
    
    Massachusetts Investors Trust, et al.; Notice of Application
    
    June 14, 1994.
    AGENCY: Securities and Exchange Commission (``SEC'').
    
    ACTION: Notice of Application for an Order under the Investment Company 
    Act of 1940 (``Act'').
    
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    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 Fixed Income Trust, MFS Municipal Series Trust, MFS Growth 
    Opportunities Fund, MFS Government Mortgage 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 Union Standard Trust, MFS Variable 
    Insurance Trust, 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, MFS/Sun Life Series 
    Trust, Sun Growth Variable Annuity Fund, Inc. and MFS Variable 
    Insurance Trust (collectively, the ``Trusts''), and Massachusetts 
    Financial Services Company (``MFS'') on their own behalf and on behalf 
    of (i) all existing and future series of each Trust, (ii) all existing 
    and future investment companies (and all existing and future series 
    thereof) not currently advised by MFS but for which MFS (or an existing 
    or future company controlled by or under common control with MFS) in 
    the future acts as investment adviser thereof (such Trusts, investment 
    companies and series are collectively referred to herein as the 
    ``Funds''), and (iii) any existing or future company controlled by or 
    under common control with MFS that in the future serves as investment 
    adviser to any Fund (collectively with MFS referred to as the 
    ``Adviser'').
    
    RELEVANT ACT SECTIONS: Order requested under section 17(d) and rule 
    17d-1.
    
    SUMMARY OF APPLICATION: Applicants seek to amend an existing order that 
    permits certain applicants to operate a joint trading account that 
    invests solely in commercial paper with a maturity of 30 days or less, 
    repurchase agreements with maturities of seven days or less, and 
    securities issued or guaranteed by the U.S. government or its agencies, 
    authorities, or instrumentalities (``U.S. Government Securities'') with 
    a maturity of 30 days or less.\1\ The amended order would permit (a) 
    cash contributed to the joint account also to be invested in (i) tax-
    exempt variable rate demand notes (``VRDNs'') with demand features 
    providing for maturities of up to 30 days or one month and (ii) 
    securities (other than VRDNs) exempt from federal and/or state income 
    tax with remaining maturities of up to 60 days, (b) commercial paper 
    and U.S. Government Securities held in the joint account to have 
    remaining maturities of up to 60 days (as opposed to 30 days as 
    permitted in the Prior Order), and (c) repurchase agreements held in 
    the joint account to have maturities of up to 60 days (as opposed to 
    seven days as permitted by the Prior Order). Applicants also seek to 
    amend the prior order by adding certain additional investment company 
    applicants.
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        \1\MFS Capital Development Fund, Investment Company Act Release 
    Nos. 19109 (Nov. 19, 1992) (notice) and 19158 (Dec. 16, 1992) 
    (order) (the ``Prior Order'').
    
    FILING DATE: The application was filed on February 18, 1994 and amended 
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    on April 15, 1994.
    
    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 July 11, 1994, 
    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 who wish to be 
    notified of a hearing may request such notification by writing to the 
    SEC's Secretary.
    
    ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
    Applicants, 500 Boylston Street, Boston, MA 02116.
    
    FOR FURTHER INFORMATION CONTACT:
    James M. Curtis, Senior Counsel, at (202) 942-0563, or C. David 
    Messman, Branch Chief, at (202) 942-0564 (Office of Investment Company 
    Regulation, Division of Investment Management).
    
    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.
    
    Applicants' Representations
    
        1. Each of the existing Funds is an open-end or a closed-end 
    management investment company registered under the Act. MFS is a 
    wholly-owned subsidiary of Sun Life Assurance Company of Canada (U.S.), 
    which is a wholly-owned subsidiary of Sun Life Assurance Company of 
    Canada. MFS is a registered investment adviser. Each of the existing 
    Funds is advised by MFS.
        2. Each of the existing Funds except MFS Series Trust and MFS 
    Municipal Income Trust (the ``Existing Funds'') is currently authorized 
    to invest through a joint account pursuant to the Prior Order. The 
    Prior Order permits each of the Existing Funds to participate in a 
    joint account (the ``Joint Account'') to pool cash balances and 
    reserves for the purpose of investing in (i) commercial paper with a 
    remaining maturity of 30 days or less, (ii) one or more repurchase 
    agreements with a bank or major brokerage house with a maturity of 
    seven days or less, or (iii) U.S. Government Securities with remaining 
    maturities of 30 days or less.
        3. Applicants propose to continue to operate the Joint Account in 
    the same manner as permitted by the Prior Order, except for the 
    modifications discussed below.
        4. Applicants seek to amend the Prior Order to permit (a) cash 
    invested in the Joint Account also to be invested in (i) VRDNs with 
    demand features providing for maturities of up to 30 days or one month 
    and (ii) securities (other than VRDNs) exempt from federal and/or state 
    income tax with remaining maturities of up to 60 days (collectively, 
    ``Tax-Exempt Securities''), (b) commercial paper and U.S. Government 
    Securities held in the Joint Account to have remaining maturities of up 
    to 60 days, and (c) repurchase agreements held in the Joint Account to 
    have maturities of up to 60 days. The amended order also would add MFS 
    Municipal Series Trust and MFS Municipal Income Trust as named 
    applicants and permit an existing or future investment company (and all 
    existing or future series thereof) not currently advised by MFS to 
    participate in the Joint Account if MFS or an existing or future 
    company controlled by or under common control with MFS becomes an 
    investment adviser to the investment company.
        5. Tax-Exempt Securities include short-term tax-exempt demand 
    obligations that have a variable or floating interest rate and an 
    unconditional right to demand payment of the unpaid principal and 
    accrued interest within 30 days (or one month). The variable or 
    floating rate features of such securities provide for the readjustment 
    of the interest rate to a rate then prevailing for similar instruments 
    so that such securities reasonably can be expected to maintain a market 
    value that approximates the par value of the notes.
        6. While none of the existing Funds are tax-exempt money market 
    funds, if a tax-exempt money market fund contributes cash to the Joint 
    Account, such cash will only be invested in securities that qualify for 
    purchase by a tax-exempt money market fund under rule 2a-7 under the 
    Act, as such rule may be amended from time to time.
        7. Repurchase agreements are entered into with securities dealers 
    and banks which are on the Advisers' approved list for repurchase 
    agreement counterparties (the ``Repo Approved List''). The Repo 
    Approved List was compiled by securities analysts and other employees 
    of the Adviser based on such persons' assessment of whether the 
    counterparty is financially responsible. The Repo Approved List is 
    reviewed by the Board of Trustees or Board of Directors of each Fund 
    (the ``Governing Boards'') at least annually, although a Fund's 
    Governing Board is not required to pre-approve a counterparty.
        8. The Adviser for each Fund will determine whether to invest 
    assets of such Fund in repurchase agreements, Tax-Exempt Securities, 
    U.S. Government Securities or commercial paper (collectively, ``Short-
    Term Investments''). The existence of the Joint Account will not affect 
    the decision of whether to invest in Short-Term Investments except to 
    the extent the Joint Account had available to it a particular Short-
    Term Investment which was not otherwise available to a particular Fund 
    and, on the basis of yield, credit worthiness, and liquidity, offered a 
    competitive investment.
        9. Each Fund will have the ability to purchase commercial paper, 
    U.S. Government Securities, and repurchase agreements through the Joint 
    Account consistent with its investment objective and policies. In 
    addition, each Fund will have the ability to purchase Tax-Exempt 
    Securities through the Joint Account consistent with its investment 
    objective and policies. Each Fund may, but is not obligated to, invest 
    not only cash which in the absence of the Joint Account would remain 
    uninvested but also cash which in the absence of the Joint Account 
    would be individually invested in Short-Term Investments pursuant to a 
    Fund's investment objective and policies. Transactions in the Joint 
    Account will be recorded and monitored pursuant to the procedures set 
    forth in the Prior Order.
    
    Applicants' Legal Analysis
    
        1. Section 17(d) and rule 17d-1(a), taken together, prohibit an 
    affiliated person of a registered investment company, or an affiliated 
    person of such a person, from participating in any joint enterprise or 
    arrangement in which such investment company is a participant, without 
    an SEC order. Rule 17d-1(b) provides that in passing upon applications 
    under section 17(d) and rule 17d-1, the SEC will consider whether each 
    party's participation in the proposed joint arrangement is consistent 
    with the provisions, policies, and purposes of the Act, and the extent 
    to which such participation is on a basis different from or less 
    advantageous than that of other participants.
        2. Each Fund, by participating in the proposed Joint Account as 
    proposed to be modified, and the Advisers, by administering the 
    proposed Joint Account, could be deemed to be ``joint participants'' in 
    a transaction within the meaning of section 17(d), and the proposed 
    Joint Account could be deemed to be a ``joint enterprise or other joint 
    arrangement'' within the meaning of rule 17d-1.
        3. Applicants believe that the proposed method of operating the 
    Joint Account will not result in any conflicts of interest between any 
    of the Funds or between a Fund and its Adviser. Although the Adviser 
    will gain some benefit through administrative convenience and a 
    possible reduction in clerical costs, the primary beneficiaries will be 
    the Funds because the Joint Account will be a more efficient way of 
    administering these investment transactions. Applicants believe that 
    the operation of the Joint Account will be free of any inherent bias 
    favoring one Fund over another.
        4. Applicants further believe that future participation in the 
    Joint Account by one or more Funds which do not presently exist or are 
    not presently advised by an Adviser would be desirable without the 
    necessity of applying for an amendment to the requested order. 
    Applicants represent that additional Funds will be permitted to 
    participate in the Joint Account only on the same terms and conditions 
    as the existing Funds have set forth herein.
        5. The Existing Funds have received the Prior Order from the SEC 
    permitting the operation of the existing Joint Account with respect to 
    repurchase agreements with a maximum maturity of seven days and 
    commercial paper and U.S. Government Securities with maximum remaining 
    maturities of 30 days. 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 thereunder 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' Conditions
    
        The Joint Account will operate subject to the following conditions:
        1. Each Fund will transfer into the Joint Account the cash it 
    wishes to invest through the Joint Account after the calculation of its 
    daily cash available for investment and will specifically indicate 
    whether the cash is to be used to purchase commercial paper, Tax-Exempt 
    Securities, repurchase agreements, or U.S. Government Securities. The 
    Joint Account will not be distinguishable from any other accounts 
    maintained by a Fund with its custodian bank except that monies from a 
    Fund will be deposited on a commingled basis. The Joint Account will 
    not have any separate existence which will 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 management by each Fund.
        2. Cash contributed by a Fund to the Joint Account will be invested 
    in one or more of the following, as directed by the Fund: (1) Interest 
    bearing or discounted commercial paper with a remaining maturity not to 
    exceed 60 days; (2) 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; (3) U.S. 
    Government Securities with remaining maturities of up to 30 days or one 
    month; (4) VRDNs that have demand features providing for maturities of 
    up to 30 days or one month; or (5) securities other than VRDNs exempt 
    from federal and/or state income tax with remaining maturities of up to 
    60 days.
        3. Any investment made by a Fund or Funds through the Joint Account 
    will satisfy the investment criteria of all Funds participating in that 
    investment.
        4. All investments held by a Fund or Funds through the Joint 
    Account will be valued on the basis of amortized cost to the extent 
    permitted by applicable Commission release, rule, or order.
        5. Each Fund valuing its net assets in reliance upon rule 2a-7 
    under the Act will use the average maturity of the instrument(s) in the 
    Joint Account in which such Fund has an interest (determined on a 
    dollar weighted basis) for the purpose of computing the Fund's average 
    portfolio maturity with respect to the portion of its assets held in 
    the Joint Account on that day.
        6. In order to assure that there will be no opportunity for one 
    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. A Fund's decision to invest through 
    the Joint Account will be solely at the Fund's option. No Fund will be 
    obligated to invest through the Joint Account or maintain any minimum 
    balance therein. 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 
    (in conformity with section 31 of the Act and the rules and regulations 
    thereunder) documenting, for any given day, each Fund's aggregate 
    investment in the Joint Account and each Fund's pro rata share of each 
    Short-Term Investment made through 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 such 
    investment, and the income earned or accrued thereon, based upon the 
    percentage of such investment purchased with monies contributed by the 
    Fund.
        9. The Adviser will administer the investments of the Joint Account 
    as part of its duty under its existing or any future investment 
    advisory contracts with each Fund and will not collect any additional 
    fee for the management of the Joint Account. (The Adviser will collect 
    fees in accordance with each Fund's respective investment advisory 
    agreement.)
        10. The Governing Boards of the Funds 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 of the Governing Boards will make and approve such 
    changes as it deems necessary to ensure that such procedures are 
    followed. In addition, the Governing Boards will determine, no less 
    frequently than annually, that the Joint Account has been operated in 
    accordance with such procedures.
        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 thereunder.
        12. Short-Term Investments held through the Joint Account generally 
    will not be sold prior to maturity except: (i) If the Adviser believes 
    the security no longer presents minimal credit risk; (ii) in the case 
    of commercial paper of Tax-Exempt Securities, if as a result of a 
    credit downgrading or otherwise, the security no longer satisfies the 
    investment criteria of all Funds participating in that investment; or 
    (iii) in the case of a repurchase agreement, if the counterparty 
    defaults. A Fund may, however, sell its fractional portion of a Short-
    Term Investment prior to the maturity of the investment if the cost of 
    such transaction will be borne solely by the selling Fund and the 
    transaction would not adversely affect the 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 Short-Term 
    Investment will be deemed to have consented to such sale and partition 
    of the Short-Term Investment.
        13. Any Short-Term Investment held through the Joint Account with a 
    remaining maturity of more than seven days will be considered illiquid 
    and, for any fund that is an open-end management investment company 
    registered under the Act, subject to the restriction that the Fund may 
    not invest more than 15% (or such other percentage as set forth by the 
    Commission from time to time) of its net assets in illiquid securities, 
    if the Fund cannot sell its fractional interest in the Short-Term 
    Investment pursuant to the requirements described in the preceding 
    condition.
    
        For the SEC, by the Division of Investment Management, pursuant 
    to delegated authority.
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 94-14937 Filed 6-17-94; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
06/20/1994
Department:
Securities and Exchange Commission
Entry Type:
Uncategorized Document
Action:
Notice of Application for an Order under the Investment Company Act of 1940 (``Act'').
Document Number:
94-14937
Dates:
The application was filed on February 18, 1994 and amended
Pages:
0-0 (1 pages)
Docket Numbers:
Federal Register: June 20, 1994, Release No. IC-20354, 812-8848