June 9, 1997


Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Proposed Amendments to Form N-1A (File No. S7-10-97)

Dear Mr. Katz:

On behalf of Massachusetts Financial Services Company ("MFS"), we appreciate the opportunity to express our views on the proposed amendments to Form N-1A (the "Proposal").

MFS and its affiliates manage a broad variety of open-end and closed-end investment companies, variable annuity products, institutional funds, offshore funds and accounts for large institutional clients. The history of the MFS organization dates to 1924 and the founding of America's first mutual fund, Massachusetts Investors Trust. MFS currently manages over $60 billion on behalf of over two million investors worldwide.

In general, we support the Proposal and the Commission's efforts to improve prospectus disclosure. We also endorse the comment letter from the Investment Company Institute (the "ICI") to the Commission on this matter (the "ICI Letter").

We would like to emphasize certain recommendations made by the ICI.

(i) Bar Chart Presentation. The ICI recommends that, for multiple class funds where two classes have existed for more than 10 years or for the same length of time (but less than ten years), funds should have the discretion to determine which class is appropriate for inclusion in the bar chart. Under the Proposal, the class with the greatest net assets as of the end of the most recent calendar year would be included. We believe that shareholders would be confused if the class used in the bar chart changed from year-to-year due to changes in relative net assets among classes, and that it is preferable to permit funds to choose the appropriate class in order to maintain a consistent presentation.

(ii) Table Presentation. The ICI recommends that the total return information presented in the table be for calendar year periods (like the bar chart), rather than the fiscal year periods. We believe that shareholders would be confused by the use of two different performance periods and that the use of calendar year periods is appropriate. The use of calendar year performance in the bar chart and table would permit shareholders to compare performance among funds based upon the same time periods and would enhance the ability of shareholders to make comparisons among competing investment options. A fund's annual report, which generally contains the information required by Item 5A of Form N-1A, contains performance information for the fund's fiscal year periods. Therefore, shareholders have ready access to this information.

(iii) Financial Highlights Table. The ICI recommends that the requirement to include the financial highlights table be eliminated. We believe that, upon adoption of the Proposal, this table will serve no useful purpose because the bar chart and performance table will include relevant performance information and the annual report contains financial highlights for the fund's most recent five year period. This table unduly lengthens and complicates the prospectus. For one MFS prospectus which offers multiple funds, the financial highlights tables comprise 29 pages.

(iv) Purchase and Redemption Procedures. The ICI recommends that funds be permitted to exclude disclosure in their prospectuses concerning the fund's purchase and redemption procedures and to include this information in a separate "owner's manual" delivered no later than with the trade confirmation. The owner's manual would be incorporated by reference into the prospectus. This information is technical in nature and is not essential information that would assist an investor in deciding whether to invest. An owner's manual would permit fund complexes to issue one uniform guide -- we believe, already a common practice -- that would avoid the current necessity of repeating the same information in multiple prospectuses. This recommendation would not only result in administrative convenience but also would reduce the possibility of error and probably result in a modest savings in printing, typesetting and mailing expenses for funds.

(v) Four to Six Month Undertaking. The ICI recommends that the requirement that new funds file a post-effective amendment with the Commission containing updated financial statements within four to six months of the commencement of investment operations be eliminated. The current requirement is burdensome, particularly for multiple funds offered in a single prospectus which commence investment operations at different times, and provides shareholders with little useful information given that the financial statements cover a very short period of time. If the ICI's recommendation to eliminate the financial highlights table is adopted, the four to six month undertaking requirement would presumably serve no viable purpose.

In addition to the ICI recommendations, we respectfully request that the Commission consider the following comments:

(i) Bar Chart Presentation. The bar chart should permit, but not require, the inclusion of an appropriate broad-based securities market index. While this information is contained in the table, the graphic presentation of this information in the bar chart may provide a clearer presentation of fund performance. Funds should be permitted to make this presentation if they so choose.

(ii) Example of Expenses. The requirement to include the "Example of Expenses" should be eliminated. This example combines the effects of a fund's operating expenses and any applicable contingent deferred sales charge (but not the effect of any applicable initial sales charges), and assumes a $10,000 investment, a 5% per annum return and a constant level of fund operating expenses. The combination of the effects of a Fund's operating expenses and certain sales charges, but not all sales charges, is no doubt confusing to shareholders. In addition, given the assumptions underlying the example, few investors, if any, will actually pay the expenses depicted in the table. Shareholders can more readily, and more accurately, compare the operating expenses of various funds by reviewing their expense ratios. The "Example of Expenses" only serves to confuse investors, lengthen the prospectus and detract from the expense ratio disclosure, and is of little or no relevance to most shareholders.

(iii) Portfolio Manager Disclosure. Item 6 of Form N-1A requires disclosure concerning a fund's portfolio manager, or, if the fund is managed by a committee, a statement to that effect. We believe that this disclosure should only be required if the fund determines that a change in the identity of the fund's portfolio manager would be a material event meriting disclosure.

MFS, along with certain other investment advisers, publicly promotes itself as the investment manager to the funds it sponsors - - it does not generally promote individual managers. While MFS assigns individual managers to oversee these funds, the funds are generally managed using a team approach. Under the current disclosure requirement, the MFS funds are required to disclose their portfolio managers and promptly notify shareholders of any changes. This requirement has the effect of elevating the role of individual managers and devaluing the central role of MFS as investment manager. It creates the false impression that the identity of individual portfolio managers is paramount to the fund's performance, while MFS believes its' collective experience, resources, personnel and reputation are of central importance.

Under MFS' proposal, disclosure concerning portfolio managers would only be required where a change in a fund's portfolio manager would be material. Therefore, only fund groups that promote the identity of their individual portfolio managers in such a way as to make this information material would be required to make this disclosure. This approach is consistent with the general principals of securities disclosure -- that material facts should be disclosed, while immaterial facts need not, and in some cases should not, be disclosed.

If the Commission does not adopt this approach, we request that it consider changing the definition of the term "committee" as used in Item 6. The current definition applies this term only to the situation where all investment decisions are made by the committee and no person is primarily responsible for making recommendations to the committee. This definition is overly restrictive and fails to reflect the typical business and organizational realities in the industry. It is not uncommon for funds to be managed by a large group of individuals who together make industry and sector allocations for the fund, but who have individual responsibility and authority to make investment decisions for the fund with respect to the industries or sectors they follow. Because these individuals have limited investment discretion, this structure does not come within the current definition of committee; however, given the number of individuals involved (e.g., conceivably 30-40 individuals), it is not practical to identify each individual as a portfolio manager, nor is their identity relevant to shareholders. Funds' resources and expenses are unduly burdened by sending supplements to all shareholders each time an individual is reassigned or a new individual joins the team.

We recommend changing this provision to permit funds to determine whether they are managed by committee and to require funds which are managed by committee to disclose this fact and to describe the manner in which the fund is managed. This approach would give funds more flexibility and would give shareholders more useful information.

We appreciate your time and attention to this matter. If you have any questions with respect to our comments, please telephone me at (617) 954-5047.


Stephen E. Cavan
Senior Vice President and General Counsel

James F. DesMarais
Vice President and Senior Counsel

cc: William J. Ballou
James R. Bordewick, Jr.
Robert T. Burns
Arnold D. Scott
Frances Stadler
Craig S. Tyle