June 9, 1997


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

Re: Proposed Investment Company Name Rule (File No. S7-11-97)

Dear Mr. Katz:

On behalf of Massachusetts Financial Services Company ("MFS"), we appreciate the opportunity to express our views on proposed Rule 35d-1 (the "Proposed Rule") under the Investment Company Act of 1940 (the "1940 Act").

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 approximately $60 billion on behalf of over two million investors worldwide.

In general, we support the Proposed Rule, subject to the changes set forth in the letter dated June 9, 1997 from the Investment Company Institute (the "Institute") to the Commission (the "Institute's Letter"). In addition, we are very much opposed to the three aspects of the Proposed Rule set forth below. We are concerned that these aspects of the Proposed Rule would cause funds subject to the 80% requirement an unnecessary loss of portfolio management flexibility to the ultimate detriment of shareholders who, after all, have invested in an actively managed fund as described in the fund's prospectus. In addition, these portions of the Proposed Rule might encourage funds to opt for more generic names in order to avoid the Proposed Rule, thus undermining its effectiveness.

1. "Temporary Defensive" Investments. We strongly agree with the views expressed in the Institute's Letter supporting the "temporary defensive" exception to the 80% requirement but recommend additional exceptions to provide funds greater portfolio management flexibility. We agree with the Institute that the most effective means of achieving this is by the retention of the "under normal conditions" standard. We are not aware of any current problems or concerns with this standard and, therefore, strongly recommend that the standard be maintained. We believe that shareholders of an actively managed fund expect their portfolio manager to be able to protect their interests in the event of unforeseen conditions, such as heavy cash flows into the fund, anticipated high levels of redemptions and, for new emerging markets funds, the unavailability of certain securities. In fact, we believe that such portfolio management flexibility is so important to the interests of shareholders that if an appropriate standard such as the "under normal conditions" standard is not retained, then we would no longer support the Proposed Rule and would oppose the proposed 80% requirement.

2. Fundamental Policy Requirement. We strongly agree with the views expressed in the Institute's Letter that no fund should be required to adopt the 80% investment requirement as a fundamental policy. There are occasions when it is in the best interests of shareholders that their fund change its name and/or investment strategy, such as in response to changing market conditions or for other reasons. However, because of the time delays and expenses associated with obtaining shareholder approval, any such changes would be impractical under the Proposed Rule even though they may be in the best interests of shareholders. Again, these are actively managed portfolios, and shareholders are fully informed whether or not the fund's objective is fundamental. In addition, in the National Securities Markets Improvements Act of 1996 (the "NSMIA") Congress amended Section 35(d) of the 1940 Act to authorize the Commission to address potentially misleading investment company names. However, the NSMIA did not amend Section 13 of the 1940 Act or otherwise provide for the creation of a new category of fundamental investment policies. Congress has clearly left this decision as optional. Therefore, in the absence of such Congressional authority and in the face of Section 13, we do not believe that the Commission has the authority to require that the 80% test be a fundamental investment policy.

3. Net Assets Plus Certain Borrowings. We strongly agree with the recommendation in the Institute's Letter that the 80% requirement be based upon a fund's net assets plus borrowings that are used for investment purposes. Although we agree with the policy of the Proposed Rule - - that borrowings used to increase investment leverage should be subject to the same 80% test as the overall portfolio and a manager should not be allowed to circumvent the test by investing borrowings in securities that do not qualify under the 80% test - - it is overbroad and would create unnecessary interpretive problems. In addition, there are a number of transactions which may be considered senior securities but that are not used by a fund for investing and, therefore, should not be included in the 80% requirement. For example, a fund which purchases a foreign currency on a forward basis creates a "senior security" equal to its obligation under the forward contract but receives no assets to invest until the contract matures. If the fund chose not to cover this obligation, it would, under the Proposed Rule, be required to include the obligation in the calculation of assets for purposes of the 80% test but would have no additional assets to invest, making compliance with the test more difficult.

Thank you for this opportunity to comment. If you have any questions with respect to our comments, please telephone Steve Cavan at (617) 954-5810 or Bill Ballou at (617) 954-5819.


Stephen E. Cavan
Senior Vice President and General Counsel

William J. Ballou
Associate Counsel

cc: James R. Bordewick, Jr.
Robert T. Burns
James F. DesMarais
Amy B.R. Lancellotta (Investment Company Institute)
Arnold D. Scott