SEC Company Response from MFS SERIES TRUST VIII (CIK 0000819673) — Feb 20, 2020
MFS SERIES TRUST VIII (CIK 0000819673)
Date: Feb. 20, 2020 · CIK: 0000819673 · Accession: 0000912938-20-000191
AI Filing Summary & Sentiment
File numbers found in text: 811-05262, 811-22033
Letter
MFS® INVESTMENT MANAGEMENT
111 Huntington Avenue, Boston, Massachusetts 02199
Phone 617-954-5000
February 20, 2020
VIA EDGAR (as Correspondence)
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
RE:
Post-Effective Amendment No. 51 to Registration Statement on Form N-1A for MFS Series Trust VIII ("Trust VIII”) on behalf of MFS Strategic Income Fund (File Nos. 033-37972 and 811-05262) and Amendment No. 15 to the Registration Statement on Form N-1A for MFS Series Trust XIV ("Trust XIV") on behalf of MFS Institutional Money Market Portfolio (File No. 811-22033)
Ladies and Gentlemen:
On behalf of Trust VIII and Trust XIV (the "Trusts"), this letter sets forth our responses to your comments of February 11, 2020, on the above-referenced Post-Effective Amendment to the Registration Statement ("PEA") for Trust VIII and the above-referenced Amendment to the Registration Statement for Trust XIV, each filed with the U.S. Securities and Exchange Commission (the "SEC") on December 26, 2019. The PEA for Trust VIII was filed on behalf of MFS Strategic Income Fund (the "Fund") for the purpose of incorporating changes to the "Principal Investment Strategies" of the Fund and making certain other changes. The Amendment for Trust XIV was filed on behalf of MFS Institutional Money Market Portfolio for the purpose of updating the Portfolio's financial and other information and, in connection therewith, making certain other minor and conforming changes.
General Comments
1. Comment: Please note that comments provided on disclosure for one Fund or in one section of each Fund applies to the other Fund or to other sections of the same Fund that contain the same or substantially similar disclosure, as applicable.
1041463 1
Securities and Exchange Commission
February 20, 2020
Page 2
Response:
We acknowledge that comments received on disclosure for one Fund or in one section of each Fund apply to the other Fund or to the other sections of each Fund that contain the same or substantially similar disclosure, as applicable.
2. Comment: Please note that portions of the filing are incomplete; revise to include all information.
Response:
All portions of the filing that are incomplete will be updated in the effective registration statement of the Fund.
Prospectus Comments
3. Comment: Pursuant to general Instruction 3(d)(ii)(B) of Item 3 of Form N-1A, please move the disclosure in the last sentence of the first paragraph in the introduction to the Expense Summary Table to a footnote below the Expense Summary Table for the Fund.
Response:
We are aware that Instruction 3(d)(ii)(B) of Item 3 of Form N-1A states to disclose in a footnote that expenses have been adjusted to reflect current fee arrangements. We believe that including the required information as a narrative introduction to the Fund fee table, rather than in a footnote, presents the required information in a more prominent, easier-to-understand format. We believe this presentation is consistent with the Form N-1A requirement to organize information to make it easy for investors to understand, the "plain English" principles of Rule 421, and the SEC's effort to reduce footnotes to the fee table. Therefore, we respectfully decline to relocate this disclosure.
4. Comment: Pursuant to general Instruction 2(a)(ii) of Item 3 of Form N-1A, if the Fund has a front-end and back-end sales load imposed, the first caption in the Shareholder Fees table should read "Maximum Sales Charge (Load)" and show the maximum cumulative percentage. Show the percentage amounts and the terms of each sales charge (load) comprising that figure on separate lines below. Please revise the presentation accordingly to show the percentage amounts and loads on a separate line below.
Response:
We respectfully decline to accept this comment as we believe the current disclosure is compliant with Instruction 2(a)(ii) of Item 3. The maximum sales charge or load that would be applicable to Class A shares of the Fund would not, in any circumstances, exceed 4.25%, since the contingent deferred sales charge of 1.00% would only apply in circumstances where an investor had been eligible to acquire the Class A shares absent any front-end sales charge and redeemed within 18 months of purchase. We interpret Instruction 2(a)(ii)'s requirement to mean that separate line items should be included for sales charges that are distinct and operate independently of each other – in other words, where both a front-end and contingent deferred charge are applicable. Here, the contingent deferred charge would only apply if there were no front-end sales charge payable by the investor and the investor redeemed within 18 months of purchase as noted in the footnote marked with a # below the fee table. More specifically, an investor would never pay both a front-end sales charge and a contingent deferred sales charge for Class A shares.
Securities and Exchange Commission
February 20, 2020
Page 3
5. Comment: Both a management fee waiver and a total annual fund operating expense limitation agreement are mentioned in footnote 1 to the Fund's Annual Fund Operating Expenses Table. If applicable, please consider including a statement regarding the circumstances under which the adviser can terminate these agreements.
Response:
As stated in the footnote, both agreements will continue until at least February 28, 2021. The adviser may not terminate these agreements during such period, and the footnote discloses that any change to the agreements must be approved by the fund’s Board of Trustees. Therefore, we respectfully decline to modify this footnote.
6. Comment: Within the Principal Investment Strategies section of the Fund's Prospectus, please identify any maturity or duration parameters applicable to the portfolio managers' investment selection or supplementally explain why maturity and duration are not principal strategic considerations for this Fund.
Response:
The Fund does not have a principal investment strategy of focusing on debt instruments with a particular maturity or duration. As a result, no disclosure concerning maturity or duration parameters will be added to the Fund’s principal investment strategies disclosure.
7. Comment: Within the Principal Investment Strategies section of the Fund's Prospectus, the disclosure states "MFS normally invests the fund’s assets primarily in a broad range of debt instruments issued by U.S. and foreign corporate, government, and other entities, including below investment grade quality debt instruments and debt instruments of issuers located in emerging market countries." Please revise the description of "below investment grade quality debt instruments" to add "commonly known as junk bonds" the first time the term is used to identify this principal category of Fund holdings. Additionally, if these securities may be in default at the time of purchase, please so state.
Securities and Exchange Commission
February 20, 2020
Page 4
Response:
We are not aware of a legal requirement to include "commonly known as junk bonds" in investment strategy disclosure relating to "below investment grade quality debt instruments." Please note that the "Credit Risk" paragraph within the "Principal Risks" section of the prospectus includes a reference to "junk bonds" as follows: "Below investment grade quality debt instruments (commonly referred to as “high yield securities” or “junk bonds”)…" Therefore, we respectfully decline to amend this disclosure.
Separately, we note that investing in securities that are in default at time of purchase is not a principal investment strategy of the Fund. As a result, we will not add disclosure with respect to investing in defaulted securities.
8. Comment: Within the Principal Investment Strategies section of the Fund's Prospectus, with respect to currency denominations, does the Fund intend to invest principally in currency futures or foreign securities that are not traded in US dollars? If so, please disclose this explicitly in the Principal Investment Strategy section of the Fund's Summary Prospectus. If not, review Item 4 Foreign Risk and Currency Risk disclosure and revise as appropriate.
Response:
We believe that the principal investment strategy and investment type disclosure conveys that the Fund may invest in securities denominated in foreign currencies and may use derivative instruments to manage currency exposure. In addition, we believe that the principal risk disclosure describes the currency risk associated with such investments. As a result, we do not believe any further change is necessary.
9. Comment: Regarding the use of emerging markets vs. frontier markets in the Fund's Principal Risks section, please disclose the method by which MFS determines whether a country is in a developed market, emerging market, or frontier market. For example, one method could be a country's inclusion in an independent third-party list of emerging market countries (like those maintained by the World Bank or IMS), or by index providers (i.e., FTSE, S&P). In an appropriate place within the registration statement, please disclose any objective criteria or benchmark the Fund uses to distinguish between these categories.
Securities and Exchange Commission
February 20, 2020
Page 5
Response:
We will add disclosure in Appendix J – Investment Strategies and Risks of the Funds Statement of Additional Information ("SAI") as follows:
Emerging market countries include countries determined to have emerging market economies, taking into account a number of factors, including whether a particular country has a low- to middle-income economy according to the International Bank for Reconstruction and Development (the World Bank), the country’s designation by the International Monetary Fund as an emerging market, the country's inclusion in an emerging market or frontier emerging market index, and other factors that demonstrate that the country's financial and capital markets are in the development phase. Emerging market countries include countries located in Latin America, Asia, Africa, the Middle East, and developing countries of Europe, primarily Eastern Europe.
With respect to frontier markets, we do not believe it is necessary to include a methodology for determining frontier markets in the SAI. We note that frontier markets are a sub-set of emerging markets and investing in frontier markets is not a principal investment strategy of the Fund.
10. Comment: The second sentence of the Principal Investment Strategies section of the Fund's Summary Prospectus references "other securitized instruments." If other types of securitized instruments will be a principal investment strategy, please identify them. If only mortgaged-back securities are a principal investment strategy, please delete this reference.
Response:
We will make the following changes to the Principal Investment Strategies sections of the Fund's Prospectus as follows:
MFS (Massachusetts Financial Services Company, the fund's investment adviser) normally invests the fund’s assets primarily in a broad range of debt instruments issued by U.S. and foreign corporate, government, and other entities, including below investment grade quality debt instruments and debt instruments of issuers located in emerging market countries. MFS focuses on investing the fund's assets in corporate bonds, mortgage-backed securities and other securitized instruments (including commercial mortgaged-backed securities, collateralized debt obligations, and/or other asset-backed securities), U.S. Government securities, and debt instruments of issuers located in emerging market countries. MFS allocates the fund’s assets across these categories with a view toward broad diversification across and within these categories.
Securities and Exchange Commission
February 20, 2020
Page 6
11. Comment: The fourth paragraph of the Fund's Principal Investment Strategies section of the Fund's Summary Prospectus states: "MFS normally invests the fund's assets across different industries, sectors, countries, and regions, but MFS may invest a significant percentage of the fund's assets in issuers in a single industry, sector, country, or region." We note that the Fund's most recent N-CSR filing for the fiscal year ended October 31, 2019, indicates that the Fund held 15.9% of its assets in commercial mortgage-backed securities. Also, the portfolio of investments included in the N-CSR indicated that 27.8% of the Fund's assets were invested in asset-backed securities. If the Fund currently has a principal strategy of focusing on a particular industry or sector, please identify the particular industry or sector and disclose the corresponding risks in your Item 9 disclosure.
Response:
The Fund does not have a principal investment strategy of focusing on a particular industry or sector. We believe that our current disclosure in the "Principal Investment Strategies" and "Principal Risks" sections of the Fund's Prospectus appropriately discloses the principal investment strategies and principal risks of the Fund. Industry and sector allocation is a result of the then current investment opportunities identified by a Fund's portfolio manager pursuant to the Fund's principal investment strategies, rather than a principal investment strategy to focus the Fund's investments in any particular industry or sector. In addition, we note that the "Principal Risks" section of the Fund's Prospectus includes general "Foc
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CORRESP
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filename1.htm
MFS® INVESTMENT MANAGEMENT
111 Huntington Avenue, Boston, Massachusetts 02199
Phone 617-954-5000
February 20, 2020
VIA EDGAR (as Correspondence)
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
RE:
Post-Effective Amendment No. 51 to Registration Statement on Form N-1A for MFS Series Trust VIII ("Trust VIII”) on behalf of MFS Strategic Income
Fund (File Nos. 033-37972 and 811-05262) and Amendment No. 15 to the Registration Statement on Form N-1A for MFS Series Trust XIV ("Trust XIV") on behalf of MFS Institutional Money Market Portfolio (File No. 811-22033)
Ladies and Gentlemen:
On behalf of Trust VIII and Trust XIV (the "Trusts"), this letter sets forth our responses to your comments of February 11, 2020, on the
above-referenced Post-Effective Amendment to the Registration Statement ("PEA") for Trust VIII and the above-referenced Amendment to the Registration Statement for Trust XIV, each filed with the U.S. Securities and Exchange Commission (the "SEC") on
December 26, 2019. The PEA for Trust VIII was filed on behalf of MFS Strategic Income Fund (the "Fund") for the purpose of incorporating changes to the "Principal Investment Strategies" of the Fund and making certain other changes. The Amendment for
Trust XIV was filed on behalf of MFS Institutional Money Market Portfolio for the purpose of updating the Portfolio's financial and other information and, in connection therewith, making certain other minor and conforming changes.
General Comments
1.
Comment:
Please note that comments provided on disclosure for one Fund or in one section of each Fund applies to the other
Fund or to other sections of the same Fund that contain the same or substantially similar disclosure, as applicable.
1041463 1
Securities and Exchange Commission
February 20, 2020
Page 2
Response:
We acknowledge that comments received on disclosure for one Fund or in one section of each Fund apply to the other Fund or to the other sections of each Fund
that contain the same or substantially similar disclosure, as applicable.
2.
Comment:
Please note that portions of the filing are incomplete; revise to include all information.
Response:
All portions of the filing that are incomplete will be updated in the effective registration statement of the Fund.
Prospectus Comments
3.
Comment:
Pursuant to general Instruction 3(d)(ii)(B) of Item 3 of Form N-1A, please move the disclosure in the last
sentence of the first paragraph in the introduction to the Expense Summary Table to a footnote below the Expense Summary Table for the Fund.
Response:
We are aware that Instruction 3(d)(ii)(B) of Item 3 of Form N-1A states to disclose in a footnote that expenses have been adjusted to reflect current fee
arrangements. We believe that including the required information as a narrative introduction to the Fund fee table, rather than in a footnote, presents the required information in a more prominent, easier-to-understand format. We
believe this presentation is consistent with the Form N-1A requirement to organize information to make it easy for investors to understand, the "plain English" principles of Rule 421, and the SEC's effort to reduce footnotes to the
fee table. Therefore, we respectfully decline to relocate this disclosure.
4.
Comment:
Pursuant to general Instruction 2(a)(ii) of Item 3 of Form N-1A, if the Fund has a front-end and back-end sales
load imposed, the first caption in the Shareholder Fees table should read "Maximum Sales Charge (Load)" and show the maximum cumulative percentage. Show the percentage amounts and the terms of each sales charge (load) comprising that
figure on separate lines below. Please revise the presentation accordingly to show the percentage amounts and loads on a separate line below.
Response:
We respectfully decline to accept this comment as we believe the current disclosure is compliant with Instruction 2(a)(ii) of Item 3. The maximum sales charge
or load that would be applicable to Class A shares of the Fund would not, in any circumstances, exceed 4.25%, since the contingent deferred sales charge of 1.00% would only apply in circumstances where an investor had been eligible to
acquire the Class A shares absent any front-end sales charge and redeemed within 18 months of purchase. We interpret Instruction 2(a)(ii)'s requirement to mean that separate line items should be included for sales charges that are
distinct and operate independently of each other – in other words, where both a front-end and contingent deferred charge are applicable. Here, the contingent deferred charge would only apply if there were no front-end sales charge
payable by the investor and the investor redeemed within 18 months of purchase as noted in the footnote marked with a # below the fee table. More specifically, an investor would never pay both a front-end sales charge and a
contingent deferred sales charge for Class A shares.
1041463
Securities and Exchange Commission
February 20, 2020
Page 3
5.
Comment:
Both a management fee waiver and a total annual fund operating expense limitation agreement are mentioned in
footnote 1 to the Fund's Annual Fund Operating Expenses Table. If applicable, please consider including a statement regarding the circumstances under which the adviser can terminate these agreements.
Response:
As stated in the footnote, both agreements will continue until at least February 28, 2021. The adviser may not terminate these agreements during such period,
and the footnote discloses that any change to the agreements must be approved by the fund’s Board of Trustees. Therefore, we respectfully decline to modify this footnote.
6.
Comment:
Within the Principal Investment Strategies section of the Fund's Prospectus, please identify any maturity or
duration parameters applicable to the portfolio managers' investment selection or supplementally explain why maturity and duration are not principal strategic considerations for this Fund.
Response:
The Fund does not have a principal investment strategy of focusing on debt instruments with a particular maturity or duration. As a result, no disclosure
concerning maturity or duration parameters will be added to the Fund’s principal investment strategies disclosure.
7.
Comment:
Within the Principal Investment Strategies section of the Fund's Prospectus, the disclosure states "MFS
normally invests the fund’s assets primarily in a broad range of debt instruments issued by U.S. and foreign corporate, government, and other entities, including below investment grade quality debt instruments and debt instruments of
issuers located in emerging market countries." Please revise the description of "below investment grade quality debt instruments" to add "commonly known as junk bonds" the first time the term is used to identify this principal category
of Fund holdings. Additionally, if these securities may be in default at the time of purchase, please so state.
1041463
Securities and Exchange Commission
February 20, 2020
Page 4
Response:
We are not aware of a legal requirement to include "commonly known as junk bonds" in investment strategy disclosure relating to "below investment grade quality
debt instruments." Please note that the "Credit Risk" paragraph within the "Principal Risks" section of the prospectus includes a reference to "junk bonds" as follows: "Below investment grade quality debt instruments (commonly
referred to as “high yield securities” or “junk bonds”)…" Therefore, we respectfully decline to amend this disclosure.
Separately, we note that investing in securities that are in default at time of purchase is not a principal
investment strategy of the Fund. As a result, we will not add disclosure with respect to investing in defaulted securities.
8.
Comment:
Within the Principal Investment Strategies section of the Fund's Prospectus, with respect to currency
denominations, does the Fund intend to invest principally in currency futures or foreign securities that are not traded in US dollars? If so, please disclose this explicitly in the Principal Investment Strategy section of the Fund's
Summary Prospectus. If not, review Item 4 Foreign Risk and Currency Risk disclosure and revise as appropriate.
Response:
We believe that the principal investment strategy and investment type disclosure conveys that the Fund may invest in securities denominated in foreign
currencies and may use derivative instruments to manage currency exposure. In addition, we believe that the principal risk disclosure describes the currency risk associated with such investments. As a result, we do not believe any
further change is necessary.
9.
Comment:
Regarding the use of emerging markets vs. frontier markets in the Fund's Principal Risks section, please
disclose the method by which MFS determines whether a country is in a developed market, emerging market, or frontier market. For example, one method could be a country's inclusion in an independent third-party list of emerging market
countries (like those maintained by the World Bank or IMS), or by index providers (i.e., FTSE, S&P). In an appropriate place within the registration statement, please disclose any objective criteria or benchmark the Fund uses to
distinguish between these categories.
1041463
Securities and Exchange Commission
February 20, 2020
Page 5
Response:
We will add disclosure in Appendix J – Investment Strategies and Risks of the Funds Statement of Additional Information ("SAI") as follows:
Emerging market countries include countries determined to have emerging market economies, taking into account
a number of factors, including whether a particular country has a low- to middle-income economy according to the International Bank for Reconstruction and Development (the World Bank), the country’s designation by the International Monetary
Fund as an emerging market, the country's inclusion in an emerging market or frontier emerging market index, and other factors that demonstrate that the country's financial and capital markets are in the development phase. Emerging market
countries include countries located in Latin America, Asia, Africa, the Middle East, and developing countries of Europe, primarily Eastern Europe.
With respect to frontier markets, we do not believe it is necessary to include a methodology for determining
frontier markets in the SAI. We note that frontier markets are a sub-set of emerging markets and investing in frontier markets is not a principal investment strategy of the Fund.
10.
Comment:
The second sentence of the Principal Investment Strategies section of the Fund's Summary Prospectus
references "other securitized instruments." If other types of securitized instruments will be a principal investment strategy, please identify them. If only mortgaged-back securities are a principal investment strategy, please
delete this reference.
Response:
We will make the following changes to the Principal Investment Strategies sections of the Fund's Prospectus as follows:
MFS (Massachusetts Financial Services Company, the fund's investment adviser) normally invests the fund’s assets
primarily in a broad range of debt instruments issued by U.S. and foreign corporate, government, and other entities, including below investment grade quality debt instruments and debt instruments of issuers located in emerging market
countries. MFS focuses on investing the fund's assets in corporate bonds, mortgage-backed securities and other securitized instruments (including commercial
mortgaged-backed securities, collateralized debt obligations, and/or other asset-backed securities), U.S. Government securities, and debt instruments of issuers located in emerging market countries. MFS allocates the fund’s
assets across these categories with a view toward broad diversification across and within these categories.
1041463
Securities and Exchange Commission
February 20, 2020
Page 6
11.
Comment:
The fourth paragraph of the Fund's Principal Investment Strategies section of the Fund's Summary Prospectus
states: "MFS normally invests the fund's assets across different industries, sectors, countries, and regions, but MFS may invest a significant percentage of the fund's assets in issuers in a single industry, sector, country, or
region." We note that the Fund's most recent N-CSR filing for the fiscal year ended October 31, 2019, indicates that the Fund held 15.9% of its assets in commercial mortgage-backed securities. Also, the portfolio of investments
included in the N-CSR indicated that 27.8% of the Fund's assets were invested in asset-backed securities. If the Fund currently has a principal strategy of focusing on a particular industry or sector, please identify the particular
industry or sector and disclose the corresponding risks in your Item 9 disclosure.
Response:
The Fund does not have a principal investment strategy of focusing on a particular industry or sector. We believe that our current disclosure in the
"Principal Investment Strategies" and "Principal Risks" sections of the Fund's Prospectus appropriately discloses the principal investment strategies and principal risks of the Fund. Industry and sector allocation is a result of
the then current investment opportunities identified by a Fund's portfolio manager pursuant to the Fund's principal investment strategies, rather than a principal investment strategy to focus the Fund's investments in any
particular industry or sector. In addition, we note that the "Principal Risks" section of the Fund's Prospectus includes general "Foc