SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER
THAN THE REGISTRANT [ ]
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CHECK THE APPROPRIATE BOX:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
MFS(R) California Insured Municipal Fund
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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1) Amount previously paid:
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4) Date Filed:
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M F S(R)
INVESTMENT MANAGEMENT
MFS California Insured Municipal Fund
500 Boylston Street
Boston, MA 02116
August 21, 2008
Dear Shareholder,
Enclosed with this letter are materials related to the Annual Meeting
of Shareholders of the MFS California Insured Municipal Fund which will be held
on October 9th, 2008.
I want to be certain you know that this year's annual shareholder
meeting includes matters that each shareowner must personally vote upon. That
means if you do not return your proxy, your vote will not be counted on certain
matters being considered at the meeting
Approval of one of the proposals being considered at this year's
meeting requires a vote by 66 2/3% of the Fund's shares -- a higher number
than required for routine proposals. Therefore, it is very important that you
take the time to review the enclosed materials and to promptly return the
proxy/voting form in the enclosed postage-paid envelope or follow the
instructions on your proxy card to vote by telephone or internet.
Please keep in my mind that you will receive additional proxy material
from the Fund and/or phone calls from the proxy solicitor or other agents,
until you return your proxy. Those shareholders who promptly return their
proxy/voting form will NOT receive follow-up materials or calls; shareholders
who do not return their voting form WILL receive additional mailings and/or
phone calls.
We apologize in advance for any inconvenience resulting from these
solicitation efforts. Nonetheless we must seek approval of our shareholders for
certain actions that your Trustees have recommended and we need your vote.
You can help your MFS California Insured Municipal Fund by promptly
returning your vote. Your action will help to keep solicitation expenses to a
minimum. If you have any questions about this matter, please call
1-866-207-3648, M-F 9 am - 10 pm Eastern Time.
Thank you for your continued support and prompt action.
Sincerely,
/s/ Robert J. Manning
Robert J. Manning, President
MFS(R) CALIFORNIA INSURED MUNICIPAL FUND
500 Boylston Street, Boston, Massachusetts 02116
Notice of the 2008 Annual Meeting of Shareholders
To be held on October 9, 2008
The 2008 Annual Meeting of Shareholders of the above referenced trust (the
"Trust" or "Fund") will be held at 500 Boylston Street, Boston, Massachusetts
02116, at 10:00 a.m. on Thursday, October 9, 2008, for the following purposes:
ITEM 1. To elect Trustees to the Board of Trustees of the Trust as outlined
below:
a) three Trustees, William R. Gutow, Michael Hegarty and Robert W. Uek,
to be elected by the holders of common shares and preferred shares of
the Trust, voting together as a single class; and
b) two Trustees, J. Atwood Ives and Laurie J. Thomsen, to be elected by
the holders of preferred shares only, voting as a separate class;
ITEM 2. To approve an Amended and Restated Declaration of Trust.
ITEM 3. To amend or remove certain fundamental investment policies of the
Trust.
ITEM 4. To act upon, if properly presented at the Meeting, a shareholder
proposal that the Board of Trustees take the steps necessary to merge
the Trust into MFS California Municipal Bond Fund, an open end fund, or
otherwise enable shareholders to realize net asset value for their
shares.
ITEM 5. To transact such other business as may properly come before the
Meeting and any adjournment(s) or postponement(s) thereof.
THE TRUSTEES OF THE TRUST RECOMMEND THAT YOU VOTE
IN FAVOR OF ITEMS 1, 2, AND 3 AND AGAINST ITEM 4.
Only the Trust's shareholders of record on August 4, 2008 will be entitled to
receive notice of and to vote at the Trust's Meeting of Shareholders or any
adjournment(s) or postponement(s) thereof.
By order of the Board of Trustees
SUSAN S. NEWTON
Assistant Secretary and Assistant Clerk
August 21, 2008
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED PROXY SO THAT IT IS RECEIVED BY THE DATE OF THE MEETING
OR RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET BY
9:59 A.M., EASTERN TIME, ON THE DATE OF THE MEETING, WHICH WILL HELP AVOID THE
ADDITIONAL EXPENSE OF A SECOND SOLICITATION FOR YOUR TRUST. THE ENCLOSED
ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND IS PROVIDED FOR YOUR CONVENIENCE.
MFS(R) CALIFORNIA INSURED MUNICIPAL FUND
Proxy Statement
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees of the MFS California Insured
Municipal Fund (the "Trust" or "Fund") to be used at the Meeting of
Shareholders to be held at 10:00 a.m. on October 9, 2008 at 500 Boylston
Street, Boston, Massachusetts 02116, for the purposes set forth in the
accompanying Notice. Information regarding the Board of Trustees can be found
in the section of this Proxy Statement entitled "Election of Trustees." If the
enclosed form of proxy is executed and returned, it may nevertheless be revoked
prior to its exercise by a signed writing filed with the proxy tabulation
agent, The Altman Group, Inc., 60 East 42nd Street, Suite 405, New York, New
York, 10165, or delivered at the Meeting. On August 4, 2008, there were
2,780,771 common shares and 978 preferred shares outstanding for the Trust:
Shareholders of record at the close of business on August 4, 2008 will be
entitled to one vote for each share held, and each fractional share will be
entitled to a proportionate fractional vote.
The mailing address of the Trust is 500 Boylston Street, Boston, Massachusetts
02116. Solicitation of proxies is being made by the mailing of this Notice and
Proxy Statement with its enclosures on or about August 21, 2008. In addition to
soliciting proxies by mail, the Trustees of your Trust and employees of
Massachusetts Financial Services Company ("MFS"), the Trust's investment
adviser and administrator, may solicit proxies in person or by telephone. The
expenses of the preparation of proxy statements and related materials,
including printing and delivery costs and vote solicitation, are borne by the
Trust. The Trust has engaged The Altman Group to provide shareholder meeting
services including the distribution of this Proxy Statement and related
materials to shareholders, as well as vote solicitation and tracking. It is
anticipated that the cost of these services will be $8,300 and may increase
substantially in the event that any vote is contested and increased
solicitation efforts are required.
A copy of the Trust's most recent annual report and semi-annual report may be
obtained without charge by contacting Computershare Trust Company, N.A.
("Computershare"), the Trust's transfer and shareholder servicing agent, 250
Royall Street, Canton, Massachusetts, 02021, or by telephoning toll-free (800)
637-2304.
SUMMARY OF ITEMS
ITEM NO. ITEM DESCRIPTION CLASS
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1.a. Election of William R. Gutow, Michael Common and Preferred
Hegarty, and Robert W. Uek as Trustees of Shareholders
the Trust
1.b. Election of J. Atwood Ives and Laurie J. Preferred Shareholders
Thomsen as Trustees of the Trust
2. Approval of an Amended and Restated Common and Preferred
Declaration Shareholders
of Trust
3. Amendment or removal of certain fundamental Common and Preferred
investment policies of the Trust Shareholders
4. Action upon a shareholder proposal Common and Preferred
Shareholders
ITEM 1 -- ELECTION OF TRUSTEES
The Board of Trustees, which oversees the Trust, provides broad supervision
over the affairs of the Trust. Those Trustees who are not "interested persons"
(as defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
of the Trust or of MFS are referred to as "Independent Trustees" throughout
this Proxy Statement. MFS is responsible for the investment management of the
Trust's assets and for providing a variety of other administrative services to
the Trust. The officers of the Trust are responsible for its operations.
The Board has fixed the number of Trustees of the Trust at twelve. Under the
provisions of the Trust's Declaration of Trust, the Trustees are divided into
three classes, each having a term of three years. The Nomination and
Compensation Committee has selected and nominated, and recommended that the
Board nominate for election by holders of common shares and preferred shares,
voting together as a single class, William R. Gutow, Michael Hegarty, and
Robert W. Uek as Trustees of the class whose term will expire at the 2011
Annual Meeting of Shareholders (or special meeting in lieu thereof) to hold
office until his or her successor is elected and qualified, and the Board of
Trustees has nominated such individuals. Each nominee is presently a Trustee of
the Trust and has agreed to serve as a Trustee of the Trust if elected. The
Board of Trustees recommends that you vote in favor of their election.
The Nomination and Compensation Committee has also selected and nominated, and
recommended that the Board nominate, for election by holders of preferred
shares only, voting as a separate class, J. Atwood Ives and Laurie J. Thomsen,
for a term that will expire at the next annual meeting of shareholders (or
special meeting in lieu thereof) to hold office until his or her successor is
elected and qualified, and the Board of Trustees has nominated such
individuals. Each nominee is presently a Trustee of the Trust and has agreed to
serve as a Trustee of the Trust if elected. The Board of Trustees recommends
that you vote in favor of their election.
It is intended that absent contrary instructions, proxies will be voted in
favor of electing Messrs. Ives, Gutow, Hegarty, Uek and Ms. Thomsen. If, before
the Meeting, any nominee refuses or is unable to serve, or if any of the
nominees is unavailable at the time of the Meeting, and such refusal or
inability to serve or unavailability is not anticipated, the Trustees may vote
for other nominees at their discretion, or the Trustees may fix the number of
Trustees at fewer than twelve for a Trust. Under the terms of the Trust's
retirement policy, the Trustees have a mandatory retirement age of 73 years.
The following table presents certain information regarding the current Trustees
of the Trust, including their principal occupations, which, unless specific
dates are shown, are of more than five years duration, although the titles may
not have been the same throughout.
PRINCIPAL OCCUPATIONS
POSITION(s) HELD TERM DURING THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH TRUST TRUSTEE SINCE(1) EXPIRING OTHER DIRECTORSHIPS(2)
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INTERESTED TRUSTEES
Robert J. Manning(3); Trustee June 2007 2010 Massachusetts Financial
(born 10/20/63) Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
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Robert C. Pozen(3) Trustee June 2007 2009 Massachusetts Financial
(born 08/08/46) Services Company, Chairman
(since February 2004); MIT
Sloan School (education),
Senior Lecturer (since 2006);
Secretary of Economic Affairs,
The Commonwealth of
Massachusetts (January 2002 to
December 2002); Fidelity
Investments, Vice Chairman
(June 2000 to December 2001);
Fidelity Management & Research
Company (investment adviser),
President (March 1997 to July
2001); Bell Canada Enterprises
(telecommunications),
Director; Medtronic, Inc.
(medical technology),
Director; Telesat (satellite
communications), Director
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INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair June 2007 2009 Private investor; Eastern
(born 05/01/36) of Trustees Enterprises (diversified
services company), Chairman,
Trustee and Chief Executive
Officer (until November 2000)
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Robert E. Butler(4) Trustee June 2007 2009 Consultant - regulatory and
(born 11/29/41) compliance matters (since July
2002); PricewaterhouseCoopers
LLP (professional services
firm), Partner (until 2002)
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Lawrence H. Cohn, M.D. Trustee June 2007 2010 Brigham and Women's Hospital,
(born 03/11/37) Chief of Cardiac Surgery
(until 2005); Harvard Medical
School, Professor of Cardiac
Surgery; Partners Health Care,
Physician Director of Medical
Devices
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David H. Gunning Trustee June 2007 2009 Retired; Cleveland-Cliffs Inc.
(born 05/30/42) (mining products and service
provider), Vice Chairman/
Director (until May 2007);
Portman Limited (mining),
Director (since 2005);
Encinitos Ventures (private
investment company), Principal
(1997 to April 2001); Lincoln
Electric Holdings, Inc.
(welding equipment
manufacturer), Director
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William R. Gutow Trustee June 2007 2011 Private investor and real
(born 09/27/41) estate consultant; Capitol
Entertainment Management
Company (video franchise),
Vice Chairman; Atlantic Coast
Tan (tanning salons), Vice
Chairman (since 2002)
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Michael Hegarty Trustee June 2007 2011 Retired; AXA Financial
(born 12/21/44) (financial services and
insurance), Vice Chairman and
Chief Operating Officer (until
May 2001); The Equitable Life
Assurance Society (insurance),
President and Chief Operating
Officer (until
May 2001)
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Lawrence T. Perera Trustee June 2007 2010 Hemenway & Barnes (attorneys),
(born 06/23/35) Partner
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J. Dale Sherratt Trustee June 2007 2009 Insight Resources, Inc.
(born 09/23/38) (acquisition planning
specialists), President;
Wellfleet Investments
(investor in health care
companies), Managing General
Partner (since 1993);
Cambridge Nutraceuticals
(professional nutritional
products), Chief Executive
Officer (until
May 2001)
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Laurie J. Thomsen Trustee June 2007 2009 New Profit, Inc. (venture
(born 08/05/57) philanthropy), Partner (since
2006); Private investor; Prism
Venture Partners (venture
capital), Co-founder and
General Partner (until June
2004); The Travelers Companies
(commercial property liability
insurance), Director
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Robert W. Uek Trustee June 2007 2011 Retired (since 1999);
(born 05/18/41) PricewaterhouseCoopers LLP
(professional services firm),
Partner (until 1999);
Consultant to investment
company industry (since 2000);
TT International Funds (mutual
fund complex), Trustee (2000
until 2005); Hillview
Investment Trust II Funds
(mutual fund complex), Trustee
(2000 until 2005)
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(1) Each Trustee has served continuously since appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e.,
"public companies").
(3) "Interested person" of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act), which is the principal federal law governing investment companies like the fund, as a result of
position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
(4) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant retained by
MFS pursuant to its settlement with the SEC concerning market timing and related matters. The terms of that
settlement required that compensation and expenses related to the independent compliance consultant be borne
exclusively by MFS and, therefore, MFS paid Mr. Butler for the services he rendered to the independent
compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29.
Each current Trustee listed above served as a board member of 98 funds within
the MFS Family of Funds (the MFS Funds) as of December 31, 2007. The address of
each Trustee is c/o MFS, 500 Boylston Street, Boston, Massachusetts 02116.
Information about the Trust, including information about its investment adviser
and administrator, independent registered public accounting firm, executive
officers, and the interests of certain persons appears under "Trust
Information" beginning on page 23.
REQUIRED VOTE. Approval of this proposal as to Mr. Ives and Ms. Thomsen will
require the affirmative vote of a plurality of the Trust's outstanding
preferred shares, voting as a separate class at the Meeting in person or by
proxy. Approval of this proposal as to Messrs. Gutow, Hegarty and Uek will
require the affirmative vote of a plurality of the Trust's outstanding
preferred and common shares, voting together as a single class, at the Meeting
in person or by proxy.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF THE TRUST VOTE TO ELECT EACH OF THE NOMINEES AS TRUSTEES OF THE
TRUST.
COMMITTEES
The Trust's Board of Trustees meets regularly throughout the year to discuss
matters and take certain actions relating to the Trust. The Trust's Board has
several standing committees, which are described below.
NUMBER OF
MEETINGS
IN LAST CURRENT
NAME OF COMMITTEE FISCAL YEAR(3) FUNCTIONS MEMBERS(1)
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AUDIT COMMITTEE 3 Oversees the accounting and Butler*(2), Gutow*,
auditing procedures of the Trust Sherratt*, Thomsen*(2)
and, among other things, considers and Uek*(2)
the selection of the independent
accountants for the Trust and the
scope of the audit, and considers
the effect on the independence of
those accountants of any non-audit
services such accountants provide
to the Trust and any audit or non-
audit services such accountants
provide to other MFS Trusts, MFS
and/or certain affiliates. The
Committee is also responsible for
establishing procedures for the
receipt, retention and treatment of
complaints received by the Trust
regarding accounting, internal
accounting controls, or auditing
matters and the confidential,
anonymous submission of concerns
regarding questionable Trust
accounting matters by officers of
the Trust and employees of the
Trust's investment adviser,
administrator, principal
underwriter or any other provider
of accounting-related services to
the Trust.
COMPLIANCE AND GOVERNANCE 3 Oversees the development and Butler*, Cohn*,
COMMITTEE implementation of the Trust's Gunning*, Gutow* and
regulatory and fiduciary compliance Sherratt*
policies, procedures and practices
under the 1940 Act and other
applicable laws as well as
oversight of compliance policies of
the Trust's investment adviser and
certain other service providers as
they relate to Trust activities.
The Trust's Independent Chief
Compliance Officer, assists the
Committee in carrying out its
responsibilities. In addition, the
Committee advises and makes
recommendations to the Board on
matters concerning Trustee
practices and recommendations
concerning the functions and duties
of the committees of the Board.
CONTRACTS REVIEW 2 Requests, reviews and considers the All Independent Trustees
COMMITTEE information deemed reasonably of the Board (Butler,
necessary to evaluate the terms of Cohn, Gunning, Gutow,
the investment advisory and Hegarty, Ives, Perera,
principal underwriting agreements Sherratt, Thomsen and
and the Plan of Distribution under Uek)
Rule 12b-1 that the Trust proposes
to renew or continue, and to make
its recommendations to the full
Board of Trustees on these matters.
NOMINATION AND 0 Recommends qualified candidates to All Independent Trustees
COMPENSATION COMMITTEE the Board in the event that a of the Board (Butler,
position is vacated or created. The Cohn, Gunning, Gutow,
Committee will consider Hegarty, Ives, Perera,
recommendations by shareholders Sherratt, Thomsen and
when a vacancy exists. Shareholders Uek)
wishing to recommend candidates for
Trustee for consideration by the
Committee may do so by writing to
the Trust's Secretary at the
principal executive office of the
Trust. Such recommendations must be
accompanied by biographical and
occupational data on the candidate
(including whether the candidate
would be an "interested person"
of the Trust), a written consent of
the candidate to be named as a
nominee and to serve as Trustee if
elected, record and ownership
information for the recommending
shareholder with respect to the
Trust, and a description of any
arrangements or understandings
regarding recommendation of the
candidate for consideration. The
Committee is also responsible for
making recommendations to the Board
regarding any necessary standards
or qualifications for service on
the Board. The Committee also
reviews and makes recommendations
to the Board regarding compensation
for the non-interested Trustees.
PORTFOLIO TRADING AND 3 Oversees the policies, procedures, Cohn*, Gunning*,
MARKETING REVIEW and practices of the Trust with Hegarty* and Perera*
COMMITTEE respect to brokerage transactions
involving portfolio securities as
those policies, procedures, and
practices are carried out by MFS
and its affiliates. The Committee
also oversees the lending of
portfolio securities and the
administration of the Trust's proxy
voting policies and procedures by
MFS. In addition, the Committee
receives reports from MFS regarding
the policies, procedures, and
practices of MFS and its affiliates
in connection with their marketing
and distribution of shares of the
Trust.
PRICING COMMITTEE 3 Oversees the determination of the Hegarty*, Perera*,
value of the portfolio securities Thomsen* and Uek*
and other assets held by the Trust
and determines or causes to be
determined the fair value of
securities and assets for which
market quotations are not "readily
available" in accordance with the
1940 Act. The Committee delegates
primary responsibility for carrying
out these functions to MFS and MFS'
internal valuation committee
pursuant to pricing policies and
procedures approved by the
Committee and adopted by the full
Board, which include methodologies
to be followed by MFS to determine
the fair values of portfolio
securities and other assets held by
the Trust for which market
quotations are not readily
available. The Committee meets
periodically with the members of
MFS' internal valuation committee
to review and assess the quality of
fair valuation and other pricing
determinations made pursuant to the
Trust's pricing policies and
procedures, and to review and
assess the policies and procedures
themselves. The Committee also
exercises the responsibilities of
the Board under the Amortized Cost
Valuation Procedures approved by
the Board on behalf of each Trust
which holds itself out as a "money
market fund" in accordance with
Rule 2a-7 under the 1940 Act.
SERVICES CONTRACTS 3 Reviews and evaluates the Butler*, Gunning*,
COMMITTEE contractual arrangements of the Sherratt*, Thomsen* and
Trust relating to transfer agency, Uek*
administrative services, custody,
pricing and bookkeeping services
and makes recommendations to the
full Board of Trustees on these
matters.
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(1) Information about each committee member is set forth above on pages 3, 4 and 5. Although Mr. Ives is not a
member of all Committees of the Board, he is invited to and attends many of the Committees' meetings in
his capacity as Chair of the Trustees.
(2) Audit Committee Financial Expert
(3) Number of meetings held during the period beginning June 30, 2007, the effective date of the investment
advisory agreement between the Trust and MFS, through the Trust's fiscal year end, November 30, 2007.
Prior to June 30, 2007, the Trust was overseen by a different board.
* Independent Trustees.
The Trustees generally hold at least eight regular meetings each calendar year.
These regular meetings take place over a two-day period. The performance and
operations of the Trust is reviewed by the Trustees at each meeting and more
in-depth reviews of particular Trusts are conducted by the Trustees throughout
the year. The current Board of the Trust held 4 meetings during the period June
30, 2007 to November 30, 2007. Prior to June 30, 2007, the Trust was overseen
by a different board. Each Trustee attended at least 75% of the Board and
applicable committee meetings for which he/she was eligible.
AUDIT COMMITTEE
The Trust's Audit Committee consists only of Independent Trustees, each of whom
is also independent of the Trust as defined by American Stock Exchange
corporate governance listing standards. The Trust's Audit Committee's report on
the Trust's most recent audited financials is included below under the heading
"Independent Registered Public Accounting Firm". The Trust's Board has adopted
a written charter for the Audit Committee. A copy of the Committee's charter is
available on MFS.com.
NOMINATION AND COMPENSATION COMMITTEE
The Trustees have adopted a written charter for the Nomination and Compensation
Committee. A copy of the Committee's charter is available on MFS.com.
The Trust's Nomination and Compensation Committee consists only of Independent
Trustees, each of whom is also independent of the Trust as defined by American
Stock Exchange corporate governance listing standards.
The Nomination and Compensation Committee requires that Trustee candidates have
a college degree or equivalent business experience, but has not otherwise
established specific, minimum qualifications that must be met by an individual
to be considered by the Committee for nomination as a Trustee. The Nomination
and Compensation Committee may take into account a wide variety of factors in
considering Trustee candidates, including, but not limited to: (i) availability
and commitment of a candidate to attend meetings and perform his or her
responsibilities to the Board; (ii) relevant industry and related experience;
(iii) educational background; (iv) financial expertise; (v) an assessment of
the candidate's ability, judgment and expertise; (vi) overall diversity of the
composition of the Board; and (vii) such other factors as the Committee deems
appropriate. The Nomination and Compensation Committee may consider candidates
for Trustee recommended by the Trust's current Trustees, officers or
shareholders or by MFS or any other source deemed appropriate by the Nomination
and Compensation Committee. The Nomination and Compensation Committee may, but
is not required to, retain a third-party search firm at the applicable Trust's
expense to identify potential candidates.
The Nomination and Compensation Committee will review and consider nominees
recommended by shareholders to serve as Trustee, provided that the recommending
shareholder follows the Procedures for Shareholders to Submit Nominee
Candidates, which are set forth as Appendix B to the Trusts' Nomination and
Compensation Committee Charter (which is available on MFS.com). Among other
requirements, these procedures provide that the recommending shareholder must
submit any recommendation in writing to the Trust, to the attention of the
Trust's Secretary, at the address of the principal executive offices of the
Trust. Any recommendation must include certain biographical information and
other information regarding the candidate and the recommending shareholder, and
must include a written and signed consent of the candidate to be named as a
nominee and to serve as a Trustee if elected. The foregoing description is only
a summary.
The Nomination and Compensation Committee has full discretion to reject
nominees recommended by shareholders, and there is no assurance that any such
person properly recommended and considered by the Committee will be nominated
for election to the Board of the Trust.
SHARE OWNERSHIP
As of August 4, 2008, the Trustees and officers of the Trust as a whole owned
less than 1% of the outstanding shares of any class of any Trust.
The following table shows the dollar range of equity securities beneficially
owned by each nominee or Trustee (a) of the Trust and (b) on an aggregate
basis, in all MFS funds overseen by the nominee or Trustee, as of August 4,
2008.
The following dollar ranges apply:
N. None
A. $1 - $10,000
B. $10,001 - $50,000
C. $50,001 - $100,000
D. $100,001 - $225,000
E. Over $225,000
AGGREGATE DOLLAR
AGGREGATE DOLLAR RANGE OF SECURITIES IN
RANGE OF EQUITY ALL MFS FUNDS OVERSEEN
SECURITIES IN OR TO BE OVERSEEN BY
NAME OF TRUSTEE THE TRUST THE NOMINEE
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INTERESTED TRUSTEES
Robert J. Manning N E
Robert C. Pozen N E
INDEPENDENT TRUSTEES
Robert E. Butler N E
Lawrence H. Cohn, M.D. N E
David H. Gunning N E
William R. Gutow N E
Michael Hegarty N E
J. Atwood Ives N E
Lawrence T. Perera N E
J. Dale Sherratt N E
Laurie J. Thomsen N E
Robert W. Uek N E
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF TRUSTEES
The Board of Trustees of the Trust has adopted procedures by which shareholders
may send communications to the Board. Shareholders may mail written
communications to the Board of Trustees, MFS California Insured Municipal Fund,
c/o Massachusetts Financial Services Company, 500 Boylston Street, Boston,
Massachusetts 02116, Attention: Frank Tarantino, Independent Chief Compliance
Officer. Shareholder communications must (i) be in writing and be signed by the
shareholder, (ii) identify the MFS Trust to which they relate and (iii)
identify the class and number of shares held by the shareholder. The Trust's
Independent Chief Compliance Officer ("ICCO") is responsible for reviewing all
properly submitted shareholder communications. The ICCO shall either (i)
provide a copy of each properly submitted shareholder communication to the
Board at its next regularly scheduled meeting or (ii) if the ICCO determines
that the communication requires more immediate attention, forward the
communication to the Chair of the Trustees promptly after receipt. The ICCO
may, in good faith, determine that a shareholder communication should not be
provided to the Board because it is ministerial in nature (such as a request
for Trust literature, share data or financial information). The ICCO may in
such cases forward the communication to the appropriate party or parties at
MFS. These procedures do not apply to (i) any communication from an officer or
Trustee of the Trust, (ii) any communication from an employee or agent of the
Trust, unless such communication is made solely in such employee's or agent's
capacity as a shareholder or (iii) any shareholder proposal submitted pursuant
to Rule l4a-8 under the Securities Exchange Act of 1934, as amended, or any
communication made in connection with such a proposal. The Trust's Trustees are
not required to attend the Trust's shareholder meetings or to otherwise make
themselves available to shareholders for communications, other than pursuant to
the aforementioned procedures. No Board members attended the 2007 Annual
Meeting of Shareholders.
The Trust's Declaration of Trust currently provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trust, unless it is finally adjudicated or, in case of a
settlement, it has been determined by Trustees not involved in the matter or
independent legal counsel, that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Trust or
that they engaged in willful misfeasance or acted with bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
offices.
TRUSTEE COMPENSATION TABLE
The table below shows the cash compensation paid to the Trustees by the Trust
for the fiscal year ended November 30, 2007. Interested Trustees receive no
compensation from a Trust for their services as Trustees.
-------------------------------------------------------------------------------
RETIREMENT TOTAL CASH
BENEFITS COMPENSATION
ACCRUED AS FROM TRUST
TRUSTEE FEES PART OF AND FUND
NAME OF TRUSTEE FROM TRUST(1) FUND EXPENSE COMPLEX(2)
-------------------------------------------------------------------------------
Robert E. Butler $450 N/A $229,619
Lawrence H. Cohn, M.D. $450 N/A $228,509
David H. Gunning $450 N/A $248,508
William R. Gutow $450 N/A $228,509
Michael J. Hegarty $450 N/A $226,509
J. Atwood Ives $450 N/A $302,509
Lawrence T. Perera $450 N/A $226,953
J. Dale Sherratt $450 N/A $268,507
Laurie J. Thomsen $450 N/A $248,508
Robert E. Uek $450 N/A $254,142
------------
(1) For the period beginning June 30, 2007, the effective date of the
investment advisory agreement between the Trust and MFS, through November
30, 2007. Prior to June 30, 2007, the Trust was overseen by a different
board.
(2) For calendar year 2007. MFS Trustees receiving compensation from the Trust
served as Trustee of 98 funds within the MFS Fund Complex (having aggregate
net assets at December 31, 2007 of approximately $106 billion).
ITEM 2 -- TO APPROVE AN AMENDED AND RESTATED DECLARATION OF TRUST
The Trust, like other investment companies, is subject to comprehensive federal
laws and regulations (in particular to the 1940 Act) and to state laws. The
Trust is subject to Massachusetts law because it is a Massachusetts business
trust. Under Massachusetts law, a business trust generally operates under an
organizational document, usually called a declaration of trust, which sets
forth various provisions relating primarily to the authority and governance of
the business trust. The Trust currently operates under its agreement and
declaration of trust ("Current Declaration").
The Board recommends that shareholders of the Trust vote to approve an Amended
and Restated Declaration of Trust ("Revised Declaration"). In June 2007, the
Trust became part of the MFS family of funds and the Board believes that, in
order to increase the efficiency of administration of the Trust by MFS, it is
in the best interests of shareholders to conform the Current Declaration of the
Trust to the form of declaration of trust used for other closed-end funds
advised by MFS.
Adoption of the Revised Declaration will not alter the Trust's current
investments or investment policies.
A description of the material differences between the Current Declaration and
the form of proposed Revised Declaration is set forth in Schedule D.
If this Proposal 2 is approved by the shareholders of the Trust, the Revised
Declaration will become effective when a majority of the trustees of the Trust
has signed the Revised Declaration. The Trust currently anticipates that, if
the requisite shareholder approval is obtained, the Revised Declaration will
become effective on November 1, 2008.
The foregoing discussion and the summary set forth in Schedule D hereto are
qualified in their entireties by reference to the form of Revised Declaration
which is attached hereto in Schedule C.
MFS intends to propose to the Trustees of the Trust that the bylaws of the
Trust be amended to conform them more closely to the bylaws of the other
closed-end funds advised by MFS. Unlike the Current Declaration, the proposed
form of Revised Declaration does not address quorum requirements for
shareholder meetings. MFS has advised the Board that the amended bylaws of the
Trust will address quorum requirements for shareholder meetings. MFS has also
advised the Board that the Trust's quorum for shareholder meetings will not
change upon the adoption of amended by-laws.
REQUIRED VOTE AND BOARD RECOMMENDATION
Approval of the Revised Declaration for the Trust will require (i) the
affirmative vote of at least 66 2/3% of the common shares and preferred
shares of the Trust entitled to vote, voting together as a single class.
If the shareholders of the Trust fail to approve the Revised Declaration, the
Trust's Current Declaration will remain in effect.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR PROPOSAL 2.
ITEM 3 -- TO AMEND OR REMOVE CERTAIN FUNDAMENTAL INVESTMENT POLICIES
OF THE TRUST
The Trust has certain investment restrictions or policies that are
"fundamental," meaning that as a matter of law they cannot be changed without
shareholder approval. Some of the fundamental polices adopted by the Trust
reflect certain regulatory business or industry conditions applicable at the
time of the policies' adoption.
The Trust's Board of Trustees, together with the Trust's officers and MFS, have
reviewed the Trust's current fundamental policies, and have concluded that
certain policies should be revised or eliminated based on the development of
new practices and changes in applicable law and to facilitate administration of
the Trust. At the Meeting, shareholders will be asked to approve the revision
or elimination of these policies.
The revised policies maintain important investor protections while providing
flexibility to respond to changing markets, new investment opportunities and
changes in applicable law. In some cases, only technical changes are being
made. The Trustees believe that implementing the revised policies will
facilitate MFS's management of the Trust's assets and simplify the process of
monitoring compliance with investment policies. The revised policies are the
standard form for other funds in the MFS fund complex.
The revised policies do not affect the investment objectives of the Trust,
which remain unchanged. The Trust will continue to be managed in accordance
with the investment polices described in its registration statement and annual
report and in accordance with federal law. As described below, some of the
revised policies would give the Trust increased ability to engage in certain
activities. The Trustees and MFS do not anticipate that the revised policies,
individually or in the aggregate, will change to a material degree the level of
investment risk associated with an investment in the Trust.
Each investment policy proposed to be revised or eliminated is discussed below.
In addition, Schedule E lists the Trust's current fundamental investment
policies and the proposed fundamental policies that will apply to the Trust if
shareholders of the Trust approve this proposal.
A. BORROWING AND ISSUANCE OF SENIOR SECURITIES
It is proposed that the Trust's policy concerning borrowing money and issuing
senior securities be changed so that the policy is consistent with that of
other funds within the MFS funds complex. MFS and the Trustees believe that the
technical changes being made to this policy will not result in any material
changes to the policy. The proposed policy reads as follows:
The Trust may not:
(a) borrow money except to the extent not prohibited by the 1940 Act and
exemptive orders granted under such Act.
(b) issue any senior securities except to the extent not prohibited by the
1940 Act and exemptive orders granted under such Act; for purposes of this
restriction, collateral arrangements with respect to any type of swap,
option, Forward Contracts and Futures Contracts and collateral arrangements
with respect to initial and variation margin are not deemed to be the
issuance of a senior security;
Both the current and proposed policies allow the Trust to borrow money and
issue senior securities in accordance with the Investment Company Act of 1940
(the "1940 Act"). In addition, the proposed policy would allow the Trust to
borrow money and issue senior securities in accordance with any exemptive
orders granted to the Trust by the Securities and Exchange Commission ("SEC").
Further, the revised policy would specifically state that collateral
arrangements with respect to swaps, options, futures, forwards, and variation
margin are not deemed to be the issuance of a senior security. This does not
represent a change in how MFS currently views these collateral arrangements,
but will ensure that the current practice is clearly described in a manner
consistent with that of the other MFS funds.
B. UNDERWRITING SECURITIES
It is proposed that the Trust's policy concerning underwriting securities be
changed so that the policy is consistent with that of other funds within the
MFS funds complex. The proposed policy reads as follows:
The Trust may not:
underwrite securities issued by other persons, except that all or any
portion of the assets of the Trust may be invested in one or more
investment companies, to the extent not prohibited by the 1940 Act and
exemptive orders granted under such Act, and except insofar as the Trust
may technically be deemed an underwriter under the Securities Act of 1933,
as amended, in selling a portfolio security.
Both the current and proposed policies allow the Trust to underwrite securities
to the extent that the Trust is deemed to be an underwriter in connection with
the sales of portfolio securities held by the Trust. In addition, the proposed
policy provides that all or any portion of the assets of the Trust may be
invested in one or more investment companies, to the extent not prohibited by
the 1940 Act and exemptive orders granted under such Act. Under the Trust's
proposed Declaration of Trust (see proposal in Item 2), the Trustees have the
power to implement a master/feeder, fund of funds or other similar structure
without seeking shareholder approval. While the Trustees have no current
intention of implementing a master/feeder, fund of funds or other similar
structure at this time, the proposed policy would specifically permit the use
of these structures were the Trustees to determine that their implementation
would be in the best interest of a Trust at a future date.
C. LENDING OF MONEY OR SECURITIES
It is proposed that the Trust's policy concerning lending money or securities
be changed so that the policy is consistent with that of other funds within the
MFS funds complex. The proposed policy reads as follows:
The Trust may not:
make loans except to the extent not prohibited by the 1940 Act and
exemptive orders granted under such Act.
Both the current and proposed policies allow the Trust to lend securities and
to make loans through the purchase of debt instruments or similar evidences of
indebtedness typically sold to financial institutions (e.g., money market
instruments, loans, or other direct indebtedness) and through repurchase
agreements.
The proposed policy also would permit the Trust to make any other types of
loans, whether of money or securities, so long as the transactions are
permitted by the 1940 Act or an exemptive order granted to the Trust by the
SEC. MFS has no current intention to cause the Fund to make loans other than as
permitted under the Trust's current policy, as described above. Any changes to
the Trust's strategy that would result in it making loans in addition to those
currently permitted would be subject to approval by the Trustees and, in the
case of certain types of loans (e.g., loans to other funds advised by MFS),
receipt of an exemptive order from the SEC.
D. INDUSTRY CONCENTRATION
It is proposed that the Fund's policy concerning industry concentration be
changed so that the policy is consistent with that of other funds within the
MFS funds complex. MFS and the Trustees believe that the technical changes
being made to this policy will not result in any material changes to the
policy. The proposed policy reads as follows:
The Trust may not:
purchase any securities of an issuer in a particular industry if as a
result 25% or more of its total assets (taken at market value at the time
of purchase) would be invested in securities of issuers whose principal
business activities are in the same industry.
The 1940 Act limits an investment company's ability to concentrate its
investments in securities of any particular industry. The staff of the SEC
takes the position that a mutual fund "concentrates" its investments in a
particular industry if, in general, more than 25% of the fund's assets are
invested in the securities of issuers in that industry.
Both the current and proposed policies do not allow the Trust to concentrate
more than 25% of their total assets in investments in a single industry. The
current policy specifically states that certain related industries within the
utilities category (e.g., gas, electric, water and telephone) are treated as
separate industries. MFS does not believe that it is necessary to specifically
state that these industries should be treated as separate industries and has
proposed that this provision be removed. MFS does not believe that these
changes represent material changes to the current policy for the Trust.
E. REAL ESTATE, COMMODITIES, FUTURES, OPTIONS, FORWARD CONTRACTS
It is proposed that the Trust's policy concerning real estate and commodities
and commodity contracts, futures, forwards, and related options be changed so
that the policy is substantially consistent with that of other funds within the
MFS funds complex. The proposed policy reads as follows:
The Trust may not:
purchase or sell real estate (excluding securities secured by real estate
or interests therein and securities of companies, such as real estate
investments trusts, which deal in real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(excluding currencies and any type of option, Futures Contracts and Forward
Contracts or other derivative instruments whose value is related to
commodities or other commodity contracts) in the ordinary course of its
business; the Fund reserves the freedom of action to hold and to sell real
estate, mineral leases, commodities or commodity contracts (including
currencies and any type of option, Futures Contracts and Forward Contracts)
acquired as a result of the ownership of securities.
The proposed policy provides that the Trust may not purchase or sell real
estate, interests in oil, gas or mineral leases, or commodities or commodity
contracts in the ordinary course of its business. Under the proposed policy,
the Trust will be able to invest in securities secured by real estate and
securities of companies that deal in real estate and or interests therein
(e.g., real estate investment trusts), currencies, and any type of option,
futures contracts, forwards, and other derivative instruments whose value is
related to commodities or other commodity contracts.
In addition, both the current policy and the proposed policy allow the Trust to
hold and sell real estate acquired as a result of a Trust's ownership of
securities. The proposed policy has a similar provision with respect to
commodities and oil, gas and mineral leases, which allows the Trust to hold and
sell commodities or commodity contracts and oil, gas and mineral leases
acquired as a result of a Trust's ownership of securities.
The Trustees and MFS believe that the revised policy will simplify the process
of monitoring compliance. While the revised policy does have material changes
from the current policy - both in terms of specifically precluding certain
types of investments and specifically providing flexibility to make other types
of investment - the changes do not affect the Trust's current investment
objectives or strategies. MFS has informed the Trustees that is does not intend
to change the way it manages the Trust as a result of the changes to the
policy, and the Trustees and MFS do not anticipate that the revised policy will
materially change the level of investment risk associated with an investment in
the Trust.
REQUIRED VOTE AND BOARD RECOMMENDATION
Approval of this matter will require the vote of (i) 67% or more of the
preferred shares of the Trust present at the Meeting, if the holders of more
than 50% of the outstanding preferred shares are present or represented by
proxy or (ii) more than 50% of the outstanding preferred shares, whichever is
less; AND (a) 67% or more of the common and preferred shares of the Trust,
voting together as a single class, present at the Meeting, if the holders of
more than 50% of the outstanding common and preferred shares of the Trust are
present or represented by proxy or (b) more than 50% of the outstanding common
and preferred shares of the Trust, voting together as a single class, whichever
is less.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, HAS CONCLUDED THAT PROPOSAL 3 IS
IN THE BEST INTEREST OF SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR PROPOSAL 3.
ITEM 4 -- SHAREHOLDER PROPOSAL
The Board of Trustees has been informed by Walter S. Baer, 344 S. Canyon
View Drive, Los Angeles, CA 90049 ("Baer"), a shareholder of record owning
over $2000 of shares of the Trust as of December 20, 2007, that he intends
to submit the following proposal at the Meeting.
RESOLVED:
The shareholders ask the Trustees to take the steps necessary to merge the
MFS California Insured Municipal Fund (CCA) into the MFS California
Municipal Bond Fund (MCFTX), an open-end fund, or otherwise enable
shareholders to realize net asset value (NAV) for their shares.
If properly presented at the meeting, Baer's proposal will be Item 4. Baer has
requested that the following statement be included in the proxy statement in
support of his proposal.
SUPPORTING STATEMENT
Many CCA shareholders hoped that our fund's acquisition by MFS in July 2007
would lead to improved performance and increased shareholder value.
Unfortunately, this has not happened.
Despite its use of leverage, CCA's performance in terms of both NAV and
market price is at the very bottom of the Lipper rankings for closed-end
California insured municipal bond funds. Morningstar also gives CCA its
lowest rating. Since MFS took over as the fund's investment advisor, the
market value of our shares has fallen by more than 14%, and the price
discount to NAV has soared from 5.2% to 13.6%. Under MFS stewardship, more
than $5.5 million in shareholder value has been erased.
However, MFS also manages a larger and better performing open-end fund with
a lower expense ratio, the same portfolio managers and similar objectives
as CCA. Merging our fund into the MFS California Municipal Bond Fund
(MCFTX) would offer CCA shareholders prospects for improved performance,
including a reduced expense ratio. It would also eliminate the double digit
discount that acts as a dead weight on CCA shareholder value.
CCA has been a conspicuously poor performer. It's time to tell MFS to put
this dog to sleep and give shareholders the opportunity to achieve better
returns.
* * * * *
AS DETAILED IN THE FOLLOWING STATEMENT OF OPPOSITION TO ITEM 4, THE BOARD,
INCLUDING THE INDEPENDENT TRUSTEES, HAS CONCLUDED THAT ITEM 4 IS NOT IN THE
BEST INTERESTS OF THE SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST ITEM 4.
BOARD OF TRUSTEES' STATEMENT IN OPPOSITION TO THE BAER PROPOSAL
Baer's proposal that shareholders recommend a merger of the Fund into the MFS
California Municipal Bond Fund ("MCA"), an open-end fund, or that the Board
take such other actions as will enable shareholders to realize net asset value
for their shares of the Fund should be rejected. As a closed-end municipal bond
fund, the Fund is positioned to use leverage to the advantage of the common
shareholders, a structural advantage that will be lost if the Fund is converted
to an open-end structure either through merger or on a stand alone basis. The
Baer proposal seeks a permanent change to the Fund's structure to address what
the Board believes, based on information provided to it by MFS, the Fund's
adviser, is a short-term situation that resulted from the extraordinary
condition of the credit markets and the credit ratings of monoline insurers
during the last 9 months. Your Board has given consideration to the proposal
and believes that it is not in the best interests of the Fund's shareholders
and that the Fund's current leveraged closed-end structure with an investment
strategy of primarily investing in assets covered by insurance guaranteeing the
timely payment of principal and interest continues to be in the best interest
of shareholders. Given the potential adverse consequences of a merger or
conversion to an open-end structure, your Board recommends that you vote "NO"
on the Baer proposal.
Short-Term Problem
Since the Fund's inception the discount at which the Fund's shares have traded
to NAV has averaged 2.82%. During this time there have been periods when the
Fund's shares have traded at a premium to NAV. The discount widened
significantly during the second half of 2007. Based on information provided to
it by MFS, the Board believes this occurred due largely to the general
dislocations in the credit markets and the uncertainty around the financial
stability of the monoline insurers. As an insured municipal bond fund, over 80%
of the Fund's assets are invested in insured bonds and the Fund was, therefore,
particularly adversely affected by this uncertainty. At the time the Baer
proposal was submitted, the discount had widened to 13.6%. As the credit
markets have stabilized and the uncertainty about the monoline insurers has
receded, the Fund's discount has narrowed to 4.76% as of June 24, 2008, and was
as low as 1.3% on February 29, 2008. Your Board does not believe that the
short-term widening of the discount, which has since narrowed, warrants the
drastic step of converting the Fund to an open-end structure.
Merger or Conversion Could Result in Lost Opportunities to Benefit from
Leverage
A key advantage of the closed-end fund structure is its ability to use leverage
for the benefit of shareholders. At its inception in 1999, the Fund issued
$24,450,000 of auction preferred shares ("APS"). The Fund pays short- term
interest rates to the holders of APS and invests the proceeds in longer- term
securities to earn the difference between the long- and short-term rates.
Historically, municipal long-term interest rates have been higher than short-
term rates, leading to a yield advantage associated with leverage. Since 1990,
for example, the average spread between long- and short-term municipal rates
has been approximately 270 basis points. During 2007, this advantage declined
to its lowest level since 1990, with an average difference between long- and
short-term rates of approximately 100 basis points. The low differential
experienced in 2007 was the result of two primary factors. First, much of 2007
was characterized by sustained high short-term rates and declining long-term
municipal rates. Second, during the latter portion of 2007 and continuing into
2008, the widely reported disruptions in the auction market raised the cost of
funds, keeping pressure on the spreads between short- and long-term municipal
rates. Even with the higher cost, the leverage obtained by the Fund through the
APS continues to be beneficial to the Fund, although not to the same extent as
it has been historically.
More recently, however, the spread between long- and short-term rates has begun
to widen -- even though the APS market remains under pressure -- with the
spread averaging 160 basis points during 2008. During May 2008, the incremental
benefit of leverage to the common shares was 1.17%. Should the APS market
become unlocked and short-term rates become realigned with historical norms,
MFS has informed the Board that it believes the Fund could achieve an
incremental benefit of approximately 1.00% in today's interest rate
environment. Now is not the time to make irreversible decisions concerning the
Fund's structure. The Fund, along with other similarly situated funds, is
working on solutions to the troubled APS market. When the form and cost of
leverage for closed-end funds over the long-term is clarified, the Board will
assess the continuing viability of the leverage strategy.
There are Key Differences Between Open-End and Closed-End Funds
A merger of the Fund into MCA or conversion of the Fund from a closed-end
structure to an open-end structure would change the core characteristics of the
Fund. A closed-end fund is different from an open-end fund in meaningful ways,
and investors often choose a closed-end fund for the very characteristics that
distinguish it from an open-end fund.
Unlike an open-end fund, a closed-end fund has a fixed number of shares that
trade on an exchange, such as the American Stock Exchange. By contrast, an
open-end fund does not trade on an exchange and has a constantly changing
number of shares because it typically sells new shares continuously and is
required to "redeem" shares when investors choose to leave the fund. If the
Fund were an open-end fund in an economic environment with potential large
redemptions on the horizon, the portfolio manager would need to raise cash to
fund redemptions, which may require significant restructuring of the portfolio
and the sale of investments that might not otherwise be sold at that time,
possibly at unfavorable prices, and with significant transaction costs. This,
combined with the likely need to maintain a portion of the portfolio in cash to
handle ongoing redemptions as they arise, could negatively impact the return
for long-term Fund shareholders.
Managers of a closed-end fund, on the other hand, are generally free to keep
fund assets more fully invested, because they need not worry about daily
redemptions. In the case of a fixed-income closed-end fund, such as the Fund,
the managers are free to invest more fund assets in fixed-income securities
that will generate income for shareholders. In addition, closed-end funds are
not encumbered by certain SEC rules that limit the ability of open-end funds to
invest in potentially attractive illiquid securities -- again, because open-end
funds must stand ready to pay for redemptions. Conversion of the Fund to an
open-end structure would deprive the Fund's managers of the ability to fully
invest in income-generating securities, to the detriment of Fund shareholders.
Additionally, the Fund would lose its listing on the American Stock Exchange
and intra-day liquidity of its common shares, which could make it less
attractive to certain investors.
Insured Portfolio Securities
Your Fund has an investment policy to invest at least 80% of its net assets in
securities covered by insurance guaranteeing the timely payment of principal
and interest. Thus, your Fund carries less exposure to risk than MCA, the fund
into which Baer proposes to merge your Fund. Bond insurers have recently
experienced an unprecedented period of market disruption. As a result, the
market has punished insured bonds. In some cases, bonds without insurance are
trading at higher prices than the same bonds with insurance, a situation that
MFS has informed the Board that it believes will not persist. If your Fund were
to merge into MCA, as proposed by Baer, your Fund would no longer be required
to hold any insured bonds. At the time of the merger, it is estimated that the
combined fund would have only 45% of its assets invested in insured securities
- and the percentage of the combined fund's assets invested in insured
securities could decline further over time. This is a significant change to the
basic risk profile of the Fund and should not be implemented without good
reason, which Baer has not articulated.
Conversion to an Open-End Structure Would Effectively Increase Fund Expenses
The Board has considered whether shareholders would be better off if the Fund
were converted to an open-end structure on a standalone basis. Such a course of
action would allow the Fund to maintain its policy of investing at least 80% of
its assets in insured bonds but would result in a loss of leverage. In addition
to the other consequences of an open-end structure described above, open-ending
the Fund would require the redemption of all the APS, resulting in an immediate
reduction of the Fund's assets to approximately $35.5 million. At this reduced
size, the Fund's expense ratio would increase because there are fewer assets
over which to spread the Fund's fixed costs.
Additionally, experience has shown that, where proposals such as Baer's
proposal are acted upon, some investors - often professional arbitrageurs and
certain hedge funds - redeem their shares immediately, further reducing fund
assets (sometimes substantially). Although those redeeming shareholders would
likely turn a quick profit, their short-term strategy would be at the expense
of long-term shareholders who wish to remain in the Fund and for whom the Fund
was designed. At a substantially reduced size, the Fund may become
unsustainable because the redemptions would reduce the number of shares over
which fixed costs of the Fund are spread and the remaining long-term
shareholders would, in any event, likely be forced to bear an increased share
of Fund expenses.
The Board has also considered the expenses involved in merging the Fund or
converting the Fund to an open-end fund, including the one-time legal,
accounting and mailing costs to obtain shareholder approval and, on an ongoing
basis, shareholder servicing costs, transfer agency fees to accommodate daily
sales and redemptions, the cost to register shares and maintain a current
prospectus for an ongoing distribution, as well as initial and ongoing state
filing fees. Based on the Fund's size (taking into account only net assets of
the common shares as the APS would be redeemed in connection with a conversion
to an open-end fund) as of its most recent fiscal year end (November 30, 2007),
MFS estimates that the Fund's expense ratio, if it were an open-end fund, would
be 0.85%. This represents an estimated increase of 15 basis points over the
Fund's actual total expense ratio of 0.70% as of its most recent fiscal year
end.
As an open-end fund, your Fund would also have to consider a means to pay
brokers for the ongoing distribution of new shares, possibly through a Rule
12b-1 fee. Rule 12b-1 fees are typical features of open-end funds. As an open-
end fund, the Fund may also impose a sales "load" that would apply to new
purchases of certain share classes of the Fund.
Merger into or Conversion to an Open-End Structure May Negatively Impact
Returns and Portfolio Management
As an open-end fund, new investors would generally be able to buy newly issued
shares of the Fund every business day and the Fund's managers would need to put
that new money to work. During periods of rising interest rates, new money can
be used to buy higher-yielding bonds. However, during periods of declining
interest rates, that new money may need to be invested in lower-yielding bonds
than those currently held by the Fund, which may result in the Fund having
lower investment returns than it would have had if it had not been required to
make new investments during the period. Imagine, for example, that the Fund
held a portfolio of securities with an overall yield (after expenses) of 5%,
and market yields fall below 5%. Net new money contributed by investors to the
Fund during this period would need to be invested in instruments reflecting the
lower yield then prevalent in the market. As a result, the Fund's total return
would be lower. This phenomenon, common in open-end bond funds, does not
generally impact closed-end funds because closed-end funds do not continuously
offer their shares and therefore do not take in significant flows of new money.
Open-ending could adversely affect the Fund in other ways as well. Experience
suggests that there are more redemptions in open-end funds near market bottoms,
which often are favorable times for a fund's managers to make portfolio
investments and not favorable times to sell portfolio securities at depressed
prices. Conversely, new money tends to be invested in open-end funds near
market peaks, which are generally not favorable times for funds to invest.
These factors have a tendency to increase investment volatility. Closed-end
funds, like the Fund, on the other hand, are able to maintain their investment
strategy during these peaks and troughs without their portfolio managers being
forced to invest new money or liquidate portfolio holdings at times when sound
investment practice could dictate otherwise and without generating unnecessary
portfolio turnover and transaction costs.
Fund Performance and Discount
The Board has closely reviewed the Fund's performance with MFS. MFS has
discussed with the Board and implemented changes to the Fund's portfolio
management, which MFS believes could result in improved Fund performance and
thus could positively affect the discount. In addition, the Board reviews the
Fund's discount frequently and has received advice from a third-party
consultant regarding the benefits and consequences of certain measures. The
Board will continue to closely monitor the Fund's performance, as well as the
discount of the Fund's common shares.
* * * * * *
In sum, your Board recommends you vote "NO" on the Baer proposal, which, if
adopted, would permanently deny shareholders the opportunity to benefit from
higher returns through the use of leverage in order to address a short-term
discount resulting from the extraordinary turmoil in the credit markets. The
long-term benefits of a closed end structure for a leveraged municipal bond
fund far outweigh the short-term benefit that might result from a merger of the
Fund with an open end fund or otherwise open-ending the Fund.
REQUIRED VOTE AND BOARD RECOMMENDATION
Approval of this matter will require the vote of a majority of the outstanding
common and preferred shares of the Trust, voting together as a single class.
THE TRUSTEES OF THE TRUST RECOMMEND THAT YOU VOTE AGAINST PROPOSAL 4.
TRUST INFORMATION
This section provides certain information about the Trust, including
information about its investment adviser and administrator, independent
registered public accounting firm, executive officers and the identity of
persons holding more than 5% of the outstanding shares of any class of the
Trust.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust engages as its investment adviser and administrator MFS, a Delaware
corporation with offices at 500 Boylston Street, Boston, Massachusetts 02116.
MFS is a majority owned subsidiary of Sun Life of Canada (U.S.) Financial
Services Holdings, Inc., which is a majority-owned subsidiary of Sun Life
Financial (U.S.) Holdings, Inc., 500 Boylston Street, Boston, Massachusetts
02116, which in turn is a wholly-owned subsidiary of Sun Life Assurance Company
of Canada--U.S. Operations Holdings, Inc., One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481 ("Sun Life U.S. Operations"). Sun Life
U.S. Operations is a wholly-owned subsidiary of Sun Life Financial Corp., 150
King Street West, Toronto, Canada MSH 1J9, which in turn is a wholly-owned
subsidiary of Sun Life Financial Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Independent Registered Public Accounting Firm and fiscal year end for the
Trust is listed below:
INDEPENDENT REGISTERED
PUBLIC FISCAL YEAR
TRUST ACCOUNTING FIRM END
------------------------------------------------------------------------------
MFS California Insured Municipal Ernst & Young LLP ("Ernst &
Fund Young") November 30
Prior to June 30, 2007, the Trust's Independent Registered Public Accounting
Firm was PricewaterhouseCoopers ("PWC").
No Independent Registered Public Accounting Firm has a direct or material
indirect interest in the Trust.
Representatives of Ernst & Young are expected to be present at the Meeting and
will have an opportunity to make a statement if they desire to do so. Such
representatives also are expected to be available to respond to appropriate
questions.
The Audit Committee of the Board of Trustees of the Trust issued the following
report concerning the financial statements for the Trust's most recent fiscal
year.
The Audit Committee reviewed and discussed the audited financial statements
with Trust management. The Audit Committee also discussed with the Auditor
the matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standards). The Audit Committee received the written
disclosures and the letter from the Auditor required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and discussed with the Auditor its independence.
Based on this review and the review of other information and these and
other discussions, the Audit Committee recommended to the Board of Trustees
that the audited financial statements be included in the Trust's annual
report to shareholders for the Trust's 2007 fiscal year for filing with the
Securities and Exchange Commission.
Respectfully submitted for MFS California Insured Municipal Fund, by the
Audit Committee as of January 22, 2008.
Robert E. Butler
William R. Gutow
J. Dale Sherratt
Laurie J. Thomsen
Robert W. Uek
To the extent required by applicable regulations, pre-approval by the Audit
Committee of the Board is needed for all audit and permissible non-audit
services rendered by the Independent Registered Public Accounting Firm to the
Trust and all permissible non-audit services rendered by the Independent
Registered Public Accounting Firm to MFS and any entity controlling, controlled
by or under common control with MFS that provides ongoing services to a Trust
(including MFS Service Center, Inc.) (each, a "MFS Service Affiliate") if the
services relate directly to the operations and financial reporting of such
Trust. Pre-approval is currently on an engagement-by- engagement basis. In the
event pre-approval of such services is necessary between regular meetings of
the Audit Committee and it is not practical to wait to seek pre-approval at the
next regular meeting of the Audit Committee, pre-approval of such services may
be referred to the Chair of the Audit Committee; provided that the Chair may
not pre-approve any individual engagement for such services exceeding $50,000
or multiple engagements for such services in the aggregate exceeding $100,000
between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
Schedule A attached hereto includes tables that set forth for each of the
Trust's two most recent fiscal years, the fees billed by Ernst & Young and PWC,
as applicable, for (a) all audit and non-audit services provided directly to
the Trust and (b) those non-audit services provided to MFS Service Affiliates
that relate directly to the Trust's operations and financial reporting after
June 30, 2007, as well as those non-audited services provided to Columbia
Management Advisors, LLC ("Columbia") and to any entity controlling, controlled
by or under common control with Columbia that provided ongoing services to the
Trust ("Columbia Service Affiliates") prior to June 30, 2007, under the
following captions:
(i) Audit Fees - fees related to the audit and review of the financial
statements included in annual reports and registration statements,
and other services that are normally provided in connection with
statutory and regulatory filings or engagements.
(ii) Audit-Related Fees - fees related to assurance and related services
that are reasonably related to the performance of the audit or review
of financial statements, but not reported under "Audit Fees",
including accounting consultations, agreed-upon procedure reports
(inclusive of annual review of basic maintenance testing associated
with the Preferred Shares), attestation reports, comfort letters and
internal control reviews.
(iii) Tax Fees - fees associated with tax compliance, tax advice and tax
planning, including services relating to the filing or amendment of
federal, state or local income tax returns, regulated investment
company qualification reviews and tax distribution and analysis
reviews.
(iv) All Other Fees - fees for products and services provided to a Trust
by the Independent Registered Public Accounting Firm other than those
reported under "Audit Fees", "Audit- Related Fees" and "Tax Fees."
Schedule A attached hereto also sets forth the aggregate fees billed by Ernst &
Young and PWC, as applicable for each of the Trust's two most recent fiscal
years for non-audit services rendered to the Trust, MFS Service Affiliates and
Columbia Service Affiliates.
The Audit Committee has considered whether the provision by Ernst & Young of
non-audit services to the MFS Service Affiliates that were not pre-approved by
the Audit Committee because such services did not relate directly to the
operations and financial reporting of the Trust) was compatible with
maintaining the independence of Ernst & Young as the Trust's principal auditor.
EXECUTIVE OFFICERS
The following table provides information about the current executive officers
of the Trust including their principal occupations, which, unless specific
dates are shown, are of more than five years duration, although the titles may
not have been the same throughout. Each officer will hold office until his or
her successor is chosen and qualified, or until he or she retires, resigns or
is removed from office.
PRINCIPAL OCCUPATIONS
POSITION(s) HELD OFFICER DURING THE PAST FIVE YEARS
NAME, DATE OF BIRTH WITH TRUST SINCE & DIRECTORSHIPS(1)
--------------------------------------------------------------------------------------------------------------
OFFICERS
Robert J. Manning(2) President March 2008 Massachusetts Financial
(born 10/20/63) ServicesCompany, Chief Executive
Officer, President, Chief Investment
Officer and Director
Maria F. Dwyer(2) Treasurer June 2007 Massachusetts Financial Services
(born 12/1/58) Company, Executive Vice President and
Chief Regulatory Officer (since March
2004), Chief Compliance Officer (since
November 2006); Fidelity Management &
Research Company, Vice President
(prior to March 2004); Fidelity Group
of Funds, President and Treasurer
(prior to March 2004)
Christopher R. Bohane(2) Assistant Secretary June 2007 Massachusetts Financial Services
(born 01/18/74) and Assistant Clerk Company, Vice President and Senior
Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law firm),
Associate (prior to April 2003);
Ethan D. Corey(2) Assistant Secretary June 2007 Massachusetts Financial Services
(born 11/21/63) and Assistant Clerk Company, Special Counsel (since
December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(2) Assistant Treasurer June 2007 Massachusetts Financial Services
(born 08/10/68) Company, Vice President (since June
2005); JP Morgan Investor Services,
Vice President (prior to June 2005)
Timothy M. Fagan(2) Assistant Secretary October 2007 Massachusetts Financial Services
(born 07/10/68) and Assistant Clerk Company, Vice President and Senior
Counsel (since September 2005); John
Hancock Advisers, LLC, Vice President
and Chief Compliance Officer
(September 2004 to August 2005),
Senior Attorney (prior to September
2004); John Hancock Group of Funds,
Vice President and Chief Compliance
Officer (September 2004 to December
2004)
Mark D. Fischer(2) Assistant Treasurer June 2007 Massachusetts Financial Services
(born 10/27/70) Company, Vice President (since May
2005); JP Morgan Investment Management
Company, Vice President (prior to May
2005)
Brian E. Langenfeld(2) Assistant Secretary June 2007 Massachusetts Financial Services
(born 03/7/73) and Assistant Clerk Company, Vice President (since May
2006); John Hancock Advisers, LLC,
Assistant, Vice President and Counsel
(May 2005 to April 2006); John Hancock
Advisers, LLC, Attorney and Assistant
Secretary (prior to May 2005)
Ellen Moynihan(2) Assistant Treasurer June 2007 Massachusetts Financial Services
(born 11/13/57) Company, Senior Vice President
Susan S. Newton(2) Assistant Secretary June 2007 Massachusetts Financial Services
(born 03/7/50) and Assistant Clerk Company, Senior Vice President and
Associate General Counsel (since April
2005); John Hancock Advisers, LLC,
Senior Vice President, Secretary and
Chief Legal Officer (prior to April
2005); John Hancock Group of Funds,
Senior Vice President, Secretary and
Chief Legal Officer (prior to April
2005)
Susan A. Pereira(2) Assistant Secretary June 2007 Massachusetts Financial Services
(born 11/5/70) and Assistant Clerk Company, Vice President and Senior
Counsel (since June 2004); Bingham
McCutchen LLP (law firm), Associate
(prior to June 2004)
Mark N. Polebaum(2) Secretary and Clerk June 2007 Massachusetts Financial Services
(born 05/01/52) Company, Executive Vice President,
General Counsel and Secretary (since
January 2006); Wilmer Cutler Pickering
Hale and Dorr LLP (law firm), Partner
(prior to January 2006)
Frank L. Tarantino Independent Chief June 2007 Tarantino LLC (provider of compliance
(born 03/07/44) Compliance Officer services), Principal (since June
2004); CRA Business Strategies Group
(consulting services), Executive Vice
President (April 2003 to June 2004);
David L. Babson & Co. (investment
adviser), Managing Director, Chief
Administrative Officer and Director
(prior to March 2003)
Richard S. Weitzel(2) Assistant Secretary October 2007 Massachusetts Financial Services
(born 07/16/70) and Assistant Clerk Company, Vice President and Assistant
General Counsel (since 2007); Vice
President and Senior Counsel (since
May 2004); Massachusetts Department of
Business and Technology, General
Counsel (February 2003 to April 2004);
Massachusetts Office of the Attorney
General, Assistant Attorney General
(April 2001 to February 2003)
James O. Yost(2) Assistant Treasurer June 2007 Massachusetts Financial Services
(born 06/12/60) Company, Senior Vice President
------------
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of the Trust within the meaning of the 1940 Act, as a result of position with MFS. The
address of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The Trust's officers hold comparable positions with the 98 funds in the MFS
Family of Funds as of December 31, 2007, and with certain affiliates of MFS.
The address of each officer is MFS, 500 Boylston Street, Boston, Massachusetts
02116.
INTERESTS OF CERTAIN PERSONS
Schedule B attached hereto sets forth, as of August 4, 2008, to the best
knowledge of the Trust, the shareholders who beneficially owned more than 5% of
the outstanding shares of any class of the Trust.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Trustees,
directors and certain officers of the Trust and MFS, and persons who own more
than ten percent of any class of a Trust's shares, to file reports of ownership
and changes in ownership with the SEC and the American Stock Exchange. Such
persons are required by SEC regulation to furnish each Trust with copies of all
Section 16(a) forms they file in relation to that Trust.
Based solely on a review of the copies of Forms 3, 4 and 5 and amendments
thereto furnished to the Trust with respect to its most recent fiscal year for
Trustees, directors and certain officers of the MFS and greater than ten
percent beneficial owners, the Trust believes all Section 16(a) transactions
were reported on a timely basis. No individuals reported any transactions.
LITIGATION
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., Sun Life Financial Inc., various MFS funds, certain current and/or former
Trustees of these MFS funds, and certain officers of MFS have been named as
defendants in multiple lawsuits filed in federal and state courts. The various
lawsuits that are still pending generally allege that some or all of the
defendants permitted or acquiesced in market timing and/or late trading in some
of the MFS funds, and inadequately disclosed MFS' internal policies concerning
market timing and such matters. The pending lawsuits assert that some or all of
the defendants violated the federal securities laws, including the Securities
Act of 1933 and the Securities Exchange Act of 1934, the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as well as fiduciary duties
and other violations of common law. The pending lawsuits variously have been
commenced as class actions or individual actions on behalf of investors who
purchased, held or redeemed shares of the MFS funds during specified periods,
or as derivative actions on behalf of the MFS funds.
The lawsuits relating to market timing and related matters have been
transferred to, and consolidated before, the United States District Court for
the District of Maryland, as part of a multi-district litigation of market
timing and related claims involving several other fund complexes (In re Mutual
Funds Investment Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam,
Allianz Dresdner), No. 1:04-md-15863 (transfer began March 19, 2004)). The
pending market timing cases related to the MFS funds include Riggs v. MFS et
al., Case No. 04-CV-01162-JFM (consolidated class action complaint filed
September 30, 2004), Hammerslough v. MFS et al., Case No. 04-MD-01620
(consolidated derivative complaint filed September 30, 2004), and Reaves v. MFS
Series Trust I, et al., Case No. 1:05-CV-02220-JFM (complaint related to Class
B shares filed March 21, 2005). The plaintiffs in these consolidated lawsuits
generally seek injunctive relief including removal of the named Trustees,
adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement
of fees and profits, monetary damages, punitive damages, attorney's fees and
costs and other equitable and declaratory relief. Insofar as any of the actions
is appropriately brought derivatively on behalf of any of the MFS funds, any
recovery will inure to the benefit of the MFS funds. Several claims of the
various lawsuits have been dismissed; MFS and other named defendants continue
to defend the various lawsuits.
FURTHER INFORMATION ABOUT VOTING AND THE MEETING
MANNER OF VOTING PROXIES
All proxies received by management will be voted on all matters presented at
the Meeting, and if not limited to the contrary, will be voted FOR the election
of J. Atwood Ives, William R. Gutow, Michael Hegarty, Laurie J. Thomsen and
Robert W. Uek as Trustees of the Trust (if still available for election), FOR
Proposals 2 and 3, and AGAINST Proposal 4.
All proxies received, including proxies that reflect (i) broker non-votes
(i.e., shares held by brokers or nominees as to which (a) instructions have not
been received from the beneficial owners or the persons entitled to vote, and
(b) the broker or nominee does not have discretionary voting power on a
particular matter), (ii) abstentions or (iii) in the case of Proposal 1, the
withholding of authority to vote for a nominee for election as Trustee, will be
counted as shares that are present on a particular matter for purposes of
determining the presence of a quorum for that matter. Thirty percent (30%) of
the Trust's outstanding shares entitled to vote at the Meeting that are present
in person or represented by proxy constitutes a quorum. With respect to the
election of Mr. Ives and Ms. Thomsen as Trustees and all other matters in which
preferred shares vote as a separate class, thirty percent (30%) of the Trust's
outstanding preferred shares entitled to vote at the Meeting that are present
in person or represented by proxy constitutes a quorum. With respect to the
election of Trustees, neither broker non-votes nor abstentions nor withholding
authority to vote have any effect on the outcome of the voting. With respect to
Proposals 2, 3 and 4, broker non-votes, absentions and withholding authority to
vote will each have the effect of voting AGAINST each such proposal.
Each shareholder of the Trust is entitled to one vote for each share of the
Trust that such shareholder owns at the close of business on August 4, 2008, on
each matter on which the shareholder is entitled to vote. Each fractional share
is entitled to a proportionate fractional vote.
The Trust will reimburse the record holders of its shares for their reasonable
expenses incurred in sending proxy material to and obtaining voting
instructions from beneficial owners.
The Trust knows of no other matters to be brought before the Meeting. If,
however, because of any unexpected occurrence, any nominee is not available for
election or if any other matters properly come before the Meeting, it is the
Trust's intention that proxies not limited to the contrary will be voted in
accordance with the judgment of the persons named in the enclosed form of
proxy.
INSTRUCTIONS FOR VOTING PROXIES
The giving of a proxy will not affect a shareholder's right to vote in person
should the shareholder decide to attend the Meeting. To vote by mail, please
mark, sign, date and return the enclosed proxy card following the instructions
printed on the card. Please refer to your proxy card for instructions for
voting by telephone or internet.
SUBMISSION OF PROPOSALS
Proposals of shareholders which are intended to be presented at the 2009 Annual
Meeting of Shareholders must be received by the Trust on or prior to April 23,
2009. The submission by a shareholder of a proposal for inclusion in the proxy
materials does not guarantee that it will be included. Shareholder proposals
are subject to certain requirements under the federal securities laws.
A shareholder who wishes to make a proposal at the 2009 Annual Meeting of
Shareholders without including the proposal in the Trust's proxy statement must
ensure that the proposal is received by the Trust in good order and in
compliance with all applicable legal requirements and requirements set forth in
the Trust's By-Laws and Declaration of Trust by May 1, 2009 at the Trust's
principal office at 500 Boylston Street, Boston, Massachusetts 02116. The
persons named as proxies for the 2008 Annual Meeting of Shareholders will have
discretionary authority to vote on all matters presented at the meeting
consistent with the SEC's proxy rules.
ADJOURNMENT
In the absence of a quorum at the Meeting, or (even if a quorum is so present)
if sufficient votes in favor of a proposal set forth in the Notice of Annual
Meeting are not received by the time scheduled for the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting after the
date set forth for the original Meeting, with no other notice than announcement
at the Meeting, to permit further solicitation of proxies with respect to such
proposal. In addition, if, in the judgment of the persons named as proxies, it
is advisable to defer action on a proposal, the persons named as proxies may
propose one or more adjournments of the Meeting with respect to such proposal.
Any adjournment(s) with respect to a proposal will require the affirmative vote
of a majority of the Shares of the Fund entitled to vote thereon present in
person or represented by proxy at the session of the Meeting to be adjourned.
The persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of the proposal in question.
They will vote against any such adjournment those proxies required to be voted
against such proposal. The costs of any additional solicitation and of any
adjourned session will be borne by the Fund. Any proposals for which sufficient
favorable votes have been received by the time of the Meeting may be acted upon
and, if so, such action will be final regardless of whether the Meeting is
adjourned to permit additional solicitation with respect to any other proposal.
At any such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
called.
ADDITIONAL INFORMATION
The expense of the preparation, printing and mailing of the enclosed form of
proxy, the Notice and this Proxy Statement, and any tabulation costs, will be
borne by the Trust.
Only one copy of this Proxy Statement may be mailed to a household, even if
more than one person in a household is a Trust shareholder of record, unless
the Trust has received contrary instructions from one or more of the
shareholders in such household. If you need additional copies of this Proxy
Statement and you are the holder of record of your shares, please contact
Altman at 1-866-207-3648. If your shares are held in broker street name please
contact your financial intermediary to obtain additional copies of this Proxy
Statement. If in the future you do not want the mailing of proxy statements to
be combined with those for other members of your household or if you are
receiving multiple copies of this Proxy Statement and do want the mailings to
be combined with those for other members of your household, contact
Computershare, in writing, at 250 Royall Street, Canton, Massachusetts, 02021,
or by telephone at 1-800-637-2304, or contact your financial intermediary.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY
August 21, 2008 MFS(R) CALIFORNIA INSURED MUNICIPAL FUND
SCHEDULE A
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
Prior to June 30, 2007, the previous board of trustees had appointed
PricewaterhouseCoopers ("PWC") to serve as independent accountants to the
Trust. The tables below set forth the audit fees billed to the Trust, as well
as fees for non-audit services provided to the Trust and/or to the Trust's
former investment adviser, Columbia Management Advisors, LLC ("Columbia"), and
to any entity controlling, controlled by, or under common control with Columbia
that provided ongoing services to the Trust ("Columbia Service Affiliates"). On
June 30, 2007, the current Board of Trustees appointed Ernst & Young, LLP
("Ernst & Young") to serve as independent accountants to the Trust. The tables
below set forth the audit fees billed to the Trust, as well as fees for
non-audit services provided to the Trust and/or to MFS from June 30, 2007, and
to any entity either controlling, controlled by, or under common control with
MFS that provides ongoing services to the Trust ("MFS Service Affiliate").
For the Trust's last two fiscal years, fees billed by the Trust's Independent
Registered Public Accounting Firm for services provided directly to the Trust:
INDEPENDENT
REGISTERED AUDIT RELATED
PUBLIC AUDIT FEES FEES
ACCOUNTING --------------------------- ----------------------
TRUST FIRM 2007 2006 2007 2006
-----------------------------------------------------------------------------------------------------------------
MFS California Insured Municipal Fund Ernst & Young $45,200 N/A 0 N/A
PWC N/A $26,900 $5,600 $13,730
INDEPENDENT
REGISTERED
PUBLIC TAX FEES ALL OTHER FEES
ACCOUNTING --------------------------- ----------------------
TRUST FIRM 2007 2006 2007 2006
-----------------------------------------------------------------------------------------------------------------
MFS California Insured Municipal Fund Ernst & Young $8,550 N/A 0 N/A
PWC $3,500 $4,104 0 0
For the Trust's last two fiscal years, fees billed by the Trust's Independent Registered Public Accounting
Firm for services provided to Columbia Service Affiliates or MFS Service Affiliates that relate directly to the
Trust's operations and financial reporting:
INDEPENDENT
REGISTERED AUDIT RELATED
PUBLIC FEES(1) TAX FEES(1) ALL OTHER FEES(1)
ACCOUNTING ------------------------- ------------------ ----------------------
TRUST FIRM 2007 2006 2007 2006 2007 2006
------------------------------------------------------------------------------------------------------------------
MFS California Insured Ernst & Young 0 N/A 0 N/A 0 N/A
Municipal Fund PWC 0 0 0 0 $357,970 $505,490
----------
(1) This amount reflects the fees billed to MFS Service Affiliates or Columbia Service Affiliates for non-audit
services relating directly to the operations and financial reporting of the Trust (portions of which services
also related to the operations and financial reporting of all funds within the MFS or Columbia Funds complex).
For the Trust's last two fiscal years, no fees were billed by any Independent Registered Public Accounting
Firm that would be disclosed under the caption "All Other Fees" to any Trust.
During the periods indicated in the tables above, no services described under "Audit-Related Fees," "Tax
Fees" or "All Other Fees" were approved pursuant to the de minimis exception set forth in paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
Aggregate fees billed by each Independent Registered Public Accounting Firm, for each of the Trust's two
most recent fiscal years, for non-audit services rendered to the Trust and MFS Service Affiliates or Columbia
Service Affiliates:
INDEPENDENT REGISTERED
TRUST PUBLIC ACCOUNTING FIRM 2007 2006
------------------------------------------------------------------------------------------------------------------
MFS California Insured Municipal Fund Ernst & Young $123,959 N/A
PWC $367,070 $523,324
SCHEDULE B
INTERESTS OF CERTAIN PERSONS
As of August 4, 2008, to the best knowledge of the Trust, the
shareholders who beneficially owned more than 5% of the outstanding shares of
any class of such Trust are as follows:
NUMBER OF PERCENT OF
OUTSTANDING OUTSTANDING
SHARES SHARES OF
NAME AND ADDRESS TITLE OF BENEFICIALLY NOTED CLASS
TRUST OF BENEFICIAL OWNER CLASS OWNED OWNED
--------------------------------------------------------------------------------------------------------------------------
MFS California Insured Cede & Co. Common 2,725,931 98.03%
Municipal Fund PO Box 20
Bowling Green Station
New York, NY
Oppenheimer & Co. Preferred 561 57.36%
125 Broad Street, 15th Floor
New York, NY 10013
Citigroup Global Markets Inc. Preferred 320 32.72%
390 Greenwich St, 5th Floor
New York, NY 10013
Morgan Stanley GWM Preferred 82 8.38%
1221 Avenue of the Americas
27th Floor
New York, NY 10020
SCHEDULE C
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
------------------------
DATED AS OF ----------, 2008
TABLE OF CONTENTS
PAGE
ARTICLE I -- Name and Definitions 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II -- Trustees 3
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 4
Section 2.4 Vacancies 4
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III -- Powers of Trustees 5
Section 3.1 General 5
Section 3.2 Investments 5
Section 3.3 Legal Title 6
Section 3.4 Issuance and Repurchase of Securities 6
Section 3.5 Borrowing Money; Lending Trust Property 7
Section 3.6 Delegation 7
Section 3.7 Collection and Payment 7
Section 3.8 Expenses 7
Section 3.9 Manner of Acting; By-Laws 7
Section 3.10 Miscellaneous Powers 7
ARTICLE IV -- Investment Adviser, Distributor, Custodian and
Transfer Agent 8
Section 4.1 Investment Adviser 8
Section 4.2 Distributor 8
Section 4.3 Custodian 9
Section 4.4 Transfer Agent 9
Section 4.5 Parties to Contract 9
ARTICLE V -- Limitations of Liability of Shareholders, Trustees
and Others 9
Section 5.1 No Personal Liability of Shareholders 9
Section 5.2 Limitation of Liability of Trustees and Others 10
Section 5.3 Mandatory Indemnification 10
Section 5.4 No Bond Required 12
Section 5.5 No Duty of Investigation; Notice in
Trust Instruments 12
Section 5.6 Good Faith Action; Reliance on Experts 12
Section 5.7 Derivative Actions 13
ARTICLE VI -- Shares of Beneficial Interest 13
Section 6.1 Beneficial Interest 13
Section 6.2 Rights of Shareholders 14
Section 6.3 Trust Only 14
Section 6.4 Issuance of Shares 14
Section 6.5 Register of Shares 15
Section 6.6 Transfer of Shares 15
Section 6.7 Notices 15
Section 6.8 Voting Powers 15
ARTICLE VII -- Determination of Net Asset Value, Net Income
and Distributions 17
ARTICLE VIII -- Duration; Termination of Trust; Amendment;
Mergers, etc. 17
Section 8.1 Duration 17
Section 8.2 Termination of Trust 17
Section 8.3 Amendment Procedure 18
Section 8.4 Merger, Consolidation and Sale of Assets 19
Section 8.5 Incorporation, Reorganization 19
Section 8.6 Conversion 20
Section 8.7 Certain Transactions 20
ARTICLE IX -- Miscellaneous 21
Section 9.1 Filing 21
Section 9.2 Governing Law 21
Section 9.3 Principal Office 22
Section 9.4 Counterparts 22
Section 9.5 Reliance by Third Parties 22
Section 9.6 Provisions in Conflict with Law or Regulations 22
Signature Page 23
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
--------------------
Dated as of , 2008
WHEREAS, was established pursuant to a Declaration of Trust dated , as
amended (the "Original Declaration"), for the investment and reinvestment of
funds contributed thereto;
WHEREAS, the Trustees desire that the beneficial interest in the Trust
assets continue to be divided into transferable Shares of Beneficial Interest
(without par value) issued in one or more series or classes, as hereinafter
provided;
WHEREAS, the Trustees wish to amend and restate the Original
Declaration in its entirety, and hereby certify that this Amended and Restated
Declaration of Trust has been amended and restated in accordance with the
provisions of the Original Declaration;
NOW THEREFORE, the Trustees hereby confirm that all money and property
contributed to the Trust hereunder shall be held and managed in trust for the
benefit of holders, from time to time, of the Shares of Beneficial Interest
(without par value) issued hereunder and subject to the provisions hereof, and
that the Original Declaration, including all appendices, is amended and
restated in its entirety as follows.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the Trust is .
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Advisory Trustee" means any person, which may include a former
Trustee, appointed by resolution of the Trustees to serve the Board in an
advisory capacity, for such period and in accordance with such terms and
conditions as are determined by the Trustees. An Advisory Trustee shall serve
at the pleasure of the Trustees and may be removed by the Trustees at any time
and for any reason, with or without cause, and may resign at any time by an
instrument in writing signed by that Advisory Trustee and delivered to the
Trust. Advisory Trustees, in their capacity as such, are not Trustees or
officers of the Trust for any purpose and shall have no legal, voting or other
powers or obligations of Trustees or officers hereunder, and shall not perform
the functions of the Trustees or officers in any manner.
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(b) "By-Laws" means the By-laws referred to in Section 3.9 hereof, as
from time to time amended.
(c) "Class" and "Class of Shares" refer to the division of Shares into
two or more classes as provided in Section 6.1 hereof.
(d) "Commission" has the meaning given that term in the 1940 Act.
(e) "Declaration" means this Amended and Restated Declaration of
Trust, as amended from time to time. Reference in this Declaration of Trust to
"Declaration," "hereof," "herein" and "hereunder" shall be deemed to refer to
this Declaration rather than the article or section in which such words appear.
(f) "Distributor" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.2 hereof.
(g) "Interested Person" has the meaning given that term in the 1940
Act.
(h) "Investment Adviser" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.1 hereof.
(i) "Majority Shareholder Vote" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the
1940 Act, except that such term may be used herein with respect to the Shares
of the Trust as a whole or the Shares of any particular Class or Series
thereof, as the context may require.
(j) "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time, and as such Act or
the Rules and Regulations thereunder may apply to the Trust or any Class
pursuant to any exemptive order or similar relief or interpretation issued by
the Commission under such Act.
(k) "Person" means and includes individuals, corporations, limited
liability companies, partnerships, trusts, associations, joint ventures and
other entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof, whether domestic or foreign.
(l) "Series" and "Series of Shares" refer to the division of Shares
representing any Class into two or more Series as provided in Section 6.1
hereof.
(m) "Shareholder" means a record owner of outstanding Shares.
(n) "Shares" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular Class or Series of Shares established by the
Trustees pursuant to Section 6.1 hereof, transferable units into which such
Class or Series of Shares shall be divided from time to time in accordance with
the terms hereof. The term "Shares" includes fractions of Shares as well as
whole Shares.
(o) "Statement" means a certificate signed by any officer of the Trust
setting forth the resolution or resolutions providing for the issuance of a
Class or Classes of Shares and any Series thereof, as described in Section 6.1
hereof.
(p) "Transfer Agent" means a party furnishing services to the Trust
pursuant to any transfer agency contract described in Section 4.4 hereof.
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(q) "Trust" means the trust hereunder.
(r) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(s) "Trustees" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to such person or
persons in their capacity as trustees hereunder. For the avoidance of any
doubt, an "Advisory Trustee" as defined in Section 1.2(a) is not a Trustee for
any purpose hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. Subject to the voting powers of one
or more Classes or Series of Shares as set forth in the Declaration, and in the
By-Laws or in any Statement, the number of Trustees shall be such number as
shall be fixed from time to time by a majority of the Trustees, provided,
however, that the number of Trustees shall in no event be less than three (3)
nor more than fifteen (15). No reduction in the number of Trustees shall have
the effect of removing any Trustee from office prior to the expiration of his
or her term unless the Trustee is specifically removed pursuant to Section 2.2
hereof at the time of the decrease.
Section 2.2. Term of Office of Trustees. The Board of Trustees shall
be divided into three classes. Within the limits above specified, the number of
Trustees in each class shall be determined by resolution of the Board of
Trustees. The term of office of the first class shall expire on the date of the
first annual meeting of Shareholders or special meeting in lieu thereof
following January 1, 2008. The term of office of the second class shall expire
on the date of the second annual meeting of Shareholders or special meeting in
lieu thereof. The term of office of the third class shall expire on the date of
the third annual meeting of Shareholders or special meeting in lieu thereof.
Upon expiration of the term of office of each class as set forth above, the
number of Trustees in such class, as determined by the Board of Trustees, shall
be elected for a term expiring on the date of the third annual meeting of
Shareholders or special meeting in lieu thereof following such expiration to
succeed the Trustees whose terms of office expire. The Trustees shall be
elected at an annual meeting of the Shareholders or special meeting in lieu
thereof called for that purpose, except as provided in Section 2.3 hereof;
provided, however, if so provided in the By-Laws or in any Statement relating
to a Class or Classes of Shares and any Series thereof designated by the
Trustees pursuant to Section 6.1 hereof, such Class or Classes of Shares,
voting as a Class at an annual meeting of the Shareholders or special meeting
in lieu thereof called for such purpose, may elect at least two (2) Trustees at
all times, and, provided, further, that under the conditions enumerated in such
By-Laws or Statement, such Class or Classes of Shares voting as a Class shall
be entitled to elect at least a majority of the Trustees pursuant to the
designations and powers, preferences and rights and the qualifications,
limitations and restrictions of such Class or Classes of Shares as determined
in accordance with the By-Laws or the Statement relating to such Class or
Classes of Shares.
Each Trustee shall hold office until the earlier of his or her death
or the election and qualification of his or her successor; except that:
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(a) any Trustee may resign his or her trust (without need for prior or
subsequent accounting) by an instrument in writing signed by that Trustee and
delivered to the Trust, which shall take effect upon such delivery or upon such
later date as is specified therein;
(b) any Trustee may be removed at any time, with or without cause, by
written instrument signed by at least three-quarters of the Trustees,
specifying the date when such removal shall become effective;
(c) any Trustee who has attained a mandatory retirement age
established pursuant to any written policy adopted from time to time by at
least two- thirds of the Trustees shall, automatically and without action of
such Trustee or the remaining Trustees, be deemed to have retired in accordance
with the terms of such policy, effective as of the date determined in
accordance with such policy; and
(d) subject to the voting powers of one or more Classes or Series of
Shares as set forth in this Declaration, and in the By-Laws or in any
Statement, a Trustee may be removed at any meeting of Shareholders by a vote of
Shares representing two-thirds of the outstanding Shares of the Classes or
Series entitled to vote for the election of such Trustee.
Upon the resignation, retirement or removal of a Trustee, or his or her
otherwise ceasing to be a Trustee, that individual shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning, retiring or removed Trustee. Upon the incapacity or
death of any Trustee, that Trustee's legal representative shall execute and
deliver on his or her behalf such documents as the remaining Trustees shall
require as provided in the preceding sentence.
Except to the extent expressly provided in a written agreement to
which the Trust is a party or in a written policy adopted by the Trustees, no
resigning or removed Trustee shall have any right to any compensation for any
period following his or her resignation or removal, or any right to damages on
account of such removal.
Section 2.3. Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement or removal of any of the Trustees,
or in case a vacancy shall, by reason of an increase in number of Trustees, or
for any other reason, exist, a majority of the remaining Trustees may fill such
vacancy by appointing such other individual as they in their discretion shall
see fit. Any such appointment shall not become effective, however, until the
person appointed shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of the Declaration. An appointment of a
Trustee may be made by the Trustees then in office in anticipation of a vacancy
to occur by reason of retirement, resignation, removal or increase in number of
Trustees effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement, resignation,
removal or increase in number of Trustees. The power of appointment is subject
to the voting power of one or more Classes or Series of Shares as set forth in
this Declaration, and in the By-Laws or in any Statement, and is subject to all
applicable provisions of the 1940 Act.
Section 2.4. Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of the Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, or while
any Trustee is incapacitated, the other Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration, and only such
other
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Trustees shall be counted for the purposes of the existence of a quorum or the
taking of any action to be taken by the Trustees. A written instrument
certifying the existence of such vacancy or incapacity signed by a majority of
the Trustees shall be conclusive evidence of the existence thereof.
Section 2.5. Delegation of Power to Other Trustees. Subject to
requirements imposed by the 1940 Act and other applicable law, any Trustee may,
by power of attorney, delegate his power for a period not exceeding six months
at any one time to any other Trustee or Trustees; provided that in no case
shall fewer than two Trustees personally exercise the powers granted to the
Trustees under the Declaration except as otherwise expressly provided herein.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. Subject to the provisions of the Declaration,
the Trustees shall have exclusive and absolute control over the Trust Property
and over the business of the Trust to the same extent as if the Trustees were
the sole owners of the Trust Property and business in their own right, but with
such powers of delegation as may be permitted by the Declaration. The Trustees
shall have power to conduct the business of the Trust and carry on its
operations in any and all of its branches and maintain offices both within and
without The Commonwealth of Massachusetts, in any and all states of the United
States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as the
Trustees deem necessary, proper or desirable in order to promote the interests
of the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of the
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power or any other power of the Trustees hereunder. Such
powers of the Trustees may be exercised without order of or resort to any
court.
Section 3.2. Investments. (a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an
investment company;
(ii) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, own, hold, pledge, sell, assign, transfer,
exchange, distribute, lend or otherwise deal in or dispose of
securities of every nature and kind, U.S. and foreign currencies, any
form of gold or other precious metal, commodity contracts, any form of
option contract, contracts for the future acquisition or delivery of
fixed income or other securities, derivative instruments of every
kind, "when-issued" or standby contracts, and all types of obligations
or financial instruments, including, without limitation, all types of
bonds, debentures, stocks, negotiable or non- negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, bankers'
acceptances, and other securities of any kind, issued, created,
guaranteed or sponsored by any and all Persons, including, without
limitation,
(A) states, territories and possessions of the
United States and the District of Columbia and any political
subdivision, agency or instrumentality of any such Person,
5
(B) the U.S. Government, any foreign government, or
any political subdivision or any agency or instrumentality of
the U.S. Government or any foreign government,
(C) any international instrumentality,
(D) any bank or savings institution, or by
(E) any corporation or organization organized under
the laws of the United States or of any state, territory or
possession thereof, or under any foreign law;
to retain Trust assets in cash and from time to time to change the investments
in which the assets of the Trust are invested; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any and
all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more Persons to exercise any of said rights, powers
and privileges in respect of any of said investments; and
(iii) to carry on any other business in connection with or incidental
to any of the foregoing powers, to do everything necessary, proper or desirable
for the accomplishment of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, and to do every other act or
thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
(b) The Trustees shall not be limited to investing in securities or
obligations maturing before the possible termination of the Trust, nor shall
the Trustees be limited by any law limiting the investments which may be made
by fiduciaries.
(c) Notwithstanding any other provision of the Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by Shareholders to either invest all or a portion of
the Trust Property, or sell all or a portion of such Trust Property and invest
the proceeds of such sales, in one or more other investment companies to the
extent not prohibited by the 1940 Act.
Section 3.3. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name of
any other Person or nominee, on such terms as the Trustees may determine. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each person who may hereafter become a Trustee. Upon the
resignation, retirement, removal or death of a Trustee, such Trustee shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII and VIII hereof, to apply
to any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds of the Trust or other Trust Property, whether capital or
surplus or otherwise.
6
Section 3.5. Borrowing Money; Lending Trust Property. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any
obligation, contract or engagement of any other Person and to lend Trust
Property.
Section 3.6. Delegation. The Trustees shall have power to delegate
from time to time to such of their number or to officers, employees, any
Investment Adviser, Distributor, custodian, agent or independent contractor of
the Trust the doing of such things and the execution of such instruments either
in the name of the Trust or the names of the Trustees or otherwise as the
Trustees may deem appropriate or expedient.
Section 3.7. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 3.8. Expenses. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees, Trustees
and Advisory Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein, in the 1940 Act or in the By-Laws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees at which a quorum is present, including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of two-thirds of the Trustees. The Trustees may adopt By-Laws
not inconsistent with the Declaration to provide for the conduct of the
business of the Trust and may amend or repeal such By-Laws to the extent
permitted therein at any time.
Section 3.10. Miscellaneous Powers. Without limiting the foregoing,
the Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust;
(b) enter into joint ventures, partnerships and any other combinations
or associations;
(c) elect and remove such officers and appoint and terminate such
agents or employees as they consider appropriate, in each case with or without
cause, and appoint and terminate any one or more committees which may exercise
some or all of the power and authority of the Trustees as the Trustees may
determine;
(d) purchase, and pay for out of Trust Property, such insurance as
they may deem necessary or appropriate for the conduct of the business of the
Trust, including, without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring Shareholders, any administrator,
Trustees, Advisory Trustees, officers, employees, agents, any Investment
Adviser, any Distributor, selected dealers or independent contractors
7
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted by any such Person in such
capacity, whether or not constituting negligence, or whether or not the Trust
would have the power to indemnify such Person against such liability;
(e) establish pension, profit-sharing, Share purchase, deferred
compensation, and other retirement, incentive and benefit plans for any
Trustees, officers, employees or agents of the Trust;
(f) to the extent permitted by law, indemnify any person with whom the
Trust has dealings, including any Investment Adviser, administrator, custodian,
Distributor, Transfer Agent, shareholder servicing agent and any dealer, to
such extent as the Trustees shall determine;
(g) guarantee indebtedness or contractual obligations of others;
(h) determine and change the fiscal year of the Trust and the method
by which its accounts shall be kept; and
(i) adopt a seal for the Trust, provided that the absence of such seal
shall not impair the validity of any instrument executed on behalf of the
Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to applicable requirements of
the 1940 Act, the Trustees may in their discretion from time to time enter into
one or more investment advisory or management contracts whereby the other party
to each such contract shall undertake to furnish the Trust such management,
investment advisory, statistical and research facilities and services,
promotional activities, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provision of the Declaration, the Trustees may delegate to the Investment
Adviser authority (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of assets of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of the Investment Adviser (and all
without further action by the Trustees). Any of such purchases, sales, loans or
exchanges shall be deemed to have been authorized by all the Trustees. Such
services may be provided by one or more Persons.
Section 4.2. Distributor. Subject to applicable requirements of the
1940 Act, the Trustees may in their discretion from time to time enter into one
or more exclusive or non-exclusive distribution contracts providing for the
sale of Shares of one or more Classes, whereby the Trust may either agree to
sell the Shares to the other party to any such contract or appoint any such
other party its sales agent for such Shares. In either case, any such contract
shall be on such terms and conditions as the Trustees may in their discretion
determine, provided that such terms and conditions are not inconsistent with
the provisions of the Declaration or the By-Laws; and such contract may also
provide for the repurchase or sale of Shares by such other party as principal
or as agent of the Trust and may provide that such other party may enter into
selected dealer agreements or agency agreements with securities
8
dealers or other Persons to further the purpose of the distribution or
repurchase of the Shares. Such services may be provided by one or more Persons.
Section 4.3. Custodian. The Trustees may in their discretion from time
to time enter into one or more contracts whereby the other party to each such
contract shall undertake to furnish such custody services to the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that
such terms and conditions are not inconsistent with the provisions of the 1940
Act, the Declaration or the By-Laws. The Trustees may authorize any custodian
to employ one or more sub-custodians from time to time to perform such of the
services of the custodian as the Trustees shall from time to time consider
desirable. Services described in this Section may be provided by one or more
Persons.
Section 4.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into one or more transfer agency or sub-transfer agency and
shareholder servicing contracts whereby the other party to each such contract
shall undertake to furnish such transfer agency and/or shareholder services to
the Trust as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine, provided that such terms and conditions are not inconsistent with
the provisions of the Declaration or the By-Laws. Such services may be provided
by one or more Persons.
Section 4.5. Parties to Contract. Any contract of the character
described in any Section of this Article IV may be entered into with any
Person, although one or more of the Trustees or officers of the Trust may be an
officer, partner, director, trustee, shareholder, or member of such other party
to the contract, and no such contract shall be invalidated or rendered voidable
by reason of the existence of any such relationship; nor shall any Person
holding such relationship be liable merely by reason of such relationship for
any loss or expense to the Trust under or by reason of any such contract or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract when entered into was not inconsistent with the provisions of
this Article IV or the By-Laws. The same Person may be the other party to
contracts entered into pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above, and
any individual may be financially interested or otherwise affiliated with
Persons who are parties to any or all of the contracts mentioned in this
Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders. No Shareholder or
former Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust solely by reason of being or having been a Shareholder. The Trust
shall indemnify and hold each Shareholder and former Shareholder harmless from
and against all claims and liabilities to which such Shareholder may become
subject solely by reason of his or her being or having been a Shareholder
(other than taxes payable by virtue of owning Shares), and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The rights accruing to a
Shareholder or former Shareholder under this Section 5.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder
9
or former Shareholder in any appropriate situation even though not specifically
provided herein. The Trust shall, upon request by a Shareholder or former
Shareholder, assume the defense of any claim made against such Shareholder for
any act or obligation of the Trust and satisfy any judgment thereon from the
assets of the Trust.
Section 5.2. Limitation of Liability of Trustees and Others. (a) No
Trustee, Advisory Trustee, officer or employee or agent of the Trust shall be
subject to any liability whatsoever to any Person in connection with Trust
Property or the affairs of the Trust, and no Trustee or Advisory Trustee shall
be responsible or liable in any event for any neglect or wrongdoing of any
officer, employee or agent of the Trust or for the act or omission of any other
Trustee or Advisory Trustee. For the sake of clarification and without limiting
the foregoing, the appointment, designation or identification of a Trustee as
the Chair of the Trustees, the lead or assistant lead independent Trustee, a
member or Chair of a committee of the Trustees, an expert on any topic or in
any area (including an audit committee financial expert) or any other special
appointment, designation or identification given to a Trustee, shall not (a)
impose on that person any duty, obligation or liability that is greater than
the duties, obligations and liabilities imposed on that person as a Trustee in
the absence of the appointment, designation or identification or (b) affect in
any way such Trustee's rights or entitlement to indemnification, and no Trustee
who has special skills or expertise, or is appointed, designated or identified
as aforesaid, shall (x) be held to a higher standard of care by virtue thereof
or (y) be limited with respect to any indemnification to which such Trustee
would otherwise be entitled. Notwithstanding anything to the contrary in this
Section 5.2(a) or otherwise, nothing in the Declaration shall protect any
Trustee, Advisory Trustee, officer, employee or agent of the Trust against any
liability to the Trust or its Shareholders to which he, she or it would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his,
her or its office or position with or on behalf of the Trust.
(b) All persons extending credit to, contracting with or having claim
against the Trust shall look solely to the assets of the Trust for payment
under such credit, contract or claim; and neither any Trustee or Advisory
Trustee, nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor.
Section 5.3. Mandatory Indemnification. (a) Subject to the exceptions
and limitations contained in paragraph (b) below:
(i) every person who is or has been a Trustee, Advisory Trustee or
officer of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him or her in connection with any claim, action,
suit or proceeding in which that individual becomes involved as a party or
otherwise by virtue of being or having been a Trustee, Advisory Trustee or
officer and against amounts paid or incurred by that individual in the
settlement thereof;
(ii) the words "claim," "action," "suit" or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, administrative
or other, including appeals), actual or threatened; and the words "liability"
and "expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement or compromise, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) against any liability to the Trust or the Shareholders by reason
of a final adjudication by the court or other body before which the proceeding
was brought that the Covered Person engaged in
10
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of that individual's office;
(ii) with respect to any matter as to which the Covered Person shall
have been finally adjudicated not to have acted in good faith in the reasonable
belief that that individual's action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee,
Advisory Trustee or officer or other disposition not involving a final
adjudication as provided in paragraph (b)(i) or (b)(ii) above resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of that
individual's office by the court or other body approving the settlement or
other disposition or by a reasonable determination, based upon a review of
readily available facts (as opposed to a full trial-type inquiry) that that
individual did not engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees (as
defined below) acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(B) by written opinion of (i) the then-current legal counsel
to the Trustees who are not Interested Persons of the Trust or (ii)
other legal counsel chosen by a majority of the Disinterested Trustees
(or if there are no Disinterested Trustees with respect to the matter
in question, by a majority of the Trustees who are not Interested
Persons of the Trust) and determined by them in their reasonable
judgment to be independent.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such person. Nothing contained herein shall limit the Trust from entering into
other insurance arrangements or affect any rights to indemnification to which
Trust personnel, including Covered Persons, may be entitled by contract or
otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit, or proceeding of the character described in paragraph (a)
of this Section 5.3 shall be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the Covered Person to
repay such amount if it is ultimately determined that the Covered Person is not
entitled to indemnification under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out
of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or legal counsel meeting the requirement in Section 5.3(b)(iii)(B)
above in a written opinion, shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Covered Person ultimately will be found entitled to
indemnification.
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As used in this Section 5.3 a "Disinterested Trustee" is one (i) who
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
(e) With respect to any such determination or opinion referred to in
clause (b)(iii) above or clause (d)(ii) above, a rebuttable presumption shall
be afforded that the Covered Person has not engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office in accordance with pronouncements of
the Commission.
Section 5.4. No Bond Required. No Trustee, Advisory Trustee or officer
shall be obligated to give any bond or other security for the performance of
any of his or her duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments. No
purchaser, lender, shareholder servicing agent, Transfer Agent or other Person
dealing with the Trustees or any officer, employee or agent of the Trust shall
be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered
to or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under the
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees or officers
shall recite that the same is executed or made by them not individually, but as
or on behalf of Trustees under the Declaration, and that the obligations of any
such instrument are not binding upon any of the Trustees, officers or
Shareholders individually, but bind only the Trust estate, and may contain any
further recital deemed appropriate, but the omission of such recital shall not
operate to bind any of the Trustees, officers or Shareholders individually. The
Trustees may maintain insurance for the protection of the Trust Property,
Shareholders, Trustees, Advisory Trustees, officers, employees and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
Section 5.6. Good Faith Action; Reliance on Experts. The exercise by
the Trustees or the officers of the Trust of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances then
prevailing shall be binding upon everyone interested. The Trustees or the
officers of the Trust shall not be liable for errors of judgment or mistakes of
fact or law. Each Trustee and officer or employee of the Trust shall, in the
performance of his or her duties, be under no liability and fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon advice of counsel, or upon reports made to the Trust
by any of its officers or employees or by the Investment Adviser, the
Distributor, Transfer Agent, custodian, any shareholder servicing agent,
selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
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Section 5.7. Derivative Actions. No Shareholder shall have the right
to bring or maintain any court action, proceeding or claim on behalf of the
Trust or any Class of Shares thereof without first making demand on the
Trustees requesting the Trustees to bring or maintain such action, proceeding
or claim. Such demand shall be excused only when the plaintiff makes a specific
showing that irreparable injury to the Trust or Class of Shares thereof would
otherwise result, or if a majority of the Board of Trustees, or a majority of
any committee established to consider the merits of such action, has a material
personal financial interest in the action at issue. A Trustee shall not be
deemed to have a personal financial interest in an action or otherwise be
disqualified from ruling on a Shareholder demand by virtue of the fact that
such Trustee receives remuneration from his or her service on the Board of
Trustees of the Trust or on the boards of one or more investment companies with
the same or an affiliated investment adviser or underwriter, or the amount of
such remuneration.
Such demand shall be mailed to the Secretary or Clerk of the Trust at
the Trust's principal office and shall set forth in reasonable detail the
nature of the proposed court action, proceeding or claim and the essential
facts relied upon by the Shareholder to support the allegations made in the
demand. The Trustees shall consider such demand within 45 days of its receipt
by the Trust. In their sole discretion, the Trustees may submit the matter to a
vote of Shareholders of the Trust or any Class thereof, as appropriate. Any
decision by the Trustees to bring, maintain or settle (or not to bring,
maintain or settle) such court action, proceeding or claim, or to submit the
matter to a vote of Shareholders, shall be made by the Trustees in their
business judgment and shall be binding upon the Shareholders. Any decision by
the Trustees to bring or maintain a court action, proceeding or suit on behalf
of the Trust or any Class thereof shall be subject to the right of the
Shareholders under Section 6.8 of the Declaration to vote on whether or not
such court action, proceeding or suit should or should not be brought or
maintained.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The Trustees may, without
Shareholder approval, authorize one or more Classes of Shares with or without
par value (which Classes may be divided into two or more Series), Shares of
each such Class or Series having such preferences, voting powers, terms of
redemption, if any, and special or relative rights or privileges (including
conversion rights, if any) as the Trustees may determine.
As of the date of the Amended and Restated Declaration, the Shares shall be
divided into [two][three] Classes of Shares, a Class of an unlimited number of
common shares of beneficial interest, without par value (the "Common Shares")
and [a Class][two Classes] of an unlimited number of preferred shares of
beneficial interest, without par value (the "Preferred Shares").
The designations and powers, preferences and rights, and the qualifications,
limitations and restrictions of the Common Shares are as follows and as set
forth elsewhere in this Declaration.
(a) Subject to the rights of the holders of the Preferred Shares, if
any, in the event of the termination of the Trust the holders of the Common
Shares shall be entitled to receive pro rata the net distributable assets of
the Trust.
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(b) The holders of the Common Shares shall not, as such holders, have
any right to acquire, purchase or subscribe for any Common Shares or securities
of the Trust which it may hereafter issue or sell, other than such right, if
any, as the Trustees in their discretion may determine.
(c) Subject to the rights of the holders of the Preferred Shares, if
any, dividends or other distributions, when, as and if declared by the
Trustees, shall be shared equally by the holders of Common Shares on a share
for share basis. The Trustees may direct that any dividends or other
distributions or any portion thereof as declared and distributed shall be paid
in cash to the holder, or, alternatively, may direct that any such dividends be
reinvested in full and fractional Shares of the Trust if such holder elects to
have them reinvested.
(d) The Trustees may hold as treasury shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
determine, or cancel any Common Shares of any Series reacquired by the Trust at
their discretion from time to time. Shares shall not entitle the Shareholder to
any title in or to the whole or any part of the Trust. The designations and
powers, preferences and rights, and the qualifications, limitations and
restrictions of the Preferred Shares, if any, shall be as set forth in the
By-Laws or the Statement relating to the Preferred Shares.
All Shares issued hereunder including, without limitations, Shares issued in
connection with a dividend in Shares, or a split of Shares, shall be fully
paid and non-assessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the
Trust nor can they be called upon to assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights specifically set forth in the
Declaration. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any Class or Series of Shares. By becoming a Shareholder each
Shareholder shall be held expressly to have assented to and agreed to be bound
by the provisions of the Declaration.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares. The Trustees may from time
to time divide or combine the Shares, including the Shares of any Class, into a
greater or lesser number without thereby changing
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their proportionate beneficial interests in Trust Property. Contributions to
the Trust may be accepted for whole Shares and/or 1/1,000ths of a Share or
integral multiples thereof.
Section 6.5. Register of Shares. A register or registers shall be kept
at the principal office of the Trust or at an office of the Transfer Agent
which shall contain the names and addresses (which may be addresses for
electronic delivery) of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares, including Shares of any
Class or Series, and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to that Shareholder as provided herein
or in the By-Laws, until the Shareholder has given his or her address to the
Transfer Agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. The Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by the record
holder's agent thereunto authorized in writing, upon delivery to the Trustees
or, if there is a Transfer Agent with respect to such Shares, the Transfer
Agent of a duly executed instrument of transfer together with any certificate
or certificates (if issued) for such Shares and such evidence of the
genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the
proposed transfer.
Any Person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or
the Transfer Agent; but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
Section 6.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
(i) if mailed, postage prepaid, addressed to any Shareholder of record at the
Shareholder's last known address as recorded on the register of the Trust, (ii)
if sent by electronic transmission to the Shareholder of record at the
Shareholder's last known address for electronic delivery as recorded on the
register of the Trust, (iii) if mailed or sent by electronic delivery to one or
more members of the Shareholder's household in accordance with applicable law
or regulation, or (iv) if otherwise sent in accordance with applicable law or
regulation.
Section 6.8. Voting Powers. Subject to the voting power of one or more
Classes or Series of Shares as set forth in the Declaration, and in the By-
Laws or in any Statement, Shareholders shall have power to vote only (i) for
the election of Trustees when that issue is submitted to Shareholders, and for
the removal of Trustees as provided in Section 2.2 hereof, (ii) with respect to
any investment advisory or management contract on which a shareholder vote is
required by the 1940 Act, (iii) with
15
respect to termination of the Trust or any Class to the extent and as provided
in Section 8.2 hereof, (iv) with respect to any amendment of the Declaration to
the extent and as provided in Section 8.3 hereof, (v) with respect to any
merger, consolidation, or sale of assets to the extent and as provided in
Sections 8.4 and 8.7 hereof, (vi) with respect to any conversion of the Trust
to an "open-end company" to the extent and as provided in Section 8.6 hereof,
(vii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the Shareholders, and (viii) with respect to such additional
matters relating to the Trust as may be required by the Declaration, the
By-Laws, any Statement, or any registration of the Trust with the Commission
(or any successor agency) or any other regulator having jurisdiction over the
Trust, or as the Trustees may consider necessary or desirable.
A Shareholder shall be entitled to one vote for each Share owned by
such Shareholder on each matter on which such Shareholder is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote,
except as otherwise provided in the By-Laws or any Statement. Shares held in
the treasury of the Trust shall not be voted.
Except when a larger vote is required by applicable law or by any
provision of the Declaration, the By-Laws, or a Statement, if any, Shares
representing a majority of the Shares voted in person or by proxy shall decide
any questions and a plurality shall elect a Trustee, provided that where any
provision of law, the Declaration, the By-Laws, or a Statement requires that
holders of any Class or Series shall vote as a class, then Shares representing
a majority of the Shares of that Class or Series voted on the matter (or a
plurality with respect to the election of a Trustee) shall decide that matter
insofar as that Class or Series is concerned, and provided further, that
abstentions and broker non-votes shall not be counted as votes cast but shall
be counted as being present for purposes of determining the existence of a
quorum.
Notwithstanding any provision hereof to the contrary but subject to
the By-Laws or any Statement relating to Preferred Shares on any matter
submitted to a vote of the Shareholders of the Trust, all Shares of the Trust
then entitled to vote shall be voted in the aggregate as a single Class, except
that (i) when required by the 1940 Act to be voted by individual Class or
Series, Shares shall not be voted in the aggregate, and (ii) when the Trustees
have determined that a matter affects only the interests of Shareholders of
particular Classes or Series of Shares, only Shareholders of such Class or
Series of Shares, as applicable, shall be entitled to vote thereon.
There shall be no cumulative voting in the election of Trustees. Until
Shares of a particular Class or Series are issued and during any period when no
Shares of a particular Class or Series are outstanding, the Trustees may
exercise all rights of Shareholders of such Class or Series and may take any
action required by law, the Declaration, the By-Laws or any Statement to be
taken by Shareholders as to such Class or Series. The By-Laws or any Statement
may include further provisions for Shareholder votes and meetings and related
matters.
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ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall
set forth in the By-Laws, in any Statement, or in a duly adopted vote of the
Trustees such bases and times for determining the per Share net asset value of
the Shares, including any Class or Series of Shares or net income, or the
declaration and payment of dividends and distributions, as they may deem
necessary or desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust. (a) Subject to the voting powers of
one or more Classes or Series of Shares as set forth in this Declaration, and
in the By-Laws or in any Statement, the Trust may be terminated at any time (i)
by the affirmative vote of the holders of not less than two-thirds of the
Shares outstanding and entitled to vote at any meeting of Shareholders, or (ii)
by the Trustees by written notice to the Shareholders. Any Class of the Trust
may be terminated at any time (i) by the affirmative vote of the holders of not
less than two-thirds of the Shares of that Class outstanding and entitled to
vote at any meeting of Shareholders, or (ii) by the Trustees by written notice
to the Shareholders of that Class. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust
and all the powers of the Trustees under the Declaration shall continue until
the affairs of the Trust shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part of
the remaining Trust Property to one or more Persons at public or private sale
for consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and to do all
other acts appropriate to liquidate its business; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly in cash
and partly in kind, among the Shareholders of the Trust according to their
respective rights and as required or permitted by the preferences and special
or relative rights and privileges of any Class or Series of Shares.
The foregoing provisions shall also apply, with appropriate
modifications as determined by the Trustees, to the termination of any Class.
(b) After termination of the Trust or Class and distribution to the
Shareholders of the Trust or Class as herein provided, a majority of the
Trustees shall execute and lodge among the records of the
17
Trust an instrument in writing setting forth the fact of such termination, and
the Trustees shall thereupon be discharged from all further liabilities and
duties hereunder with respect to the Trust or Class, and the rights and
interests of all Shareholders of the Trust or Class shall thereupon cease.
Section 8.3. Amendment Procedure. (a) Except as specifically provided
herein, the Trustees may, without any Shareholder vote, amend or otherwise
supplement the Declaration by making an amendment, a Declaration of Trust
supplemental hereto or an amended and restated Declaration. Without limiting
the foregoing power reserved to the Trustees, the Trustees may, without any
Shareholder vote, amend the Declaration to designate or redesignate Classes or
Series, to change the name or principal office of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary or advisable, to
conform the Declaration to the requirements of applicable law, including the
1940 Act and the Internal Revenue Code of 1986, as amended, but the Trustees
shall not be liable for failing to do so. Shareholders shall have the right to
vote on (i) any amendment that would affect their right to vote granted in
Section 6.8; (ii) any amendment to Section 8.3(a) or (b); (iii) any amendment
as may be required by law, by the Trust's registration statement, by the By-
Laws, or by any Statement to be approved by Shareholders; and (iv) any
amendment submitted to them by the Trustees. Except to the extent a higher vote
is required by the By-Laws or any Statement, or as otherwise provided in
Section 8.3(c), any amendment on which Shareholders have the right to vote
shall require a Majority Shareholder Vote of the Shareholders of the Trust, or
the written consent, without a meeting, of the holders of Shares representing
not less than a majority of the voting power of the Shares of the Trust.
Notwithstanding the foregoing, if the Trustees shall determine that
any amendment required or permitted to be submitted to Shareholders would
affect only the interest of Shareholders of particular Classes of Shares, then
only Shareholders of such Classes shall be entitled to vote thereon, and no
vote of Shareholders of any other Classes shall be required.
(b) Nothing contained in the Declaration shall permit the amendment of
the Declaration to impair the exemption from personal liability of the
Shareholders, former Shareholders, Trustees, Advisory Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders or
former Shareholders. Notwithstanding anything else herein, any amendment to
Section 5.3 shall not limit the rights to indemnification or insurance provided
therein with respect to actions or omissions of persons entitled to
indemnification under such Section prior to such amendment.
(c) No amendment may be made which shall amend, alter, change or
repeal any of the provisions of Section 2.2, Section 8.2, this Section 8.3(c),
Section 8.4, Section 8.6 and Section 8.7 unless the amendment effecting such
amendment, alteration, change or repeal shall receive the affirmative vote or
consent of sixty-six and two-thirds percent (66 2/3%) of the Shares
outstanding and entitled to vote. Such affirmative vote or consent shall be in
addition to the vote or consent of the holders of Shares otherwise required by
law or by the terms of any Class or Series of preferred stock, whether now or
hereafter authorized, or any agreement between the Trust and any national
securities exchange.
(d) A certificate signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Shareholders (if
applicable) or by the Trustees as aforesaid or a copy of the Declaration, as
amended, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust.
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(e) Notwithstanding any other provision hereof, until such time as
Shares of a particular Class are first issued the Declaration may be terminated
or amended in any respect as to that Class, and as to any Class in which Shares
are not outstanding, by the affirmative vote of a majority of the Trustees or
by an instrument signed by a majority of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets. Subject to
applicable law and except as otherwise provided in Section 8.5 hereof, the
Trust or any Class thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property (or all or substantially all of the
Trust Property allocated to a particular Class of the Trust) including its good
will, upon such terms and conditions and for such consideration when and as
authorized (a) at any meeting of Shareholders called for the purpose by the
affirmative vote of the holders of not less than two- thirds of the Shares
outstanding and entitled to vote of all Classes of the Trust voting as a single
class if the entire Trust is merging, consolidating or disposing of assets, or
by the affirmative vote of the holders of not less than two-thirds of the
Shares of a Class if only that Class is merging consolidating or disposing of
assets, or (b) by the written consent, without a meeting, of the holders of not
less than two-thirds of such Shares or of the Shares of the particular Class as
described above, provided, however, that if such merger, consolidation, sale,
lease or exchange is recommended by the Trustees, the vote or written consent
of the holders of a majority of Shares of the Trust outstanding and entitled to
vote or of the Shares of the particular Class as described above, shall be
sufficient authorization. Any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of The Commonwealth of Massachusetts. Such
transactions may be effected through share-for-share exchanges, transfers or
sales of assets, in-kind redemptions and purchases, exchange offers, or any
other method approved by the Trustees. Nothing contained herein shall be
construed as requiring approval of Shareholders for any recapitalization or
reclassification of any Class, for any sale of assets in the ordinary course of
the business of the Trust, or for any transaction, whether deemed a merger,
consolidation, reorganization or exchange of shares or otherwise, whereby the
Trust issues shares of one or more Classes in connection with the acquisition
of assets (including those subject to liabilities) from any other investment
company or similar entity.
Section 8.5. Incorporation, Reorganization. The Trustees may, without
the vote or consent of Shareholders, cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction, or
any other trust (or series or class of a trust), unit investment trust,
partnership, limited liability company, association or other organization to
acquire all or a portion of the Trust Property (or all or a portion of the
Trust Property allocated to a particular Class) or to carry on any business in
which the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer such Trust Property to any such corporation, trust (or
series or class of a trust), partnership, limited liability company,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization in which the Trust holds or is about to acquire
shares or any other interest. The Trustees may also, without the vote or
consent of Shareholders, cause a merger or consolidation between the Trust or
any successor thereto and any such corporation, trust (or series or class of a
trust), partnership, association or other organization if and to the extent
permitted by law. The Trustees shall provide written notice to affected
Shareholders of each transaction pursuant to this Section 8.5. Such
transactions may be effected through share-for-
19
share exchanges, transfers or sales of assets, in-kind redemptions and
purchases, exchange offers, or any other method approved by the Trustees.
Section 8.6. Conversion. Notwithstanding any other provision of this
Declaration, the conversion of the Trust from a "closed-end company" to an
"open-end company," as those terms are defined in the 1940 Act, shall require
the affirmative vote or consent of the holders of sixty-six and two-thirds
percent (66 2/3%) of the Shares of each Class outstanding and entitled to
vote. Such affirmative vote or consent shall be in addition to the vote or
consent of the holders of the Shares otherwise required by law or by the terms
of any Class or Series of preferred stock, whether now or hereafter authorized,
or any agreement between the Trust and any national securities exchange.
Section 8.7. Certain Transactions. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in paragraph
(c) of this Section shall require the affirmative vote or consent of the
holders of sixty-six and two-thirds percent (66 2/3%) of the Shares
outstanding and entitled to vote, when a Principal Shareholder (as defined in
paragraph (b) of this Section) is a party to the transaction. Such affirmative
vote or consent shall be in addition to the vote or consent of the Shareholders
otherwise required by law or by the terms of any Class or Series of preferred
stock, whether now or hereafter authorized, or any agreement between the Trust
and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation,
person or other entity which is the beneficial owner, directly or indirectly,
of more than five percent (5%) of the outstanding Shares and shall include any
affiliate or associate, as such terms are defined in clause (ii) below, of a
Principal Shareholder. For the purposes of this Section, in addition to the
Shares which a corporation, person or other entity beneficially owns directly,
(a) any corporation, person or other entity shall be deemed to be the
beneficial owner of any Shares (i) which it has the right to acquire pursuant
to any agreement or upon exercise of conversion rights or warrants, or
otherwise (but excluding share options granted by the Trust) or (ii) which are
beneficially owned, directly or indirectly (including Shares deemed owned
through application of clause (i) above), by any other corporation, person or
entity with which its "affiliate" or "associate" (as defined below) has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of Shares, or which is its "affiliate" or "associate" as
those terms are defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect on December 1, 1986, and
(b) the outstanding Shares shall include Shares deemed owned through
application of clauses (i) and (ii) above but shall not include any other
shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) the merger or consolidation of the Trust or any subsidiary of the
Trust with or into any Principal Shareholder;
(ii) the issuance of any securities of the Trust to any Principal
Shareholder for cash;
(iii) the sale, lease or exchange of all or any substantial part of
the assets of the Trust to any Principal Shareholder (except assets having an
aggregate fair market value of less than $1,000,000, aggregating for the
purpose of such computation all assets sold, leased or exchanged in any series
of similar transactions within a twelve-month period);
20
(iv) the sale, lease or exchange to the Trust or any subsidiary
thereof, in exchange for securities of the Trust of any assets of any Principal
Shareholder (except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all assets sold,
leased or exchanged in any series of similar transactions within a twelve-
month period).
(d) The provisions of this Section shall not be applicable to (i) any
of the transactions described in paragraph (c) of this Section if the Board of
Trustees of the Trust shall by resolution have approved a memorandum of
understanding with such Principal Shareholder with respect to and substantially
consistent with such transaction, or (ii) any such transaction with any
corporation of which a majority of the outstanding shares of all classes of
stock normally entitled to vote in elections of directors is owned of record or
beneficially by the Trust and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section on the basis of information known to the
Trust, whether (i) a corporation, person or entity beneficially owns more than
five percent (5%) of the outstanding Shares, (ii) a corporation, person or
entity is an "affiliate" or "associate" (as defined above) of another, (iii)
the assets being acquired or leased to or by the Trust or any subsidiary
thereof, constitute a substantial part of the assets of the Trust and have an
aggregate fair market value of less than $1,000,000, and (iv) the memorandum of
understanding referred to in paragraph (d) hereof is substantially consistent
with the transaction covered thereby. Any such determination shall be
conclusive and binding for all purposes of this Section.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Filing. The Declaration and any subsequent amendment
hereto and any Statement shall be filed in the office of the Secretary of The
Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of The Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate,
provided that the failure to so file shall not invalidate this instrument or
any properly authorized amendment hereto. Each amendment so filed shall be
accompanied by a certificate signed and acknowledged by an officer or Trustee
stating that such action was duly taken in a manner provided herein, and unless
such amendment or such certificate sets forth some other time for the
effectiveness of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, integrating into a single instrument all of the
provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu
of the original Declaration and the various amendments thereto.
Section 9.2. Governing Law. The Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust, and the absence of a specific reference herein to
any such power, privilege, or action shall not imply that the Trust may not
exercise such power or privilege or take such action.
21
Section 9.3. Principal Office. The principal office of the Trust is
500 Boylston Street, Boston, Massachusetts. The Trustees, without a vote of
Shareholders, may change the principal office of the Trust.
Section 9.4. Counterparts. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 9.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be an officer
or Trustee hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders, (iv) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements
of the Declaration, (v) the form of any By-Laws adopted by or the identity of
any officers elected by the Trustees, or (vi) the existence of any fact or
facts which in any manner relates to the affairs of the Trust, shall be
conclusive evidence as to the matters so certified in favor of any Person
dealing with the Trustees and their successors.
Section 9.6. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
or other provisions of the Internal Revenue Code of 1986, as amended, or with
other applicable laws and regulations, the conflicting provision shall be
deemed never to have constituted a part of the Declaration; provided, however,
that such determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
22
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the day and year first written above.
----------------------------- -----------------------------
Robert E. Butler Robert J. Manning
c/o MFS Investment Management c/o MFS Investment Management
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
----------------------------- -----------------------------
Lawrence H. Cohn Lawrence T. Perera
c/o MFS Investment Management c/o MFS Investment Management
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
----------------------------- -----------------------------
David H. Gunning Robert C. Pozen
c/o MFS Investment Management c/o MFS Investment Management
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
----------------------------- -----------------------------
William R. Gutow J. Dale Sherratt
c/o MFS Investment Management c/o MFS Investment Management
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
----------------------------- -----------------------------
Michael Hegarty Laurie J. Thomsen
c/o MFS Investment Management c/o MFS Investment Management
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
----------------------------- -----------------------------
J. Atwood Ives Robert W. Uek
c/o MFS Investment Management c/o MFS Investment Management
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
23
SCHEDULE D
COMPARISON OF MATERIAL TERMS OF CURRENT
DECLARATION AND FORM OF REVISED DECLARATION
REVISED DECLARATION CURRENT DECLARATION
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Shareholder The Trust shall indemnify and hold each A shareholder or former shareholder held to
Liability: shareholder or former shareholder harmless be personally liable solely by reason of his
against all claims in connection with Trust or her being or having been a shareholder is
property or the acts, obligations or affairs entitled to be held harmless from and
of the Trust to which such shareholder may indemnified against all loss and expense
become subject solely by reason of his or arising from such liability.
her being or having been a shareholder.
Every written obligation, contract, Every note, bond, contract, instrument,
instrument, certificate, share, other certificate or undertaking made or issued by
security of the Trust or undertaking made or the Trustees or by any officers or officer
issued by the Trustees or officers shall must recite that the same was executed or
recite that the same is executed or made by made by or on behalf of the Trust or by them
or on behalf of Trustees and that the as Trustees or as officers and that
obligations of such instrument are not obligations of such instrument are not
binding on any of the Trustees, officers or binding upon any of them or shareholders
shareholders individually. individually.
Shareholder Voting Subject to the voting power of one or more Subject to the voting powers of one or more
Rights: Classes of Shares as set forth in the classes or series of shares as set forth in
Declaration, and in the By-Laws or in any the bylaws, shareholders have the power to
Statement, Shareholders have the power to vote only (i) for the election or removal of
vote only (i) for the election, when Trustees; (ii) with respect to any
submitted to shareholders, or removal of investment advisory or management contract;
Trustees; (ii) with respect to any (iii) with respect to any termination, by
investment advisory or management contract the shareholders, of the Trust; (iv) with
for which a shareholder vote is required by respect to any amendment of the Declaration
the 1940 Act; (iii) with respect to of Trust that requires shareholder
termination, by the shareholders, of the authorization; (v) with respect to
Trust or any Class; (iv) with respect to any derivative actions similar to a
amendment of the Declaration of Trust that Massachusetts corporation; and (vi) with
requires shareholder approval; (v) with respect to any other matters required by
respect to any merger, consolidation or sale law, the organizational documents,
of assets where shareholder authorization is registration with the Commission or other
required; (vi) with respect to any regulators or deemed desirable by the Board.
conversion of the Trust to an "open-end
company"; (vii) with respect to derivative
actions similar to a Massachusetts
corporation; and (viii) with respect to
certain transactions with principal
shareholders; and (ix) with respect to any
other matters required by the organizational
documents, registration with the Commission
or other regulators or deemed desirable by
the Board. Except as provided in the by-laws, each
whole share or fractional share is entitled
A shareholder is entitled to one vote for to one vote or a proportionate fractional
each share owned by such shareholder on each vote, respectively.
matter on which such shareholder is entitled
to vote, and each fractional share is On any matter submitted to a vote of
entitled to a proportionate fractional vote, shareholders, all shares of the Trust then
except as otherwise provided in the By-Laws entitled to vote shall, except as otherwise
or any Statement. provided in the by-laws or required by law,
be voted in the aggregate as a single class
Except as otherwise required by law or the without regard to classes or series of
organizational documents, shares shares.
representing a majority of the shares voted
in person or by proxy shall decide any Except when a different vote is required by
questions and a plurality shall elect a the provisions of the Declaration of Trust
Trustee, provided that where any provision or the by-laws, a majority of the shares
of law, the Declaration, the By-Laws, or a voted shall decide any questions and a
Statement requires that holders of any Class plurality shall elect a Trustee, provided
or Series shall vote as a class, then Shares that where the bylaws require that the
representing a majority of that Class or holders of any class or series shall vote as
Series vote on the matter (or a plurality an individual class or series, a majority of
with respect to the election of a Trustee) the shares of that class or series voted on
shall decide that matter insofar as that the matter (or a plurality with respect to
Class or Series is concerned. the election of a Trustee) shall decide that
matter insofar as that class or series is
concerned.
Shareholders Issue not addressed in the Declaration of If the Trustees shall fail to call or give
Meetings: Trust. notice of any meeting of shareholders for 30
days after written application requesting a
meeting by shareholders holding at least 10%
of the shares then outstanding of all
classes and series entitled to vote at such
meeting, then shareholders holding at least
10% of the shares then outstanding may call
and give notice of such meeting.
Shareholder Issue not addressed in the Declaration of 30% of the shares entitled to vote on a
Quorum: Trust, but intended to be addressed in the particular matter shall be a quorum, except
Bylaws as described in Proposal 2. where the by-laws require that holders of
any class or series shall vote as an
individual class or series, in which case
30% of the aggregate number of shares of
that class or series is necessary to
constitute a quorum.
Shareholder Consent of two-thirds of the shares Majority consent (or such larger proportion
Consent: outstanding and entitled to vote required as required by any express provision of the
for shareholder action taken without a Declaration of Trust or bylaws) required for
meeting, as relates to approval of merger/ shareholder action taken without a meeting.
consolidation, unless such merger/
consolidation is recommended by the
Trustees, in which case consent of a
majority of the shares outstanding and
entitled to vote is sufficient.
Majority consent required for shareholder
action taken without a meeting, as relates
to amendments to the Declaration of Trust.
Notice to Any notices to which a shareholder may be Notice of shareholder meetings is to be
Shareholders: entitled and any and all communications mailed, postage prepaid, not less than seven
shall be deemed duly served (i) if mailed, days in advance.
postage prepaid, (ii) if sent by electronic
transmission to shareholder, (iii) if mailed Notice must state the time, place and
or sent by electronic delivery to one or purpose of the meeting.
more members of shareholder's household, or
(iv) if otherwise sent in accordance with
applicable law or regulation.
Power to Amend Except where shareholder authorization is Except to the extent the bylaws or
Declaration of required, the Declaration of Trust may be applicable law require a higher vote or a
Trust: amended by the Trustees, to change the name separate vote of one or more classes or
or principal office of the Trust, to supply series of shares, the Declaration of Trust
any omission, to cure, correct or supplement may be amended at any time by an instrument
any ambiguous, defective or inconsistent in writing signed by a majority of the then
provision or if the Trustees deem it Trustees when authorized so to do by vote of
necessary or advisable, to conform the a majority of the shares entitled to vote
Declaration of Trust to the requirements of with respect to such amendment, except that
applicable law. shareholder authorization is not required
for amendments to authorize one or more
Shareholders have the right to vote on any classes or series of shares, to change the
amendment that would affect their right to name of the Trust, supply any omission, cure
vote, any amendment that requires a any ambiguity or cure, correct or supplement
shareholder approval under law or the any defective or inconsistent provision.
trust's registration statement, any
amendment to the declaration of trust
provision regarding amendment and any other
amendment submitted to them by the trustees.
Except to the extent a higher vote is
required by the By-Laws or any Statement, or
as otherwise provided below, any amendment
on which the shareholders have the right to
vote shall require a majority shareholder
vote.
No amendment may be made which shall impair
the exemption from personal liability of the
Shareholders, former Shareholders, Trustees,
Advisory Trustees, officers, employees and
agents of the Trust, permit assessments upon
Shareholders or former Shareholders, or
limit the rights to indemnification or
insurance with respect to actions or
omissions of persons entitled to
indemnification under the provisions of the
Declaration prior to such amendment.
No amendment may be made which shall amend, Except to the extent the bylaws or
alter, change or repeal any of the applicable law require a higher vote or a
provisions relating to term of trustees, separate vote, no amendment may be made
termination of the Trust or any Class, which repeals certain provisions relating to
amendments to the declaration of trust, the number and term of Trustees, the
merger, consolidation or sale of assets; conversion to an open-end fund or this
conversion and certain transactions unless provision, unless such amendment shall
the amendment effecting such amendment, receive the affirmative vote of 66 2/3%
alteration, change or repeal shall receive of the shares entitled to vote.
the affirmative vote or consent of sixty-six
and two-thirds percent (66 2/3%) of the
shares outstanding and entitled to vote.
Termination of Trust: Subject to the voting powers of one or more Subject to the voting powers of one or more
Classes of Shares, Shareholders have the classes or series of shares as set forth in
right to terminate the Trust or any Class the bylaws, the Trust may be terminated at
upon a vote of not less than two-thirds of any time by vote of shareholders holding at
the outstanding shares of the Trust or such least 66 2/3% of the shares entitled to vote.
Class.
Trustees may terminate the Trust or any Trustees may terminate the Trust by written
Class by written notice to shareholders. notice to the shareholders.
Merger or The Declaration of Trust provides that a Issue not addressed in the Declaration of
Consolidation consolidation, merger or sale of assets may Trust.
of Trust: be authorized by a two-thirds shareholder
vote at a meeting called for such purpose,
or by written consent, without a meeting, of
the holders of not less than two-thirds of
such shares, provided, however, that if such
merger, consolidation, sale, lease or
exchange is recommended by the Trustees, the
vote or written consent of the holders of a
majority of shares outstanding and entitled
to vote, shall be sufficient authorization.
Conversion: Notwithstanding any other provision of this The conversion of the Trust from a "closed-
Declaration, the conversion of the Trust end company" to an "open-end company,"
from a "closed-end company" to an "open-end together with any necessary amendments to
company," as those terms are defined in the the Declaration of Trust to permit such a
1940 Act, shall require the affirmative vote conversion, require the affirmative vote of
or consent of the holders of sixty-six and 66 2/3% of shares of each class entitled
two-thirds percent (66 2/3%) of the shares to vote.
of each Class outstanding and entitled to
vote.
Removal of Subject to the voting powers of one or more At any meeting called for such purpose and
Trustees: Classes of Shares, a Trustee may be removed subject to the voting powers of one or more
at any meeting of shareholders by a vote of classes or series of shares as set forth in
shares representing two-thirds of the the bylaws, a Trustee may be removed, with
outstanding shares of the Trust entitled to or without cause, by vote of 75% of the
vote for the election of such trustee. outstanding shares of the classes or series
entitled to vote for the election of such
A Trustee may be removed at any time, with Trustee.
or without cause, by written instrument The Trustees may remove a Trustee, with or
signed by at least three-quarters of the without cause, by vote of 75% of the
Trustees, specifying the date when such Trustees then in office.
removal shall become effective.
Trustee No Trustee, advisory Trustee, officer or Trustees are not responsible or liable for
Liability: employee or agent will be liable whatsoever any neglect or wrongdoing of any officer,
to any person in connection with Trust agent, employee, adviser, or principal
property or the affairs of the Trust, and no underwriter of the Trust. No Trustee is
Trustee or advisory Trustee will be liable responsible for the act or omission of any
or responsible in any event for any neglect other Trustee. Trustee is not protected
or wrongdoing of any officer, employee or against any liability to which he or she
agent of the Trust or for the act or would otherwise be subject by reason of
omission of any other Trustee. Trustees, willful misfeasance, bad faith, gross
advisory Trustees, officers, employees and negligence or reckless disregard of the
agents are not protected against any duties involved in the conduct of his or her
liability to the Trust or its shareholders office.
to which he or she would otherwise be
subject by reason of willful misfeasance,
bad faith, gross negligence or reckless
disregard of the duties involved in the
conduct of his or her office or position
with or on behalf of the Trust.
Trustee The Trust will indemnify each of its The Trust will indemnify each of its
Indemnification: Trustees, advisory Trustees and officers Trustees and officers (including persons who
against all liability and all expenses serve at the Trust's request as trustees or
reasonably incurred by him or her in officers of another organization in which
connection with any proceeding in which that the Trust has any interest as a shareholder,
individual becomes involved as a party or creditor or otherwise) against all
otherwise by virtue of being or having been liabilities and expenses, including amounts
a Trustee, advisory Trustee or officer and paid in satisfaction of judgments, in
against amount paid or incurred by that compromise, as fines and penalties, and as
individual in settlement thereof. No counsel fees, reasonably incurred by such
indemnification will be provided to a person while in office or thereafter, by
Trustee, advisory Trustee or officer of the reason of the indemnified person's service
Trust: (i) against any liability to the as a Trustee or officer. The Trust will not
Trust or the shareholders by reason of a indemnify its Trustees and officers with
final adjudication by the court that such respect to any matter in which such person
person engaged in willful misfeasance, bad has been finally adjudicated in a decision
faith, gross negligence or reckless on the merits not to have acted in good
disregard of the duties involved in the faith in the reasonable belief that such
conduct of that individual's office; or (ii) person's action was in the best interests of
with respect to any matter as to which such the Trust. The Trust will not indemnify its
person has been finally adjudicated not to Trustees and officers against any liability
have acted in good faith in the reasonable to the Trust or to its shareholders to which
belief that the individual's action was in he or she would otherwise be subject by
the best interest of the Trust. reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of
the duties involved in the conduct of such
person's office.
No indemnification will be provided in the In the absence of a final decision on the
event of a settlement or other disposition merits by an adjudicating body that such
not involving a final adjudication resulting person is liable by reason of willful
in a payment by a Trustee, advisory Trustee misfeasance, bad faith, gross negligence or
or officer, unless there has been a reckless disregard of the duties involved in
determination that such person did not the conduct of their office or did not act
engage in willful misfeasance, bad faith, in good faith in the reasonable belief that
gross negligence or reckless disregard of his or her actions were in the best
duties involved in the conduct of that interests of the Trust, indemnification will
individual's office by the court or other be provided if (a) approved as in the best
body approving the settlement or other interests of the Trust, after notice that it
disposition or by a reasonable determination involves such indemnification, by at least a
that the individual did not engage in such majority of the disinterested, non-Party
conduct: (i) by vote of a majority of the Trustees acting on the matter (provided that
disinterested, non-party Trustees; or (ii) a majority of the disinterested Trustees
by written opinion of the then-current legal then in office act on the matter) upon a
counsel to the disinterested Trustees or determination that such person acted in good
other legal counsel chosen by the majority faith in the reasonable belief that his or
of the disinterested, non-party Trustees. her actions were in the best interest of the
Trust and is not liable to the Trust or its
shareholders by reason of willful
misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in
the conduct of his or her office or (b)
there has been obtained an opinion in
writing of independent legal counsel to the
effect that such person acted in good faith
and such indemnification would not protect
such person against any liability to the
Trust to which such person would otherwise
be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless
disregard of the duties involved in the
conduct of his or her office.
Legal Legal expenses associated with authorized Legal expenses may be paid from time to time
Expenses: indemnification shall be advanced by the by the Trust in advance of the final
Trust prior to final disposition thereof disposition of any such proceeding if the
upon receipt of an undertaking by or on Trust receives a written undertaking by the
behalf of the indemnified person to repay indemnified person to reimburse the Trust in
such amount if it is ultimately determined the event it is ultimately determined that
that such person is not entitled to the indemnified person is not entitled to
indemnification, provided that (a) the such indemnification and (a) the indemnified
indemnified person provides security for his person provides security for his
undertaking or the Trust is insured against undertaking, or (b) the Trust is insured
such losses, or (b) a majority of the against losses arising by reason of such
disinterested, non-party Trustees or indemnified person's failure to fulfill his
independent legal counsel, through a written or her undertaking, or (c) a majority of the
opinion, determine that there is reason to disinterested, non-party Trustees (provided
believe that the indemnified person that a majority of such Trustees then in
ultimately will be found entitled to office act on the matter) or independent
indemnification. legal counsel, as expressed in a written
opinion, determines that there is reason to
believe that the indemnified person
ultimately will be found entitled to
indemnification.
Derivative No shareholder shall have the right to bring Issue not addressed.
Actions: or maintain any court action, proceeding or
claim on behalf of the Trust or any Class
without first making demand on the Trustees
requesting the Trustees to bring or maintain
such action, proceeding or claim. Such
demand shall be excused only when the
plaintiff makes a specific showing that
irreparable injury to the Trust or any Class
would otherwise result, or if a majority of
the Trustees or a majority of any committee
established to consider the merits of such
action, has a material personal financial
interest in the action at issue.
SCHEDULE E
CURRENT FUNDAMENTAL INVESTMENT POLICIES AND
PROPOSED ACTION TO BE TAKEN
MFS CALIFORNIA INSURED MUNICIPAL FUND
CURRENT FUNDAMENTAL POLICY PROPOSED POLICY
-------------------------- ---------------
The Fund may: The Fund may not:
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MFS CALIFORNIA INSURED MUNICIPAL FUND
CURRENT FUNDAMENTAL POLICY PROPOSED FUNDAMENTAL POLICY
The Fund may: The Fund may not:
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(1) issue senior securities or borrow money to (1) (a) borrow money except to the extent not
the extent permitted by the Investment Company prohibited by the 1940 Act and exemptive orders granted
Act of 1940, as amended; under such Act.
(1) (b) issue any senior securities except to the
extent not prohibited by the 1940 Act and exemptive
orders granted under such Act; for purposes of this
restriction, collateral arrangements with respect to
any type of swap, option, Forward Contracts and Futures
Contracts and collateral arrangements with respect to
initial and variation margin are not deemed to be the
issuance of a senior security;
-----------------------------------------------------------------------------------------------------------
(2) underwrite securities issued by others (2) underwrite securities issued by other persons,
only when disposing of portfolio securities; except that all or any portion of the assets of the
Fund may be invested in one or more investment
companies, to the extent not prohibited by the 1940 Act
and exemptive orders granted under such Act, and except
insofar as the Fund may technically be deemed an
underwriter under the Securities Act of 1933, as
amended, in selling a portfolio security;
-----------------------------------------------------------------------------------------------------------
(3) make loans through the lending of (3) make loans except to the extent not prohibited by
securities, through the purchase of debt the 1940 Act and exemptive orders granted under such
instruments or similar evidences of Act;
indebtedness typically sold to financial
institutions and through repurchase
agreements;
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(4) not concentrate more than 25% of its total (4) purchase any securities of an issuer in a
assets in any one industry. (In the utilities particular industry if as a result 25% or more of its
category, gas, electric, water, and telephone total assets (taken at market value at the time of
companies will be treated as separate purchase) would be invested in securities of issuers
industries.) whose principal business activities are in the same
industry.
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(5) (a) only own real estate acquired as a (5) purchase or sell real estate (excluding securities
result of owning securities; secured by real estate or interests therein and
(b) purchase and sell futures contracts securities of companies, such as real estate
and related options; investments trusts, which deal in real estate or
(c) not purchase or sell commodities or interests therein), interests in oil, gas or mineral
commodity contracts, except that, consistent leases, commodities or commodity contracts (excluding
with its investment policies, the Trust may currencies and any type of option, Futures Contracts
purchase and sell financial futures contracts and Forward Contracts or other derivative instruments
and options and may enter into swap whose value is related to commodities or other
agreements, foreign exchange contracts and commodity contracts) in the ordinary course of its
other financial transactions not requiring the business; the Fund reserves the freedom of action to
delivery of physical commodities hold and to sell real estate, mineral leases,
commodities or commodity contracts (including
currencies and any type of option, Futures Contracts
and Forward Contracts) acquired as a result of the
ownership of securities.
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M F S(R)
INVESTMENT MANAGEMENT CE-CCA-PRX-8/08
M F S(R) MFS INVESTMENT MANAGEMENT
INVESTMENT MANAGEMENT MFS(R) CALIFORNIA INSURED MUNICIPAL FUND - COMMON SHARES
500 Boylston Street, Boston, Massachusetts 02116
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST
NOTICE OF THE 2008 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 9, 2008
The signer of this proxy card hereby appoints Christopher R. Bohane, Timothy M. Fagan, Mark D. Fischer, Brian E. Langenfeld, Susan
S. Newton, and Susan A. Pereira and each of them separately, proxies, with power of substitution, and hereby authorizes each of
them to represent, and to vote as designated on the reverse side, at the Meeting of Shareholders of the above-referenced Trust,
on Thursday, October 9, 2008 at 10:30 a.m. Boston time, and at any adjournment thereof, all of the shares of the Trust that the
undersigned would be entitled to vote if personally present. Shareholders of each Trust will vote separately on each item. Only a
Trust's shareholders of record on August 4, 2008 will be entitled to vote at the Trust's Meeting of Shareholders.
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY
VOTING, SIGNING AND RETURNING THE ENCLOSED PROXY, WHICH WILL
HELP AVOID THE ADDITIONAL EXPENSE OF A SECOND SOLICITATION FOR
YOUR TRUST. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE
AND IS PROVIDED FOR YOUR CONVENIENCE.
PLEASE FOLD HERE AND RETURN ENTIRE BALLOT - DO NOT DETACH
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MFS(R) CALIFORNIA INSURED MUNICIPAL FUND - COMMON SHARES
2008 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 9, 2008
VOTE BY PHONE, BY MAIL OR VIA THE INTERNET! Please be sure to sign and date this proxy. Please sign
exactly as your name appears on this proxy. When shares are
CALL: TO VOTE YOUR PROXY BY PHONE, CALL 1-866-458-9858 held by joint tenants, both should sign. When signing as
AND ENTER THE 12-DIGIT CONTROL NUMBER FOUND ON attorney, executor, administrator, trustee, or guardian,
THE REVERSE SIDE OF THIS PROXY BALLOT. THIS please give full title as such. If a corporation, please sign
TOUCH-TONE VOTING LINE IS AVAILABLE 24 HOURS A in full corporate name by president or other authorized
DAY, SEVEN DAYS A WEEK. officer. If a partnership, please sign in partnership name by
authorized person.
LOG-ON: TO VOTE ON THE INTERNET GO TO WWW.PROXYONLINE.COM
AND ENTER THE 12-DIGIT CONTROL NUMBER FOUND ON PLEASE MARK YOUR VOTE ON THE REVERSE OF THIS PROXY BALLOT.
THE REVERSE SIDE OF THIS PROXY BALLOT.
MAIL: TO VOTE YOUR PROXY BY MAIL, CHECK THE APPROPRIATE --------------------------------------------------------------
VOTING BOX ON THE REVERSE SIDE OF THIS PROXY BALLOT, Shareholder sign here
SIGN AND DATE THE BALLOT AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR MAIL TO: THE
ALTMAN GROUP, P.O. BOX 238, LYNDHURST, NJ 07071. --------------------------------------------------------------
Joint owner sign here
--------------------------------------------------------------
Date:
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER'S VOTE IS IMPORTANT.
MFS(R) CALIFORNIA INSURED MUNICIPAL FUND - COMMON SHARES
CONTROL NUMBER
-------------------
123456789123
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WE NEED YOUR PROXY VOTE AS SOON AS POSSIBLE. YOUR PROMPT ATTENTION TO THIS MATTER WILL HELP TO AVOID THE EXPENSE
OF FURTHER SOLICITATION.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SIGNING SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSAL 4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED
TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THE TRUSTEES OF YOUR TRUST RECOMMEND THAT YOU VOTE
IN FAVOR OF ITEMS 1, 2 AND 3 AND AGAINST ITEM 4
PLEASE MARK THE BOXES BELOW IN BLUE OR BLACK INK.
PROPOSALS FOR WITHHOLD
1. ELECTION OF DIRECTORS:
01 - William R. Gutow [ ] [ ]
02 - Michael Hegarty [ ] [ ]
03 - Robert W. Uek [ ] [ ]
FOR AGAINST ABSTAIN
2. To approve an amended and restated Declaration of Trust. [ ] [ ] [ ]
3. To amend or remove certain fundamental investment policies of the Fund. [ ] [ ] [ ]
3. To act upon, if properly presented at the Meeting, a shareholder [ ] [ ] [ ]
proposal that the Board of Trustees take the steps necessary to merge
the Trust into California Municipal Bond Fund, an open end fund, or
otherwise enable shareholders to realize net asset value for their
shares.
5. To transact such other business as may properly come before the Meeting and any adjournments thereof.
(BARCODE HERE) (TAGID HERE) (CUSIP HERE)
M F S(R) MFS INVESTMENT MANAGEMENT
INVESTMENT MANAGEMENT MFS(R) CALIFORNIA INSURED MUNICIPAL FUND - PREFERRED SHARES
500 Boylston Street, Boston, Massachusetts 02116
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST
NOTICE OF THE 2008 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 9, 2008
The signer of this proxy card hereby appoints Christopher R. Bohane, Timothy M. Fagan, Mark D. Fischer, Brian E. Langenfeld, Susan
S. Newton, and Susan A. Pereira and each of them separately, proxies, with power of substitution, and hereby authorizes each of
them to represent, and to vote as designated on the reverse side, at the Meeting of Shareholders of the above-referenced Trust,
on Thursday, October 9, 2008 at 10:30 a.m. Boston time, and at any adjournment thereof, all of the shares of the Trust that the
undersigned would be entitled to vote if personally present. Shareholders of each Trust will vote separately on each item. Only a
Trust's shareholders of record on August 4, 2008 will be entitled to vote at the Trust's Meeting of Shareholders.
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY
VOTING, SIGNING AND RETURNING THE ENCLOSED PROXY, WHICH WILL
HELP AVOID THE ADDITIONAL EXPENSE OF A SECOND SOLICITATION FOR
YOUR TRUST. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE
AND IS PROVIDED FOR YOUR CONVENIENCE.
PLEASE FOLD HERE AND RETURN ENTIRE BALLOT - DO NOT DETACH
---------------------------------------------------------------------------------------------------------------------------------
MFS(R) CALIFORNIA INSURED MUNICIPAL FUND - PREFERRED SHARES
2008 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 9, 2008
VOTE BY PHONE, BY MAIL OR VIA THE INTERNET! Please be sure to sign and date this proxy. Please sign
exactly as your name appears on this proxy. When shares are
CALL: TO VOTE YOUR PROXY BY PHONE, CALL 1-866-458-9858 held by joint tenants, both should sign. When signing as
AND ENTER THE 12-DIGIT CONTROL NUMBER FOUND ON attorney, executor, administrator, trustee, or guardian,
THE REVERSE SIDE OF THIS PROXY BALLOT. THIS please give full title as such. If a corporation, please sign
TOUCH-TONE VOTING LINE IS AVAILABLE 24 HOURS A in full corporate name by president or other authorized
DAY, SEVEN DAYS A WEEK. officer. If a partnership, please sign in partnership name by
authorized person.
LOG-ON: TO VOTE ON THE INTERNET GO TO WWW.PROXYONLINE.COM
AND ENTER THE 12-DIGIT CONTROL NUMBER FOUND ON PLEASE MARK YOUR VOTE ON THE REVERSE OF THIS PROXY BALLOT.
THE REVERSE SIDE OF THIS PROXY BALLOT.
MAIL: TO VOTE YOUR PROXY BY MAIL, CHECK THE APPROPRIATE --------------------------------------------------------------
VOTING BOX ON THE REVERSE SIDE OF THIS PROXY BALLOT, Shareholder sign here
SIGN AND DATE THE BALLOT AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR MAIL TO: THE
ALTMAN GROUP, P.O. BOX 238, LYNDHURST, NJ 07071. --------------------------------------------------------------
Joint owner sign here
--------------------------------------------------------------
Date:
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER'S VOTE IS IMPORTANT.
MFS(R) CALIFORNIA INSURED MUNICIPAL FUND - PREFERRED SHARES
CONTROL NUMBER
-------------------
123456789123
-------------------
WE NEED YOUR PROXY VOTE AS SOON AS POSSIBLE. YOUR PROMPT ATTENTION TO THIS MATTER WILL HELP TO AVOID THE EXPENSE
OF FURTHER SOLICITATION.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SIGNING SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSAL 4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED
TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THE TRUSTEES OF YOUR TRUST RECOMMEND THAT YOU VOTE
IN FAVOR OF ITEMS 1, 2 AND 3 AND AGAINST ITEM 4
PLEASE MARK THE BOXES BELOW IN BLUE OR BLACK INK.
PROPOSALS FOR WITHHOLD
1. ELECTION OF DIRECTORS:
01 - J. Atwood Ives [ ] [ ]
02 - William R. Gutow [ ] [ ]
03 - Michael Hegarty [ ] [ ]
04 - Robert W. Uek [ ] [ ]
05 - Laurie J. Thompson [ ] [ ]
FOR AGAINST ABSTAIN
2. To approve an amended and restated Declaration of Trust. [ ] [ ] [ ]
3. To amend or remove certain fundamental investment policies of the Fund. [ ] [ ] [ ]
4. To act upon, if properly presented at the Meeting, a shareholder [ ] [ ] [ ]
proposal that the Board of Trustees take the steps necessary to merge
the Trust into California Municipal Bond Fund, an open end fund, or
otherwise enable shareholders to realize net asset value for their
shares.
5. To transact such other business as may properly come before the Meeting and any adjournments thereof.
(BARCODE HERE) (TAGID HERE) (CUSIP HERE)