<PAGE>
As Filed With The Securities And Exchange Commission On June 5, 1997
File No. 333-22967
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
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THE NAVELLIER PERFORMANCE FUNDS
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(Exact Name of Registrant as Specified in Charter)
One East Liberty Street, Third Floor, Reno, Nevada 89501
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(Address of Principal Executive Offices) (Zip Code)
(702) 785-2300
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(Registrant's Telephone Number, Including Area Code)
Mr. Louis G. Navellier
The Navellier Performance Funds
One East Liberty, Third Floor
Reno, Nevada 89501
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(Name and Address of Agent for Service of Process)
Copies to:
Samuel Kornhauser, Esq.
155 Jackson Street, Suite 1807
San Francisco, California 94111
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940; accordingly, no fee is payable herewith. The Registrant has
undertaken to file on February 28, 1998, a Rule 24f-2 Notice for its most recent
fiscal year ended December 31, 1997.
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following
pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letters to Shareholders
Notice of Special Meeting
PART A
Combined Prospectus/Proxy Statement
PART B
Statement of Additional Information
PART C
Other Information
Signatures
Exhibits
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
N-14 LOCATION IN
ITEM NO. REGISTRATION STATEMENT
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PART A. INFORMATION REQUIRED IN PROSPECTUS/PROXY STATEMENT
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1. Beginning of Registration Cover Page; Cross Reference Sheet
Statement and Outside Front
Cover Page of Prospectus
2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
3. Synopsis and Risk Factors Synopsis; Principal Risk Factors
4. Information About the Synopsis; The Proposed Transactions;
Transaction Appendix A
5. Information About the Synopsis; Comparison of Investment
Registrant Objectives and Policies; Principal Risk
Factors; Additional Information About the
Acquiring Fund and the Acquiring Fund
Shares; Miscellaneous; Current Prospectus
of The Navellier Aggressive Small Cap
Portfolio
6. Information About the Company Synopsis; Comparison of Investment
Being Acquired Objectives and Policies; Principal Risk
Factors; Additional Information About the
Portfolio and the Portfolio Shares;
Current Prospectus of The MFS Aggressive
Small Cap Equity Portfolio
7. Voting Information Introduction and Voting Information;
Synopsis
8. Interest of Certain Persons Introduction and Voting Information; The
and Experts Proposed Transactions; Miscellaneous
9. Additional Information Not Applicable
Required for Reoffering by
Persons Deemed to be
Underwriters
<PAGE>
N-14 LOCATION IN
ITEM NO. REGISTRATION STATEMENT
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PART B: INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information About Current Statement of Additional
the Registrant Information of The Navellier Aggressive
Small Cap Portfolio of The Navellier
Performance Funds
PART B: INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION (CONTINUED)
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13. Additional Information About Current Statement of Additional
the Company Being Acquired Information of The Navellier Series Fund
14. Financial Statements Current Annual Report of The Navellier
Performance Funds; Current Annual Report
of The Navellier Series Fund; "PRO FORMA
FINANCIAL STATEMENTS"
PART C: OTHER INFORMATION
--------------------------
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
<PAGE>
LOUIS G. NAVELLIER
AND
NAVELLIER MANAGEMENT INC.
(FORMER INVESTMENT ADVISOR TO THE NAVELLIER SERIES FUND)
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
1-800-887-8671
JUNE 5, 1997
TO THE SHAREHOLDERS OF
THE NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
RECENTLY RENAMED THE MFS AGGRESSIVE SMALL CAP EQUITY FUND
Dear Shareholder:
A special meeting of the shareholders of The Navellier Aggressive Small Cap
Equity Portfolio recently renamed the MFS Aggressive Small Cap Equity Fund (the
"Portfolio"), a series of The Navellier Series Fund recently renamed the MFS
Series Trust, will be held at 10:00 A.M., Pacific Standard Time, on June 19,
1997, at the offices of Navellier Management, Inc., at One East Liberty
Street, Third Floor, Reno, Nevada 89501 (the "Meeting"). The shareholders of
the Portfolio (the "Shareholders") will vote on an Agreement and Plan of
Reorganization (the "Plan"). Under the Plan, the formerly named Navellier
Aggressive Small Cap Equity Portfolio will merge into The Navellier Aggressive
Small Cap Portfolio (the "Acquiring Fund"), a separate portfolio of The
Navellier Performance Funds (the "Reorganization"). The Acquiring Fund has
investment objectives and policies which are essentially the same as the
investment objectives, investment style and policies of the Portfolio when it
was managed by Navellier Management, Inc.
If the Plan is approved and implemented by the Portfolio, the Shareholders of
the Portfolio will become shareholders of the Acquiring Fund and will receive
shares of the Acquiring Fund having an aggregate value equal to the aggregate
value of his or her investment in the Portfolio. No sales charge will be
imposed as a result of the Reorganization. The Reorganization will be
conditioned upon receipt of an opinion of counsel indicating that the
Reorganization will qualify as a tax-free reorganization for Federal income tax
purposes.
I and a group of shareholders of the Portfolio who own more than 10% of the
shares of the Portfolio and Navellier Management, Inc. (the former Investment
Advisor to The Navellier Series Fund's Navellier Aggressive Small Cap Equity
Portfolio) are proposing a shareholder vote for a merger of the Portfolio into
the Acquiring Fund. I and Navellier Management, Inc. ("The Navellier Group")
are soliciting your proxy (vote) because we (the "Navellier Group") believe that
the proposed merger should benefit Shareholders by reducing portfolio operating
costs through the elimination or reduction of duplicate or excessive expenses
and reinstating Navellier Management, Inc. and its investment style as your
Investment Advisor. We believe that you invested in the Portfolio because of
Navellier's unique investment style (application
<PAGE>
To the Shareholders of
The formerly named Navellier Aggressive Small Cap Equity Portfolio
June 5, 1997
Page 2
of modern portfolio theory) and that the independent Trustees did not act in
your best interests when they replaced Navellier Management, Inc. with another
investment advisor, Massachusetts Financial Services ("MFS") which uses a
different investment style and investment philosophy than the one you chose.
The Independent Trustees of The Navellier Series Fund did not vote to approve
the proposed Reorganization but rather, voted to direct Navellier Management,
Inc. to prepare and file this Proxy Solicitation so you, the Shareholders of the
formerly named Navellier Aggressive Small Cap Equity Portfolio, could decide
whether to merge the Portfolio into the Navellier Aggressive Small Cap Portfolio
of The Navellier Performance Funds. After Navellier Management, Inc. filed
preliminary proxy material with the Securities and Exchange Commission, we
believe the independent trustees of the Portfolio attempted to sabotage your
vote on the merger by refusing to rehire Navellier Management, Inc. and
substituting MFS as temporary investment advisor to the Portfolio. We believe
the independent trustees and MFS attempted to block the merger and keep MFS as
investment advisor by sending you inaccurate and misleading information about
Navellier Management, Inc. by falsely asserting that Navellier Management, Inc.
had "SEC regulatory problems". Those assertions regarding regulatory problems
and others regarding the withholding of information are FALSE. Navellier
Management, Inc. provided the Trustees with all information they were entitled
to and Navellier Management, Inc. had NO SEC or regulatory problems. We believe
the reason Navellier Management, Inc. was removed as Investment Advisor and
Administrator of the Portfolio was because the independent trustees were angry
at Navellier for firing their friend who was Navellier's head of marketing and
because the merger would eliminate their jobs and fees as Trustees. The
independent Trustees took and are taking their actions to "get back" at
Navellier. The Navellier Group believes that this Reorganization is in the best
interest of the Portfolio and the Shareholders and, therefore, recommends that
the Shareholders vote FOR approving the Plan.
WE STRONGLY URGE YOU TO REVIEW, COMPLETE, AND RETURN YOUR PROXY AS SOON AS
POSSIBLE. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. VOTING
YOUR SHARES EARLY WILL HELP TO AVOID COSTLY FOLLOW-UP MAIL AND TELEPHONE
SOLICITATION. LOUIS NAVELLIER AND NAVELLIER MANAGEMENT, INC. ARE PAYING FOR
THIS PROXY SOLICITATION AND WILL NOT SEEK REIMBURSEMENT FROM THE FUND OR YOU.
THE TRUSTEES AND MFS ARE CHARGING YOU AND THE OTHER SHAREHOLDERS FOR THEIR
OPPOSITION. AFTER REVIEWING THE ENCLOSED MATERIALS, PLEASE EXERCISE YOUR RIGHT
TO VOTE TODAY AND VOTE FOR BY COMPLETING, DATING, AND SIGNING EACH PROXY CARD
YOU RECEIVE AND MAILING THE PROXY IN THE SELF-ADDRESSED, POSTAGE-PAID ENVELOPE
THAT HAS BEEN ENCLOSED FOR YOUR CONVENIENCE. IT IS VERY IMPORTANT THAT YOU VOTE
AND THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER THAN JUNE 19, 1997.
<PAGE>
To the Shareholders of
The formerly named Navellier Aggressive Small Cap Equity Portfolio
June 5, 1997
Page 3
Please note that you may receive more than one proxy package if you hold shares
of the Portfolio in more than one account. You should return separate proxy
cards for each such account. If you have any questions, please call Navellier
Management, Inc. at 1-800-887-8671.
Sincerely,
Louis G. Navellier
------------------------------------------------
Shareholder, former Trustee of The Navellier
Aggressive Small Cap Equity Portfolio of The
Navellier Series Fund and President of Navellier
Management Inc., (former Investment Advisor to The
Navellier Aggressive Small Cap Equity Portfolio of
The Navellier Series Fund)
<PAGE>
LOUIS G. NAVELLIER
AND
NAVELLIER MANAGEMENT, INC.
(THE FORMER INVESTMENT ADVISOR TO THE NAVELLIER SERIES FUND)
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
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THE FORMERLY NAMED NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 19, 1997
To: The Shareholders of The Formerly Named Navellier Aggressive Small Cap
Equity Portfolio of The Formerly Named Navellier Series Fund
You are hereby notified that a Special Meeting of the Shareholders of the
formerly named Navellier Aggressive Small Cap Equity Portfolio of the formerly
named Navellier Series Fund will be held at the former offices of The Navellier
Series Fund located at One East Liberty Street, Third Floor, Reno, Nevada, on
June 19, 1997, at 10:00 a.m. (Pacific Standard Time), for the purpose of
considering and voting upon the following matters:
PROPOSAL 1. With respect to the Aggressive Small Cap Equity Portfolio of The
formerly named Navellier Series Fund (the "Portfolio")
To approve or disapprove an Agreement and Plan of Reorganization (the
"Plan"), whereby The formerly named Navellier Aggressive Small Cap
Equity Portfolio would transfer all of its assets to The Navellier
Aggressive Small Cap Portfolio (the "Acquiring Fund") of The Navellier
Performance Funds in a tax-free exchange for shares of beneficial
interest in the Acquiring Fund that would be distributed to the
shareholders of The Navellier Aggressive Small Cap Equity Portfolio.
Also, as part of the Plan, the Acquiring Fund would assume all the
liabilities of the formerly named Navellier Aggressive Small Cap
Equity Portfolio.
PROPOSAL 2. With respect to the Portfolio:
To transact such other business as properly may come before the
Meeting or any adjournment(s) thereof.
The transactions contemplated by the Plan of Reorganization and related
matters are described in the attached Combined Prospectus/Proxy Statement. A
copy of the form of the Plan is attached as Appendix A thereto.
<PAGE>
You are entitled to vote at the Meetings, and any adjournment(s) thereof,
if you owned shares of the Portfolio at the close of business on April 16, 1997.
If you attend the Meeting, you may vote your shares in person. If you do not
expect to attend the meeting, please complete, date, sign, and return the
enclosed proxy card marked FOR in the enclosed self-addressed, postage-paid
return envelope.
June 5, 1997 Louis G. Navellier
------------------------------------------------------
Shareholder and former Trustee of the formerly named
Navellier Aggressive Small Cap Equity Portfolio of the
formerly named Navellier Series Fund, and President of
Navellier Management, Inc. (former Investment Advisor
to the formerly named Navellier Series Fund)
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
PLEASE VOTE FOR PROPOSAL 1 ON THE ENCLOSED GOLD PROXY CARD, THEN PLEASE
DATE AND SIGN THE CARD AND RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED. IF
YOU SIGN, DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR
SHARES WILL BE VOTED "FOR" EACH APPLICABLE PROPOSAL NOTICED ABOVE. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE AND DELAY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR GOLD PROXY CARD PROMPTLY SO THAT A QUORUM MAY BE
ENSURED. A VOTE OF 67% OF THE SHARES OF THE PORTFOLIO WHICH ARE PRESENT IN
PERSON OR BY PROXY AND ENTITLED TO VOTE (IF MORE THAN 50% OF THE OUTSTANDING
SHARES OF RECORD ARE PRESENT IN PERSON OR BY PROXY) OR MORE THAN 50% OF THE
OUTSTANDING SHARES ENTITLED TO VOTE, WHICHEVER IS LESS, IS REQUIRED TO PASS ANY
PROPOSAL, SO RETURN OF YOUR PROXY IS IMPORTANT. UNLESS PROXY CARDS SUBMITTED BY
CORPORATIONS AND PARTNERSHIPS ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED
IN THE VOTING INSTRUCTIONS ON THE PROXY CARD, SUCH PROXY CARDS CANNOT BE VOTED.
Louis G. Navellier
---------------------------------------------
Shareholder and former Trustee of the
formerly Named Navellier Aggressive Small Cap
Equity Portfolio of the formerly named
Navellier Series Fund, and President of
Navellier Management, Inc. (former Investment
Advisor to the formerly named Navellier
Aggressive Small Cap Equity Portfolio)
<PAGE>
PROXY SOLICITATION
BY
LOUIS G. NAVELLIER
AND
NAVELLIER MANAGEMENT, INC.
(THE FORMER INVESTMENT ADVISOR TO THE FORMERLY NAMED
NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO OF
THE NAVELLIER SERIES FUND)
_______________
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
1-800-887-8671
COMBINED PROSPECTUS/PROXY STATEMENT
This combined prospectus/proxy statement is being furnished in connection with
the solicitation of proxies by Louis G. Navellier and Navellier Management,
Inc., the former Investment Advisor to the formerly named Navellier Aggressive
Small Cap Equity Portfolio ("Portfolio") of the formerly named Navellier Series
Fund ("Fund"), for use at a special meeting of shareholders ("Shareholders") of
the "Portfolio" to be held at 10:00 a.m., Pacific Standard Time, on June 19,
1997, at the offices of Navellier Management, Inc. located at One East Liberty
Street, Third Floor, Reno, Nevada, and at any adjournment(s) thereof (the
"Meeting"). The Meeting is being held so that shareholders can vote on a
proposal made by Louis Navellier and Navellier Management, Inc:
PROPOSAL 1. With respect to the Aggressive Small Cap Equity Portfolio of The
formerly named Navellier Series Fund (the "Portfolio")
To approve or disapprove an Agreement and Plan of Reorganization (the
"Plan"), whereby the formerly named Navellier Aggressive Small Cap
Equity Portfolio would transfer all of its assets to The Navellier
Aggressive Small Cap Portfolio (the "Acquiring Fund") of The Navellier
Performance Funds in a tax-free exchange for shares of beneficial
interest in the Acquiring Fund that would be distributed to the
shareholders of The Navellier Aggressive Small Cap Equity Portfolio.
Also, as part of the Plan, the Acquiring Fund would assume all the
liabilities of the formerly named Navellier Aggressive Small Cap
Equity Portfolio.
<PAGE>
The Fund is a series investment company organized by Louis Navellier as a
Business Trust in the State of Delaware with one class of common stock
outstanding, with such class representing an interest in a separate series of
the Fund. Since only one portfolio currently exists, all shareholders of the
Fund are being solicited in connection with the Meeting.
The purpose of the Meeting is to consider a proposed Plan of Reorganization (the
"Plan"), which would effect the merger of the Portfolio into The Navellier
Aggressive Small Cap Portfolio (the "Acquiring Fund") of The Navellier
Performance Funds, and the transactions contemplated thereby, as described below
(collectively, the "Reorganization"). The Navellier Performance Funds is a
series open-end investment company which seeks capital appreciation by investing
in growth securities. The Plan has been proposed by Mr. Navellier and Navellier
Management, Inc. (the Fund's former Investment Advisor). A group of
shareholders owning more than 10% of the shares of the Portfolio who would like
to vote on the Plan have demanded a shareholder meeting to vote on the proposal
to merge the Portfolio into the Acquiring Fund. The Board of Trustees of the
Fund (the "Board") had not approved the Plan but had instead directed Navellier
Management, Inc. to prepare a proxy solicitation so that a shareholders meeting
of the Portfolio could be held to vote on the Plan. Pursuant to the Plan, all
of the assets of the Portfolio would be acquired by the Acquiring Fund (which
has investment policies the same as those which the Portfolio had when
Navellier Management, Inc. was Investment Advisor to the Portfolio), in a
tax-free exchange for shares of beneficial interest in the Acquiring Fund
("Acquiring Fund Shares") and the assumption by the Acquiring Fund of all the
liabilities of the Portfolio. Specifically, it is proposed that the assets of
the Portfolio be transferred to the Acquiring Fund in a tax-free exchange for
Acquiring Fund Shares of value equal to the assets transferred from the
Portfolio. Following such transfer, the Acquiring Fund Shares received by the
Portfolio would then be distributed pro rata to the shareholders of the
Portfolio, and then the Portfolio would be liquidated. As a result of the
proposed transactions, each shareholder of the Portfolio would receive a number
of full and fractional Acquiring Fund Shares having a total net asset value
equal, on the effective date of the Reorganization, to the net asset value of
the Shareholder's shares of common stock in the Portfolio. In order to have a
merger, the Trustees must approve the merger.
This combined prospectus/proxy statement, which should be retained for future
reference, sets forth concisely the information about the Portfolio and the
Acquiring Fund, and the transactions contemplated by the proposed
Reorganization, that an investor should know before voting on the proposed
Reorganization. A copy of the current Prospectus of The Navellier Performance
Funds dated November 26, 1996 is included with this combined prospectus/proxy
statement for each Shareholder of the Portfolio, and is incorporated by
reference herein.
A Statement of Additional Information regarding The Navellier Performance Funds
dated November 26, 1996 has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated by reference herein. Copies
of such Statement of Additional Information also may be obtained without charge
by contacting Navellier Management Inc. ("NMI") at One East Liberty Street,
Third Floor, Reno, Nevada 89501, or by telephoning Navellier Management, Inc.,
toll-free at 1-800-887-8671.
A Prospectus and a Statement of Additional Information regarding the Portfolio
dated May 1, 1997 also has been filed with the Commission and each is
incorporated by reference herein.
2
<PAGE>
Copies of these Portfolio documents also may be obtained without charge by
contacting Navellier Management, Inc., at One East Liberty Street, Third Floor,
Reno, Nevada 89501, or by telephoning Navellier Management, Inc., toll-free at
1-800-887-8671.
A Statement of Additional Information dated June 5, 1997, relating to the
proposed transactions described in this combined prospectus/proxy statement,
including historical financial statements, has been filed with the Commission
and is incorporated by reference herein. Copies of this Statement of Additional
Information may be obtained without charge by contacting Navellier Management,
Inc., at One East Liberty Street, Third Floor, Reno, Nevada 89501, or by
telephoning Navellier Management, Inc., toll-free at 1-800-887-8671.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Combined Prospectus/Proxy Statement is June 5, 1997.
3
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
PAGE
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Introduction and Voting Information . . . . . . . . . . . . . . . . . . .
Special Meeting; Voting of Proxies; Adjournment . . . . . . . . .
Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . . .
Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . .
No Dissenters' Rights of Appraisal . . . . . . . . . . . . . . .
Additional Voting Information . . . . . . . . . . . . . . . . . .
Synopsis
The Proposed Reorganization . . . . . . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . . . .
Operations of The Navellier Aggressive Small Cap Portfolio of
The Navellier Performance Funds ("Acquiring Fund")
Following the Reorganization . . . . . . . . . . . . . . . . .
Management Fees, Administrative Fees, and Other
Operating Expenses . . . . . . . . . . . . . . . . . . . . .
Purchases and Exchanges . . . . . . . . . . . . . . . . . . . . .
Redemption Procedures and Fees . . . . . . . . . . . . . . . . .
Dividends and Distributions; Automatic Reinvestment . . . . . . .
Federal Tax Consequences of the Proposed Reorganization . . . . .
Costs and Expenses of the Reorganization . . . . . . . . . . . .
Continuation of Shareholder Accounts; Share Certificates . . . .
Form of Organization of the Acquiring Fund . . . . . . . . . . .
Comparison of Investment Objectives and Policies . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . . . .
Certain Investment Restrictions and Limitations . . . . . . . . .
Principal Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .
The Proposed Transactions . . . . . . . . . . . . . . . . . . . . . . . .
Agreement and Plan of Reorganization . . . . . . . . . . . . . .
Reasons for the Proposed Transactions . . . . . . . . . . . . . .
Description of Securities to Be Issued . . . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . . . . . .
Pro Forma Capitalization and Ratios . . . . . . . . . . . . . . .
Dissolution of the Portfolios . . . . . . . . . . . . . . . . . .
Navellier Group Recommendation . . . . . . . . . . . . . . . . .
Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information About the Acquiring Fund and the Acquiring
Fund's shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information About the Portfolio and the Portfolio Shares . . .
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Experts . . . . . . . . . . . . . . . .
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A: Form of Agreement and Plan of Reorganization
3
<PAGE>
PART A
<PAGE>
SOLICITATION BY LOUIS G. NAVELLIER
AND
NAVELLIER MANAGEMENT, INC.
(THE FORMER INVESTMENT ADVISOR TO THE NAVELLIER SERIES FUND)
ONE EAST LIBERTY STREET, THIRD FLOOR
RENO, NEVADA 89501
1-800-887-8671
---------------
THE FORMERLY NAMED NAVELLIER SERIES FUND
(THE FORMERLY NAMED
NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO)
---------------
COMBINED PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
JUNE 19, 1997
---------------
INTRODUCTION AND VOTING INFORMATION
SPECIAL MEETING; VOTING OF PROXIES; ADJOURNMENT
This combined prospectus/proxy statement is being furnished to the shareholders
of the formerly named Navellier Series Fund's formerly named Navellier
Aggressive Small Cap Equity Portfolio ("Portfolio") in connection with the
solicitation by Louis G. Navellier and Navellier Management, Inc., the former
Investment Advisor to the Portfolio, (collectively the "Navellier Group") of
proxies to be used at a special meeting of the shareholders of this Portfolio to
be held on June 19, 1997 at 10:00 a.m. at the offices of Navellier Management,
Inc., located at One East Liberty Street, Third Floor, Reno, Nevada 89501, and
at any adjournment(s) thereof (the "Meeting"). The purpose of the Meeting is to
vote on the proposed tax-free Reorganization (the "Plan") to merge the Portfolio
into The Navellier Aggressive Small Cap Portfolio (the "Acquiring Fund"), which
is a series of The Navellier Performance Funds, pursuant to the terms and
conditions of the Plan, as described below in greater detail. A vote on the
approval or disapproval of the Plan will be conducted at the Meeting by the
shareholders of the Portfolio.
Shareholders of record of the Portfolio at the close of business on April 16,
1997 (the "Record Date") will be entitled to vote at the Meeting. Such holders
of shares of beneficial interest in the Portfolio ("Portfolio Shares") are
entitled to one vote for each Portfolio Share held and to fractional votes for
fractional Portfolio Shares held. A quorum for the Portfolio must be present in
person or represented by Proxy for the transaction of business at the Meeting.
The holders of record of one-third of the
4
<PAGE>
Portfolio Shares outstanding at the close of business on that Record Date
present in person or represented by proxy will constitute a quorum for the
Meeting of the Shareholders of the Portfolio. A quorum being present, the
approval at the Meeting by the shareholders of the Portfolio for the
Reorganization requires the affirmative vote of at least 67% of the outstanding
shares of the Portfolio present in person or represented by proxy at the Meeting
if more than 50% of the outstanding shares of the Portfolio are present in
person or represented by proxy or more than 50% of the outstanding shares
entitled to vote, whichever is less.
If either (i) a quorum is not present at the Meeting or (ii) a quorum is present
but sufficient votes in favor of a matter proposed at the Meeting (a
"Proposal"), as set forth in the Notice of this Meeting, are not received by
June 19, 1997, then the persons named as attorneys and proxies in the enclosed
proxy ("Proxies") may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of at least one-third of the shares present in person or by
proxy. The persons named as Proxies will vote those proxies that such persons
are required to vote FOR such Proposal in favor of such an adjournment and will
vote those proxies required to be voted AGAINST such Proposal against such an
adjournment. A Shareholder vote may be taken on a Proposal in this combined
prospectus/proxy statement prior to any such adjournment if sufficient votes
have been received and it is otherwise appropriate.
The individuals named as Proxies on the enclosed GOLD proxy card will vote in
accordance with your direction, as indicated thereon, if your proxy card is
received and is properly executed. If you properly execute your GOLD proxy and
give no voting instructions with respect to a Proposal, your shares will be
voted in favor of the Proposal. The duly-appointed Proxies, in their
discretion, may vote upon such other matters as may properly come before the
Meeting. Mr. Navellier and the Navellier Group are not aware of any other
matters to come before the Meeting.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on the Plan, then the Portfolio Shares covered by such broker non-vote shall be
deemed present at the Meeting for the purposes of determining a quorum, but
shall not be deemed to be represented at the Meeting for the purposes of
calculating the number of Portfolio Shares present in person or represented by
proxy at the Meeting with respect to the Plan or any other Proposal.
PROXY SOLICITATION
Proxies will be solicited by mail and, if necessary to obtain the requisite
representation of Shareholders, Mr. Navellier also may solicit proxies by
telephone, telegraph, and/or personal interview by representatives of Mr.
Navellier, Navellier Management, Inc., employees of Navellier Management, Inc.,
the former Investment Advisor to the Portfolio, or their affiliates, and by
representatives of any independent proxy solicitation service retained for the
Meeting including MacKenzie Partners, Inc., a proxy solicitation firm. Mr.
Navellier has agreed to pay MacKenzie Partners a base fee of $15,000 plus a
bonus of $25,000 if the proposal herein is approved. Navellier Management,
Inc., whose principal location is One East Liberty Street, Third Floor, Reno,
Nevada 89501, will bear the costs of its solicitation, including the costs such
as the preparation and mailing of the notice, the combined prospectus/proxy
statement, and the proxy, and the solicitation of proxies, including
reimbursement to persons who forward proxy materials to their clients, and the
expenses connected with the solicitation of these proxies in person, by
telephone, or by telegraph. Banks, brokers, and other persons holding Portfolio
Shares registered in their names or in the names of their nominees will be
reimbursed for their expenses incurred in sending proxy materials to and
obtaining proxies from the beneficial owners of such Portfolio Shares.
Mr. Navellier, as sole owner of Navellier Management, Inc., has a financial
interest in the outcome of the vote. Since any merger and removal of the
present Trustees would result in Navellier
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Management, Inc. being investment advisor to the merged Portfolio, for which it
would receive investment advisory fees and administrative services fees.
The vote of the shareholders of the Acquiring Fund is not being solicited, since
their approval or consent is not necessary for the approval of the
Reorganization.
REVOCATION OF PROXIES
You may revoke your proxy: (i) at any time prior to the proxy's exercise by
written notice to Navellier Management, Inc. at the above address prior to the
Meeting; (ii) by the subsequent execution and return of another proxy prior to
the Meeting; or (iii) by being present and voting in person at the Meeting and
giving oral notice of revocation to the Chairman of the Meeting.
NO DISSENTERS' RIGHTS OF APPRAISAL
The purpose of the Meeting is to vote on the proposed tax-free Reorganization of
the Portfolio into the Acquiring Fund, as described below in greater detail.
The Portfolio is a separate series of the formerly named Navellier Series Fund.
The Declaration of Trust of the formerly named Navellier Series Fund (the
"Declaration of Trust") does not entitle shareholders to appraisal rights (i.e.,
to demand the fair value of their shares) in the event of a reorganization or
merger. Consequently, the shareholders will be bound by the terms of the Plan,
if the Plan is approved at the Meeting for the Portfolio. Any Shareholder,
however, may redeem his or her Portfolio Shares at net asset value prior to the
closing date of the proposed Reorganization.
ADDITIONAL VOTING INFORMATION
As of the Record Date, there were outstanding and entitled to be voted 5,269,046
Portfolio Shares. As of the Record Date [Charles Schwab & Company, San
Francisco, California held for the benefit of others ____% of the Portfolio.
The Fidelity Group held for the benefit of others ___% of the Portfolio and
Smith Barney, held for the benefit of others __% of the Portfolio. Trustees and
officers of The formerly named Navellier Series Fund own in the aggregate less
than 1% of the shares of the Portfolio. To the knowledge of Mr. Navellier, no
other person then owned more than 5% of the outstanding shares of the Portfolio.
As more fully described in this combined prospectus/proxy statement, the Meeting
has been called for the following purpose:
PROPOSAL 1. With respect to the Aggressive Small Cap Equity Portfolio of The
formerly named
Navellier Series Fund (the "Portfolio")
To approve or disapprove an Agreement and Plan of Reorganization (the
"Plan"), whereby The formerly named Navellier Aggressive Small Cap
Equity Portfolio would transfer all of its assets to The Navellier
Aggressive Small Cap Portfolio (the "Acquiring Fund") of The Navellier
Performance Funds in a tax-free exchange for shares of beneficial
interest in the Acquiring Fund that would then be distributed to the
shareholders of The formerly named Navellier Aggressive Small Cap
Equity Portfolio. Also, as part of the Plan, the Acquiring Fund would
assume all the liabilities of The formerly named Navellier Aggressive
Small Cap Equity Portfolio.
As described below, if holders of more than 50% of the outstanding shares of
record are present in person or by proxy, the approval by the Portfolio of
Proposal 1 at the Meeting requires the affirmative vote of at least 67% of the
Portfolio Shares present in person or represented by proxy at the Meeting or the
vote of more than 50% of the outstanding shares entitled to vote, whichever is
less.
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A GROUP OF SHAREHOLDERS OWNING OVER 10% OF THE OUTSTANDING SHARES OF THE
FORMERLY NAMED NAVELLIER SERIES FUND REQUESTED THIS MEETING. MR. NAVELLIER AND
NAVELLIER MANAGEMENT, INC. ("THE NAVELLIER GROUP") RECOMMEND THAT THE
REORGANIZATION DESCRIBED HEREIN BE APPROVED.
SYNOPSIS
The following is a summary of certain information contained elsewhere in this
combined prospectus/proxy statement, including the prospectuses of the Portfolio
and the Acquiring Fund and the Agreement and Plan or Reorganization.
Shareholders should read this entire combined prospectus/proxy statement
carefully.
THE PROPOSED REORGANIZATION
Shareholders of the Portfolio will be asked at the Meeting to vote upon and
approve the Plan, which provides for the Reorganization of the Portfolio. A
copy of the form of the Plan is set forth in Appendix A to this combined
prospectus/proxy statement. Pursuant to the Plan, the Portfolio, which is a
series of the formerly named Navellier Series Fund, a diversified, open-end
management investment company organized as a business trust under the laws of
the State of Delaware, would be merged tax-free into the Acquiring Fund of The
Navellier Performance Funds. The Acquiring Fund is a series of THE NAVELLIER
PERFORMANCE FUNDS, an open-end management investment company organized under the
laws of the State of Delaware as a business trust. The Plan sets forth the
terms and conditions under which the proposed Reorganization may be consummated.
The Independent Trustees (who are not "interested persons" as that term is
defined in the Investment Company Act of 1940) of The formerly named Navellier
Series Fund initially voted against the Reorganization, but then on November
11, 1996 instructed Navellier Management, Inc. to prepare a proxy statement so
that the shareholders of the Portfolio could vote on whether or not to merge
the Portfolio into the Acquiring Fund. Approval by the present Trustees or
newly elected Trustees of the Portfolio would be required in order to merge the
Portfolio into the Acquiring Fund.
Navellier Management, Inc. prepared and filed a Preliminary Proxy Statement and
Registration Statement with the Securities and Exchange Commission on March 7,
1997 pursuant to that November 11, 1996 authorization. The independent
trustees, however, took a number of actions thereafter which the Navellier Group
believe were designed to prevent the shareholders of the Portfolio from voting
on the proposal to merge and to defeat the proposed merger. For example, on
March 13, 1997, the independent trustees voted unilaterally to let Navellier
Management, Inc.'s investment advisory contract with the Portfolio lapse and to
hire Massachusetts Financial Services Company ("MFS") as investment advisor to
the Portfolio thereby effectively terminating Navellier Management, Inc. and
substituting MFS as investment advisor. The independent trustees then sent out
press releases and printed material to Portfolio shareholders. Those press
releases and printed materials falsely and inaccurately claim that Navellier
Management, Inc. had "SEC or regulatory problems" and failed to provide the
trustees with necessary information. Those statements are false. Navellier
Management, Inc. and the Portfolio did not have SEC or regulatory problems. Nor
did Navellier Management, Inc. fail to provide the trustees with necessary and
relevant information. Navellier Management, Inc. believes the independent
trustees are spreading these false statements in an effort to taint Navellier
Management, Inc. in order to induce shareholders to vote against the proposed
merger and to vote for their proposed proxy to hire MFS as investment advisor to
the Portfolio.
The Trustees, as part of their campaign against Navellier Management, Inc., held
a trustees' meeting on April 10, 1997 to remove Louis Navellier and Alan Alpers
as Trustees of the Portfolio. However, because the independent trustees only
constituted 60% (3 out of 5) of the Trustees and 67% of the Trustees had to vote
to remove a trustee, the independent trustees voted to increase the number of
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trustees from 5 to 6, then appointed Arnold Scott, a person affiliated with MFS.
Then when they had 6 trustees they voted to remove Louis Navellier and Alan
Alpers as Trustees. They gave no reason for the removal. Mr. Navellier
believes that the independent trustees removed him as part of their continuing
effort to impose MFS as investment advisor and to defeat the merger proposal.
The independent trustees also instructed Rushmore Savings & Trust, the
Portfolio's Transfer Agent and Custodian, not to provide Navellier Management,
Inc. with a shareholder list or with information regarding shareholders who have
redeemed. The information is necessary for Navellier Management, Inc. to have
an accurate tally of the shareholders necessary for a quorum, for an accurate
tally of the number of shareholders necessary to have a group of 10% or more of
the shareholders to demand a vote and to solicit shareholders' proxies.
Navellier Management, Inc. believes MFS and the independent Trustees attempted
to delay or block Navellier's access to this information in order to hinder the
merger proxy and shareholder vote.
MFS also told Deloitte & Touche, the Portfolio's independent accountants, not to
provide Navellier Management, Inc. with a consent to the use of the Portfolio's
Financial Statement. The Navellier Group believes that MFS has so instructed
Deloitte & Touche in order to make it more difficult and more time-consuming to
get a proxy out and hold a shareholder meeting on the merger. Also the
independent trustees have put out press releases saying even if the shareholders
vote not to hire MFS as investment advisor that they will not retain Navellier
Management, Inc. as Investment Advisor for the Portfolio. The independent
trustees have also said in press releases and media interviews that they did not
take their actions in order to preserve their jobs and fees as trustees.
However, they caused to be filed a preliminary proxy statement with the
Securities and Exchange Commission on April 10, 1997 in which they say they
"CURRENTLY EXPECT to resign as trustees of the Trust no later than eighteen
months following the Special Meeting." Thus the independent trustees make no
assurance that they will resign and even if they do they may stay on and
continue to be paid for 18 months more.
The independent trustees also stated in a March 26, 1997 press release, which
they issued, that Navellier Management, Inc.'s failure to renew malpractice
insurance was a reason why they did not renew Navellier Management, Inc.'s
investment advisory contract. The malpractice insurance was an expense to the
Portfolio's shareholders and would have provided insurance protection (at
shareholder expense) to the trustees of the Portfolio for their negligence. It
was the independent trustees who wanted such insurance.
Navellier Management, Inc. believes all of the above actions are indicative of
the independent trustees' efforts to block or defeat the proposed merger, to
install MFS as investment advisor to the Portfolio and for the independent
trustees to retain their positions and fees as trustees of the Portfolio.
THE NAVELLIER GROUP BELIEVES THE REORGANIZATION PLAN SHOULD BE APPROVED. The
consummation of the proposed transactions contemplated by the Reorganization is
subject to a number of conditions set forth in the Plan, some of which
conditions may be waived by the Trustees. See "The Proposed Transactions --
Agreement and Plan of Reorganization." Among the significant conditions (which
may not be waived) for the Reorganization are (i) the receipt by each of the
Funds of an opinion of counsel (or a revenue ruling of the U.S. Internal Revenue
Service) as to certain Federal income tax aspects of the Reorganization (see
"The Proposed Transactions -- Federal Income Tax Consequences") and (ii) the
approval of the Plan by the affirmative vote of at least 67% of the Portfolio
Shares present in person or by proxy if a quorum of shareholders is present or
the holders of at least a majority of the outstanding voting Shares of the
Portfolio, whichever amount is less and (iii) approval of the merger by the
present or newly elected Trustees of the Portfolio. The Plan provides, with
respect to the Reorganization, for the acquisition of all the assets of the
Portfolio by Acquiring Fund in exchange for Acquiring Fund Shares and the
assumption by Acquiring Fund of all the liabilities of the Portfolio. The
Acquiring Fund Shares received by Portfolio then would be distributed pro rata
to the Shareholders of the Portfolio, and the outstanding Portfolio Shares of
the Portfolio would be
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cancelled and the Portfolio would be liquidated. The Reorganization is
anticipated to occur on June 21, 1997, or such later date as the parties may
agree (the "Closing Date"). As a result of the proposed transactions
contemplated by the Reorganization, each shareholder would receive a number of
full and fractional shares of the corresponding Acquiring Fund having a total
net asset value equal in value to the net asset value of his or her Portfolio
Shares in the Portfolio as of the Closing Date of the Reorganization.
The following sets forth the Portfolio and the corresponding Acquiring Fund:
Portfolio of Acquiring Fund of
The Navellier Series Fund The Navellier Performance Funds
------------------------- -------------------------------
The formerly named Navellier The Navellier Aggressive
Aggressive Small Cap Equity Small Cap Portfolio
Portfolio
For the reasons set forth below under "The Proposed Transactions -- Reasons for
the Proposed Transactions", the Navellier Group, including Mr. Navellier and the
former Investment Advisor, have concluded that the Reorganization would be in
the best interests of the Portfolio and its shareholders and that the interests
of existing shareholders will not be diluted as a result of the transactions
contemplated by the Reorganization. The Navellier Group, therefore, has
submitted the Plan effecting the Reorganization for approval by the shareholders
of the Portfolio at the Meeting and recommends a vote FOR the Plan.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The Acquiring Fund and the Portfolio as it was originally chartered
and managed by Navellier Management, Inc. up to March 15, 1997 each were
chartered and managed the same, i.e. to invest in equities of small cap issuers.
When the independent trustees replaced Navellier Management, Inc. with MFS on
March 15, 1997, the investment style of the Portfolio changed. Navellier
Management, Inc. used a modern portfolio theory style of stock selection as does
the Acquiring Fund. The MFS investment advisor which the independent trustees
replaced Navellier Management, Inc. with does not use modern portfolio theory to
select stocks.
The investment objective of the Portfolio and of the Acquiring Fund is a
fundamental policy which may not be changed without the approval of a vote of at
least a "majority" (as that term is defined in the 1940 Act) of the outstanding
shares, respectively, of the Portfolio or the Acquiring Fund. All other
investment policies of the Portfolio and of the Acquiring Fund that are not
specified as fundamental are not fundamental policies and may be changed by the
Acquiring Fund Board of Trustees and the Portfolio Board of Trustees,
respectively, without shareholder approval.
THE NAVELLIER SMALL CAP EQUITY PORTFOLIO ("PORTFOLIO"). The investment
objective of the Portfolio is to seek to achieve long term growth of capital
primarily through investments in securities of small cap companies (companies
with market capitalization of less than $1 Billion) with appreciation potential
by employing a modern portfolio theory to select securities. While the
investment objectives remain the same, the stock selection process used to
achieve that investment objective for the Portfolio changed after March 15, 1997
when Navellier Management, Inc. was effectively terminated by the independent
trustees.
The investment objective of the Acquiring Fund is to seek to achieve long term
growth of capital primarily through investments in securities of small cap
companies (companies with market capitalization of less than $1 Billion) with
appreciation potential. The Acquiring Fund is a newly organized Portfolio of
The Navellier Performance Funds. The Acquiring Fund has no significant history
9
<PAGE>
of operations. The Acquiring Fund has the same investment advisor (Navellier
Management, Inc.) which the Portfolio had prior to March 15, 1997 and employs
the same modern portfolio investment style which was used by the Portfolio prior
to March 15, 1997.
For further discussion of the comparisons in the investment policies of the
Acquiring Fund and of the Portfolio, see "Comparison of Investment Objectives
and Policies" in this combined prospectus/proxy statement.
OPERATIONS OF THE NAVELLIER PERFORMANCE FUNDS AND THE ACQUIRING FUND FOLLOWING
THE REORGANIZATION
The Navellier Performance Funds and the Acquiring Fund will continue to operate
substantially the same as each did prior to the Reorganization. The
responsibilities, powers and fiduciary duties of the Trustees of The Navellier
Performance Funds are essentially the same as those of the Trustees of the
Portfolio. Subject to the provisions of The Navellier Performance Funds
Declaration of Trust, dated October 17, 1995 (the "Trust Declaration"), the
business of The Navellier Performance Funds and the Acquiring Fund is managed by
the Navellier Performance Funds Board of Trustees (the "Trust Board"), which has
all powers necessary and appropriate to carry out that business responsibility.
The Trust Board supervises the business affairs and investments of the Acquiring
Fund. The Acquiring Fund of The Navellier Performance Funds receives investment
advisory services from Navellier Management, Inc. which was, prior to March 15,
1997, also the Investment Advisor to the Portfolio. Administrative services for
The Navellier Performance Funds are provided for by Navellier Management, Inc.
MANAGEMENT FEES, ADMINISTRATIVE FEES, AND OTHER OPERATING EXPENSES
MANAGEMENT FEES. Navellier Management, Inc., was, prior to March 15, 1997 (when
it was replaced by MFS), investment advisor to the Portfolio pursuant to an
investment management agreement between the formerly named Navellier Series Fund
and Navellier Management, Inc. (the "Series Fund Management Contract").
Navellier Management, Inc. currently manages the investment and reinvestment of
the assets of the Acquiring Fund, subject to the general supervision and control
of the officers and Trustees of The Navellier Performance Funds. The Portfolio
paid Navellier Management, Inc. and currently pays MFS an investment advisory
fee at an annual rate of 1.25% of the aggregate average daily net asset value of
the Portfolio. The Acquiring Fund pays Navellier Management, Inc. an investment
advisory fee at an annual rate of 1.15% of the aggregate average daily net asset
value of the Acquiring Fund.
Before March 15, 1997, Navellier Management, Inc. complied with all applicable
state regulations which required it to make reimbursements, respectively to
Portfolio or Acquiring Fund in the event that Portfolio's or Acquiring Fund's
respective aggregate operating expenses (including the management fee, but
generally excluding taxes, interest, brokerage commissions, distribution fees,
and extraordinary expenses) were in excess of specific applicable limitations.
Navellier Management, Inc. continues to comply with those regulations as
investment advisor to the Acquiring Fund.
ADMINISTRATIVE FEES AND OTHER OPERATING EXPENSES. Portfolio pays its own
operating costs. Pursuant to an Administrative Services Agreement, Portfolio
paid Navellier Management, Inc. an annual fee, pro rata monthly, of 0.25% of the
aggregate average daily net asset value of the Portfolio to provide
administrative services including shareholder servicing services to the
Portfolio. After March 15, 1997, the Portfolio has been paying MFS the same
0.25% administrative services annual fee. The Acquiring Fund has an
Administrative Services Agreement with Navellier Management, Inc. which has the
same terms as the Administrative Services Agreement between Portfolio and
Navellier Management, Inc. prior to March 15, 1997.
The following sets forth the fund operating expenses (as a percentage of the
average daily net assets) for the Portfolio for the twelve-month period ended
December 31, 1996. Adjacent to the column for
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Portfolio expenses is presented the expected fund operating expenses (as a
percentage of the average daily net assets) of the Acquiring Fund into which the
Portfolio would merge under the Plan.
TABLE
COMBINED
PORTFOLIO ACQUIRING FUND PRO FORMA
--------- -------------- ---------
Management Fees 1.25% 1.15% 1.15%
Administrative Fees 0.25% 0.25% 0.25%
Other Expenses 0.36% 0.15% 0.15%
(before waiver of (pro forma (pro forma
reimbursement by after waiver of after waiver of
investment advisor) reimbursement by reimbursement by
investment advisor) investment
advisor)
Total Fund
Operating Expenses 1.86% 1.55% 1.55%
(before waiver of (pro forma (pro forma
reimbursement by after waiver of after waiver of
investment advisor) reimbursement by reimbursement by
investment advisor) investment
advisor)(1)
As reflected above, it is expected that the Acquiring Fund will have lower total
operating expenses than those historically incurred by Portfolio. Mr. Navellier
believes that the lower management fee charged to the Acquiring Fund and
avoiding or reducing duplicative costs by merging the Portfolio into the
Acquiring Fund will save the Portfolio in excess of $100,000 per year by
reducing the fees paid to trustees, outside counsel to the independent trustees,
reducing duplicative printing and mailing and reduced management fees, and that
the Reorganizations would be advantageous to and in the best interests of the
Shareholders. See "The Proposed Transactions -- Reasons for the Proposed
Transactions".
PURCHASES AND EXCHANGES
Acquiring Fund Shares are sold in a continuous offering and are offered to the
public, and may be purchased through securities dealers or directly from the
Acquiring Fund's underwriter, Navellier Securities Corp., at the net asset value
next computed after the receipt of a purchase order. No sales charge is
imposed by Acquiring Fund or Navellier Securities Corp. on any purchase of
Acquiring Fund Shares; however, securities dealers may charge a processing fee
for orders transmitted by such dealers to the Acquiring Fund. The Portfolio's
current underwriter, MFS Fund Distributors, Inc., sells Portfolio shares in a
continuous offering to the public at the public offering price which includes a
sales charge of between 3% and 0% as set forth in the current Prospectus for the
Portfolio, and underwriter also may charge a contingent deferred sales charge,
not to exceed 6% upon redemption of shares. Acquiring Fund does not charge any
contingent deferred sales charge upon redemption.
Upon the effectiveness of the Reorganization, shareholders of the Acquiring Fund
Shares will be entitled to the exchange privileges currently offered with
respect to Acquiring Fund Shares. The Acquiring Fund currently offers an
exchange privilege, including telephone exchange privileges, which, subject to
certain restrictions, permit shares of any of the two other portfolios of The
Navellier Performance Funds to be exchanged for shares of the Acquiring Fund.
These exchanges are based upon each Portfolio's net asset value per share next
computed following receipt of a properly-executed
- ------------------------
(1) This estimated 1.55% figure was arrived at based on an estimate that the
investment advisor would waive reimbursement of approximately $270,849 in
advanced expenses.
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exchange request, without any sales charge, and are not subject to an early
withdrawal fee. These exchanges also may be made only between
identically-registered accounts, and these exchange privileges also are
available only in states where the shares to be acquired may be legally sold.
If the proposed merger does not occur, Portfolio shareholders will not be able
to exchange their Portfolio shares for shares of any series of the Navellier
Performance Funds. Except for the foregoing, there would be no material
differences between the exchange privileges which shareholders of the Portfolio
currently have and the exchange privileges which such shareholders will have as
shareholders of the Acquiring Fund upon effectiveness of the Reorganization.
The Acquiring Fund has reserved the right to reject or refuse, at Acquiring
Fund's discretion, any order for the purchase of its shares in whole or in part.
REDEMPTION PROCEDURES AND FEES
Acquiring Fund Shares may be redeemed at a redemption price equal to the net
asset value of the shares as next computed following the receipt of a request
for redemption in proper form. Payment of redemption proceeds for redeemed
Acquiring Fund Shares ordinarily are made within seven days after receipt of a
redemption request in proper form and documentation. Shares of the Acquiring
Fund may be redeemed without charge. Since March 15, 1997, pursuant to
Portfolio's new distribution agreement with MFS Fund Distributors, Inc., MFS
Fund Distributors, Inc. may charge a contingent deferred sales charge of up to
6% upon redemption of shares by Portfolio shareholders.
DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC REINVESTMENT
The Acquiring Fund and Portfolio each declares and pays dividends from the net
investment income and short-term capital gains, if any, to shareholders during
December of each year and distributes long-term capital gains, if any, to
shareholders on an annual basis in December.
The income dividends and capital gains distributions for investors in the
Acquiring Fund and in the Portfolio are each automatically reinvested, without
sales charge, in additional shares of the Acquiring Fund and of the Portfolio
respectively at the applicable net asset value of such shares calculated on the
ex-dividend date unless such an investor has requested otherwise in writing.
FEDERAL TAX CONSEQUENCES OF THE PROPOSED REORGANIZATION
The Acquiring Fund and the Portfolio will receive, as a condition to the
Reorganization, an opinion of Samuel Kornhauser, counsel to The Navellier
Performance Funds, to the effect, for Federal income tax purposes, that the
proposed Reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(C) of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, it is believed that no gain or loss
generally will be recognized by The Navellier Performance Funds or by the
Acquiring Fund, by the Fund or by the Portfolio, or by their respective
shareholders (see "The Proposed Transactions -- Federal Income Tax
Consequences").
COSTS AND EXPENSES OF THE REORGANIZATION
The Navellier Group will bear the costs, expenses, and professional fees
incurred by them in the preparation and mailing of this notice and this combined
prospectus/proxy statement and the proxy, and in their solicitation of proxies,
which may include reimbursement to broker-dealers and others who forward proxy
materials to their clients and the costs of a professional solicitation firm.
See "Introduction and Voting Information -- Proxy Solicitation". The Portfolio
shareholders will bear the costs of the Portfolio Trustees' opposition, if any,
to the Navellier Group's proxy.
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CONTINUATION OF SHAREHOLDER ACCOUNTS; SHARE CERTIFICATES
As a result of the proposed transactions contemplated by the Reorganization of
the Portfolio into the Acquiring Fund, Shareholders would cease to be
shareholders of the Portfolio and would receive on the books of the Acquiring
Fund, that number of full and fractional Acquiring Fund Shares having an
aggregate net asset value equal to the aggregate net asset value of his or her
Portfolio Shares as of the close of business on the Closing Date.
The Acquiring Fund will establish accounts on the Closing Date for Shareholders
which will contain the appropriate number of Acquiring Fund Shares. Acceptance
of Acquiring Fund Shares by a Shareholder will be deemed to be authorization of
the Acquiring Fund and its agents to establish, with respect to the Acquiring
Fund, all of the account options, including telephone redemptions, if any, and
dividend and distribution options, as have been established for the
Shareholder's Portfolio account. Shareholders who are receiving payments under
an Automatic Investment Plan, with respect to Portfolio Shares, will retain the
same rights and privileges as to Acquiring Fund Shares under such an Automatic
Investment Plan after the Reorganization. Similarly, no further action will be
necessary in order to continue, with respect to Acquiring Fund Shares, any
retirement plan currently maintained by a Shareholder with respect to Portfolio
Shares.
As a series of a Delaware business trust, the Acquiring Fund will not issue
certificates evidencing ownership of Acquiring Fund Shares. Shareholders of
Portfolio will have their beneficial interests in Portfolio cancelled on the
books of Portfolio in order to receive Acquiring Fund Shares on the books of
Acquiring Fund as a result of the Reorganization.
No sales or other charges will be imposed in connection with the issuance of
Acquiring Fund Shares to Portfolio Shareholders pursuant to the Reorganization.
FORM OF ORGANIZATION OF THE NAVELLIER PERFORMANCE FUNDS
The Navellier Performance Funds is an unincorporated voluntary association
organized under the laws of the State of Delaware as a business trust pursuant
to the Declaration of Trust. The operations of The Navellier Performance Funds
and the Acquiring Fund (a Portfolio of The Navellier Performance Funds) are
governed by this Declaration of Trust, by The Navellier Performance Funds'
By-Laws, and by Delaware Law, as applicable. The formerly named Navellier
Series Fund is an unincorporated voluntary association organized under the laws
of the State of Delaware as a business trust. The operations of The formerly
named Navellier Series Fund and the Portfolio are governed by The Navellier
Series Fund Declaration of Trust dated May 28, 1993, and by Delaware law, as
applicable. Both The Navellier Performance Funds and The formerly named
Navellier Series Fund, as well as their series investment portfolios, are
subject to the provisions of the 1940 Act, and the rules and regulations of the
Commission thereunder. The Navellier Performance Funds is authorized to issue
an unlimited number of shares of beneficial interest in one or more series
investment portfolios or funds. Currently, The Navellier Performance Funds is
composed of three (3) separate investment portfolios: The Navellier Aggressive
Growth Portfolio, The Navellier Mid Cap Growth Portfolio and The Navellier
Aggressive Small Cap Portfolio ("the Portfolio"). See "The Proposed
Transactions - Description of Securities to Be Issued".
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
As discussed below, the investment objective and policies of the Acquiring Fund
and the Portfolio were, prior to March 15, 1997, essentially the same.
Effective March 16, 1997, the independent trustees of Portfolio retained MFS as
investment advisor to the Portfolio. MFS does NOT apply the proprietary modern
portfolio theory investment style which Navellier Management, Inc. applied to
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<PAGE>
investments for the Portfolio prior to March 15, 1997 and which Navellier
Management, Inc. still applies in its investment advice for the Acquiring Fund.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL. The Acquiring Fund and the Portfolio each invest in the common stocks
of small cap companies (companies with market capitalization of less than $1
Billion).
INVESTMENT OBJECTIVE OF THE ACQUIRING FUND.
The Investment Objective of the Acquiring Fund is to achieve long-term growth of
capital primarily through investment in small cap companies with appreciation
potential. The Acquiring Fund invests in securities traded in the United States
securities markets of domestic issuers and of foreign issuers. The sole
objective of the Acquiring Fund is to seek to achieve long term growth of
capital primarily through investments in securities of small cap companies
(companies with market capitalization of less than $1 Billion) with appreciation
potential by applying the proprietary modern portfolio theory techniques of
Navellier Management, Inc. There can be no assurance that the Acquiring Fund
will achieve its investment objectives. The Acquiring Fund's investment
objectives may not be changed without shareholder approval. The Acquiring Fund
should not be considered suitable for investors seeking current income.
Investors in this Portfolio pay no sales charge and no 12b-1 fee.
INVESTMENT OBJECTIVE OF THE PORTFOLIO
The investment objective of the Portfolio is the same as the investment
objective of the Acquiring Fund but, since March 15, 1997, when MFS was hired as
investment advisor to the Portfolio, the investment style (method of stock
selection) has changed. MFS does not use the modern portfolio theory style of
stock selection which Navellier Management, Inc. used for the Portfolio prior to
its replacement as investment advisor. The Portfolio's investment objective is
to achieve long-term growth of capital primarily through investment in small cap
companies with appreciation potential. The Portfolio invests in securities
traded in the United States securities markets of domestic issuers and of
foreign issuers. The sole objective of the Portfolio is to seek to achieve long
term growth of capital primarily through investments in securities of small cap
companies (companies with market capitalization of less than $1 Billion) with
appreciation potential. There can be no assurance that the Portfolio will
achieve its investment objectives. The Portfolio's investment objectives may
not be changed without shareholder approval. The Portfolio should not be
considered suitable for investors seeking current income. Investors in the
Portfolio pay a sales charge of between 3% and 0% and now may pay a contingent
deferred sales charge to MFS of up to 6% upon redemptions. There is no 12b-1
fee.
OTHER INVESTMENTS. Both the Acquiring Fund and the Portfolio may, for temporary
defensive purposes or to maintain cash or cash equivalents to meet anticipated
redemptions, also invest in debt securities and money market funds if, in the
opinion of the investment advisor, such investment will further their cash needs
or temporary defensive needs. In addition, when the investment advisor feels
that market or other conditions warrant it, for temporary defensive purposes,
both the Acquiring Fund and the Portfolio may retain cash or invest all or any
portion of their assets in cash equivalents, including money market mutual
funds. Under normal conditions, both the Acquiring Fund's and Portfolio's
holdings in such non-equity securities should not exceed 35% of the total assets
of such fund. If either the Acquiring Fund's or the Portfolio's assets, or a
portion thereof, are retained in cash or money market funds or money market
mutual funds, such cash will, in all probability, be deposited in
interest-bearing or money market accounts or Rushmore's money market mutual
funds. Rushmore Trust & Savings, FSB is also the Acquiring Fund's Transfer
Agent and Custodian. Cash deposits by both the Acquiring Fund and the Portfolio
in interest bearing instruments issued by Rushmore Trust & Savings ("Transfer
Agent") will only be deposited with the Transfer Agent if its interest rates,
terms,
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and security are equal to or better than could be received by depositing such
cash with another savings institution. Money market investments have no FDIC
protection and deposits in Rushmore Trust & Savings, FSB accounts have only
$100,000 protection.
CERTAIN INVESTMENT RESTRICTIONS AND LIMITATIONS
The investment restrictions and limitations of Acquiring Fund and those of the
current Portfolio are substantially similar, however the Navellier investment
style for the Acquiring Fund is different than the MFS investment style of the
current Portfolio. Unless otherwise specified, the investment restrictions and
limitations are considered to be "fundamental" policies, and, as such, may not
be changed without approval of the holders of a "majority" (as that term is
defined in the 1940 Act) of Acquiring Fund's or Portfolio's respective
outstanding shares.
Both the Acquiring Fund and Portfolio may not:
1. Purchase securities of any issuer, other than obligations issued or
guaranteed as to principal and interest by the United States government or its
agencies or instrumentalities, if immediately thereafter (i) more than 5% of
Acquiring Fund's or Portfolio's total assets (taken at market value) would be
invested in the securities of such issuer, or (ii) more than 10% of the voting
securities of any class of such issuer would be held by Acquiring Fund or by
Portfolio.
2. Concentrate the Portfolio investments of Acquiring Fund or of
Portfolio in any one industry. To comply with this restriction, no security
may be purchased for Acquiring Fund or Portfolio if such purchase would cause
the value of the aggregate investment of Acquiring Fund or of Portfolio in
any one industry to be 25% or more of Acquiring Fund's or Portfolio's total
assets (taken at market value).
3. Purchase any securities or other property on margin, or engage in
short sales of securities (unless it owns, or by virtue of its ownership of
other securities has the right to obtain without payment of any additional
consideration securities equivalent in kind and amount to the securities
sold); PROVIDED, HOWEVER, that both Acquiring Fund and Portfolio may obtain
short-term credit as may be necessary for the clearance of purchases and
sales of securities.
4. Make cash loans, except that both the Acquiring Fund and Portfolio
may purchase bonds, notes, debentures, or similar obligations which are
customarily purchased by institutional investors whether publicly distributed
or not.
5. Make securities loans, except that both the Acquiring Fund and
Portfolio may make loans of the securities of Acquiring Fund or of Portfolio,
provided that the market value of the securities subject to any such loans
does not exceed 33-1/3% of the value of the total assets (taken at market
value) of Acquiring Fund or Portfolio.
6. Make investments in real estate or commodities or commodity
contracts, including futures contracts, although both Acquiring Fund and
Portfolio may purchase securities of issuers which deal in real estate or
commodities although this is not a primary objective of the Acquiring Fund or
of Portfolio but only if such securities are small cap equity securities or
constitute less than 35% of the Acquiring Funds or Portfolio's total assets.
7. Invest in oil, gas, or other mineral exploration or development
programs, although both the Acquiring Fund and Portfolio may purchase
securities of issuers which engage in whole or in part of such activities,
but only if such securities are small cap equity securities or constitute
less than 35% of Acquiring Fund's or Portfolio's total assets.
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8. Invest in or sell puts, calls, straddles, and any combination thereof.
9. Purchase securities of companies for the purpose of exercising
management or control.
10. Participate in a joint or joint and several trading account in
securities.
11. Purchase the securities of (i) other open-end investment companies, or
(ii) closed-end investment companies.
12. Issue senior securities or borrow money, except that Acquiring Fund
and Portfolio may (i) borrow money only from banks for temporary or emergency
(not leveraging) purposes, including the meeting of redemption requests, that
might otherwise require the untimely disposition of securities, provided that
any such borrowing does not exceed 10% of the value of the total assets
(taken at market value) of Acquiring Fund or Portfolio, and (ii) borrow money
only from banks for investment purposes, provided that (a) after each such
borrowing, when added to any borrowing described in clause (i) of this
paragraph, there is an asset coverage of at least 300% as defined in the
Investment Company Act of 1940, and (b) is subject to an agreement by the
lender that any recourse is limited to the assets of Acquiring Fund or
Portfolio with respect to which the borrowing has been made. Neither
Acquiring Fund or Portfolio may invest in securities while the amount of its
borrowing exceeds 5% of its total assets.
13. Pledge, mortgage, or hypothecate its assets to an extent greater
than 10% of its total assets to secure borrowings made pursuant to the
provisions of Item 12 above.
PRINCIPAL RISK FACTORS
The principal risks associated with an investment in the Portfolio since March
15, 1997 and an investment in the Acquiring Fund are:
POSSIBLY NO INVESTMENT ADVISOR FOR THE PORTFOLIO AFTER JULY 12, 1997
On March 15, 1997 the independent Trustees allowed Navellier Management, Inc.'s
investment advisory contract with the Portfolio to expire so they could hire
MFS. However, MFS could only act as investment advisor for 120 days unless the
Portfolio's shareholders voted to retain MFS. The Portfolio shareholders did
not approve retaining MFS. Therefore, MFS cannot continue as investment advisor
after July 12, 1997. The Trustees may not be able to hire another investment
advisor for the Portfolio. Therefore, if the Portfolio is not merged into the
Acquiring Fund prior to July 12, 1997, the Portfolio could be without an
investment advisor.
LACK OF OPERATING HISTORY AND EXPERIENCE
The Acquiring Fund is a newly organized investment company portfolio of The
Navellier Performance Funds with a short history of operations. Navellier
Management, Inc. was organized on May 28, 1993 and managed the assets of The
formerly named Navellier Series Fund from January 3, 1994 (and the publicly
invested assets of The formerly named Navellier Series Fund since April 1,
1994) to March 15, 1997.
Navellier Management, Inc. is also the investment advisor to the Acquiring Fund
and has been managing the assets of The Navellier Performance Funds since
December 28, 1995. None of the principals, officers, legal counsel, or
directors of the Navellier Management, Inc. (including such of those persons
who are also controlling persons or legal counsel of the Acquiring Fund) had,
before June 1993 ever registered, operated, or supervised the operations of
investment companies, and there is no assurance that their past business
experiences or their experience with The Navellier Series Fund
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will enable them to successfully manage the assets of the Acquiring Fund in the
future. Samuel Kornhauser is the legal counsel to both the Acquiring Fund and
to Navellier Management, Inc., the Acquiring Fund's investment advisor. The
Independent Trustees of the Portfolio terminated Mr. Kornhauser (over Mr.
Navellier's objection) as counsel to the Portfolio on April 26, 1996 claiming
that he had a potential conflict of interest as counsel to the Portfolio and to
Navellier Management, Inc. Mr. Kornhauser denied any such conflict,
particularly in light of the fact that decisions regarding Navellier Management,
Inc.'s dealings with the Portfolio were made by the vote of the Independent
Trustees who were not represented by Mr. Kornhauser. Louis Navellier, the owner
of the Investment Advisor, has been in the business of rendering advisory
services to significant pools of capital such as retirement plans and large
investors since 1987.
Louis Navellier, the owner of Navellier Management, Inc., is also the owner of
another investment advisory firm, Navellier & Associates Inc., which presently
manages over $1.8 billion in investor funds. The owner of Navellier
Management, Inc. is also the owner of another investment advisory firm,
Navellier Fund Management, Inc., and controls other investment advisory entities
which manage assets and/or act as sub-advisors, all of which firms employ the
same basic modern portfolio theories and select many of the same
over-the-counter stocks and other securities which Navellier Management, Inc.
intends to employ and invest in while managing the portfolios of the Acquiring
Fund. Because many of the over-the-counter and other securities which
Navellier Management, Inc. intends to, or may, invest in have a smaller number
of shares available to trade than more conventional companies, lack of shares
available at any given time may result in the Portfolio or the Acquiring Fund
not being able to purchase or sell all shares which Navellier Management, Inc.
desires to trade at a given time or period of time, thereby creating a potential
liquidity problem which could adversely affect their performance. Since
Navellier Management, Inc. will be trading on behalf of the Portfolio and the
Acquiring Fund in some or all of the same securities at the same time that
Navellier & Associates, Inc., Navellier Fund Management, Inc. and other
Navellier controlled investment entities are trading, the potential liquidity
problem could be exacerbated. In the event the number of shares available for
purchase or sale in a security or securities is limited and therefore the trade
order cannot be fully executed at the time it is placed, i.e., where the full
trade orders of Navellier & Associates, Inc., Navellier Fund Management, Inc.
and other Navellier controlled investment entities and the Acquiring Fund or
Portfolio cannot be completed at the time the order is made, Navellier
& Associates Inc., and the other Navellier controlled investment entities and
Navellier Management, Inc. will allocate their purchase or sale orders in
proportion to the dollar value of the order made by the other Navellier
entities, and the dollar value of the order made by the Acquiring Fund or
Portfolio. For example, if Navellier & Associates, Inc. and Navellier Fund
Management, Inc. each place a $25,000 purchase order and Navellier Management,
Inc., on behalf of the Acquiring Fund or Portfolio, places a $50,000 purchase
order for the same stock and only $50,000 worth of stock is available for
purchase, the order would be allocated $12,500 each of the stock to Navellier &
Associates, Inc. and Navellier Fund Management, Inc., and $25,000 of the stock
to the Acquiring Fund or Portfolio. As the assets of the Acquiring Fund or
Portfolio increase, the potential for shortages of buyers or sellers increases,
which could adversely affect the performance of the Acquiring Fund or Portfolio.
While Navellier Management, Inc. generally does not anticipate liquidity
problems (i.e., the possibility that the Acquiring Fund or Portfolio cannot sell
shares of a company and therefore the value of those shares drops) unless the
Acquiring Fund or Portfolio has assets in excess of two billion dollars
(although liquidity problems could still occur when the Acquiring Fund or
Portfolio has assets of substantially less than two billion dollars), each
investor is being made aware of this potential risk in liquidity. These same
liquidity risks exist for the Portfolio.
An investment in shares of the Acquiring Fund involves certain speculative
considerations. There can be no assurance that any of the Acquiring Fund's
objectives will be achieved or that the value of the investment will increase.
An investment in shares of the Portfolio also involves the same risks.
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All securities in which the Acquiring Fund may invest are inherently subject to
market risk, and the market value of the Acquiring Fund's investments will
fluctuate. The Portfolio is subject to the same risks.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issuers. These considerations include, among others,
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under laws applicable
to foreign securities markets, the impact of political, social, or diplomatic
developments, difficulties in invoking legal process abroad, and the difficulty
of assessing economic trends in foreign countries. Navellier Management, Inc.
will use the same basic selection criteria for investing in foreign securities
as it uses in selecting domestic securities.
While, to some extent, the risks to the Acquiring Fund of investing in foreign
securities may be limited, since it may not invest more than 25% of its net
asset value in such securities and since it may only invest in foreign
securities which are traded in the United States securities markets, the risks
nonetheless exist. The same risks apply to the Portfolio's investments in
foreign securities.
PORTFOLIO TURNOVER
The annual rate of portfolio turnover for the Acquiring Fund is unknown, since
it is newly formed and has no significant operating history and therefore, no
annual portfolio turnover rate presently exists. Navellier Management, Inc.
estimates that the annual portfolio turnover rate will not exceed 200%.
Navellier Management, Inc., which was, up to March 16, 1997, also the
investment advisor to the Portfolio, will employ the same investment style for
the Acquiring Fund as it employed in managing the Portfolio, which had an annual
portfolio turnover rate in 1996 of 136.9%. However, these are NOT restrictions
on Navellier Management, Inc. and if, in Navellier Management Inc.'s judgment,
a higher annual portfolio turnover rate is required in order to attempt to
achieve a higher overall performance, then Navellier Management, Inc. is
permitted to do so. However, high portfolio turnover (100% or more) will result
in increased brokerage commissions, dealer mark-ups, and other transaction costs
on the sale of securities and on reinvestment in other securities and could
therefore adversely affect performance. To the extent that increased portfolio
turnover results in sales at a profit of securities held less than three months,
the Acquiring Fund's ability to qualify as a "regulated investment company"
under the Internal Revenue Code may be affected.
The risks associated with portfolio turnover for Acquiring Fund are essentially
the same for the Portfolio.
Both the Portfolio and the Acquiring Fund are diversified investment companies
and as such, at least 75% of each of said portfolio's total assets must be
invested in cash, U.S. Government securities and other securities. Such
securities of any one issuer are limited, for the purposes of this calculation,
to an amount not greater than 5% of the value of each of the portfolio's total
assets and 10% of the outstanding voting securities of any one issuer.
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THE PROPOSED TRANSACTIONS
AGREEMENT AND PLAN OF REORGANIZATION
The terms and conditions of the proposed merger, as contemplated by the
Reorganization, are set forth in the Plan. Significant provisions of the Plan,
with respect to the proposed Reorganization of the Portfolio into the Acquiring
Fund, are summarized immediately below. This summary, however, is qualified in
its entirety by reference to the Plan, a form of which is attached to this
combined prospectus/proxy statement as Appendix A.
With respect to the proposed Reorganization, the Plan contemplates (i) the
Acquiring Fund, on the closing date of the Reorganization, acquiring all of the
assets of the Portfolio in exchange for Acquiring Fund Shares and the assumption
by the Acquiring Fund of all the liabilities of the Portfolio and (ii) the
constructive distribution of Acquiring Fund Shares to the Shareholders of the
Portfolio in exchange for the Portfolio Shares of such Shareholders, all as
provided for by the Plan.
The assets of the Portfolio to be acquired by the Acquiring Fund include all
property, including without limitation, all cash, securities, commodities and
futures interests and dividends or interest receivables which are owned by the
Portfolio and any deferred or prepaid expenses shown as an asset on the books of
the Portfolio on the closing date of the Reorganization. The Acquiring Fund
will assume from the Portfolio all liabilities, expenses, costs, charges and
reserves reflected on an unaudited statement of assets and liabilities of the
Portfolio. The Acquiring Fund also will deliver Acquiring Fund Shares to the
Portfolio, which Acquiring Fund Shares the Portfolio then shall distribute to
the Shareholders of Portfolio in exchange for such Shareholders' Portfolio
Shares. The exchange of the Portfolio's assets for the Acquiring Fund Shares is
anticipated to occur on June 23, 1997, or such later date as the parties may
agree (the "Closing Date").
The value of the Portfolio's assets to be acquired by, and the value of the
Portfolio's liabilities to be assumed by, the Acquiring Fund and the net asset
value of a share of the Acquiring Fund will be determined as of immediately
after the close of regular trading on the NYSE on the Closing Date, using the
valuation procedures set forth in the Acquiring Fund's then-current Prospectus
and Statement of Additional Information.
Upon the Closing Date, the Portfolio will liquidate and distribute pro rata to
its Shareholders of record (as evidenced by such Shareholders' Portfolio Shares)
the Acquiring Fund Shares received by the Portfolio in exchange for such
Shareholders' interests in the Portfolio. This liquidation and distribution
will be accomplished by opening accounts on the books of the Acquiring Fund in
the name of each shareholder of record in the Portfolio and by crediting thereon
the shares previously credited to the Portfolio account of the shareholder on
those books, as described above (see "Synopsis -- Continuation of Shareholder
Accounts; Share Certificates"). Each such Acquiring Fund shareholder account
shall represent the respective pro-rata number of the Acquiring Fund Shares due
to such Shareholder.
Accordingly, every Shareholder will own Acquiring Fund Shares immediately after
the Reorganization, the total value of which Acquiring Fund Shares will be equal
to the total value of his or her Portfolio Shares immediately prior to the
Reorganization. Moreover, because the Acquiring Fund Shares will be issued at
net asset value in exchange for the net assets transferred from the Portfolio,
the total net asset value of the Acquiring Fund Shares received by Portfolio
Shareholders after the transfer of assets
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will be equal to the net asset value of the Portfolio Shares at the Closing
Date. Thus, the Reorganization will not result in a dilution in value of any
Shareholder account.
The consummation of the proposed transaction contemplated by the Reorganization
is subject to a number of conditions set forth in the Plan, some of which
conditions may be waived by the Series Fund Board or the Performance Funds
Board, or by an authorized officer of The formerly named Navellier Series Fund
or The Navellier Performance Funds, as appropriate. Among the significant
conditions (which may not be waived) for the Reorganization are: (i) the
receipt by the Portfolio and by the Acquiring Fund of an opinion of counsel to
The Navellier Performance Funds as to certain Federal income tax aspects of the
Reorganization (see "The Proposed Transactions -- Federal Income Tax
Consequences"); (ii) the approval of the Plan by the affirmative vote of the
holders of at least 67% of the Portfolio shares present in person or by proxy
entitled to vote at the Portfolio shareholders' meeting if a quorum is present
or a majority of the Portfolio's outstanding voting shares, whichever percentage
is less and (iii) approval of the Plan by the Portfolio's present or a newly
elected Board of Trustees. The Plan may be terminated and the Reorganization
abandoned at any time, before or after approval by the Shareholders, prior to
the applicable Closing Date or by mutual consent of the Portfolio and the
Acquiring Fund. In addition, the Plan may be amended in any mutually-agreeable
manner, except that no amendment may be made to the Plan subsequent to the
Meeting that would be materially detrimental to the Shareholders.
The Investment Advisor to the Acquiring Fund (Navellier Management, Inc.)
contemplates that the Portfolio's assets at the date of the transactions of the
Reorganization will be invested in a manner consistent with the investment
objectives and policies of both the Portfolio and the Acquiring Fund.
REASONS FOR THE PROPOSED TRANSACTIONS
Navellier Management, Inc. was effectively terminated as Investment Advisor to
Portfolio by the Portfolio's independent trustees on March 13, 1997 when they
refused to renew Navellier's investment advisory agreement. As a result,
Portfolio shareholders who invested in Portolio because they wanted Navellier
Management, Inc.'s unique investment style no longer have it. If, however, the
merger is approved, the Portfolio shareholders will again have the same
Navellier Management, Inc., investment style, objectives and policies which they
had in the Portfolio prior to March 16, 1997 and can regain that Navellier
Management, Inc. investment style tax-free through the merger. As described
below in greater detail, the Navellier Group and the Performance Fund's Board
believe the Reorganization would benefit Shareholders of the Portfolio by
effectively reinstating Navellier Management, Inc. as Investment Advisor to the
Portolio's shareholders by means of the merger into the Acquiring Fund and would
further benefit Portfolio shareholders by substantially reducing existing
operating costs and expenses of the Portfolio by an estimated $100,000 per year
or more thereby promoting more efficient operations. The proposed
Reorganization was first recommended to the Series Fund Board by Navellier
Management, Inc., the investment advisor to the Portfolio and by Louis
Navellier, a then Trustee of the Portfolio and one of the Portfolio Managers of
the Portfolio, at the April 26, 1996 meetings of the Board of Trustees of the
Portfolio because Mr. Navellier felt that a merger of the Portfolio into the
Acquiring Fund would substantially reduce the annual operating expenses of the
Portfolio by eliminating or reducing the Portfolio's annual Independent
Trustee's fees, expenses, independent counsel's fees and liability insurance; by
reducing duplicative costs of printing separate prospectuses, annual and
semi-annual shareholder reports, quarterly reports and mailings for both the
Portfolio and the Acquiring Fund; by reducing the management fee charged by the
Investment Advisor;
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and that a merger would generally increase the efficiency of operations and
would not result in any change in the way the assets were managed, since the
Investment Advisor, Navellier Management, Inc., would remain the same and would
operate pursuant to the same investment objectives and restrictions. For these
reasons, Mr. Navellier felt that the Reorganization of the Portfolio into the
Acquiring Fund was in the best interests of the Shareholders of the Portfolio
and that the interests of the Shareholders of the Portfolio would not be diluted
by the Reorganization.
Louis Navellier, as a Trustee of the Portfolio and as President and sole owner
of Navellier Management, Inc., the Investment Advisor to the Portfolio at the
time, also indicated to the Board of Trustees that if a merger of the Portfolio
into the Acquiring Fund did not occur, that Navellier Management, Inc. would
resign or terminate its services as Investment Advisor to the Portfolio. The
Board of Trustees initially voted 3 to 2 against the proposed merger (with Louis
Navellier and Alan Alpers voting in favor of the proposed merger and the three
Independent Trustees voting against a proposed merger) but asked Mr. Navellier
and Navellier Management, Inc. to delay or reconsider terminating their services
pending the Independent Trustees' further review of the proposed merger.
On May 10, 1996, at a meeting of the Portfolio's Board of Trustees, Mr.
Navellier and the Independent Trustees agreed to temporarily extend Navellier
Management, Inc.'s investment advisory agreement with the Portfolio through
November 15, 1996 and for the Independent Trustees to consider additional
information so that the Independent Trustees could further consider the possible
merits of the proposed merger. However, Mr. Navellier and the Independent
Trustees were not able to agree on the scope of information to be provided, in
particular, Mr. Navellier did not feel that he or all the other Navellier-owned
entities (which had nothing to do with the management of the Portfolio) had to
turn over to a hostile Portfolio Board of Trustees proprietary financial
information about those other entities. The independent trustees asked the SEC
to force Mr. Navellier to turn over such information, but the SEC declined to
take any action. As a result, at a November 11, 1996 meeting of the Trustees,
the three Independent Trustees voted to let the Portfolio shareholders decide
whether to merge into the Acquiring Fund and instructed Navellier Management,
Inc. to prepare and file a proxy statement so that a shareholder meeting of the
Portfolio could be held to vote on the proposed merger. On March 7, 1997,
pursuant to the November 11, 1996 authorization (and subsequent agreement),
Navellier Management, Inc. filed with the SEC a preliminary proxy statement
regarding the merger. However, on March 13, 1997, the independent trustees
unilaterally refused to renew Navellier Management, Inc. as Investment Advisor
and indicated in the media that they did not intend to pursue a vote on the
proposed merger. Those independent trustees have since taken a number of steps
to either prevent or delay a Portfolio shareholder vote on the merger, i.e. they
refused to rehire Navellier Management, Inc. as Investment Advisor to the
Portfolio and installed MFS as Investment Advisor; in March, 1997, they
instructed Rushmore Trust and Savings (the Transfer Agent) not to provide
Navellier Management, Inc. with current shareholder lists or shareholder
redemption information, which information would assist Navellier in the
solicitation of proxies for the shareholder vote on the merger; they sent out
press releases falsely accusing Navellier Management, Inc. of regulatory and SEC
problems and of failing to provide the Trustees with information (Mr. Navellier
believes these false accusations were intended to discredit Navellier
Management, Inc. in its proxy effort); on or about March 24, 1997, they
instructed Deloitte & Touche, the Portfolio's independent accountant, not to
consent to the use of reports concerning Portfolio financial statements (which
consent is necessary for the filing of Navellier's proxy material); they
unilaterally increased the number of Trustees from 5 to 6 so they could have a
2/3 majority of Trustees necessary to remove Mr. Navellier as Trustee of the
Portfolio in order to prevent him from monitoring their actions on behalf of the
shareholders. Mr. Navellier is convinced that the Trustees took these actions
because of their personality differences with Mr.
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Navellier and his agents and because the Trustees wanted to preserve their jobs
and fees as Trustees. Indeed, under the Trustees' recently filed proxy (to vote
on whether to retain MFS as investment advisor), the independent Trustees could
remain Trustees of the Portfolio for at least 18 months and possibly not resign
as Trustees at all.
Despite the Trustees' efforts, the Navellier Group strongly recommends that the
Shareholders of the Portfolio vote FOR Proposal 1 (the Reorganization of the
Portfolio) based on a number of factors, first and foremost of which is that the
Reorganization should result in substantial savings and be a means of
reacquiring Navellier Management, Inc. as Investment Advisor with the same
investment objectives, policies and investment style and would permit the
Shareholders of the Portfolio to pursue the same investment goals. The
Navellier Group also believes that the Reorganization, if effected, would enable
the resulting larger fund complex, with its larger asset base, to achieve
enhanced distribution capability through the no load fund supermarkets. It is
also believed that the anticipated reduction in costs should increase the
performance of the Portfolio.
The merger should permit the reduction or elimination of certain duplicative
costs and expenses presently incurred for services that are separately performed
for both the Portfolio and the Acquiring Fund. For example, the projected
$75,000 per annum in Independent Trustees fees and expenses expected to be paid
to the Independent Trustees of the Portfolio would be eliminated, as would the
$25,000 per year in liability insurance and the approximately $55,000 in
attorney's fees and costs of the outside counsel for the Independent Trustees.
Printing and mailing costs should be reduced as a result of a single prospectus,
annual report, and semi-annual report. As a general rule, economies can be
expected to be realized primarily with respect to fixed expenses, such as costs
of printing and fees for professional services. Expenses that are based on the
value of assets or the number of shareholder accounts, such as custody and
transfer agent fees, however, would be largely unaffected by the Reorganization.
Achievement of these goals, of course, cannot be assured.
The Navellier Group recommends the proposed Reorganization, and the transactions
contemplated thereby, to the Shareholders for the reasons set forth above as
well as on a number of other factors, including the following:
1. the continued availability of Navellier Management, Inc., as Investment
Advisor managing the assets of the Portfolio Shareholders which would be
lost if a merger is not approved;
2. the terms and conditions of the Reorganization and the fact that the
Reorganization would not result in dilution of Shareholder interests;
3. the fact that the investment objectives, policies, Navellier investment
style and restrictions of the Portfolio and the Acquiring Fund would again
be essentially the same;
4. similar service features available to shareholders in the Portfolio and the
Acquiring Fund;
5. the anticipated benefits to the Shareholders of the Portfolio of being part
of a family of funds; and
6. the tax-free nature and consequences of the Reorganization.
DESCRIPTION OF SECURITIES TO BE ISSUED
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GENERAL. The Acquiring Fund Shares to be issued pursuant to the proposed
Reorganization represent shares of beneficial interest in The Navellier
Aggressive Small Cap Portfolio of The Navellier Performance Funds, which is a
diversified, open-end management investment company. The Navellier Performance
Funds is an unincorporated voluntary association organized under the laws of the
State of Delaware as a business trust, pursuant to The Navellier Performance
Funds' Declaration of Trust, dated October 17, 1995 (the "Declaration of
Trust"). The Declaration of Trust authorizes The Navellier Performance Funds to
issue an unlimited number of shares of beneficial interest in one or more
series. Currently, The Navellier Performance Funds has authorized three series:
the Navellier Aggressive Growth Portfolio, the Navellier Mid Cap Growth
Portfolio and the Navellier Aggressive Small Cap Portfolio (which is the
"Acquiring Fund"). Other series in The Navellier Performance Funds, however,
may be added in the future. Each Acquiring Fund Share represents an equal
proportionate interest with each other Acquiring Fund Share and each such
Acquiring Fund Share is entitled to equal voting, dividend, liquidation and
redemption rights. Acquiring Fund Shares entitle their holders to one vote per
full share held and to fractional votes for fractional shares held. The
Acquiring Fund Shares do not have cumulative voting rights, preemptive rights or
subscription rights and are fully paid, nonassessable, redeemable and freely
transferable.
Currently, each shareholder of the Acquiring Fund is permitted to inspect the
records, accounts and books of The Navellier Performance Funds for any
legitimate business purpose.
MEETINGS. As a Delaware business trust, The Navellier Performance Funds is not
required to hold an annual shareholders' meeting if the 1940 Act does not
require such a meeting. The Declaration of Trust provides that a special
meeting of The Navellier Performance Funds shareholders of any series of The
Navellier Performance Funds may be called by the Trustees of The Navellier
Performance Funds ("Trustees") and shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
The Navellier Performance Funds entitled to vote. The Navellier Performance
Funds will hold special shareholder meetings as required or deemed desirable by
the Performance Board for such purposes as electing Trustees, changing
fundamental policies or approving an investment advisory or shareholder services
agreement. Any Trustee may be removed from office with or without cause at any
time either by written instrument, signed by at least two-thirds (2/3) of the
number of Trustees prior to such removal, specifying the date upon which such
removal shall become effective, or by a vote of The Navellier Performance Funds
shareholders owning at least two-thirds (2/3) of the outstanding shares of The
Navellier Performance Funds. If requested by shareholders of at least 10% of
the outstanding shares of The Navellier Performance Funds, The Navellier
Performance Funds will call a shareholder meeting for the purpose of voting upon
the question of the removal of a Trustee and will assist in communications with
other Navellier Performance Funds shareholders as required by Section 16(c) of
the 1940 Act.
SHAREHOLDER LIABILITY. Beneficial owners of a Delaware business trust, such as
The Navellier Performance Funds, except to the extent otherwise provided in the
governing instrument of the business trust, are entitled to the same limitation
of personal liability extended to stockholders of private for-profit
corporations. The Navellier Performance Funds's governing instrument, the Trust
Declaration, specifically disclaims shareholder liability for acts or
obligations of The Navellier Performance Funds and provides that The Navellier
Performance Funds' shareholders shall not be subject to any personal liability
for the acts or obligations of The Navellier Performance Funds. The Trust
Declaration further provides for indemnification, out of the property of the
series of The Navellier Performance Funds with respect to which such
shareholder's shares are issued, for all losses and expenses of any shareholder
held personally liable solely by reason of his or her being or having been
23
<PAGE>
a shareholder of such series and not because of his or her acts or omissions or
for some other reason. Thus, the risk of a shareholder of The Navellier
Performance Funds incurring financial loss on account of shareholder liability
is considered remote since such liability is limited to circumstances in which a
disclaimer is inoperative and The Navellier Performance Funds would be unable to
meet its obligations.
LIABILITY OF TRUSTEES. Under the Declaration of Trust of The Navellier
Performance Funds, a Trustee will be held personally liable only for the
Trustee's own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of a Trustee.
Under said Declaration of Trust and separate indemnity agreements, trustees and
officers of The Navellier Performance Funds ("Trust Officers") will be
indemnified for the expenses of litigation against them unless it is determined
that the person did not act in good faith in the reasonable belief that the
person's action was in or not opposed to the best interest of The Navellier
Performance Funds or if the person's conduct is determined to constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of that person's
duties. The Navellier Performance Funds also may advance money for these
expenses provided that the Trustee or the Trust Officer undertakes to repay The
Navellier Performance Funds if that person's conduct later is determined to
preclude indemnification. The Navellier Series Fund's Declaration of Trust and
separate indemnity agreements currently set forth comparable provisions.
The foregoing is only a summary of certain characteristics of (i) the shares of
beneficial interest of The Navellier Performance Funds to be issued pursuant to
the proposed Reorganization, (ii) the operations of The Navellier Performance
Funds' Declaration of Trust and By-Laws, and (iii) Delaware law. The foregoing
is not a complete description of the shares of beneficial interest of The
Navellier Performance Funds nor of the documents or laws cited. Shareholders
should refer to the provisions of Delaware law directly for a more thorough
description.
FEDERAL INCOME TAX CONSEQUENCES
The formerly named Navellier Series Fund and The Navellier Performance Funds
will receive, as a condition to the Reorganization, an opinion from Samuel
Kornhauser, counsel to The Navellier Performance Funds to the effect, for
Federal income tax purposes and with respect to the Reorganization, that:
1. the proposed Reorganization and the transactions contemplated thereby,
as described herein, will constitute a tax-free "reorganization"
within the meaning of Section 368(a)(1)(C) of the Internal Revenue
Code (the "Code");
2. no gain or loss generally will be recognized to the Portfolio
upon the transfer of all of the Portfolio's assets to the
Acquiring Fund in exchange solely for Acquiring Fund Shares and
the assumption by the Acquiring Fund of all the liabilities of
the Portfolio and the subsequent distribution of those Acquiring
Fund Shares to the Portfolio's Shareholders of record in
liquidation thereof;
3. no gain or loss will be recognized to the Acquiring Fund upon the
receipt of those Portfolio assets in exchange solely for
Acquiring Fund Shares and the assumption by the Acquiring Fund of
those Portfolio liabilities;
24
<PAGE>
4. the Acquiring Fund's basis for those Portfolio assets transferred
by the Portfolio to the Acquiring Fund will be the same as the
basis thereof in the Portfolio's hands immediately before the
Reorganization and the Acquiring Fund's holding period for those
assets will include the Portfolio's holding period therefor;
5. each Shareholder of record will recognize no gain or loss upon
the constructive exchange of all of his or her Portfolio Shares
solely for Acquiring Fund Shares pursuant to the Reorganization;
6. each Shareholder's basis for the Acquiring Fund Shares to be
received by the Shareholder pursuant to the Reorganization will
be the same as the Shareholder's basis in the Portfolio Shares to
be constructively surrendered in exchange therefor; and
7. each such Shareholder's holding period for those Acquiring Fund
Shares will include the period during which the Portfolio Shares
to be constructively surrendered in exchange for Acquiring Fund
Shares were held, provided the Portfolio Shares were held as
capital assets by that Shareholder on the date of the
Reorganization.
A revenue ruling of the Internal Revenue Service as to the Reorganization is not
expected to be obtained.
As of December 31, 1996, the Portfolio had a loss carryover of $1,910,202.00
and, as of December 31, 1996, the Acquiring Fund had no loss carryover. None,
some or all of the Portfolio's loss carryover may be lost if the merger occurs,
depending on future tax circumstances of the Portfolio.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL FEDERAL INCOME
TAX CONSEQUENCES OF THE REORGANIZATION AND SHOULD NOT BE CONSIDERED TO BE TAX
ADVICE. THERE CAN BE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL CONCUR
ON ALL OR ANY OF THE ISSUES DISCUSSED ABOVE. SHAREHOLDERS OF THE PORTFOLIO ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE AND LOCAL
TAX CONSEQUENCES WITH RESPECT TO THE FOREGOING MATTERS AND ANY OTHER
CONSIDERATIONS WHICH MAY BE APPLICABLE TO THE SHAREHOLDERS.
25
<PAGE>
PRO FORMA CAPITALIZATION AND RATIOS
The following tables show the capitalization of the Portfolio as of December 31,
1996 and the Acquiring Fund separately, as of February 28, 1997, and combined in
the aggregate on a pro forma basis, as of December 31, 1996, giving effect to
the Reorganization:
Acquiring Pro Forma
Portfolio Fund Combined
--------- ---- --------
Net Assets: $190,034,513 $0 $190,034,513
Net Asset Value Per Share $17.79 $0 $17.79
Shares Outstanding 10,683,004 0 10,683,004
DISSOLUTION OF THE PORTFOLIOS
If the Plan is approved by the Shareholders of the Portfolio and the
Reorganization is completed, the Portfolio will be dissolved as soon as
practicable in accordance with the provisions of Delaware law and the Plan. See
"The Proposed Transactions -- Agreement and Plan of Reorganization".
NAVELLIER GROUP RECOMMENDATION
The Navellier Group has solicited this shareholder vote to approve the
Reorganization and recommends that the Portfolio Shareholders vote FOR the
Reorganization on the enclosed GOLD proxy card. The Navellier Group, for the
reasons mentioned herein (See "Reasons For Proposed Transactions"), believes the
Reorganization of the Portfolio into the Acquiring Fund would result in the
reacquisition of Navellier Management, Inc. as Investment Advisor to Portfolio
shareholders and would result in substantial cost savings, would be in the best
interests of the Portfolio Shareholders and that their interests would not be
diluted.
The Navellier Group therefore recommends that the Shareholders of the Portfolio
vote FOR Proposal No. 1, the proposal to merge the Portfolio into the Acquiring
Fund and the transactions contemplated thereby.
With respect to the reorganization of the Portfolio into the Acquiring Fund, the
independent Trustees of the Portfolio by their actions and statements since
March 13, 1997, have opposed the proposed merger. In the event that the
Shareholders of the Portfolio do not approve the merger of the Portfolio into
the Acquiring Fund contemplated hereunder, Navellier Management, Inc. would not
be investment advisor to the Portfolio shareholders.
REQUIRED VOTE
As described above, if 50% of the outstanding shares entitled to vote) is
present in person or by proxy, the approval of the Plan by the Shareholders of
the Portfolio under Proposal 1 requires the affirmative vote of at least 67% of
the shares present in person or by proxy at a meeting in which a quorum is
present or more than 50% of the outstanding voting shares of the Portfolio ,
whichever is less.
26
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ADDITIONAL INFORMATION ABOUT
THE ACQUIRING FUND AND
THE ACQUIRING FUND SHARES
Additional information about the Acquiring Fund is included in the current
Prospectus of The Navellier Performance Funds, dated November 26, 1996. A copy
of that prospectus has been filed with the Commission and is incorporated by
reference herein. A Shareholder of the Portfolio will receive with this
combined prospectus/proxy statement, a copy of the prospectus for The Navellier
Performance Funds. Further information about the Acquiring Fund is included in
the Statement of Additional Information for The Navellier Performance Funds,
dated November 26, 1996. The Statement of Additional Information has been filed
with the Commission and is incorporated by reference herein. Copies of that
Statement of Additional Information for The Navellier Performance Funds may be
obtained without charge by contacting Navellier Management, Inc. (which provides
administrative services to the Acquiring Fund) or by telephoning Navellier
Management, Inc. toll-free at 1-800-887-8671.
ADDITIONAL INFORMATION ABOUT
THE PORTFOLIO AND THE PORTFOLIO SHARES
Additional information about the Portfolio is included in the current Prospectus
of the MFS Series Trust, dated May 1, 1997. A copy of that prospectus has been
filed with the Commission and is incorporated by reference herein. A
Shareholder will receive with this combined prospectus/proxy statement a copy of
the prospectus for the MFS Series Trust. Further information about the
Portfolio is included in the Statement of Additional Information for the MFS
Series Trust, dated May 1, 1997, which also has been filed with the Commission
and is incorporated by reference herein. A copy of this Statement of Additional
Information for the MFS Series Trust may be obtained without charge by
contacting Navellier Management, Inc. at One East Liberty Street, Third Floor,
Reno, Nevada 89501, or by telephoning Navellier Management, Inc. toll-free at
1-800-887-8671.
MISCELLANEOUS
AVAILABLE INFORMATION
The Navellier Performance Funds is registered under the 1940 Act and is subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended, and the 1940 Act and, in accordance therewith, files reports, proxy
materials and other information with the Commission. The formerly named
Navellier Series Fund also is registered under the 1940 Act and is required to
file reports under the 1940 Act. Such reports, proxy materials and other
information can be inspected at the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, DC 20549. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, DC 20539, at prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Acquiring Fund
Shares will be passed upon by Samuel Kornhauser, 155 Jackson Street, Suite 1807,
San Francisco, California 94111 ("Counsel").
27
<PAGE>
Counsel also will render an opinion as to certain Federal income tax
consequences of the Reorganization.
FINANCIAL STATEMENTS AND EXPERTS
Both the audited financial statement of the Acquiring Fund included in the
Statement of Additional Information related to this combined prospectus/proxy
statement (the "SAI") and the audited financial statement of the Portfolio
included in the SAI have been audited by Deloitte & Touche, LLP, independent
accountants, for the periods indicated in the reports of independent accountants
thereon which appear in the SAI. Such financial statements are relied upon as
reports of independent accountants and were given by such firm as experts in
accounting and auditing. Copies of these financial statements, as included in
the SAI, may be obtained without charge by contacting Navellier Management,
Inc., at One East Liberty Street, Third Floor, Reno, Nevada 89501, or by
telephoning Navellier Management, Inc. toll-free at 1-800-887-8671.
OTHER BUSINESS
The Navellier Group knows of no business to be brought before the Meeting other
than the matters set forth in this combined prospectus/proxy statement. Should
any other matter requiring a vote of Shareholders arise, however, the Proxies
will vote thereon according to their best judgment in the interests of the
Portfolio and of the Shareholders.
By Louis G. Navellier and Navellier Management, Inc.
By
------------------------------
Louis G. Navellier
One East Liberty Street, Third Floor
Reno, Nevada 89501
June 5, 1997
28
<PAGE>
THE MFS AGGRESSIVE SMALL CAP EQUITY FUND
FORMERLY KNOWN AS
PROXY THE NAVELLIER AGGRESSIVE SMALL CAP EQUITY PROXY
PORTFOLIO
THE MFS SERIES TRUST
FORMERLY KNOWN AS
THE NAVELLIER SERIES FUND
One East Liberty Street, Third Floor
Reno, Nevada 89501
--------------------
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
June 19, 1997
THIS PROXY IS SOLICITED BY LOUIS NAVELLIER, and NAVELLIER MANAGEMENT, INC.
(the "NAVELLIER GROUP") for use at a special meeting of the shareholders of The
MFS Aggressive Small Cap Equity Fund formerly known as The Navellier Aggressive
Small Cap Equity Portfolio (the "Portfolio"), an investment portfolio offered by
The MFS Series Trust formerly known as The Navellier Series Fund (the "Series
Fund") which meeting will be held at 10:00 A.M., Pacific Time, on June 19, 1997,
at the offices of Navellier Management, Inc., One East Liberty Street, Third
Floor, Reno Nevada 89501 (the "Meeting").
The undersigned shareholder of the Portfolio, revoking any and all previous
proxies heretofore given for shares of the Portfolio held by the undersigned
("Shares"), does hereby appoint Louis Navellier and Samuel Kornhauser, and each
and any of them, with full power of substitution to each to be the attorneys and
proxies of the undersigned (the "Proxies"), to attend the Meeting of the
shareholders of the Portfolio, and to represent and direct the voting interests
represented by the undersigned as of the record date for said Meeting for the
Proposals specified below.
This proxy, if properly executed, will be voted in the manner as directed
herein by the undersigned shareholder. Unless otherwise specified below in the
squares provided, the undersigned's vote will be cast "FOR" each Proposal. If
no direction is made for any Proposals, this proxy will be voted "FOR" any and
all such Proposals. In their discretion, the Proxies are authorized to transact
and vote upon such other matters and business as may come before the Meeting or
any adjournments thereof.
<PAGE>
Proposal 1 To approve or disapprove an Agreement and Plan of
Reorganization (the "Plan"), whereby The MFS Aggressive
Small Cap Equity Fund formerly known as The Navellier
Aggressive Small Cap Equity Portfolio would transfer all of
its assets to The Navellier Aggressive Small Cap Portfolio
(the "Acquiring Fund") of The Navellier Performance Funds in
exchange for shares of beneficial interest in the Acquiring
Fund that would then be distributed to the shareholders of
The MFS Aggressive Small Cap Equity Fund formerly known as
The Navellier Aggressive Small Cap Equity Portfolio. Also,
as part of the Plan, the Acquiring Fund would assume all the
liabilities of The MFS Aggressive Small Cap Equity Fund
formerly known as The Navellier Aggressive Small Cap Equity
Portfolio.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
To avoid the expense of adjourning the Meeting to a subsequent date, please
return this proxy in the enclosed self-addressed, postage-paid envelope. THIS
PROXY IS SOLICITED ON BEHALF OF LOUIS NAVELLIER and NAVELLIER MANAGEMENT, INC.
WHICH RECOMMEND A VOTE FOR PROPOSAL 1.
Dated _______________, 1997
------------------------ ----------------
Signature of Shareholder Number of shares
------------------------ ----------------
Signature of Shareholder Number of shares
This proxy may be revoked by the shareholder(s) at any time
prior to the special meeting.
NOTE: Please sign exactly as your name appears hereon. If shares are
registered in more than one name, all registered shareholders should sign this
proxy; but if one shareholder signs, that signature binds the other shareholder.
When signing as an attorney, executor, administrator, agent, trustee, or
guardian, or custodian for a minor, please give full title as such. If a
corporation, please sign in full corporate name by an authorized person. If a
partnership, please sign in partnership name by an authorized person.
<PAGE>
APPENDIX A:
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _________, 1997, by and between THE formerly named NAVELLIER
SERIES FUND (the "Series Fund"), a Delaware business trust with its principal
place of business at One East Liberty Street, Third Floor, Reno, Nevada 89501,
and THE NAVELLIER PERFORMANCE FUNDS (the "Performance Funds"), a Delaware
business trust with its principal place of business at One East Liberty Street,
Third Floor, Reno, Nevada 89501.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), with respect to the
proposed reorganization of the formerly named NAVELLIER AGGRESSIVE SMALL CAP
EQUITY PORTFOLIO (the "Portfolio"), which portfolio is a series of the Series
Fund, pursuant to which the Portfolio will be merged into and become part of The
Navellier Aggressive Small Cap Portfolio (the "Acquiring Fund") of the
Performance Funds (the "Reorganization"). Specifically, this Agreement is
intended to be and is adopted for the purpose of providing for the
Reorganization of the Portfolio into the Acquiring Fund. The Reorganization
will consist of the transfer of all of the assets of the Portfolio to the
Acquiring Fund in exchange solely for (i) shares of beneficial interest in the
Acquiring Fund (the "Acquiring Fund Shares") and (ii) the assumption by the
Acquiring Fund of all the liabilities of the Portfolio and the distribution of
the Acquiring Fund Shares to the Shareholders of the Portfolio in complete
liquidation of the Portfolio, as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Performance Funds and the Series Fund are both open-end,
registered investment companies of the management type and the Portfolio owns
securities which are assets of the character in which the Acquiring Fund is
permitted to invest;
WHEREAS, the Shareholders of the Series Fund have determined, with respect
to such Reorganization, that the exchange of all of the assets of the Portfolio
for Acquiring Fund shares and the assumption of all the liabilities of the
Portfolio by the Acquiring Fund is in the best interests of the Portfolio and
its Shareholders and that the interests of the existing Shareholders of the
Portfolio would not be diluted as a result of this transaction; and
WHEREAS, the purpose of the Reorganization is to combine the assets of the
Acquiring Fund with those of the Portfolio in an attempt to achieve greater
operating economies and to retain Navellier Management, Inc. as the investment
advisor to manage the assets of the Portfolio;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree, with
respect to the Reorganization, as follows:
A-1
<PAGE>
1. THE TRANSFER OF ASSETS OF THE PORTFOLIO TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL THE LIABILITIES OF THE
PORTFOLIO, AND THE LIQUIDATION OF THE PORTFOLIO
1.1 For the Reorganization, the closing shall take place as provided for
in paragraph 3.1 ("Closing") and the provisions of paragraphs 1 through 8 of
this Agreement shall apply. At the Closing, the Portfolio agrees to transfer
all of its assets, as set forth in paragraph 1.2, to the Acquiring Fund, and the
Acquiring Fund agrees in exchange therefor: (1) to deliver to the Portfolio the
number of Acquiring Fund Shares, including fractional Acquiring Fund Shares,
determined by dividing the value of the Portfolio's net assets computed in the
manner and as of the time and date set forth in paragraph 2.1 by the net asset
value of one Acquiring Fund Share computed in the manner and as of the time and
date set forth in paragraph 2.2; and (ii) to assume all the liabilities of the
Portfolio, as set forth in paragraph 1.3.
1.2 The assets of the Portfolio to be acquired by the Acquiring Fund
shall consist of all property, including, without limitation, all cash,
securities, interests, and dividends or interest receivable which are owned by
the Portfolio and any deferred or prepaid expenses shown as assets on the books
of the Portfolio on the closing date provided in paragraph 3.1 (the "Closing
Date")
1.3 The Portfolio will endeavor to discharge all of its known liabilities
and obligations prior to the Closing Date. The Acquiring Fund shall assume all
liabilities, expenses, costs, charges and reserves reflected on an unaudited
statement of assets and liabilities of the Portfolio prepared by the
administrator of the Acquiring Fund and the Portfolio, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period.
1.4 Immediately after the transfer of assets provided for in paragraph
1.1, the Portfolio will distribute pro rata to its Shareholders of record,
determined as of immediately after the close of business on the Closing Date
(the "Portfolio Shareholders"), the Acquiring Fund Shares received by the
Portfolio pursuant to paragraph 1.1 and will completely liquidate. Such
distribution and liquidation will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Portfolio on the books
of the Acquiring Fund to the share records of the Acquiring Fund in the names of
the Portfolio Shareholders and representing the respective pro rata number of
the Acquiring Fund Shares due such Shareholders. All issued and outstanding
shares of the Portfolio will simultaneously be canceled on the books of the
Portfolio. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange. Ownership of Acquiring
Fund Shares will be shown on the books of the Acquiring Fund's transfer agent.
2. VALUATION
2.1 The value of the Portfolio's assets to be acquired by the Acquiring
Fund hereunder shall be the net asset value of such assets computed as of
immediately after the close of business of the New York Stock Exchange on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures for computing net asset value set forth in the
Portfolio's then-current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of immediately after the close of business of the
New York Stock Exchange on the Valuation Date, using the valuation procedures
for computing net asset value set forth in the Performance Funds' then-current
prospectus or statement of additional information.
A-2
<PAGE>
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Portfolio's assets shall be
determined by dividing the value of the net assets of the Portfolio determined
using the same valuation procedures referred to in paragraph 2.1 by the net
asset value of an Acquiring Fund Share determined in accordance with paragraph
2.2.
2.4 All computations of value for the Performance Funds and the Acquiring
Fund shall be made by Rushmore Trust & Savings Bank, FSB; all computations of
value for the Series Fund and the Portfolio shall be made by Rushmore Trust &
Savings Bank, FSB.
3. CLOSING AND CLOSING DATE
3.1 The Closing for the Reorganization shall be April 28, 1997 or such
other date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of immediately after the
close of business on the Closing Date unless otherwise agreed to by the parties.
The close of business on the Closing Date shall be as of 4:00 p.m., New York
Time. The Closing shall be held at the offices of the Performance Funds, One
East Liberty Street, Third Floor, Reno, Nevada 89501, or at such other time
and/or place as the parties may agree.
3.2 Rushmore Trust & Savings Bank, FSB, Bethesda, Maryland, as custodian
for the Portfolio (the "Custodian"), shall deliver at the Closing a certificate
of an authorized officer stating that: (i) the Portfolio's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund within two business days prior to or on the Closing Date; and
(ii) all necessary taxes, including all applicable Federal and state stock
transfer stamps, if any, shall have been paid, or provision for payment shall
have been made, in conjunction with the delivery of the Portfolio's portfolio
securities.
3.3 Rushmore Trust & Savings Bank, FSB (the "Transfer Agent"), on behalf
of the Acquiring Fund and the Portfolio, shall deliver at the Closing a
certificate of an authorized officer stating that their records contain the
names and addresses of the Portfolio Shareholders and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately prior
to the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Portfolio or provide evidence satisfactory to the Portfolio
that such Acquiring Fund Shares have been credited to the Portfolio's account on
the books of the Acquiring Fund. At the Closing, each party shall deliver to
the other such bills of sales, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Series Fund, on its own and on behalf of the Portfolio,
represents and warrants to the Performance Funds and the Acquiring Fund as
follows:
(a) The Series Fund is a business trust duly organized, validly
existing, and in good standing under the laws of the State of Delaware;
(b) The Series Fund is a registered investment company classified
as a management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission"), as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
registration of its shares, under the Securities Act of 1933, as amended (the
"1933 Act") are in full force and effect;
A-3
<PAGE>
(c) Neither the Series Fund nor the Portfolio is in, and the
execution, delivery and performance of this Agreement will not result in, a
material violation of the Series Fund's Declaration of Trust or By-Laws or of
any agreement, indenture, instrument, contract, lease or other undertaking to
which the Series Fund or the Portfolio is a party or by which either or both of
the Series Fund and the Portfolio are bound;
(d) Neither the Series Fund nor the Portfolio has any material
contracts or other commitments (other than this Agreement) which will be
terminated with liability to the Series Fund or the Portfolio prior to the
Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by the
Performance Funds or the Acquiring Fund, no material litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or to their knowledge threatened against
the Series Fund or the Portfolio or any of their properties or assets which, if
adversely determined, would materially and adversely affect the Series Fund's or
the Portfolio's financial condition or the conduct of either the Series Fund's
or the Portfolio's business. Neither the Series Fund nor the Portfolio knows of
any facts which might form the basis for the institution of such proceedings and
neither the Series Fund nor the Portfolio is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects the business or the ability of the Series
Fund or the Portfolio to consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Portfolio at
December 31, 1996 has been audited by Deloitte & Touche, independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (a copy of which has been furnished to
the Performance Funds) fairly reflects the financial condition of the Portfolio
as of such date, and there are no known contingent liabilities of the Portfolio
as of such date not disclosed therein;
(g) Since December 31, 1996, there has not been any material
adverse change in the Portfolio's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Portfolio of indebtedness maturing more than one year from the
date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Performance Funds. For the purposes of this subparagraph (g), a
decline in net asset value per share of the Portfolio, the discharge of
Portfolio liabilities, or the redemption of Portfolio shares by Portfolio
Shareholders shall not constitute a material adverse change;
(h) At the Closing Date, all material Federal and other tax returns
and reports of the Series Fund and the Portfolio required by law to have been
filed by such date or due after request for extension, if any, shall have been
filed and are or will be correct, and all Federal and other taxes shown as due
or required to be shown as due on said returns and reports shall have been paid
or provision shall have been made for the payment thereof, and to the best
knowledge of the Series Fund and the Portfolio, no such return is currently
under audit and no assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation, the Portfolio has met
the requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such;
(j) All issued and outstanding shares of the Portfolio are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Portfolio. All of the
A-4
<PAGE>
issued and outstanding shares of the Portfolio will, at the time of closing, be
held by the persons and in the amounts set forth in the records of the Transfer
Agent, on behalf of the Portfolio as provided in paragraph 3.3. The Portfolio
does not have outstanding any options, warrants or other rights to subscribe for
or to purchase any of the Portfolio shares, nor is there outstanding any
security convertible into any of the Portfolio shares;
(k) At the Closing Date, the Portfolio will have good and
marketable title to the Portfolio's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to any restrictions as might arise under the 1933 Act,
other than as disclosed to the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Series Fund's Trustees and, subject to the approval of the
Portfolio Shareholders, this Agreement will constitute a valid and binding
obligation of the Series Fund and of the Portfolio, enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(m) The information to be furnished by the Series Fund and the
Portfolio for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws and
regulations thereunder applicable thereto; and
(n) The proxy statement of the Series Fund (the "Proxy Statement")
to be included in the Registration Statement referred to in paragraph 5.6 (other
than information therein that relates to the Performance Funds and the Acquiring
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
4.2 The Performance Funds, on its own behalf and on behalf of the
Acquiring Fund, represents and warrants to the Series Fund and the Portfolio as
follows:
(a) The Performance Funds is a business trust duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) The Performance Funds is a registered investment company
classified as a management company of the open-end type, and its registration
with the Commission, as an investment company under the 1940 Act, and the
registration of its shares, under the 1933 Act, are in full force and effect;
(c) The current prospectus and statement of additional information
of the Performance Funds conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
A-5
<PAGE>
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets;
(e) Neither the Performance Funds nor the Acquiring Fund is in, and
the execution, delivery and performance of this Agreement will not result in, a
material violation of the Performance Funds' Declaration of Trust or By-Laws or
of any agreement, indenture, instrument, contract, lease or other undertaking to
which the Performance Funds or the Acquiring Fund is a party or by which the
Performance Funds or the Acquiring Fund are bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened against the Performance Funds or the Acquiring Fund or any of
their properties or assets, except as previously disclosed in writing to the
Series Fund. Neither the Performance Funds nor the Acquiring Fund knows of any
facts which might form the basis for the institution of such proceedings and
neither the Performance Funds nor the Acquiring Fund is a party to or subject to
the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects the business or the ability of the
Performance Funds or the Acquiring Fund to consummate the transactions
contemplated herein;
(g) The Statement of Assets and Liabilities of the Acquiring Fund
at December 31, 1996, audited by Deloitte & Touche, independent accountants, and
a copy of which has been furnished to the Series Fund, fairly and accurately
reflects the financial condition of the Acquiring Fund as of such date in
accordance with generally accepted accounting principles consistently applied;
(h) Since December 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred. For the purposes of this
subparagraph (h), a decline in net asset value per share of the Acquiring Fund
shares, the discharge of Acquiring Fund liabilities or the redemption of
Acquiring Fund shares by Acquiring Fund Shareholders, shall not constitute a
material adverse change;
(i) At the Closing Date all material Federal and other tax returns
and reports of the Performance Funds and the Acquiring Fund required by law to
have been filed by such date or due after request for extension, if any, shall
have been filed and are or will be correct, and all Federal and other taxes
shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and,
to the best knowledge of the Performance Funds and the Acquiring Fund, no such
return is currently under audit and no assessment has been asserted with respect
to such returns;
(j) For each taxable year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such;
(k) All issued and outstanding Acquiring Fund Shares are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Acquiring Fund. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or to
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
A-6
<PAGE>
(l) The execution, delivery and performance of this Agreement will
have been fully authorized prior to the Closing Date by all necessary action, if
any, on the part of the Trustees of the Performance Funds and this Agreement
will constitute a valid and binding obligation of the Acquiring Fund enforceable
in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights, and to general equity principles;
(m) The Acquiring Fund Shares to be issued and delivered
(transferred on the Acquiring Fund's books) to the Portfolio for the account of
the Portfolio Shareholders, pursuant to the terms of this Agreement, will, at
the Closing Date, have been duly authorized and, when so issued and delivered,
will be duly and validly issued Acquiring Fund Shares, and will be fully paid
and non-assessable by the Acquiring Fund;
(n) The information to be furnished by the Acquiring Fund for use
in registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto;
(o) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Performance Funds and the Acquiring
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which such statements
were made, not materially misleading; and
(p) The Performance Funds and the Acquiring Fund each agrees to use
all reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such of the state blue sky or securities laws as
may be necessary in order to continue their operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE PORTFOLIO
The following covenants of the Acquiring Fund and the Portfolio, as
applicable, are made, respectively, by the Performance Funds and the Series
Fund:
5.1 The Acquiring Fund and the Portfolio each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions and any other distribution
that may be advisable.
5.2 The Portfolio will call a meeting of the Portfolio Shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3 The Portfolio covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Reorganization
Agreement.
A-7
<PAGE>
5.4 The Portfolio will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the shares of the Portfolio.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and
the Portfolio will each take, or cause to be taken, all actions and do, or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.6 The Portfolio will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(n), all to
be included in a Registration Statement on Form N-14 of the Performance Funds
(the "Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act, in
connection with the meeting of the Portfolio Shareholders to consider approval
of this Agreement and the transactions contemplated herein (the "Meeting").
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SERIES FUND AND THE PORTFOLIO
The obligations of the Series Fund and the Portfolio to consummate the
transactions provided for herein shall be subject, at their election, to the
performance by the Performance Funds and the Acquiring Fund of all the
obligations to be performed by the Performance Funds and the Acquiring Fund
hereunder on or before the Closing Date and, in addition thereto, to the
following further conditions:
6.1 All representations and warranties of the Performance Funds and the
Acquiring Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date; and
6.2 The Performance Funds shall have delivered to the Series Fund, on the
Closing Date, a certificate executed in the Performance Funds' name by the
Performance Funds' President and Treasurer, in a form reasonably satisfactory to
the Series Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Performance Funds and the Acquiring Fund
made in this Agreement are true and correct at and as of the Closing Date,
except as these representations and warranties may be affected by the
transactions contemplated by this Agreement and as to such other matters as the
Performance Funds shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PERFORMANCE FUNDS AND THE
ACQUIRING FUND
The obligations of the Performance Funds and the Acquiring Fund to complete
the transactions provided for herein shall be subject, at their election, to the
performance by the Series Fund and the Portfolio of all of the obligations to be
performed by the Series Fund and the Portfolio hereunder on or before the
Closing Date and, in addition thereto, to the following conditions:
7.1 All representations and warranties of the Series Fund and the
Portfolio contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as these representations and
warranties may be affected by the transactions contemplated by this Agreement,
as of the Closing Date, with the same force and effect as if made on and as of
the Closing Date;
A-8
<PAGE>
7.2 The Series Fund shall have delivered to the Performance Funds a
statement of the Portfolio's assets and liabilities, as of the Closing Date,
certified by the Treasurer of the Series Fund; and
7.3 The Series Fund shall have delivered to the Performance Fund, on the
Closing Date, a certificate executed in the Series Fund's name and the
Portfolio's name by the Series Fund's President and Treasurer, in form and
substance satisfactory to the Performance Funds and dated as of the Closing
Date, to the effect that the representations and warranties of the Series Fund
and the Portfolio, with respect to the Series Fund and the Portfolio made in
this Agreement are true are correct at and as of the Closing Date, except as
these representations and warranties may be affected by the transactions
contemplated by this Agreement and as to such other matters as the Performance
Funds shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
PORTFOLIO
If any of the conditions set forth below do not exist on or before the
Closing Date, with respect to the Portfolio or the Acquiring Fund, then the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
beneficial interest of the Portfolio in accordance with the provisions of the
Series Fund's Declaration of Trust and By-Laws and copies of the resolutions
evidencing such approval shall have been delivered to the Performance Fund.
Notwithstanding anything herein to the contrary, neither the Performance Funds
or the Acquiring Fund nor the Series Fund or the Portfolio may waive the
conditions set forth in this paragraph 8.1;
8.2 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Performance Funds or the Series Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Performance Funds or the Acquiring Fund or the Series Fund or the Portfolio,
provided that either party hereto may, for itself, waive any of such conditions;
8.3 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued; and
8.4 The parties shall have received the legal opinion of Samuel
Kornhauser, attorney at law, addressed to the Performance Funds and the Series
Fund, substantially to the effect that the transactions contemplated by this
Agreement shall constitute a tax-free reorganization for Federal income tax
purposes.
9. BROKERAGE FEES AND EXPENSES
9.1 The Performance Funds and the Series Fund each represents and
warrants to the other that there are no brokers or finders entitled to receive
any payments in connection with the transactions provided for herein.
A-9
<PAGE>
9.2 Navellier Management Inc. will bear the aggregate expenses and costs
of its solicitation of this Proxy Solicitation regarding the Reorganization.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Performance Funds and the Series Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement, or in any document delivered pursuant hereto or in connection
herewith, shall survive the consummation of the transactions contemplated
hereunder.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by either party by resolution of the party's Board of Trustees and
resolution passed by the requisite number of Shareholders of that party at any
time prior to the Closing Date if circumstances should develop that make
proceeding with the Agreement inadvisable.
12. WAIVER
The Performance Funds and the Series Fund, by mutual consent of their
respective Board of Trustees, may waive any condition to their respective
obligations hereunder, except as provided herein.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Performance Funds and the Series Fund; provided, however, that following the
meeting of the Portfolio Shareholders called by the Portfolio pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Portfolio Shareholders under this Agreement to the detriment
of such Shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Performance Funds at One
East Liberty Street, Third Floor, Reno, Nevada 89501 or to the Series Fund at
One East Liberty Street, Third Floor, Reno, Nevada 89501.
A-10
<PAGE>
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or to give any
person, firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
15.5 It is expressly agreed that the obligations of the Series Fund and
the Portfolio hereunder shall not be binding upon any of the Trustees,
Shareholders, nominees, officers, agents or employees of the Series Fund
personally, but shall bind only the corporate property of the Series Fund and
the Portfolio, as provided in the Declaration of Trust of the Series Fund. The
execution and delivery by such officers of the Series Fund shall not be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Series Fund
and the Portfolio as provided in the Declaration of Trust of the Series Fund.
15.6 It is expressly agreed that the obligations of the Performance Funds
and the Acquiring Fund hereunder shall not be binding upon any of the Trustees,
Shareholders, nominees, officers, agents or employees of the Performance Funds
personally, but shall bind only the trust property of the Performance Funds and
the Acquiring Fund, as provided in the Performance Funds' Declaration of Trust.
The execution and delivery by such officers of the Performance Funds shall not
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Performance Funds and the Acquiring Fund, as provided in the Performance
Funds' Declaration of Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President and attested by its Secretary.
Attest: THE NAVELLIER PERFORMANCE FUNDS
By: By:
------------------------- -----------------------------------
Secretary President
Attest: THE FORMERLY NAMED NAVELLIER SERIES FUND
By: By:
------------------------- -----------------------------------
Secretary President
A-11
<PAGE>
PART B
<PAGE>
PART B
THE NAVELLIER PERFORMANCE FUNDS
(The Navellier Aggressive Small Cap Portfolio)
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 14, 1997
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the Combined Prospectus/Proxy Statement of The
Navellier Performance Funds (the "Fund"), dated June 5, 1997 for the special
meeting (the "Meeting") of the shareholders of the formerly named Navellier
Aggressive Small Cap Equity Portfolio (the "Portfolio") of the formerly named
Navellier Series Fund, a copy of which Prospectus/Proxy Statement may be
obtained, without charge, by contacting the Fund, at its mailing address c/o
Navellier Securities Corp., One East Liberty, Third Floor, Reno, Nevada 89501;
Tel: 1-800-887-8671. This Statement of Additional Information contains
additional and more detailed information about the operations and activities of
The Navellier Aggressive Small Cap Portfolio (the "Acquiring Fund") of the Fund
and the operations and activities of the Portfolio.
The combined Prospectus/Proxy Statement describes certain transactions
contemplated by the proposed merger of the Portfolio into the Acquiring Fund
(the "Reorganization") whereby the Acquiring Fund would acquire all of the
assets of the Portfolio in exchange solely for shares of beneficial interest in
the Acquiring Fund and the assumption by the Acquiring Fund of all of the
liabilities of the Portfolio.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PROSPECTUS OF THE NAVELLIER PERFORMANCE FUNDS DATED NOVEMBER 26, 1996. . . . .
STATEMENT OF ADDITIONAL INFORMATION FOR THE NAVELLIER PERFORMANCE FUNDS
DATED NOVEMBER 26, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROSPECTUS OF THE MFS SERIES TRUST DATED MAY 1, 1997 . . . . . . . . . . . . .
STATEMENT OF ADDITIONAL INFORMATION FOR THE MFS SERIES TRUST DATED
MAY 1, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CURRENT AUDITED ANNUAL REPORT OF THE NAVELLIER PERFORMANCE FUNDS AS OF
DECEMBER 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CURRENT AUDITED ANNUAL REPORT OF THE NAVELLIER SERIES FUND AS OF
DECEMBER 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRO FORMA FINANCIAL STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
The Navellier Performance Funds (the "Fund") is an open-end management
investment company which offers its shares in a series of no load non-
diversified and diversified portfolios. The Fund is presently offering its
shares in three Portfolios: the Navellier Aggressive Growth Portfolio
("Aggressive Growth") - a non-diversified open-end management company portfolio
(See p. 7); the Navellier Mid Cap Growth Portfolio ("Mid Cap Growth"), a
diversified open-end management company portfolio investing in mid cap growth
securities (See p. 7); and the Navellier Aggressive Small Cap Portfolio
("Aggressive Small Cap"), a diversified open-end management company portfolio
investing in small cap growth securities (See p. 8). Additional non-
diversified or diversified portfolios may be added to the Fund in the future.
There can be no assurance that the Portfolios of the Fund will achieve their
investment objectives.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be read and
retained for future reference.
A Statement of Additional Information about the Fund has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by calling or writing The Navellier Performance Funds c/o Navellier
Securities Corp., One East Liberty, Third Floor, Reno, Nevada 89501; Telephone:
1-800-887-8671. The Statement of Additional Information bears the same date as
this Prospectus and is incorporated by reference into this Prospectus in its
entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, ITS INVESTMENT
ADVISER, OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
Distributor and Sales Information
---------------------------------
Navellier Securities Corp.
One East Liberty, Third Floor
Reno, Nevada 89501
1-800-887-8671
The date of this Prospectus is November 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
AND ANNUAL FUND OPERATING EXPENSES..... 1
SUMMARY..................................... 5
INVESTMENT OBJECTIVES AND POLICIES.......... 7
SPECIAL INVESTMENT METHODS AND RISKS........ 10
INVESTMENT RESTRICTIONS..................... 11
RISK FACTORS................................ 12
PERFORMANCE................................. 15
MANAGEMENT OF THE FUND...................... 17
EXPENSES OF THE FUND........................ 19
REPORTS AND INFORMATION..................... 21
DESCRIPTION OF SHARES....................... 22
DIVIDENDS AND DISTRIBUTIONS................. 23
TAXES....................................... 24
PURCHASE AND PRICING OF SHARES.............. 26
REDEMPTION OF SHARES........................ 29
CERTAIN SERVICES PROVIDED TO SHAREHOLDERS... 32
ADDITIONAL INFORMATION...................... 33
ASSENT TO TRUST INSTRUMENT.................. 34
</TABLE>
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES
AND ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
NAVELLIER NAVELLIER NAVELLIER
AGGRESSIVE MID CAP AGGRESSIVE
GROWTH GROWTH SMALL CAP
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES/1/
- - --------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. 0% 0% 0%
Maximum Sales Load Imposed on
Reinvested Dividends........................... None None None
Redemption Fees.................................... None None None
Exchange Fee/3/.................................... 0-$5 0-$5 0-$5
ANNUAL FUND OPERATING EXPENSES
- - ------------------------------
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- - ---------------------------------------
Management Fees/4/................................. 1.25% 1.25% 1.15%
12b-1 Fees/2/...................................... 0.25% 0.25% None
Other Expenses/5/ (after waivers).................. 0.50% 0.50% 0.40%
---- ---- ----
Total Fund Operating Expenses/6/ (after waivers)... 2.00% 2.00% 1.55%
- - ----------------------- ==== ==== ====
</TABLE>
/1/ The above table of fees and other expenses is provided to assist you in
understanding the various potential costs and expenses that an investor in the
Fund may bear directly or indirectly since the Fund has an operating history of
less than one year. The Investment Adviser may, but is under no obligation to,
reimburse the Fund's expenses now or in the future. The Navellier Aggressive
Growth Portfolio has been in existence and has an operating history beginning
December 28, 1995. Neither the Navellier Mid Cap Growth Portfolio or the
Navellier Aggressive Small Cap Portfolio have any operating history.
/2/ The Aggressive Growth Portfolio, and the Mid Cap Growth Portfolio do not
charge an initial sales load but do pay an annual 0.25% 12b-1 fee to the
distributor or brokers who have signed a selling agreement with the Fund. The
applicable Portfolio of the Fund pays these brokers or the distributor annually
0.25% of the value of the assets of the applicable Portfolio of the Fund which
were obtained by said broker or distributor. The fee is paid to the broker or
distributor for continuous personal services and distribution services by such
broker or distributor to investors in the applicable Portfolio. Investors may
also be charged a transaction fee if they effect transactions in fund shares
through a broker or agent. Long-term shareholders in the Fund may pay more than
the economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers ("NASD"). There is no 12b-1 fee
charged to shareholders of the Navellier Aggressive Small Cap Portfolio.
/3/ Shares of the Aggressive Growth Portfolio or the Mid Cap Growth
Portfolio may be exchanged for shares of each other at net asset value without
charge (up to five (5) exchanges per account). There is a charge of $5 per
exchange thereafter. Shares of the Navellier Aggressive Small Cap Portfolio can
be exchanged for shares of the Aggressive Growth Portfolio or the Mid Cap Growth
Portfolio at net asset value without charge (up to five (5) exchanges per
account) but shares of those Portfolios cannot be exchanged for shares of the
Aggressive Small Cap Portfolio.
/4/ Represents the advisory fee paid to Navellier Management, Inc. (See
"Expenses of the Fund - Compensation of the Investment Adviser".)
/5/ Since the Mid Cap Growth and Aggressive Small Cap Portfolios have no
operating history, these 0.50% and 0.40% figures represent an estimate of other
expenses of the Portfolios respectively. Before the Investment Advisor waived
reimbursement of costs advanced, "Other Expenses" of the Aggressive Growth
Portfolio were 0.87% of the Portfolio's average net assets. The Investment
Advisor has agreed to waive reimbursement of all further operating expenses for
the Aggressive Growth Portfolio advanced by it in excess of a 2% operating
expense ratio for the fiscal year ended December 31, 1996.
/6/ This includes the annual 0.25% 12b-1 fee for the Aggressive Growth
Portfolio and the Mid Cap Growth Portfolio (there is no 12b-1 fee for the
Aggressive Small Cap Portfolio), which has the effect of increasing annual
operating expenses. Before waiver of reimbursement of costs advanced, "Total
Fund Operating Expenses" of the Aggressive Growth Portfolio were 2.37% of
average net assets. The Investment Advisor has agreed to waive reimbursement of
all further operating expenses for the Aggressive Growth Portfolio advanced by
it in excess of a 2% operating expense ratio for the fiscal year ended December
31, 1996.
1
<PAGE>
EXAMPLES:
The following example indicates the direct and indirect expenses an investor
(maintaining an average annual investment of $1,000) could expect to incur in a
single year, and three-year period respectively:
<TABLE>
<CAPTION>
Navellier Navellier Navellier
Aggressive Mid Cap Aggressive
Growth Growth Small Cap
Portfolio Portfolio Portfolio
---------- --------- ----------
<S> <C> <C> <C>
One-Year............. $21 $21 $21
Three-Year........... $64 $64 $64
</TABLE>
The foregoing examples assume (a) that an investor maintains an average of
$1,000 invested in the Portfolio; (b) no sales load; (c) a 5% annual return; (d)
percentage amounts listed above for Annual Fund Operating Expenses remain
constant (for all periods shown above); (e) reinvestment of all dividends and
distributions; and (f) no exchanges between Portfolios.
THE EXAMPLES SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES OF EACH PORTFOLIO OF THE FUND MAY BE GREATER
OR LESS THAN THOSE SHOWN ABOVE.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth financial history for the Aggressive Growth
Portfolio. The distribution of Aggressive Growth Portfolio Shares commenced on
December 28, 1995.
There is no financial history for the Mid Cap Growth Portfolio or for the
Aggressive Small Cap Portfolio.
Deloitte & Touche LLP, the Fund's independent accountants, has audited the
information for the period December 28, 1995 - December 31, 1995. The financial
information for the period January 1, 1996 - June 30, 1996 is unaudited. The
report for the first six months of 1996 is included in the Semi-Annual Report of
the Fund. The report is available upon request and is incorporated by reference
into the Statement of Additional Information.
NAVELLIER AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------=
<TABLE>
<CAPTION>
Unaudited Audited
For the Six For the
Months Ended Period Ended
June 30, 1996 December 31, 1995*
------------- -----------------
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Period $ 9.99 $ 10.00
------- -------
Income from Investment Operations:
Net Investment Income (Loss) (0.081) 0.002
Net Realized and Unrealized Gains (Losses) on Securities 3.141 (0.008)
------- -------
Total from Investment Operations 3.060 (0.006)
------- -------
Distributions to Shareholders:
From Net Investment Income - -
From Net Realized Capital Gains - -
------- -------
Total Distributions to Shareholders - -
------- -------
Net Increase (Decrease) in Net Asset Value 3.06 (0.01)
------- -------
Net Asset Value - End of Period $ 13.05 $ 9.99
======= =======
Total Investment Return/1/ 30.63% (0.10)%
</TABLE>
- - ---------------------
/1/ Total returns for periods of less than one year are not annualized.
3
<PAGE>
NAVELLIER AGGRESSIVE GROWTH PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited Audited
For the Six For the
Months Ended Period Ended
June 30, 1996 December 31, 1995*
------------- -----------------
<S> <C> <C>
Ratios to Average Net Assets:
Expenses After Reimbursement/2/,/3/ 2.00% 2.00%
Expenses Before Reimbursement/2/,/3/ 2.37% 27.25%
Net Investment Income (Loss)/2/ (1.27)% 2.59%
Supplementary Data:
Portfolio Turnover Rate 33.2% -
Net Assets at End of Period (000's omitted) $80,225 $ 300
Number of Shares Outstanding at End of
Period (000's omitted) 6,149 30
Average Commission Rate Paid Per Share/4/ 4.2 cents ______
</TABLE>
- - ---------------------
* From Commencement of Operations December 28, 1995.
/2/ Annualized.
/3/ The Aggressive Growth Portfolio has only been in existence since December
28, 1995. During the three days it was in existence during 1995, it had
substantial start-up expenses in relation to the small amount of total initial
investments in the Portfolio during those first three days and therefore would
have had an operating expense ratio of 27.25% for that three day period if the
Investment Advisor had not agreed to waive reimbursement of operating expenses
which it had advanced during that period. The Investment Advisor was entitled
to reimbursement of costs advanced during that three day period but agreed to
waive reimbursement which resulted in an actual operating expense ratio for 1995
of 2%.
During the six month period ended June 30, 1996, the Aggressive Growth
Portfolio had operating expenses of 2% after the Investment Advisor agreed to
waive reimbursement of $49,577.00 of expenses advanced. If the Investment
Advisor had not waived reimbursement of such amounts, the operating expense
ratio during that six month period would have been 2.37%.
The Mid Cap Growth Portfolio is a newly created Portfolio which commenced
operations November 26, 1996 and therefore had no operating expenses and had no
waiver of expense reimbursement.
The Aggressive Small Cap Portfolio is a newly created Portfolio which
commenced operations November 26, 1996 and therefore had no operating expenses
and had no waiver of expense reimbursement.
/4/ The average commission paid for securities purchased during the period
01/01/96 to 06/30/96 was 4.2 cents per share. Commissions are paid for listed
trades, soft dollar trades or trades on crossing networks (i.e. Instinet).
4
<PAGE>
SUMMARY
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be read and
retained for future reference. Each of the Portfolios of the Fund is designed
for long term investors and not as trading vehicles and are not intended to
present a complete investment program for the investor. An investment in any of
the Portfolios of the Fund involves certain speculative considerations; see
"Risk Factors". The Aggressive Growth Portfolio employs an aggressive
investment strategy that has the potential for yielding high returns. However,
share prices of the Aggressive Growth Portfolio may also experience substantial
fluctuations including declines so that your shares may be worth less than when
you originally purchased them. The Aggressive Growth Portfolio seeks long term
growth, does not attempt to maintain a balanced Portfolio, and its performance
may fluctuate due to the possibility of greater investment of the Portfolio's
assets in a single issuer. (See p. 7 for greater detail.)
The Mid Cap Growth and the Aggressive Small Cap Portfolios also employ
aggressive investment strategies and can experience substantial fluctuations,
including declines, so that shares may be worth less than when originally
purchased. However, because these Portfolios can only invest up to 5% of their
assets in the securities of any single issuer, in theory they should not pose as
great a risk of fluctuation as the Aggressive Growth Portfolio, although there
can be no such assurance (See pp. 7 for greater detail).
A Statement of Additional Information about the Fund has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by calling or writing The Navellier Performance Funds c/o Navellier
Securities Corp., One East Liberty, Third Floor, Reno, Nevada 89501; Telephone:
1-800-887-8671. The Statement of Additional Information bears the same date as
this Prospectus and is incorporated by reference into this Prospectus in its
entirety.
INVESTMENT ADVISER
Navellier Management, Inc. (the "Investment Advisor") administers the
assets of each of the existing three Portfolios of the Fund and determines which
securities will be selected as investments for each of the existing Portfolios
of the Fund. Louis Navellier, the President and CEO of the Investment Advisor,
refined the Modern Portfolio Theory investment strategy which is applied in
managing the assets of each Portfolio. He sets the strategies and guidelines for
each Portfolio and oversees the Portfolio Manager's activities. Louis Navellier
and Alan Alpers are the Portfolio Managers involved in the day-to-day investment
activities of the Aggressive Growth Portfolio. Alan Alpers has been an analyst
and portfolio manager for Navellier & Associates, Inc. since 1989 and has been
responsible along with Mr. Navellier for day-to-day management of over $100
million in individual accounts for Navellier & Associates, Inc. Louis Navellier
and Alan Alpers are also the Portfolio Managers involved in the day-to-day
investment activities of the Mid Cap Growth Portfolio and the Aggressive Small
Cap Portfolio. The Investment Advisor receives an annual advisory fee, equal to
1.25% of the average daily net asset value of assets under management for the
Aggressive Growth Portfolio and the Mid
5
<PAGE>
Cap Growth Portfolio and receives a fee equal to 1.15% of the average daily net
asset value of assets under management for the Aggressive Small Cap Portfolio.
The advisory fee for each Portfolio is payable monthly, based upon a percentage
of that Portfolio's average daily net assets. The advisory fees paid to the
Investment Advisor are higher than those generally paid by most other investment
companies. The existing Portfolios of the Fund are paying these higher advisory
fees based on their desire to retain Navellier Management, Inc.'s specific
application of Modern Portfolio Theory, its particular method of analyzing
securities and its investment advisory services.
DISTRIBUTION OF SHARES
Navellier Securities Corp. (the "Distributor") acts as the sole underwriter
for the shares of each of the Portfolios of the Fund. The Distributor is a
corporation wholly owned by Louis Navellier, who also owns 100% of Navellier
Management, Inc., the Fund's Investment Advisor. The Distributor may sell
shares of each Portfolio of the Fund directly to investors or shares may be
purchased through a network of broker-dealers selected by the Distributor. The
Distributor will compensate these selected dealers for shareholder services by
paying them directly, or by allowing them to receive annually all or a portion
of the 0.25% annual 12b-1 fee paid on the Aggressive Growth Portfolio and on the
Mid Cap Growth Portfolio. No 12b-1 fee is paid on the Aggressive Small Cap
Portfolio.
HOW TO INVEST
Shares of each Portfolio of the Fund are continuously offered for sale by
the Distributor and through selected broker-dealers. The daily purchase price
for the Aggressive Growth Portfolio, the Mid Cap Growth Portfolio and the
Aggressive Small Cap Portfolio is the net asset value next computed after
receipt of your order. Initial purchases must be at least $2,000 ($500 in the
case of IRA and other retirement plans or qualifying group plans) and subsequent
investments must be $100 or more.
RISK FACTORS
Investment in any Portfolio of the Fund involves special risks and there
can be no guarantee of profitability. Some of those risks are briefly described
here. Because the Aggressive Growth Portfolio is allowed to invest up to 10% of
its assets in any single company and/or up to 25% of its total assets in any
single industry, there is potentially a greater risk of loss or fluctuation in
value of this portfolio. Some of the small cap securities which the Portfolios
may purchase may be difficult to liquidate on short notice or, on occasion, only
a portion of the shares of a company in which the Investment Advisor intends to
trade may be available to be bought or sold by a Portfolio. There can be no
assurance of profitability or of what the percentage of any of the Portfolios'
total annual operating expenses will be. Investments, if any, in securities of
foreign issuers may pose greater risks. The Investment Advisor's investment
style could result in above average portfolio turnover which could result in
higher brokerage expenses. As with any equity fund, the investments may decline,
resulting in a loss of value to the shareholder. (For more detail, see "Risk
Factors".)
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
NAVELLIER AGGRESSIVE GROWTH PORTFOLIO
THE INVESTMENT OBJECTIVE OF THE NAVELLIER AGGRESSIVE GROWTH PORTFOLIO IS TO
ACHIEVE LONG TERM GROWTH OF CAPITAL PRIMARILY THROUGH INVESTMENTS IN STOCKS OF
COMPANIES WITH APPRECIATION POTENTIAL.
The Navellier Aggressive Growth Portfolio is a non-diversified Portfolio,
which means it may invest a larger than normal percentage of its total assets in
the equity (including convertible debt) securities of any one company or
companies which the Investment Adviser believes represents an opportunity for
significant capital appreciation. The Investment Adviser will not invest more
than 10% of the Portfolio's assets in the securities of any single company or
25% or more of the Portfolio's assets in securities issued by companies in any
one industry. Since the Investment Adviser can invest more of the Portfolio's
assets in the stock of a single company, this Portfolio should be considered to
offer greater potential for capital appreciation as well as greater risk of loss
due to the potential increased investment of assets in a single company. This
Portfolio, because of its non-diversification, also poses a greater potential
for volatility. This Portfolio should not be considered suitable for investors
seeking current income. This Portfolio may invest its assets in the securities
of a broad range of companies without restriction on their capitalization. Under
normal circumstances, the Aggressive Growth Portfolio will invest at least 65%
of its total assets in securities of issuers. However, that projected minimum
percentage could be lowered during adverse market conditions or for defensive
purposes and is not a fundamental policy of the Portfolio. Securities of issuers
include, but are not limited to, common and preferred stock, and convertible
preferred stocks that are convertible into common stock. While this Portfolio
intends to operate as a non-diversified open end management investment company
for the purposes of the 1940 Act, it also intends to qualify as a regulated
investment company under the Internal Revenue Code ("Code"). As a non-
diversified investment company under the 1940 Act, the Fund may invest more than
5% and up to 25% of its assets in the securities of any one issuer at the time
of purchase. However, for purposes of the Internal Revenue Code, as of the last
day of any fiscal quarter, this Portfolio may not have more than 25% of its
total assets invested in any one issuer, and, with respect to 50% of its total
assets, the Portfolio may not have more than 5% of its total assets invested in
any one issuer, nor may it own more than 10% of the outstanding voting
securities of any one issuer. These limitations do not apply to investments in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or the securities of investment companies that qualify as
regulated investment companies under the Code.
Investors in the Aggressive Growth Portfolio pay no initial sales charge
(load) but do pay an annual 0.25% fee ("12b-1 fee") which over a period of years
could result in higher overall expenses than payment of an initial sales load.
INVESTMENT OBJECTIVE OF THE NAVELLIER MID CAP GROWTH PORTFOLIO
The Investment Objective of the Mid Cap Growth Portfolio is to achieve
long-term growth of capital primarily through investment in mid cap companies
with appreciation
7
<PAGE>
potential. The Mid Cap Growth Portfolio invests in equity securities traded in
all United States markets including dollar denominated foreign securities traded
in United States markets. It is a diversified portfolio, meaning it limits its
investment in the securities of any single company (issuer) to a maximum of 5%
of the Portfolio assets and further limits its investments to less than 25% of
the Portfolio's assets in any one industry group. The Mid Cap Growth Portfolio
seeks long term capital appreciation through investments in securities of mid
cap companies (companies with market capitalization of between $1 Billion and $5
Billion) which the Investment Advisor feels are undervalued in the marketplace.
Investors in the Mid Cap Growth Portfolio pay no initial sales charge (load) but
do pay an annual 0.25% fee ("12b-1 fee") which over a period of years could
result in higher overall expenses than payment of an initial sales load.
Navellier Management, Inc. is the Investment Advisor for the Mid Cap Growth
Portfolio. Navellier Securities Corp. is the principal distributor for the Mid
Cap Growth Portfolio's shares. This Portfolio should not be considered suitable
for investors seeking current income.
INVESTMENT OBJECTIVE OF THE NAVELLIER AGGRESSIVE SMALL CAP PORTFOLIO
The Investment Objective of the Navellier Aggressive Small Cap
Portfolio is to achieve long-term growth of capital primarily through investment
in small cap companies with appreciation potential. The Aggressive Small Cap
Portfolio invests in equity securities traded in the United States securities
markets of domestic issuers and of foreign issuers. The sole objective of the
Aggressive Small Cap Portfolio will be to seek to achieve long term growth of
capital primarily through investments in securities of small cap companies
(companies with market capitalization of less than $1 Billion) with appreciation
potential. There can be no assurance that the Portfolio will achieve its
investment objectives. The Portfolio's investment objectives may not be changed
without shareholder approval. This Portfolio should not be considered suitable
for investors seeking current income. Investors in this Portfolio pay no sales
charge and no 12b-1 fee.
OTHER INVESTMENTS
Each of the Portfolios may, for temporary defensive purposes or to
maintain cash or cash equivalents to meet anticipated redemptions, also invest
in debt securities and money market funds if, in the opinion of the Investment
Adviser, such investment will further the cash needs or temporary defensive
needs of the Portfolio. In addition, when the Investment Adviser feels that
market or other conditions warrant it, for temporary defensive purposes each
Portfolio may retain cash or invest all or any portion of its assets in cash
equivalents, including money market mutual funds. Under normal conditions, a
Portfolio's holdings in such non-equity securities should not exceed 35% of the
total assets of the Portfolio. If a Portfolio's assets, or a portion thereof,
are retained in cash or money market funds or money market mutual funds, such
cash will, in all probability, be deposited in interest-bearing or money market
accounts or Rushmore's money market mutual funds. Rushmore Trust & Savings, FSB
is also the Fund's Transfer Agent and Custodian. Cash deposits by the Fund in
interest bearing instruments issued by Rushmore Trust & Savings ("Transfer
Agent") will only be deposited with the Transfer Agent if its interest rates,
terms, and security are equal to or better than could be received by depositing
such cash with another savings institution. Money market investments have no
FDIC protection and deposits in Rushmore Trust & Savings accounts have only
$100,000 protection.
8
<PAGE>
It is anticipated that, for each of the Portfolios, all of their
investments in corporate debt securities (other than commercial paper) and
preferred stocks will be represented by debt securities and preferred stocks
which have, at the time of purchase, a rating within the four highest grades as
determined by Moody's Investors Service, Inc. (Aaa, Aa, A, Baa) or by Standard &
Poor's Corporation (AAA, AA, A, BBB; securities which are rated BBB/Baa have
speculative characteristics). Although investment-quality securities are subject
to market fluctuations, the risk of loss of income and principal is generally
expected to be less than with lower quality securities. In the event the rating
of a debt security or preferred stock in which the Portfolio has invested drops
below investment grade, the Portfolio will promptly dispose of such investment.
When interest rates go up, the market value of debt securities generally goes
down and long-term debt securities tend to be more volatile than short term debt
securities.
In determining the types of companies which will be suitable for investment
by the Aggressive Growth Portfolio, the Mid Cap Growth Portfolio and the
Aggressive Small Cap Portfolio, the Investment Adviser will screen over 6,000
stocks and will take into account various factors and base its stock selection
on its own model portfolio theory concepts. Each Portfolio invests primarily in
what the Investment Adviser believes are undervalued common stocks believed to
have long-term growth potential. Stocks are selected on the basis of an
evaluation of factors such as earnings growth, expanding profit margins, market
dominance and/or factors that create the potential for market dominance, sales
growth, and other factors that indicate a company's potential for growth. There
are no limitations on the Aggressive Growth Portfolio as to the type, operating
history, or dividend paying record of companies or industries in which the
Aggressive Growth Portfolio may invest; the principal criteria for investment is
that the securities provide opportunities for capital growth. The Mid Cap
Growth Portfolio will invest at least 65% of its total assets in equity
securities of companies defined as Mid Cap (companies with capitalization of
between $1 Billion and $5 Billion). The Aggressive Small Cap Portfolio will
invest at least 65% of its total assets in equity securities of companies
defined as small cap (companies with capitalization of less than $1 Billion).
The Portfolios will invest up to 100% of their capital in equity securities
selected for their capital growth potential. The Investment Adviser will
typically (but not always) purchase common stocks of issuers which have records
of profitability and strong earnings momentum. When selecting such stocks for
investment by the Portfolios, the issuers may be lesser known companies moving
from a lower to a higher market share position within their industry groups
rather than the largest and best known companies in such groups. The Investment
Adviser, when investing for the Aggressive Growth Portfolio, may also purchase
common stocks of well known, highly researched, large companies if the
Investment Adviser believes such common stocks offer opportunity for long-term
capital growth.
9
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
"SHORT SALES AGAINST THE BOX"
Any Portfolio of the Fund is permitted to make short sales if at the time
of the short sale the Portfolio owns or has the right to acquire a security
equal in kind and amount to the security being sold short, at no additional
cost. This investment technique is known as a "short sale against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position
is maintained, the seller collateralizes its obligation to deliver the
securities sold short in an amount equal to the proceeds of the short sale plus
an additional margin amount established by the Board of Governors of the Federal
Reserve. If the Fund engages in a short sale, the collateral account will be
maintained by the Fund's custodian. While the short sale is open, the Fund will
maintain, in a segregated custodial account, an amount of securities equal in
kind and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities at no additional cost. These
securities would constitute the Fund's long position.
Any Portfolio may make a short sale against the box, when it believes that
the price of a security may decline, causing a decline in the value of a
security owned by the Portfolio (or a security convertible into or exchangeable
for such security), or when the Portfolio desires to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code. In such a case, any future losses in the Portfolio's long position should
be reduced by a gain in the short position. The extent to which such gains or
losses are reduced would depend upon the amount of the security sold short
relative to the amount the Portfolio owns. There will be certain additional
transaction costs associated with short sales against the box, but the Portfolio
will endeavor to offset theses costs with income from the investment of the cash
proceeds of short sales.
10
<PAGE>
INVESTMENT RESTRICTIONS
The Aggressive Growth Portfolio can invest up to 10% of its assets in
securities of a single issuer and up to 25% of its assets in securities of
companies in a single industry. The Mid Cap Growth Portfolio and the Aggressive
Small Cap Portfolio can each invest up to 5% of their assets in the securities
of a single issuer and each can invest up to 25% of its assets in the securities
of a single industry. None of the Portfolios of the Fund may make investments
in real estate or commodities or commodity contracts, including futures
contracts, but may purchase securities of issuers which deal in real estate or
commodities. Each of the existing Portfolios of the Fund are also prohibited
from investing in or selling puts, calls, straddles (or any combination
thereof). Each of the existing Portfolios of the Fund are prohibited from
investing in derivatives. Each of the existing Portfolios may borrow money only
from banks for temporary or emergency (not leveraging) purposes provided that,
after each borrowing, there is an asset coverage in the borrowing Portfolio of
at least 300% The Aggressive Growth Portfolio, the Mid Cap Growth Portfolio and
the Aggressive Small Cap Portfolio will not purchase securities if the amount of
borrowing by any one of these three named Portfolios respectively exceeds 5% of
total assets of the Portfolio. In order to secure any such borrowing, the
borrowing Portfolio may pledge, mortgage, or hypothecate up to 10% of the market
value of the assets of the Portfolio. The investment by the Portfolio in
securities, including American Depository Receipts, of issuers or any
governmental entity or political subdivision thereof, located, incorporated or
organized outside of the United States is limited to 25% of the net asset value
of the Portfolio, provided that no such foreign securities may be purchased
unless they are traded on United States securities markets.
The Fund may not purchase for any Portfolio "restricted securities" (as
defined in Rule 144(a)(3) of the Securities Act of 1933) if, as a result of such
purchase, more than 10% of the net assets (taken at market value) of such
Portfolio would be invested in such securities nor will the Fund invest in
illiquid or unseasoned securities if as a result of such purchase more than 5%
of the net assets of such portfolio would be invested in either illiquid or
unseasoned securities. The Board of Trustees will determine whether these
securities are liquid and will monitor liquidity on an ongoing basis.
In addition to the investment restrictions described above, the investment
program of each Portfolio is subject to further restrictions which are described
in the Statement of Additional Information. The restrictions for each Portfolio
are fundamental and may not be changed without shareholder approval.
11
<PAGE>
RISK FACTORS
LACK OF OPERATING HISTORY AND EXPERIENCE
The Aggressive Growth Portfolio went effective December 28, 1995 and has
less than one year of operations. The Mid Cap Growth Portfolio and the
Aggressive Small Cap Portfolio, are newly organized investment company
portfolios with no history of operations. The Investment Adviser was organized
on May 28, 1993 and has been managing the assets of The Navellier Series Fund
since January 3, 1994 and the publicly invested assets of The Navellier Series
Fund since April 1, 1994. Although the Investment Adviser sub-contracts a
substantial portion of its responsibilities for administrative services of the
Fund's operations to various agents, including the Transfer Agent, the
Custodian, and Accountant, the Investment Adviser still has overall
responsibility for the administration of each of the Portfolios and oversees the
administrative services performed by others as well as servicing customer's
needs and, along with each Portfolio's Trustees, is responsible for the
selection of such agents and their oversight. The Investment Advisor is also
responsible for the selection of securities for investment. None of the
principals, officers, legal counsel, or directors of the Investment Adviser
(including such of those persons who are also controlling persons or legal
counsel of the Fund) had, before June 1993 ever registered, operated, or
supervised the operations of investment companies in the past, and there is no
assurance that their past business experiences or their experience with The
Navellier Series Fund will enable them to successfully manage the assets of the
Fund in the future. The owner of the Investment Adviser has been in the business
of rendering advisory services to significant pools of capital such as
retirement plans and large investors since 1987.
The owner of the Investment Adviser is also the owner of another investment
advisory firm, Navellier & Associates Inc., which presently manages over $1.8
billion in investor funds. The owner of the Investment Adviser is also the owner
of another investment advisory firm, Navellier Fund Management, Inc., and
controls other investment advisory entities which manage assets and/or act as
sub-advisors, all of which firms employ the same basic modern portfolio theories
and select many of the same over-the-counter stocks and other securities which
the Investment Adviser intends to employ and invest in while managing the
Portfolios of the Fund. Because many of the over-the-counter and other
securities which Investment Adviser intends to, or may, invest in have a smaller
number of shares available to trade than more conventional companies, lack of
shares available at any given time may result in one or more of the Portfolios
of the Fund not being able to purchase or sell all shares which Investment
Adviser desires to trade at a given time or period of time, thereby creating a
potential liquidity problem which could adversely affect the performance of the
Fund portfolios. Since the Investment Adviser will be trading on behalf of the
various Portfolios of the Fund in some or all of the same securities at the same
time that Navellier & Associates Inc., Navellier Fund Management, Inc., other
Navellier controlled investment entities and The Navellier Series Fund are
trading, the potential liquidity problem could be exacerbated. In the event the
number of shares available for purchase or sale in a security or securities is
limited and therefore the trade order cannot be fully executed at the time it is
placed, i.e., where the full trade orders of Navellier & Associates Inc.,
Navellier Fund Management, Inc., The Navellier Series Fund and other Navellier
controlled investment entities and the Fund cannot be completed at the time the
12
<PAGE>
order is made, Navellier & Associates Inc., and the other Navellier controlled
investment entities and the Investment Adviser will allocate their purchase or
sale orders in proportion to the dollar value of the order made by the other
Navellier entities, and the dollar value of the order made by the Fund. For
example, if Navellier & Associates Inc., and Navellier Fund Management, Inc.,
each place a $25,000 purchase order and Investment Adviser on behalf of the Fund
places a $50,000 purchase order for the same stock and only $50,000 worth of
stock is available for purchase, the order would be allocated $12,500 each of
the stock to Navellier & Associates Inc., and Navellier Fund Management, Inc.,
and $25,000 of the stock to the Fund. As the assets of each Portfolio of the
Fund increase the potential for shortages of buyers or sellers increases, which
could adversely affect the performance of the various Portfolios. While the
Investment Adviser generally does not anticipate liquidity problems (i.e., the
possibility that the Portfolio cannot sell shares of a company and therefore the
value of those shares drops) unless the Fund has assets in excess of two billion
dollars (although liquidity problems could still occur when the Fund has assets
of substantially less than two billion dollars), each investor is being made
aware of this potential risk in liquidity and should not invest in the Fund if
he, she, or it is not willing to accept this potentially adverse risk, and by
investing, acknowledges that he, she or it is aware of the risks.
An investment in shares of any Portfolio of the Fund involves certain
speculative considerations. There can be no assurance that any of the
Portfolios objectives will be achieved or that the value of the investment will
increase. An investment in shares of the Aggressive Growth Portfolio may also
involve a higher degree of risk than an investment in shares of a more
traditional open-end diversified investment company because the Aggressive
Growth Portfolio may invest up to 10% of its assets in the securities of any
single issuer and up to 25% of its assets in the securities of any single
industry, thereby potentially creating greater volatility or increasing the
chance of losses. As a non-diversified investment Portfolio, the Aggressive
Growth Portfolio may be subject to greater fluctuation in the total market value
of the Portfolio, and economic, political or regulatory developments may have a
greater impact on the value of this Portfolio than would be the case if the
Portfolio were diversified among a greater number of issuers. All Portfolios
intend to comply with the diversification and other requirements applicable to
regulated investment companies under the Internal Revenue Code.
All securities in which any of the Fund's Portfolios may invest are
inherently subject to market risk, and the market value of the Fund's
investments will fluctuate. From time to time the Fund may choose to close a
portfolio or portfolios to new investors.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of non-
governmental issuers, involve considerations which are not ordinarily associated
with investing in domestic issuers. These considerations include, among others,
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under laws applicable
to foreign securities markets, the impact of political, social, or diplomatic
developments, difficulties in invoking legal process abroad, and the difficulty
of assessing economic trends in foreign countries. The Investment Adviser will
use the same basic selection criteria for investing in foreign securities as it
uses in selecting domestic securities as described in the Investment Objectives
and Policies section of this Prospectus.
13
<PAGE>
While to some extent the risks to the Fund of investing in foreign
securities may be limited, since each Portfolio may not invest more than 25% of
its net asset value in such securities and each Portfolio of the Fund may only
invest in foreign securities which are traded in the United States securities
markets, the risks nonetheless exist.
NET ASSET VALUE
The net asset value of each of the Portfolios is determined by adding
the values of all securities and other assets of that specific Portfolio,
subtracting liabilities, and dividing by the number of outstanding shares of
that Portfolio. (See "Purchase and Pricing of Shares - Valuation of Shares" and
the Statement of Additional Information.)
PORTFOLIO TURNOVER
The annual rate of portfolio turnover for each of the three existing
Portfolios is unknown since none of the three Portfolios has an operating
history of more than a year and therefore no actual portfolio turnover rate
presently exists. The Portfolio turnover rate for the first six months of
operation for the Navellier Aggressive Growth portfolio was 33.2%. The
Investment Adviser estimates that the annual portfolio turnover rate will not
exceed 200%. The Investment Adviser estimates that the portfolio turnover rate
for the Mid Cap Growth Portfolio and for the Aggressive Small Cap Portfolio will
not exceed 300% per annum respectively. However, these are not restrictions on
---
the Investment Adviser and if in the Investment Adviser's judgment a higher
annual portfolio turnover rate is required in order to attempt to achieve a
higher overall Portfolio performance, then the Investment Adviser is permitted
to do so. However, high portfolio turnover (100% or more) will result in
increased brokerage commissions, dealer mark-ups, and other transaction costs on
the sale of securities and on reinvestment in other securities and could
therefore adversely affect Portfolio performance. To the extent that increased
portfolio turnover results in sales at a profit of securities held less than
three months, the Fund's ability to qualify as a "regulated investment company"
under the Internal Revenue Code may be affected. (See the Statement of
Additional Information, "Taxes".)
SPECIAL RISK CONSIDERATIONS RELATING TO SECURITIES OF THE PORTFOLIO
For a description of certain other factors, including certain risk factors,
which investors should consider relating to the securities in which the
Portfolio will invest, see "Investment Objectives and Policies".
14
<PAGE>
PERFORMANCE
From time to time the Fund may include the performance history of each
Portfolio (and if appropriate, the performance history of the Investment
Advisor and/or the Portfolio Manager in managing comparable asset accounts) in
advertisements, sales literature, or reports to current or prospective
shareholders. Navellier Management, Inc., which is the Investment Advisor to
this Fund's Navellier Aggressive Small Cap Portfolio, is also the Investment
Advisor to the Navellier Aggressive Small Cap Equity Portfolio of the Navellier
Series Fund which charges a variable sales load. Both Portfolios have the same
investment objectives and restrictions and Navellier Management, Inc., intends
to manage both Portfolios in the same way (except that no "load" will be charged
to investors of this Fund's Aggressive Small Cap Portfolio). The Investment
Advisor's total return (average annual compounded rate of return) on investment
in the Navellier Series Fund's Aggressive Small Cap Equity Portfolio from
inception (April 1, 1994) through September 30, 1996 was 31.17% per annum. The
S&P 500 increased during this period by 22.77% per annum. The total return on
investment in the Navellier Series Fund's Aggressive Small Cap Equity Portfolio
from October 1, 1995 through September 30, 1996 was 19.37%. The S&P 500
increased during this period by 18.15%. (The total return percentages for the
Navellier Aggressive Small Cap Equity Portfolio represent the returns net of any
sales charge.)
Louis Navellier's wholly owned investment advisory firm, Navellier &
Associates, Inc., has also managed, on an individual basis, accounts for
individuals and institutions since 1987 employing a modern portfolio theory
style of stock analysis which uses substantially the same investment objectives,
policies and strategies that are employed by Navellier Management, Inc. for the
Aggressive Growth Portfolio and the Mid Cap Growth Portfolio.
The basic difference between the investment style used by Navellier &
Associates, Inc. and the style used for the Aggressive Growth Portfolio is that
the Aggressive Growth Portfolio can invest a greater percentage of assets (up to
10% of the Portfolio's assets) in the securities of a single company and that
the securities are intended to be held for at least three (3) months, whereas
investments for private accounts managed by Navellier & Associates, Inc. tend
not to have as great a percentage of assets invested in the securities of a
single company and can be held for less than three (3) months (although the
average holding period for securities is eight months).
The basic difference between the investment style used by Navellier &
Associates, Inc. and the style used by the Mid Cap Growth Portfolio is that
Navellier & Associates, Inc. is not restricted to investing in companies with
capitalization between $1 Billion and $5 Billion and is not required to hold
securities for at least three (3) months, whereas the Mid Cap Growth Portfolio
is so restricted in its investments and intends to hold all securities for at
least three (3) months. The basic investment style is a proprietary system of
computer based screens to anaylyze over 7,000 stocks in order to determine which
stocks to buy and sell (the "Navellier system"). Louis Navellier and his staff
at Navellier & Associates, Inc. have used the Navellier system since 1987 to
manage the private accounts under management.
15
<PAGE>
The following tables set forth composite performance data for Navellier &
Associates, Inc. for all private accounts under its management during the dates
indicated. The data is provided to illustrate the past performance of Navellier
& Associates, Inc. in managing the private accounts based on the Navellier
system, as measured against the S&P 500 Index.
<TABLE>
<CAPTION>
Navellier & Associates, Inc. S&P 500
Index
<S> <C> <C>
1987 . . . . . . . . . . . . . . . . . . 8.05 5.24
1988 . . . . . . . . . . . . . . . . . . 11.40 16.51
1989 . . . . . . . . . . . . . . . . . . 22.20 31.58
1990 . . . . . . . . . . . . . . . . . . 12.51 -3.15
1991 . . . . . . . . . . . . . . . . . . 66.43 30.50
1992 . . . . . . . . . . . . . . . . . . 3.12 7.61
1993 . . . . . . . . . . . . . . . . . . 16.83 10.09
1994 . . . . . . . . . . . . . . . . . . 1.53 1.31
1995 . . . . . . . . . . . . . . . . . . 43.80 37.89
1996 (Six months). . . . . . . . . . . . 14.81 10.10
<CAPTION>
Navellier & Associates, Inc. S&P 500
Index
<S> <C> <C>
One Year 34.03% 26.02%
Three Years 21.70 17.21
Five Years 19.80 15.74
Since Inception 25.55 19.69
</TABLE>
Performance information about the Portfolio manager or the Investment Advisor is
based on its past performance only and is not an indication of future
performance. Performance history may be expressed as total return of each
Portfolio.
The "total return" of each Portfolio refers to the average annual
compounded rate of return of the Portfolio over some representative period that
would equate an initial payment of $1,000 at the beginning of a stated period to
the ending redeemable value of the investment, after giving effect to the
reinvestment of all dividends and distributions and deductions of expenses
during the period.
For more information about calculation of the investment performance of
each Portfolio, see the Statement of Additional Information.
16
<PAGE>
MANAGEMENT OF THE FUND
THE BOARD OF TRUSTEES
The Fund's Board of Trustees directs the business and affairs of each
Portfolio of the Fund as well as supervises the Investment Adviser, Distributor,
accountant, Transfer Agent and Custodian, as described below.
THE INVESTMENT ADVISER
Navellier Management, Inc. acts as the Investment Adviser to each of the
three existing Portfolios of the Fund. The Investment Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940. The Investment
Adviser is responsible for selecting the securities which will constitute the
pool of securities which will be selected for investment for each Portfolio.
Pursuant to a separate Administrative Services Agreement, the Investment Adviser
provides each Portfolio of the Fund with certain administrative services,
including accounting and bookkeeping services and supervising the Custodian's
and Transfer Agent's activities and each Portfolio's compliance with its
reporting obligations. The Investment Adviser may contract (and pay for out of
its own resources including the administrative fee it receives) for the
performance of such services to the Custodian, Transfer Agent, or others, and
may retain all of its 0.25% administrative services fee or may share some or all
of its fee with such other person(s). The Investment Adviser also provides each
Portfolio of the Fund with a continuous investment program based on its
investment research and management with respect to all securities and
investments. The Investment Adviser will determine from time to time what
securities and other investments will be selected to be purchased, retained, or
sold by the Fund.
The Investment Adviser is owned and controlled by its sole shareholder,
Louis G. Navellier (a 100% stockholder). In 1987, Louis Navellier was in
litigation with a business partner and on the advice of his then legal counsel,
as part of a legal strategy, filed a personal bankruptcy petition in connection
with that litigation. The bankruptcy petition was voluntarily dismissed by Mr.
Navellier less than two months later with all creditors being paid in full.
Louis G. Navellier is an affiliated person of the Fund and is also the sole
owner of the Distributor, Navellier Securities Corp. Louis Navellier is also
the sole shareholder of Navellier & Associates Inc. (See the Statement of
Additional Information.) Navellier & Associates Inc., is registered as an
investment adviser with the Securities and Exchange Commission and with all
states which require investment adviser registration. Louis Navellier is
registered as an investment adviser representative or agent in all states
requiring such registration. Louis Navellier and Navellier & Associates Inc.,
without admitting liability, did in the past agree to a two-week suspension in
California and agreed to pay civil penalties to the States of California,
Connecticut, and Maryland for allegedly not being properly registered as an
investment adviser. Navellier Management, Inc. is also and has been since
January 1994, the investment adviser to The Navellier Series Fund, an open-end
diversified investment company. Louis Navellier is, and has been, in the
business of rendering investment advisory services to significant pools of
capital since 1987.
17
<PAGE>
For information regarding the Fund's expenses and the fees paid to the
Investment Adviser see "Expenses of the Fund".
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On October 17, 1995, in order to fulfill the requirements of Section
14(a)(1) of the Investment Company Act of 1940, one hundred percent (100%) of
the issued and outstanding shares of the only existing Portfolio of the Fund
(the Navellier Aggressive Growth Portfolio) was subscribed to for purchase by
Louis Navellier under an agreement dated October 17, 1995. Such subscription
was made for an aggregate of $100,000 allocated 100% for the Navellier
Aggressive Growth Portfolio (to purchase 10,000 shares). Louis Navellier is no
longer a control person of the Navellier Aggressive Growth Portfolio.
THE DISTRIBUTOR
Navellier Securities Corp., acts as the Fund's Distributor and is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers ("NASD"). The
Distributor renders its services to the Fund pursuant to a distribution
agreement under which it serves as the principal underwriter of the shares of
each existing Portfolio of the Fund. The Distributor may sell certain of the
Fund's Portfolio shares by direct placements. Through a network established by
the Distributor, each of the Fund's Portfolio shares may also be sold through
selected broker-dealers. (For information regarding the Fund's expenses and the
fees it pays to the Distributor, see "Expenses of the Fund" following.) Louis
G. Navellier, an affiliate of the Fund and the Investment Adviser, is an
officer, director, and sole shareholder of the Distributor.
THE CUSTODIAN AND THE TRANSFER AGENT
Rushmore Trust & Savings, FSB, 4922 Fairmont Avenue, Bethesda,
Maryland, 20814, telephone: (301) 657-1510 or (800) 622-1386, is Custodian for
the Fund's securities and cash and Transfer Agent for the Fund shares. The
Distributor shall be responsible for the review of applications in order to
guarantee that all requisite and statistical information has been provided with
respect to the establishment of accounts.
18
<PAGE>
EXPENSES OF THE FUND
GENERAL
Each Portfolio is responsible for the payment of its own expenses.
These expenses are deducted from that Portfolio's investment income before
dividends are paid. These expenses include, but are not limited to: fees paid
to the Investment Adviser, the Custodian, the Transfer Agent, and the
Accountant; Trustees' fees; taxes; interest; brokerage commissions; organization
expenses; securities registration ("blue sky") fees; legal fees; auditing fees;
printing and other expenses which are not directly assumed by the Investment
Adviser under its investment advisory or expense reimbursement agreements with
the Fund. General expenses which are not associated directly with a specific
Portfolio (including fidelity bond and other insurance) are allocated to each
Portfolio based upon their relative net assets. The Investment Advisor may, but
is not obligated to, from time to time advance funds, or directly pay, for
expenses of the Fund and may seek reimbursement of or waive reimbursement of
those advanced expenses.
COMPENSATION OF THE INVESTMENT ADVISER
The Investment Adviser receives an annual 1.25% fee for investment
management of The Aggressive Growth Portfolio, an annual 1.25% fee for
investment management of the Mid Cap Growth Portfolio and an annual 1.15% fee
for investment management of the Aggressive Small Cap Portfolio. Each fee is
payable monthly, based upon each Portfolio's average daily net assets. These
advisory fees are higher than those generally paid by most other investment
companies. The Investment Adviser also receives a 0.25% annual fee for
rendering administrative services to the Fund pursuant to an Administrative
Services Agreement and is entitled to reimbursement for operating expenses it
advances for the Fund.
DISTRIBUTION PLANS
The Aggressive Growth Portfolio Distribution Plan
-------------------------------------------------
The Aggressive Growth Portfolio has adopted a Plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), whereby it reimburses Distributor or
others in an amount up to 0.25% per annum of the average daily net assets of the
Aggressive Growth Portfolio for expenses incurred for the promotion and
distribution of the shares of such Portfolio of the Fund, including, but not
limited to, the printing of prospectuses, statements of additional information
and reports used for sales purposes, expenses (including personnel of
Distributor) of preparation of sales literature and related expenses,
advertisements and other distribution-related expenses, including a prorated
portion of Distributor's overhead expenses attributable to the distribution of
such Portfolio Fund shares. Such payments are made monthly. The 12b-1 fee
includes, in addition to promotional activities, amounts the Aggressive Growth
Portfolio may pay to Distributor or others as a service fee to reimburse such
parties for personal services provided to shareholders of the Aggressive Growth
Portfolio and/or the maintenance of shareholder accounts. The total amount of
12b-1 fees paid for such personal services and promotional services shall not
exceed 0.25% per year of the average daily net assets of the Aggressive Growth
Portfolio. The Distributor can keep all of said 12b-1 fees it receives to the
extent it is
19
<PAGE>
not required to pay others for such services. Such Rule 12b-1 fees are made
pursuant to the distribution plan(s) and distribution agreements entered into
between such service providers and Distributor or the Fund directly. Payments
in excess of reimbursable expenses under the plan in any year must be refunded.
The Rule 12b-1 expenses and fees in excess of 0.25% per year of the Aggresive
Growth Portfolio's average net assets that otherwise qualify for payment may not
be carried forward into successive annual periods. The Plan also covers
payments by certain parties to the extent such payments are deemed to be for the
financing of any activity primarily intended to result in the sale of shares
issued by the Aggressive Growth Portfolio within the context of Rule 12b-1. The
payments under the Plan are included in the maximum operating expenses which may
be borne by the Aggressive Growth Portfolio.
The Mid Cap Growth Portfolio Distribution Plan
----------------------------------------------
The Mid Cap Growth Portfolio has adopted a Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), whereby such Portfolio compensates Distributor
or others in the amount of 0.25% per annum of the average daily net assets of
the Mid Cap Growth Portfolio for expenses incurred and services rendered for the
promotion and distribution of the shares of such Mid Cap Growth Portfolio of the
Fund, including, but not limited to, the printing of prospectuses, statements of
additional information and reports used for sales purposes, expenses (including
personnel of Distributor) of preparation of sales literature and related
expenses, advertisements and other distribution-related expenses, including a
prorated portion of Distributor's overhead expenses attributable to the
distribution of the Mid Cap Growth Portfolio Fund shares. Such payments are
made monthly. The 12b-1 fee includes, in addition to promotional activities,
amounts such Portfolio pays to Distributor or others as a service fee to
compensate such parties for personal services provided to shareholders of such
Portfolio and/or the maintenance of shareholder accounts. The total amount of
12b-1 fees paid for such personal services and promotional services shall be
0.25% per year of the average daily net assets of the Mid Cap Growth Portfolio.
The Distributor can keep all of said 12b-1 fees it receives to the extent it is
not required to pay others for such services. Such Rule 12b-1 fees are made
pursuant to the distribution plan and distribution agreements entered into
between such service providers and Distributor or the Mid Cap Growth Portfolio
directly. The 12b-1 Plan for the Mid Cap Growth Portfolio also covers payments
by the Distributor and Investment Advisor to the extent such payments are deemed
to be for the financing of any activity primarily intended to result in the sale
of shares issued by such Portfolio within the context of Rule 12b-1. The
payments under the 12b-1 Plan for the Mid Cap Growth Portfolio are included in
the maximum operating expenses which may be borne by the Mid Cap Growth
Portfolio. Payments under the 12b-1 Plan for the Mid Cap Growth Portfolio may
exceed actual expenses incurred by the Distributor, Investment Advisor or
others.
BROKERAGE COMMISSIONS
The Investment Adviser may select selected broker-dealers to execute
portfolio transactions for the Portfolios of the Fund, provided that the
commissions, fees, or other remuneration received by such party in exchange for
executing such transactions are reasonable and fair compared to those paid to
other brokers in connection with comparable transactions. In addition, when
selecting broker-dealers for Fund portfolio transactions, the Investment Adviser
may consider the record of such broker-dealers with respect to the sale of
shares of the Fund. (See the Statement of Additional Information.)
20
<PAGE>
REPORTS AND INFORMATION
The Fund will distribute to the shareholders of each Portfolio semi-annual
reports containing unaudited financial statements and information pertaining to
matters of each Portfolio of the Fund. An annual report containing financial
statements for each Portfolio, together with the report of the independent
auditors for each Portfolio of the Fund is distributed to shareholders each
year. Shareholder inquiries should be addressed to The Navellier Performance
Funds, at One East Liberty, Third Floor, Reno, Nevada 89501; Tel: (800) 887-
8671, or to the Transfer Agent, Rushmore Trust & Savings, FSB, 4922 Fairmont
Avenue, Bethesda, Maryland, 20814, Telephone: (301) 657-1510 or (800) 622-1386.
21
<PAGE>
DESCRIPTION OF SHARES
The Fund is a Delaware business trust organized on October 17, 1995. The
Declaration of Trust permits the Trustees to issue an unlimited number of shares
of beneficial interest. The Board of Trustees has the power to designate one or
more classes ("Portfolios") of shares of beneficial interest and to classify or
reclassify any unissued shares with respect to such classes. Presently the Fund
is offering shares of three Portfolios - the Navellier Aggressive Growth
Portfolio, the Navellier Mid Cap Growth Portfolio and the Navellier Aggressive
Small Cap Portfolio, each of which is described above.
The shares of each Portfolio, when issued, are fully paid and non-
assessable, are redeemable at the option of the holder, are fully transferable,
and have no conversion or preemptive rights. Shares are also redeemable at the
option of each Portfolio of the Fund when a shareholder's investment, as a
result of redemptions in the Fund, falls below the minimum investment required
by the Fund (see "Redemption of Shares"). Each share of a Portfolio is equal as
to earnings, expenses, and assets of the Portfolio and, in the event of
liquidation of the Portfolio, is entitled to an equal portion of all of the
Portfolio's net assets. Shareholders of each Portfolio of the Fund are entitled
to one vote for each full share held and fractional votes for fractional shares
held, and will vote in the aggregate and not by Portfolio except as otherwise
required by law or when the Board of Trustees determines that a matter to be
voted upon affects only the interest of the shareholders of a particular
Portfolio. Voting rights are not cumulative, so that the holders of more than
50% of the shares voting in any election of Trustees can, if they so choose,
elect all of the Trustees. While the Fund is not required, and does not intend,
to hold annual meetings of shareholders, such meetings may be called by the
Trustees at their discretion, or upon demand by the holders of 10% or more of
the outstanding shares of any Portfolio for the purpose of electing or removing
Trustees.
All shares (including reinvested dividends and capital gain distributions)
are issued or redeemed in full or fractional shares rounded to the second
decimal place. No share certificates will be issued. Instead, an account will
be established for each shareholder and all shares purchased will be held in
book-entry form by the Fund.
22
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions with respect to the shares of any Portfolio
will be payable in shares at net asset value or, at the option of the
shareholder, in cash. Any shareholder who purchases shares of the Portfolio
prior to the close of business on the record date for a dividend or distribution
will be entitled to receive such dividend or distribution. Dividends and
distributions (whether received in shares or in cash) are treated either as
return of capital, ordinary income or long-term capital gain for federal income
tax purposes. Between the record date and the cash payment date, each Portfolio
retains the use and benefits of such monies as would be paid as cash dividends.
Each Portfolio will distribute all of its net investment income and net
realized capital gains, if any, annually in December.
If a cash payment is requested with respect to the Portfolio, a check will
be mailed to the shareholder. Unless otherwise instructed, the Transfer Agent
will mail checks or confirmations to the shareholder's address of record.
The federal income tax laws impose a four percent (4%) nondeductible excise
tax on each regulated investment company with respect to the amount, if any, by
which such company does not meet distribution requirements specified in the
federal income tax laws. Each Portfolio intends to comply with the distribution
requirements and thus does not expect to incur the four percent (4%)
nondeductible excise tax, although the imposition of such excise tax may
possibly occur.
Shareholders will have their dividends and/or capital gain distributions
reinvested in additional shares of the applicable Portfolio(s) unless they elect
in writing to receive such distributions in cash. Shareholders whose shares are
held in the name of a broker or nominee should contact such broker or nominee to
determine whether they want dividends reinvested or distributed.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions. (See "Taxes" following.)
In the case of foreign participants whose dividends are subject to U.S.
income tax withholding and in the case of any participants subject to 31%
federal backup withholding, the Transfer Agent will reinvest dividends after
deduction of the amount required to be withheld.
Experience may indicate that changes in the automatic reinvestment of
dividends are desirable. Accordingly, the Fund reserves the right to amend or
terminate this provision as applied to any dividend or distribution paid
subsequent to written notice of the change sent to shareholders at least 90 days
before the record date for such dividend or distribution.
23
<PAGE>
TAXES
FEDERAL TAXES
Each Portfolio of the Fund is a separate taxpayer and intends to meet
the requirements of Subchapter M of the Internal Revenue Code of 1986 (relating
to regulated investment companies) with respect to diversification of assets,
sources of income, and distributions of taxable income and will elect to be
taxed as a regulated investment company for federal income tax purposes.
However, the Code contains a number of complex tests relating to
qualification which a Portfolio might not meet in any particular year. For
example, if a Portfolio derives 30% or more of its gross income from the sale of
securities held for less than three months, it may fail to qualify. If a
Portfolio did not so qualify, it would be treated for tax purposes as an
ordinary corporation and receive no tax deduction for payments made to
shareholders.
Because each Portfolio of the Fund intends to distribute all of its
net investment income and net realized capital gains at least annually, it is
not expected that any Portfolio of the Fund will be required to pay federal
income tax for any year throughout which it was a regulated investment company
nor, for this reason, is it expected that any Portfolio will be required to pay
the 4% federal excise tax imposed on regulated investment companies that fail to
satisfy certain minimum distribution requirements. However, the possibility of
federal or state income tax and/or imposition of the federal excise tax does
exist.
If a Portfolio pays a dividend in January of any year which was
declared in the last three months of the previous year and was payable to
shareholders of record on a specified date in such a month, the dividend will be
treated as having been paid and received in the previous year.
Dividends (other than capital gains dividends) will be taxable to
shareholders as ordinary income, whether received in shares or cash and will, in
the case of corporate shareholders, generally qualify for the dividends-received
deduction to the extent paid out of qualifying dividends received by the
Portfolio.
Capital gains dividends will ordinarily be taxable to shareholders as
long-term capital gain, regardless of how long they have held their shares. A
dividend is a capital gains dividend if it is so designated by the Portfolio and
is paid out of the Portfolio 's net capital gain (that is, the excess of the
Portfolio's net long-term capital gain over its net short-term capital loss).
Any dividends paid shortly after a purchase by an investor may have
the effect of reducing the per share net asset value of the investor's shares by
the per share amount of dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
If the Fund redeems some or all of the shares held by any shareholder,
the transaction will generally be treated as a sale or exchange unless the
redemption fails to substantially reduce the shareholder's percentage ownership
interest in the Fund (determined for this purpose using
24
<PAGE>
certain specific rules of constructive ownership). If a redemption of shares is
not treated as a sale or exchange, the amount paid for the shares will be
treated as a dividend.
If a redemption is treated as a sale or exchange, the shareholder will
generally recognize gain or loss measured by the difference between the
redemption price and the basis of the shares. This gain or loss will generally
be treated as capital gain (long-term or short-term, depending upon the holding
period for the redeemed shares).
Shareholders will be subject to information reporting with respect to
dividends and redemptions, and may be subject to backup withholding with respect
to dividends at the rate of 31% unless (a) they are corporations or come within
other exempt categories or (b) they provide correct taxpayer identification
numbers, certify as to no loss of exemption from backup withholding, and
otherwise comply with applicable requirements of the law relating to backup
withholding. Any amounts paid as backup withholding will be creditable against
the federal income tax liabilities of the affected shareholders.
The Fund may pay taxes to foreign countries with respect to dividends
or interest it receives from foreign issuers or from domestic issuers that
derive a substantial amount of their revenues in foreign countries, or such
taxes may be withheld at the source by such issuers. The Fund will generally be
entitled to deduct such taxes in computing its taxable income.
STATE AND LOCAL TAXES
Each Portfolio of the Fund may be subject to state or local taxation
in jurisdictions in which it may be deemed to be doing business. Taxable income
of each Portfolio of the Fund and its shareholders for state and local purposes
may be different from taxable income calculated for federal income tax purposes.
Each prospective investor is advised to consult his or her tax adviser
for advice as to the federal, state, and local taxation which may be applicable
to such investor in connection with an investment in the Fund.
25
<PAGE>
PURCHASE AND PRICING OF SHARES
PURCHASE OF SHARES
The Fund's various portfolio shares are sold to the general public on
a continuous basis through the Distributor, the Transfer Agent and the
Distributor's network of broker-dealers.
PURCHASE BY MAIL
Investments in the Fund can be made directly to the Distributor or
through the transfer agent - Rushmore Trust & Savings, FSB - or through selected
securities dealers who have the responsibility to transmit orders promptly and
who may charge a processing fee.
TO INVEST BY MAIL: Fill out an application designating which Portfolio you are
investing in and make a check payable to "The Navellier Performance Funds."
Mail the check along with the application to:
The Navellier Performance Funds
c/o Rushmore Trust & Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
Purchases by check will be credited to an account as of the date the
Portfolio's net asset value is next determined after receipt of payment and a
properly completed account application. Foreign checks will not be accepted.
Be certain to specify which Portfolio or Portfolios you are investing in.
Purchase orders which do not specify the Portfolio in which an investment
is to be made will be returned. (See "Purchase and Pricing of Shares - General
Purchasing Information".) Net asset value per share is calculated once daily as
of 4 p.m. E.S.T. on each business day. (See "Purchase and Pricing of Shares -
Valuation of Shares".)
THE NAVELLIER PERFORMANCE FUNDS' PORTFOLIOS
The shares of each Portfolio are sold at their net asset value per share
next determined after an order in proper form (i.e., a completely filled out
application form) is received by the Transfer Agent.
If an order for shares of a Portfolio is received by the Transfer Agent by
4:00 p.m. on any business day, such shares will be purchased at the net asset
value determined as of 4:00 p.m. New York Time on that day. Otherwise, such
shares will be purchased at the net asset value determined as of 4:00 p.m New
York Time on the next business day. However, orders received by the Transfer
Agent from the Distributor or from dealers or brokers after the net asset value
is determined that day will receive such net asset value price if the orders
were received by the Distributor or broker or dealer from its customer prior to
such determination and were transmitted to and received by the Transfer Agent
prior to its close of business on that day (normally 4:00 p.m. New York Time).
Shares are entitled to receive any declared
26
<PAGE>
dividends on the day following the date of purchase.
PURCHASES THROUGH SELECTED DEALERS
Shares purchased through Selected Dealers will be effected at the net asset
value next determined after the Selected Dealer receives the purchase order,
provided that the Selected Dealer transmits the order to the Transfer Agent and
the Transfer Agent accepts the order by 4:00 p.m. New York Time on the day of
determination. See "Valuation of Shares". If an investor's order is not
transmitted and accepted by 4:00 p.m. New York Time, the investor must settle
his or her entitlement to that day's net asset value with the Selected Dealer.
Investors may also purchase shares of the Fund by telephone through a Selected
Dealer by having the Selected Dealer telephone the Transfer Agent with the
purchase order. Investors may be charged a transaction fee if they effect
transactions in Fund shares through a broker or agent.
Certain selected Dealers may effect transactions in shares of the
Portfolios through the National Securities Clearing Corporation's Fund/SERV
system.
Purchases of shares through Selected Dealers not utilizing the National
Securities Clearing Corporation's Fund/SERV system will be effected when
received in proper form by the Transfer Agent, as described above, in the same
manner and subject to the same terms and conditions as are applicable to shares
purchased directly through the Transfer Agent. There is no sales load charged
to the investor on purchases of the Fund's Portfolios, whether purchased through
a Selected Dealer or directly through the Transfer Agent; there is however an
ongoing Rule 12b-1 fee (except as to the Aggressive Small Cap Portfolio).
Shareholders who wish to transfer Fund shares from one broker-dealer to
another should contact the Fund at (800) 621-7874.
TO INVEST BY BANK WIRE: Request a wire transfer to:
Rushmore Federal Savings Bank
Bethesda, MD
Routing Number 0550 71084
For Account of The Navellier
Performance Funds
Account Number 029 385770
AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE, YOU MUST TELEPHONE
THE FUND AT (800) 622-1386 OR (301) 657-1510 BETWEEN 8:30 A.M. AND 4:00 P.M. NEW
YORK TIME AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK
SENDING THE TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. IF THE
PURCHASE IS CANCELLED BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE
LIABLE FOR ANY LOSS THE FUND MAY INCUR.
27
<PAGE>
Such wire should identify the name of the Portfolio, the account number,
the order number (if available), and your name.
TO INVEST BY AUTOMATIC MONTHLY INVESTMENT PLAN:
Shareholders may make automatic monthly purchases of a Portfolio's shares
by executing an automatic monthly withdrawal application authorizing his/her/its
bank to transfer money from his/her/its checking account to the Transfer Agent
for the automatic monthly purchase of shares of the Portfolio for the
shareholder. There is no charge by the Portfolio for this automatic monthly
investment plan and the shareholder can discontinue the service at any time.
GENERAL PURCHASING INFORMATION
Each of the existing Portfolios of the Fund has established a minimum
initial investment of $2,000 ($500 in the case of IRA and other retirement plans
or qualifying group plans) and $100 for subsequent investments in any Portfolio.
Orders for shares may be made by mail by completing the Account Application
included with this Prospectus and mailing the completed application and the
payment for shares to the Transfer Agent. Documentation in addition to the
information required by the Account Application may be required when deemed
appropriate by the Fund and/or the Transfer Agent and the Account Application
will not be deemed complete until such additional information has been received.
The Fund reserves the right to not accept an applicant's proposed investment in
any of the Fund's shares.
VALUATION OF SHARES
The net asset value of the shares of each Portfolio of the Fund are
determined once daily as of 4 p.m. New York Time, on days when the New York
Stock Exchange is open for trading. In the event that the New York Stock
Exchange or the national securities exchanges on which Portfolio stocks are
traded adopt different trading hours on either a permanent or temporary basis,
the Trustees of the Fund will reconsider the time at which net asset value is to
be computed. The net asset value is determined by adding the values of all
securities and other assets of the Portfolio, subtracting liabilities, and
dividing by the number of outstanding shares of the Portfolio. The price at
which a purchase is effected is based on the next calculation of net asset value
after the order is received.
In determining the value of the assets of each Portfolio, the securities
for which market quotations are readily available are valued at market value.
Debt securities (other than short-term obligations) are normally valued on the
basis of valuations provided by a pricing service when such prices are believed
to reflect the fair value of such securities. All other securities and assets
are valued at their fair value as determined in good faith by the Trustees,
although the actual calculations may be made by persons acting pursuant to the
direction of the Trustees.
28
<PAGE>
REDEMPTION OF SHARES
GENERAL
A shareholder may redeem shares of each Portfolio at the net asset value
next determined after receipt of a notice of redemption in accordance with the
procedures set forth below and compliance with the further redemption
information and/or additional documentation requirements described in this
Section. As used in this Prospectus, the term "business day " refers to those
days on which stock exchanges trading stocks held by the Fund are open for
business. The Fund may change the following procedures at its discretion.
The shareholder will not be credited with dividends on those shares being
redeemed for the day on which the shares are redeemed by the Portfolio (but will
be credited with dividends on the day such shares were purchased). A check for
the proceeds of redemption will normally be mailed within seven days of receipt
of any redemption request received by the Transfer Agent. If shares to be
redeemed were purchased by check, the Fund may delay transmittal of redemption
proceeds only until such times as it is reasonably assured that good payment has
been collected for the purchase of such shares, which may be up to 15 days from
purchase date. Such delays can be avoided by wiring Federal Funds in effecting
share purchases.
If a shareholder wishes to redeem his or her entire shareholdings in a
Portfolio, he or she will receive, in addition to the net asset value of shares,
all declared but unpaid dividends thereon. The net asset value of the shares
may be more or less than a shareholder's cost depending on the market value of
the Portfolio securities at the time of the redemption.
REDEMPTION BY MAIL
A shareholder may redeem shares by mail on each day that the New York Stock
Exchange is open by submitting a written redemption request to:
The Navellier Performance Funds
c/o Rushmore Trust & Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
The request for redemption should include the name of the Portfolio, the
account name and number, and should be signed by all registered owners of the
shares in the exact names in which they are registered. Each request should
specify the number or dollar amount of shares to be redeemed or that all shares
in the account are to be redeemed.
REDEMPTIONS BY TELEPHONE
If you have indicated on your Account Application that you wish to
establish telephone redemption privileges, you may redeem shares by calling the
Transfer Agent at 1-800-622-1286 by 4:00 p.m. New York Time on any day the New
York Stock Exchange is open for business.
29
<PAGE>
If any account has more than one owner, the Transfer Agent may rely on the
instructions of any one owner. Each Portfolio of the Fund employs reasonable
procedures in an effort to confirm the authenticity of telephone instructions,
which may include giving some form of personal identification prior to acting on
the telephone instructions. If these procedures are not followed, the Fund and
the Transfer Agent may be responsible for any losses because of unauthorized or
fraudulent instructions. By requesting telephone redemption privileges, you
authorize the Transfer Agent to act upon any telephone instructions it believes
to be genuine, (1) to redeem shares from your account and (2) to mail or wire
transfer the redemption proceeds. You cannot redeem shares by telephone until
30 days after you have notified the Transfer Agent of any change of address.
Telephone redemption is not available for shares held in IRAs. Each
Portfolio may change, modify, or terminate its telephone redemption services at
any time upon 30 days' notice.
FURTHER REDEMPTION INFORMATION
Additional documentation (i.e., signature guarantee for redemptions in
excess of $1,000 or verification identification when redemption is by telephone)
regarding a redemption by any means may be required when deemed appropriate by
the Fund and/or the Transfer Agent, and the request for such redemption will not
be considered to have been received in proper form until such additional
documentation has been received. An investor should contact the Fund or the
Transfer Agent to inquire what, if any, additional documentation may be
required.
The Fund reserves the right to modify any of the methods of redemption for
providing these services upon 30 days' written notice to shareholders.
Due to the high cost of maintaining accounts of less than $2,000 ($500 for
IRA or other qualifying plan accounts), the Fund reserves the right to redeem
shares involuntarily in any such account at their then current net asset value.
Shareholders will first be notified and allowed 30 days to make additional share
purchases to bring their accounts to more than $2,000 ($500 for IRA or other
qualifying plan accounts). An account will not be redeemed involuntarily if the
balance falls below $2,000 ($500 for IRA or other qualifying plan accounts) by
virtue of fluctuations in net asset value rather than through investor
redemptions.
Under certain circumstances (i.e., when the applicable exchange is closed
or trading has been restricted, etc.), the right of redemption may be suspended
or the redemption may be satisfied by distribution of portfolio securities
rather than cash if a proper election pursuant to Rule 18F-1 of the Investment
Company Act has been made by the Fund. Information as to those matters is set
forth in the Statement of Additional Information.
Investors may redeem their shares and instruct the Fund or Transfer Agent,
in writing or by telephone, to either deposit the redemption proceeds in the
money market mutual fund - Fund for Government Investors, Inc. - a regulated
investment company custodied by Rushmore Trust & Savings, FSB, pending further
instructions as to the investor's desire to subsequently reinvest in the Fund or
the investor may direct some other disposition of said redemption proceeds.
30
<PAGE>
OPTION TO MAKE SYSTEMATIC WITHDRAWALS
The owner of $25,000 or more worth of the shares of any Portfolio may
provide for the payment from his/her account of any requested dollar amount (but
not less than $1,000) to him/her or his/her designated payee monthly, quarterly,
or annually. Shares will be redeemed on the last business day of each month.
Unless otherwise instructed, the Transfer Agent will mail checks to the
shareholder at his/her address of record. A sufficient number of shares will be
redeemed to make the designated payment.
31
<PAGE>
CERTAIN SERVICES PROVIDED TO SHAREHOLDERS
STATEMENTS OF ACCOUNT
Statements of Account for each Portfolio will be sent to each shareholder
at least quarterly.
DIVIDEND ELECTION
A shareholder may elect to receive dividends in shares or in cash. If no
election is made, dividends will automatically be credited to a shareholder's
account in additional shares of the Portfolio to which such dividend relates.
EXCHANGE PRIVILEGES
Shares of each Portfolio in this Fund may be exchanged for one another at
net asset value. Exchanges among portfolios of the Fund and/or portfolios of The
Navellier Series Fund may be made only in those states where such exchanges may
legally be made. The total value of shares being exchanged must at least equal
the minimum investment requirement of the Portfolio into which they are being
exchanged. Exchanges are made based on the net asset value next determined of
the shares involved in the exchange. Only one exchange in any 30-day period is
permitted. The Fund reserves the right to restrict the frequency or otherwise
modify, condition, terminate, or impose charges upon the exchange, upon 60 days'
prior written notice to shareholders. Exchanges between Portfolios will be
subject to a $5 exchange fee after five (5) exchanges per year. There is a limit
of ten (10) exchanges per year. Exchanges will be effected by the redemption of
shares of the Portfolio held and the purchase of shares of the other Portfolio.
For federal income tax purposes, any such exchange constitutes a sale upon which
a gain or loss, if any, may be realized, depending upon whether the value of the
shares being exchanged is more or less than the shareholder's adjusted cost
basis. For this purpose, however, a shareholder's cost basis may not include the
sales charge, if any, if the exchange is effectuated within 90 days of the
acquisition of the shares. Shareholders wishing to make an exchange should
contact the Transfer Agent. Exchange requests in the form required by the
Transfer Agent and received by the Transfer Agent prior to 4:00 p.m. New York
Time will be effected at the next determined net asset value.
32
<PAGE>
ADDITIONAL INFORMATION
The Statement of Additional Information, available upon request, without
charge from the Fund, provides a further discussion of certain sections of the
Prospectus and other information which may be of interest to certain investors.
This Prospectus and the Statement of Additional Information do not contain all
the information included in the Registration Statement filed with the Securities
and Exchange Commission with respect to the securities being sold, certain
portions of which have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the Statement of Additional Information and the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, each such statement being
qualified in all respects by such reference.
33
<PAGE>
ASSENT TO TRUST INSTRUMENT
Every Shareholder, by virtue of having purchased a Share or Interest shall
become a Shareholder and shall be held to have expressly assented and agreed to
be bound by the terms hereof.
34
<PAGE>
Investment Adviser
Navellier Management, Inc.
One East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
Distributor THE NAVELLIER PERFORMANCE FUNDS
Navellier Securities Corp.
One East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
Independent Auditors
Deloitte & Touche, LLP
1900 M Street
Washington, D.C. 20036
(202) 955-4000
Transfer Agent and Custodian
Rushmore Trust & Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
(800) 622-1386
Counsel
Samuel Kornhauser
Law Offices of Samuel Kornhauser
155 Jackson Street, Suite 1807
San Francisco, CA 94111
(415) 981-6281
Sales Information
Navellier Securities Corp.
One East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
Shareholder Inquiries
Rushmore Trust & Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
(800) 622-1386 November 26, 1996
35
<PAGE>
<TABLE>
<CAPTION>
NAVELLIER NEW ACCOUNT APPLICATION For a retirement account application call 800-887-8671
PERFORMANCE =================================================================================
FUNDS
<S> <C>
800-887-8671
MAIL APPLICATION & CHECKS TO:
The Navellier Performance Funds
c/o Rushmore Trust & Savings
4922 Fairmont Ave.
Bethesda, MD 20814
800-622-1386
- - ------------------------------- ====================================================================================
REGISTRATION 1. Individual
-----------------------------------------------------------------------
First Name Initial Last Name
[_] Individual
Use lines 1 & 3
2. Joint Tenant
[_] Joint Account with ---------------------------------------------------------------------
Rights of Survivor First Name Initial Last Name
Lines 1, 2 & 3 Rights of survivor will be applied unless otherwise indicated
[_] Joint Account with
Tenancy in Common 3. Social Security No. Date of Birth
Lines 1, 2 & 3 ------------------------- --------------------
S.S.# to be used for tax purposes
[_] Gift to Minor 4. Uniform Gift to Minor
Lines 4 & 5 ------------------------------------------------------------
Custodian's Name / State
OR
[_] Corporations, 5.
Partnerships, ---------------------------------------------------------------------------------
Trusts & Others Minor's Name Minor's Social Security No. Date of Birth
Lines 6 & 7 6.
---------------------------------------------------------------------------------
Name of Corporation or Entity Tax ID Number
7. Registration Type: ___ Corporation ___ Partnership ___ Unincorporated Association
___ Trust - Date of Trust _______________
Please include a copy of the first and last pages of your trust agreement.
- - ------------------------------- ====================================================================================
MAILING ADDRESS Street or P.O. Box
------------------------------------------------------------------
Complete if different from City State Zip
above address label ------------------------------------------ ----------------- ----------
Telephone: Home Work
---------------------------- ---------------------------------
Your Residency: [_] U.S. [_] Resident Alien [_] Non-Resident Alien
Specify Country
---------------------------------------------------------------------
- - ------------------------------- ====================================================================================
</TABLE>
<PAGE>
<TABLE>
- - ------------------------------
====================================================================================================
<S> <C>
INVESTMENT Portfolio Amount
--------- ------
Make check payable to: [_] Navellier Aggressive Growth Portfolio
The Navellier Performance $_____________
Funds [_] Navellier Mid Cap Growth Portfolio
$_____________
[_] Navellier Aggressive Small Cap Portfolio
$_____________
[_] By check $ [_] By wire $
-------------------------------------- ------------------------------
From Account No.
------------------------------------------------------------------------------------
Minimum initial investment is $2,000 ($500 for IRAs, call 800-887-8671 for an IRA application).
Make checks payable to The Navellier Performance Funds. Call 800-622-1386 for wiring instructions or
see the prospectus.
- - ------------------------------
====================================================================================================
DIVIDENDS [_] Reinvest dividends and capital gains. [_] Reinvest dividends, pay capital gains.
AND CAPITAL GAINS [_] Pay dividends and capital gains in cash. [_] Pay dividends, reinvest capital gains.
DISTRIBUTIONS
All dividends and capital gains distributions will be reinvested if no box is checked. All
distributions will be reinvested if a withdrawal plan is elected.
- - ------------------------------
====================================================================================================
INVESTOR FINANCIAL Annual Income: $ Net Worth: $
& INVESTMENT INFO. --------------------------------- -------------------------------------
Required by NASD Investment Objective: [_] Growth
- - ------------------------------
====================================================================================================
SHAREHOLDER Telephone/Expedited Redemption - please check all that apply. These privileges are subject to the
PRIVILEGES terms set forth in the Prospectus.
[_] Yes, I would like to be able to redeem shares by telephone.
[_] Deposit redemption proceeds in the money market mutual fund, Fund for Government
Investors, Inc., custodied by Rushmore Trust & Savings, FSB.
[_] Wire redemption proceeds to:
------------------------------------------------------------------
Name of Bank
------------------------------------------- -----------------------------------------
Type of Account Account Number
[_] Mail a check to my address indicated above.
- - ------------------------------
===================================================================================================
SYSTEMATIC [_] YES A Systematic Withdrawal Plan is available for accounts with an underlying share value of $25,000 or
WITHDRAWAL [_] NO more. If this plan is elected, all distributions will be automatically reinvested. Minimum
PLAN withdrawal is $1,000.
Optional Amount of payment $
-------------------------
Payments made: [_] Monthly [_] Quarterly [_] Annually
Payments to commence the 2nd business day of:
-------------------------
Month, Year
If checks are to be sent to another address or paid to someone other than the registered owner shown
on application, please provide the following:
Name:
-----------------------------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------------------------
- - ------------------------------
====================================================================================================
BROKER Firm
INFORMATION ------------------------------------------------------------------------------------------------
Mailing Address City
------------------------------------------ -------------------------------------
State Zip Phone
---------------------------------- --------------- --------------------------------
If shares are being purchased Dealer Code Office Code Rep. Number
through a Service Agent, -------------------------- --------------------- ------------------
Agent should complete this Agent Name Agent Signature:
section. ------------------------------ ----------------------------------------
- - ------------------------------
====================================================================================================
</TABLE>
<PAGE>
<TABLE>
- - ------------------------------
===================================================================================================
<S> <C>
SIGNATURES I/We authorize Rushmore Trust & Savings, FSB, as custodian and transfer agent for The Navellier
& CERTIFICATION Performance Funds, to honor any requests made in accordance with the terms of this application, and
I/we further affirm that, subject to any limitations imposed by applicable law, neither Rushmore
Confirmation of Account Trust & Savings, FSB, nor The Navellier Performance Funds shall be held liable by me/us for any
Establishment: Soon after loss, liability, cost, or expense for acting in accordance with this application, or any section
all essential items are thereof. I/We understand that all of the shareholder options described in this application are
received by the custodian, subject to the terms set forth in the Prospectus.
a confirmation statement(s)
showing account number(s), I/WE CERTIFY THAT WE HAVE FULL RIGHT, POWER, AUTHORITY, AND LEGAL CAPACITY TO PURCHASE AND REDEEM
amount received, shares SHARES AND AFFIRM THAT I/WE HAVE RECEIVED AND READ THE PROSPECTUS, AGREE TO ITS TERMS, AND HAVE NOT
purchased, and price paid RELIED ON OR MADE MY/OUR DECISION TO INVEST IN THE NAVELLIER PERFORMANCE FUNDS ON ANY WRITTEN OR
per share will be sent to ORAL INFORMATION OTHER THAN THE WRITTEN INFORMATION CONTAINED IN THE PROSPECTUS, REGISTRATION
the registered shareholder. STATEMENT AND STATEMENT OF ADDITIONAL INFORMATION. Under penalties of perjury, I/we certify (i)
that the number shown on this form is my/our correct Social Security Number or Taxpayer
Subsequent Payments: A new Identification Number and (ii) that (1) I/we are not subject to backup withholding either because
application need not be I/we have not been notified by the Internal Revenue Service that I/we are subject to backup
submitted with additional withholding as a result of a failure to report all interest or dividends, or (2) the IRS has
payments to an existing notified me/us that I am/we are no longer subject to backup withholding. If you have been notified
account if a current by the IRS that you are currently subject to backup withholding strike out phrase (2) above.
application is on file with
the custodian. Subsequent
purchases should be X X
identified by account ------------------------------------------------ ------------------------------------------------
number and account Signature as it appears on Line No. 1 Date Joint Signature (if applicable) Date
registration name.
</TABLE>
<PAGE>
PART B
THE NAVELLIER PERFORMANCE FUNDS
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 26, 1996
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the Prospectus of The Navellier Performance Funds
(the "Fund"), dated November 26, 1996, a copy of which Prospectus may be
obtained, without charge, by contacting the Fund, at its mailing address c/o
Navellier Securities, Corp., One East Liberty, Third Floor, Reno, Nevada 89501;
Tel: 1-800-887-8671.
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION AND HISTORY....................... 1
INVESTMENT OBJECTIVES AND POLICIES.................... 1
TRUSTEES AND OFFICERS OF THE FUND..................... 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES... 8
THE INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT........................ 9
BROKERAGE ALLOCATION AND OTHER PRACTICES.............. 14
CAPITAL STOCK AND OTHER SECURITIES.................... 16
PURCHASE, REDEMPTION, AND PRICING OF SHARES........... 17
TAXES................................................. 18
UNDERWRITERS.......................................... 21
CALCULATION OF PERFORMANCE DATA....................... 22
FINANCIAL STATEMENTS.................................. 23
APPENDIX.............................................. 24
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
The Fund is a business trust company (organized under the laws of the State
of Delaware on October 17, 1995) and has less than one year of operations as of
November 26, 1996.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES. The investment objectives and policies of each
-------------------
Portfolio are described in the "Investment Objectives and Policies" section of
the Prospectus. The following general policies supplement the information
contained in that section of the Prospectus.
CERTIFICATES OF DEPOSIT. Certificates of deposit are generally short-
-----------------------
term, interest-bearing, negotiable certificates issued by banks or savings and
loan associations against funds deposited in the issuing institution.
TIME DEPOSITS. Time deposits are deposits in a bank or other
-------------
financial institution for a specified period of time at a fixed interest rate
for which a negotiable certificate is not received.
BANKER'S ACCEPTANCES. A banker's acceptance is a time draft drawn on
--------------------
a commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer, or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
COMMERCIAL PAPER. Commercial paper refers to short-term, unsecured
----------------
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months.
CORPORATE DEBT SECURITIES. Corporate debt securities with a remaining
-------------------------
maturity of less than one year tend to become liquid and can sometimes be traded
as money market securities.
UNITED STATES GOVERNMENT OBLIGATIONS. Securities issued or guaranteed
------------------------------------
as to principal and interest by the United States government include a variety
of Treasury securities, which differ only in their interest rates, maturities,
and times of issuance. Treasury bills have a maturity of one year or less.
Treasury notes have maturities of one to seven years, and Treasury bonds
generally have a maturity of greater than five years.
1
<PAGE>
Agencies of the United States government which issue or guarantee
obligations include, among others, export-import banks of the United States,
Farmers' Home Administration, Federal Housing Administration, Government
National Mortgage Association, Maritime Administration, Small Business
Administration, the Defense Security Assistance Agency of the Department of
Defense, and the Tennessee Valley Authority. Obligations of instrumentalities
of the United States government include securities issued or guaranteed by,
among others, the Federal National Mortgage Associates, Federal Intermediate
Credit Banks, Banks for Cooperatives, and the United States Postal Service.
Some of the securities are supported by the full faith and credit of the United
States government; others are supported by the right of the issuer to borrow
from the Treasury, while still others are supported only by the credit of the
instrumentality.
INVESTMENT RESTRICTIONS. The Fund's fundamental policies as they
-----------------------
affect a Portfolio cannot be changed without the approval of a vote of a
majority of the outstanding securities of such Portfolio. A proposed change in
fundamental policy or investment objective will be deemed to have been
effectively acted upon with respect to any Portfolio if a majority of the
outstanding voting securities of that Portfolio votes for the matter. Such a
majority is defined as the lesser of (a) 67% or more of the voting shares of the
Fund present at a meeting of shareholders of the Portfolio, if the holders of
more than 50% of the outstanding shares of the Portfolio are present or
represented by proxy or (b) more than 50% of the outstanding shares of the
Portfolio. For purposes of the following restrictions (except the percentage
restrictions on borrowing and illiquid securities -- which percentage must be
complied with) and those contained in the Prospectus: (i) all percentage
limitations apply immediately after a purchase or initial investment; and (ii)
any subsequent change in any applicable percentage resulting from market
fluctuations or other changes in the amount of total assets does not require
elimination of any security from the Portfolio.
The following investment restrictions are fundamental policies of the
Fund with respect to all Portfolios (unless otherwise specified below) and may
not be changed except as described above. The Fund may not:
1. Purchase any securities or other property on margin; provided,
--------
however, that the Fund may obtain short-term credit as may be necessary for the
- - -------
clearance of purchases and sales of securities.
2. Make cash loans, except that the Fund may purchase bonds, notes,
debentures, or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not.
3. Make securities loans, except that the Fund may make loans of the
portfolio securities of any Portfolio, provided that the market value of the
securities subject to any such loans does not exceed 33-1/3% of the value of the
total assets (taken at market value) of such Portfolio.
2
<PAGE>
4. Make investments in real estate or commodities or commodity contracts,
including futures contracts, although the Fund may purchase securities of
issuers which deal in real estate or commodities although this is not a primary
objective of the Portfolio.
5. Invest in oil, gas, or other mineral exploration or development
programs, although the Fund may purchase securities of issuers which engage in
whole or in part in such activities.
6. Purchase securities of companies for the purpose of exercising
management or control.
7. Participate in a joint or joint and several trading account in
securities.
8. Issue senior securities or borrow money, except that the Fund may (i)
borrow money only from banks for any Portfolio for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests, that might
otherwise require the untimely disposition of securities, provided that any such
borrowing does not exceed 10% of the value of the total assets (taken at market
value) of such Portfolio, and (ii) borrow money only from banks for any
Portfolio for investment purposes, provided that (a) after each such borrowing,
when added to any borrowing described in clause (i) of this paragraph, there is
an asset coverage of at least 300% as defined in the Investment Company Act of
1940, and (b) is subject to an agreement by the lender that any recourse is
limited to the assets of that Portfolio with respect to which the borrowing has
been made. As an operating policy, no Portfolio may invest in portfolio
securities while the amount of borrowing of the Portfolio exceeds 5% of the
total assets of such Portfolio.
9. Pledge, mortgage, or hypothecate the assets of any Portfolio to an
extent greater than 10% of the total assets of such Portfolio to secure
borrowings made pursuant to the provisions of Item 8 above.
10. Purchase for any Portfolio "restricted securities" (as defined in Rule
144(a)(3) of the Securities Act of 1933), if, as a result of such purchase, more
than 10% of the net assets (taken at market value) of such Portfolio would then
be invested in such securities nor will the Fund invest in illiquid or
unseasoned securities if as a result of such purchase more than 5% of the net
assets of such portfolio would be invested in either illiquid or unseasoned
securities.
11. Invest more than 10% of the Aggressive Growth Portfolio's assets in
the securities of any single company or 25% or more of any Portfolio's total
assets in a single industry; invest more than 5% of the assets of the Mid Cap
Growth Portfolio or Aggressive Small Cap Portfolio in securities of any single
issuer.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of port-
3
<PAGE>
folio securities or amount of net assets shall not be considered a violation of
the restrictions, except as to the 5%, 10% and 300% percentage restrictions on
borrowing specified in Restriction Number 8 above.
PORTFOLIO TURNOVER. Each Portfolio has a different expected annual
------------------
rate of portfolio turnover which is calculated by dividing the lesser of
purchases or sales of portfolio securities during the fiscal year by the monthly
average of the value of the Portfolio's securities (excluding from the
computation all securities, including options, with maturities at the time of
acquisition of one year or less). A high rate of portfolio turnover generally
involves correspondingly greater expenses to the Portfolio, including brokerage
commission expenses, dealer mark-ups, and other transaction costs on the sale of
securities, which must be borne directly by the Portfolio. Turnover rates may
vary greatly from year to year as well as within a particular year and may also
be affected by cash requirements for redemptions of each Portfolio's shares and
by requirements which enable the Fund to receive certain favorable tax
treatment. Because each of the existing Portfolios is a new fund portfolio
which has not been in operation for a year, no actual turnover rate can be given
at this time. The Fund will attempt to limit the annual portfolio turnover rate
of each Portfolio to 300% or less, however, this rate may be exceeded if in the
Investment Adviser's discretion securities are or should be sold or purchased in
order to attempt to increase the Portfolio's performance. In Wisconsin an
annual portfolio turnover rate of 300% or more is considered a speculative
activity and under Wisconsin statutes could involve relatively greater risks or
costs to the Fund.
4
<PAGE>
TRUSTEES AND OFFICERS OF THE FUND
The following information, as of November 26, 1996, is provided with
respect to each trustee and officer of the Fund:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT AND ITS AFFILIATES DURING PAST FIVE YEARS
- - ------------------------ -------------------------------- ----------------------------------------------
<S> <C> <C>
Louis Navellier/1/ Trustee, President and Mr. Navellier is and has been the CEO and
One East Liberty Treasurer of The Navellier President of Navellier & Associates Inc., an
Third Floor Performance Funds. Mr. investment management company since
Reno, NV 89501 Navellier is also the CEO, 1988; CEO and President of Navellier
President, Secretary, and Management, Inc., an investment manage-
Treasurer of Navellier ment company since May 10, 1993; Trustee
Management, Inc., a of the Navellier Series Fund; CEO and
Delaware corporation which is President of Navellier International Manage-
the Investment Adviser to the ment, Inc., an investment management com-
Fund. Mr. Navellier is also pany, since May 10, 1993; CEO and
CEO, President, Secretary, President of Navellier Securities Corp. since
and Treasurer of Navellier May 10, 1993; Trustee of The Navellier
Securities Corp., the principal Series Fund; CEO and President of
underwriter of the Fund's Navellier Fund Management, Inc., an
shares. investment management company, since
November 30, 1995; and has been publisher
and editor of MPT Review from August
1987 to the present and was publisher and
editor of the predecessor investment
advisory newsletter OTC Insight, which he
began in 1980 and wrote through July 1987.
Arnold Langsen/2/ Trustee (however, Professor Professor Langsen is Professor Emeritus of
The Langsen Group, Langsen is the President and a Financial Economics, School of Business,
Inc. of California shareholder of The Langsen California State University at Hayward
637 Silver Lake Dr. Group, Inc. of California, (1973-1992); Visiting Professor, Financial
Danville, CA 94526 which corporation provides Economics, University of California at
consulting services to Berkeley (1984-1987).
Navellier & Associates Inc.;
Barry Sander Trustee Currently the President and CEO of Ursa
695 Mistletoe Rd., #2 Major Inc., a stencil manufacturing firm and
Ashland, OR 97520 has been for the past eight years.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
Joel Rossman Trustee Currently President and CEO of Personal
Personal Stamp Stamp Exchange, Inc., a manufacturer,
Exchange, Inc. designer and distributor of rubber stamp
360 Sutton Place products. He has been President and CEO
Santa Rosa, CA of Personal Stamp Exchange for the past 10
95407 years.
Jacques Delacroix Trustee Professor of Business Administration, Leavy
University of School of Business, Santa Clara University
Santa Clara (1983-present).
Santa Clara, CA
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ This person is an interested person affiliated with the Investment Adviser.
/2/ This person, although technically not an interested person affiliated with
the Investment Adviser, does own a company which provides consulting services to
Navellier & Associates Inc., a company owned by Louis Navellier.
6
<PAGE>
OFFICERS
The officers of the Fund are affiliated with the Investment Adviser and
receive no salary or fee from the Fund. The Fund's disinterested Trustees are
each compensated by the Fund with an annual fee, payable quarterly (calculated
at an annualized rate), of $7,500. The Trustees' fees may be adjusted according
to increased responsibilities if the Fund's assets exceed one billion dollars.
In addition, each disinterested Trustee receives reimbursement for actual
expenses of attendance at Board of Trustees meetings.
The Fund does not expect, in its current fiscal year, to pay aggregate
remuneration in excess of $60,000 for services in all capacities to any (a)
Trustee, (b) officer, (c) affiliated person of the Fund (other than the
Investment Adviser), (d) affiliated person of an affiliate or principal
underwriter of the Fund, or (e) all Trustees and officers of the Fund as a
group.
The Board of Trustees is permitted by the Fund's By-Laws to appoint an
advisory committee which shall be composed of persons who do not serve the Fund
in any other capacity and which shall have no power to dictate corporate
operations or to determine the investments of the Fund. The Fund currently has
no advisory committee.
<TABLE>
<CAPTION>
REMUNERATION TABLE
- - ------------------------------------------------------------------------
Name Capacity In Which Aggregate
Remuneration Received Remuneration /*/
From
Registrant and
Fund Complex
- - ------------------------------------------------------------------------
<S> <C> <C>
Louis G. Navellier Trustee, President, $ 0.00
Chief Executive Officer,
and Treasurer
- - ------------------------------------------------------------------------
Barry Sander Trustee $8,500.00/1/
- - ------------------------------------------------------------------------
Arnold Langsen Trustee $8,500.00/1/
- - ------------------------------------------------------------------------
Joel Rossman Trustee $8,500.00/1/
- - ------------------------------------------------------------------------
Jacques Delacroix Trustee $8,500.00/1/
- - ------------------------------------------------------------------------
</TABLE>
/*/ Based on projections for fiscal year 1996.
/1/ Includes $7,500 annual salary and reimbursement for estimated out-of-pocket
expenses per annum.
7
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On October 17, 1995, in order to fulfill the requirements of Section
14(a)(1) of the Investment Company Act of 1940, one hundred percent (100%) of
the issued and outstanding shares of the only existing Portfolio of the Fund was
purchased by Louis Navellier under a subscription agreement dated October 17,
1995. Such subscription for acquisition was made for an aggregate of $100,000
allocated 100% for the Navellier Aggressive Growth Portfolio (to purchase 10,000
shares). Louis Navellier now owns 1.8% of the Fund and is no longer a control
person of the Fund.
8
<PAGE>
THE INVESTMENT ADVISER, DISTRIBUTOR,
-----------------------------------
CUSTODIAN AND TRANSFER AGENT
(A) THE INVESTMENT ADVISER
----------------------
The offices of the Investment Adviser (Navellier Management, Inc.) are
located at One East Liberty, Third Floor, Reno, Nevada 89501. The Investment
Adviser began operation in May 1993 and only advises this Fund and The Navellier
Series Fund.
(i) The following individuals own the enumerated shares of outstanding
stock of the Investment Adviser and, as a result, maintain control over the
Investment Adviser:
Shares of Outstanding Stock Percentage of
Name of the Investment Adviser Outstanding Shares
- - ---- --------------------------- ------------------
Louis G. Navellier 1,000 100%
(ii) The following individuals are affiliated with the Fund, the
Investment Adviser, and the Distributor in the following capacities:
Name Position
- - ---- --------
Louis G. Navellier Trustee, President, and Treasurer of The Navellier Series
Fund; Director, CEO, President, Secretary, and Treasurer of
Navellier Management, Inc.,; Director, President, CEO,
Secretary, and Treasurer of Navellier Securities Corp.; one
of the Portfolio Managers of the Aggressive Growth
Portfolio, the Mid Cap Growth Portfolio, the Aggressive
Small Cap Portfolio and the Aggressive Small Cap Equity
Portfolio of the Navellier Series Fund.
Alan Alpers Trustee and Secretary of The Navellier Series Fund, One of
the Portfolio Manager's of the Aggressive Growth Portfolio,
The Mid Cap Portfolio, the Aggressive Small Cap Portfolio
and Aggressive Small Cap Equity Portfolio of the Navellier
Series Fund.
(iii) The management fee payable to the Investment Adviser under the terms
of the Investment Advisory Agreement (the "Advisory Agreement") between the
Investment Adviser and the Fund is payable monthly and is based upon 1.25% of
the Aggressive Growth Portfolio's and of the Mid Cap Growth Portfolio's and
1.15% of the Aggressive Small Cap Portfolio's average daily net assets. The
Investment Adviser has the right, but not the obligation, to waive any portion
or all of its management fee, from time to time.
9
<PAGE>
Expenses not expressly assumed by the Investment Adviser under the Advisory
Agreement are paid by the Fund. The Advisory Agreement lists examples of
expenses paid by the Fund for the account of the applicable Portfolio, the major
categories of which relate to taxes, fees to Trustees, legal, accounting, and
audit expenses, custodian and transfer agent expenses, certain printing and
registration costs, and non-recurring expenses, including litigation.
In the event that the annual operating expenses of any Portfolio, including
amounts payable to the Investment Adviser, paid or payable by such Portfolio for
any fiscal year, exceed the expense limitations applicable to the Portfolio
imposed by state securities laws or regulations thereunder, as such limitations
may be adjusted from time to time, the Investment Adviser shall reduce its
management fee to the extent of such excess and, if required, pursuant to any
such laws or regulations (unless otherwise waived), will reimburse the
applicable Portfolio for annual operating expenses in excess of any such expense
limitation. Presently, California has the most restrictive state expense
limitations applicable to the Fund. Generally, these limitations provide that
the Fund's aggregate annual expenses shall not normally exceed 2-1/2% of the
first $30 million of average net assets, 2% of the next $70 million of average
net assets, and 1-1/2% of the remaining average net assets of the Fund for any
fiscal year.
The Advisory Agreement provides that the Investment Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund or its investors except for losses (i) resulting from the willful
misfeasance, bad faith, or gross negligence on its part, (ii) resulting from
reckless disregard by it of its obligations and duties under the Advisory
Agreement, or (iii) a loss for which the Investment Adviser would not be
permitted to be indemnified under the Federal Securities laws.
(iv) Pursuant to an Administrative Services Agreement, the Investment
Adviser receives an annual fee of .25% of the value of the assets under
management and provides or is responsible for the provision of certain
administrative services to the Fund, including, among others, the preparation
and maintenance of certain books and records required to be maintained by the
Fund under the Investment Company Act of 1940. The Administrative Services
Agreement permits the Investment Adviser to contract out for all of its duties
thereunder; however, in the event of such contracting, the Investment Adviser
remains responsible for the performance of its obligations under the
Administrative Services Agreement. The Investment Adviser has entered into an
agreement with Rushmore Trust & Savings, FSB, to perform, in addition to
custodian and transfer agent services, some or all administrative services and
may contract in the future with other persons or entities to perform some or all
of its administrative services. All of these contracted services are and will
be paid for by the Investment Advisor out of its fees or assets.
In exchange for its services under the Administrative Services Agreement,
the Fund reimburses the Investment Adviser for certain expenses incurred by the
Investment Adviser in connection therewith but does not reimburse Investment
Advisor (over the amount of
10
<PAGE>
0.25% annual Administrative Services Fee) to reimburse it for fees Investment
Advisor pays to others for administrative services. The agreement also allows
Investment Adviser to pay to its delegate part or all of such fees and
reimbursable expense payments incurred by it or its delegate.
The Investment Adviser Agreement permits the Investment Adviser to act as
investment adviser for any other person, firm, or corporation, and designates
the Investment Adviser as the owner of the name "Navellier" or any use or
derivation of the word Navellier. If the Investment Adviser shall no longer act
as investment adviser to the Fund, the right of the Fund to use the name
"Navellier" as part of its title may, solely at the Investment Adviser's option,
be withdrawn.
The Investment Adviser is advancing the Fund's organizational expenses
which were $126,000. The Fund has agreed to reimburse the Investment Adviser
for the organizational and other expenses it advances, without interest, on a
date or dates to be chosen at the sole discretion of Navellier Management, Inc.,
or the Investment Advisor can elect to waive reimbursement of some or all of
such advances. No Portfolio shall be responsible for the reimbursement of more
than its proportionate share of expenses.
(b) THE DISTRIBUTOR
---------------
The Fund's Distributor is Navellier Securities Corp., a Delaware
Corporation organized and incorporated on May 10, 1993. Navellier Securities
Corp. is registered as a broker-dealer with the Securities Exchange Commission
and National Association of Securities Dealers and the various states in which
this Fund's securities will be offered for sale and will be registered with such
agencies and governments before any Fund shares are sold. The Fund's shares
will be continuously distributed by Navellier Securities Corp. (the
"Distributor") located at One East Liberty, Third Floor, Reno, Nevada 89501,
pursuant to a Distribution Agreement, dated October 17, 1995. The Distribution
Agreement obligates the Distributor to pay certain expenses in connection with
the offering of the shares of the Fund. The Distributor is responsible for any
payments made to its registered representatives as well as the cost in excess of
the 12b-1 fee (discussed below under "Distribution Plan") of printing and
mailing Prospectuses to potential investors and of any advertising incurred by
it in connection with the distribution of shares of the Fund.
Distribution Plans
The Aggressive Growth Portfolio Distribution Plan
------------------------------------------------
The Aggressive Growth Portfolio has adopted a Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), whereby it reimburses Distributor or others in
an amount up to 0.25% per annum of the average daily net assets of the
Aggressive Growth Portfolio for expenses incurred for the promotion and
distribution of the shares of such Portfolio of the Fund, including, but not
limited to, the printing of prospectuses, statements of additional information
and reports used for sales purposes, expenses (including personnel of
Distributor) of preparation of sales literature and related expenses,
advertisements and other distribution related expenses, including a prorated
portion of Distributor's overhead expenses attributable to the distribution of
such Portfolio Fund shares. Such payments are made monthly. The 12b-1 fee
includes, in addition to promotional activities, amounts the Aggressive Growth
Portfolio may pay to Distributor or others as a service fee to reimburse such
parties for personal services provided to shareholders of the Aggressive Growth
Portfolio and/or the maintenance of shareholder accounts. The total amount of
12b-1 fees paid for such personal services and promotional services shall not
exceed 0.25% per year of the average daily net assets of the Aggressive Growth
Portfolio. The Distributor can keep all of said 12b-1 fees it receives to the
extent it is not required to pay others for such services. Such Rule 12b-1 fees
are made pursuant to the distribution plans(s) and distribution agreements
entered into between such service providers and Distributor or the Fund
directly. Payments in excess of reimbursable expenses under the plan in any year
must be refunded. The Rule 12b-1 expenses and fees in excess of 0.25% per year
of the Aggressive Growth Portfolio's average net assets that otherwise qualify
for payment may not be carried forward into successive annual periods. The Plan
also covers payments by certain parties to the extent such payments are deemed
to be for the financing of any activity primarily intended to result in the sale
of shares issued by the Aggressive Growth Portfolio within the context of Rule
12b-1. The payments under the Plan are included in the maximum operating
expenses which may be borne by the Aggressive Growth Portfolio.
The Mid Cap Growth Portfolio Distribution Plan
----------------------------------------------
The Mid Cap Growth Portfolio has adopted a Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), whereby such Portfolio compensates Distributor
or others in the amount of 0.25% per annum of the average daily net assets of
the Mid Cap Growth Portfolio for expenses incurred and services rendered for the
promotion and distribution of the shares of the Mid Cap Growth Portfolio of the
Fund, including, but not limited to, the printing of prospectuses, statements of
additional information and reports used for sales purposes, expenses (including
personnel of Distributor) of preparation of sales literature and related
expenses, advertisements and other distribution related expenses including a
prorated portion of Distributor's overhead expenses attributable to the
distribution of the Mid Cap Growth Portfolio Fund shares. Such payments are made
monthly. The 12b-1 fee includes, in addition to promotional activities, amounts
such Portfolio pays to Distributor or others as a service fee to compensate such
parties for personal services provided to shareholders of such Portfolio and/or
the maintenance of shareholder accounts. The total amount of 12b-1 fees paid for
such personal services and promotional services shall be 0.25% per year of the
average daily net assets of the Mid Cap Growth Portfolio. The Distributor can
keep all of said 12b-1 fees it receives to the extent it is not required to pay
others for such services. Such Rule 12b-1 fees are made pursuant to the
distribution plan and distribution agreements entered into between such service
providers and Distributor or the Mid Cap Growth Portfolio directly. The 12b-1
Plan for the Mid Cap Growth Portfolio also covers payments by the Distributor
and Investment Advisor to the extent such payments are deemed to be for the
financing of any activity primarily intended to result in the sale of shares
issued by such Portfolio within the context of Rule 12b-1. The payments under
the 12b-1 Plan for the Mid Cap Growth Portfolio are included in the maximum
operating expenses which may be borne by the Mid Cap Growth Portfolio. Payments
under the 12b-1 Plan for the Mid Cap Growth Portfolio may exceed actual expenses
incurred by the Distributor investment Advisor or others.
The Distributor has accrued $33,542 in 12b-1 fees during the first 6 months
of 1996. Investors may also be charged a transaction fee if they effect
transactions in fund shares through a broker or agent.
11
<PAGE>
(c) THE CUSTODIAN AND TRANSFER AGENT
--------------------------------
Rushmore Trust & Savings, FSB, 4922 Fairmont Avenue, Bethesda, Maryland
20814, serves as the custodian of the Fund's portfolio securities and as the
Fund's transfer agent and, in those capacities, maintains certain accounting and
other records of the Fund and processes requests for the purchase or the
redemption of shares, maintains records of ownership for shareholders, and
performs certain other shareholder and administrative services on behalf of the
Fund.
(d) LEGAL COUNSEL
-------------
The Law Offices of Samuel Kornhauser is legal counsel to the Fund, to the
Investment Adviser and to the Distributor.
12
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
In effecting portfolio transactions for the Fund, the Investment Adviser
adheres to the Fund's policy of seeking best execution and price, determined as
described below, except to the extent it is permitted to pay higher brokerage
commissions for "brokerage and research services," as defined herein. The
Investment Adviser may cause the Fund to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission which another broker or dealer would have charged for effecting the
transaction if the Investment Adviser determines in good faith that such amount
of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer or that any offset of direct
expenses of a Portfolio yields the best net price. As provided in Section 28(e)
of the Securities Exchange Act of 1934, "brokerage and research services"
include giving advice as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities; furnishing analysis and reports concerning issuers, industries,
economic facts and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Brokerage and research services
provided by brokers to the Fund or to the Investment Adviser are considered to
be in addition to and not in lieu of services required to be performed by the
Investment Adviser under its contract with the Fund and may benefit both the
Fund and other clients of the Investment Adviser or customers of or affiliates
of the Investment Adviser. Conversely, brokerage and research services provided
by brokers to other clients of the Investment Adviser or its affiliates may
benefit the Fund.
If the securities in which a particular Portfolio of the Fund invests are
traded primarily in the over-the-counter market, where possible, the Fund will
deal directly with the dealers who make a market in the securities involved
unless better prices and execution are available elsewhere. Such dealers
usually act as principals for their own account. On occasion, securities may be
purchased directly from the issuer. Bonds and money market instruments are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Fund (involving both price paid or received and any net
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, the availability of the broker to stand ready to execute possibly
difficult transactions in the future, and the financial strength and stability
of the broker. Such considerations are judgmental and are weighed by the
Investment Adviser in determining the overall reasonableness of brokerage
commissions paid by the Fund. Some portfolio transactions are subject to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and subject to obtaining best prices and executions, effected through dealers
who sell shares of the Fund.
13
<PAGE>
The Board of Trustees of the Fund will periodically review the performance
of the Investment Adviser of its respective responsibilities in connection with
the placement of portfolio transactions on behalf of the Fund and review the
commissions paid by the Fund over representative periods of time to determine if
they are reasonable in relation to the benefits to the Fund.
The Board of Trustees will periodically review whether the recapture for
the benefit of the Fund of some portion of the brokerage commissions or similar
fees paid by the Fund on portfolio transactions is legally permissible and
advisable. At present, no recapture arrangements are in effect. The Board of
Trustees will review whether recapture opportunities are available and are
legally permissible, and, if so, will determine, in the exercise of their
business judgment, whether it would be advisable for the Fund to seek such
recapture.
14
<PAGE>
CAPITAL STOCK AND OTHER SECURITIES
The rights and preferences attached to the shares of each Portfolio are
described in the Prospectus. (See "Description of Shares".) The Investment
Company Act of 1940 requires that where more than one class or series of shares
exists, each class or series must be preferred over all other classes or series
in respect of assets specifically allocated to such class or series. Rule 18f-2
under the Act provides that any matter required to be submitted by the
provisions of the Investment Company Act or applicable state law, or otherwise,
to the holders of the outstanding voting securities of an investment company
such as the Fund shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each series
affected by such matter. Rule 18f-2 further provides that a series shall be
deemed to be affected by a matter unless the interests of each series in the
matter are substantially identical or that the matter does not affect any
interest of such series. However, the Rule exempts the selection of independent
public accountants, the approval of principal distribution contracts, and the
election of Trustees from the separate voting requirements of the Rule.
15
<PAGE>
PURCHASE, REDEMPTION, AND PRICING OF SHARES
REDEMPTION OF SHARES. The Prospectus, under "Redemption of Shares"
--------------------
describes the requirements and methods available for effecting redemption. The
Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange or any other applicable
exchange, is closed (other than a customary weekend and holiday closing), (b)
when trading on the New York Stock Exchange, or any other applicable exchange,
is restricted, or an emergency exists as determined by the Securities and
Exchange Commission ("SEC") or the Fund so that disposal of the Fund's
investments or a fair determination of the net asset values of the Portfolios is
not reasonably practicable, or (c) for such other periods as the SEC by order
may permit for protection of the Portfolio's shareholders.
The Fund normally redeems shares for cash. However, the Board of Trustees
can determine that conditions exist making cash payments undesirable. If they
should so determine (and if a proper election pursuant to Rule 18F-1 of the
Investment Company Act has been made by the Fund), redemption payments could be
made in securities valued at the value used in determining net asset value.
There generally will be brokerage and other costs incurred by the redeeming
shareholder in selling such securities.
DETERMINATION OF NET ASSET VALUE. As described in the Prospectus under
--------------------------------
"Purchase and Pricing of Shares - Valuation of Shares," the net asset value of
shares of each Portfolio of the Fund is determined once daily as of 4 p.m. New
York time on each day during which the New York Stock Exchange, or other
applicable exchange, is open for trading. The New York Stock Exchange is
scheduled to be closed for trading on the following days: New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. The Board of Trustees of the Exchange
reserves the right to change this schedule. In the event that the New York
Stock Exchange or the national securities exchanges on which small cap equities
are traded adopt different trading hours on either a permanent or temporary
basis, the Board of Trustees of the Fund will reconsider the time at which net
asset value is to be computed.
VALUATION OF ASSETS. In determining the value of the assets of any
-------------------
Portfolio of the Fund, the securities for which market quotations are readily
available are valued at market value, which is currently determined using the
last reported sale price, or, if no sales are reported - as is the case with
many securities traded over-the-counter - the last reported bid price. Debt
securities (other than short-term obligations, i.e., obligations which have 60
days or less left to maturity, which are valued on the basis of amortized cost)
are normally valued on the basis of valuations provided by a pricing service
when such prices are believed to reflect the fair value of such securities.
Prices provided by a pricing service may be determined without exclusive
reliance on quoted prices and take into account appropriate factors such as
institution-size trading in similar groups of securities, yield, quality of
issue, trading characteristics, and other market data. All other securities and
assets are valued at their fair value as determined in good faith by the Board
of Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Board of Trustees.
16
<PAGE>
TAXES
In the case of a "series fund" (that is, a regulated investment company
having more than one segregated portfolio of investments the beneficial
interests in which are owned by the holders of a separate series of stock), each
investment portfolio is treated as a separate corporation for federal income tax
purposes. The Fund will be deemed a series fund for this purpose and, thus,
each Portfolio will be deemed a separate corporation for such purpose.
Each Portfolio of the Fund intends to qualify as a regulated investment
company for federal income tax purposes. Such qualification requires, among
other things, that each Portfolio (a) make a timely election to be a regulated
investment company, (b) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities (including options and futures) or
foreign currencies, (c) derive less than 30% of its gross income from the sale
or other disposition within three months of purchase of (i) stock or securities,
(ii) options, futures, or forward contracts (other than options, futures, or
forward contracts on foreign currencies), or (iii) foreign currencies or
options, futures, or forward contracts on foreign currencies that are not
directly related to its principal business of investing in stocks or securities
(or options and futures with respect to stocks or securities), and (d) diversify
its holdings so that at the end of each fiscal quarter (i) 50% of the market
value of its assets is represented by cash, government securities, securities of
other regulated investment companies, and securities of one or more other
issuers (to the extent the value of the securities of any one such issuer owned
by the Portfolio does not exceed 5% of the value of its total assets and 10% of
the outstanding voting securities of such issuer) and (ii) not more than 25% of
the value of its assets is invested in the securities (other than government
securities and securities of other regulated investment companies) of any one
industry. These requirements may limit the ability of the Portfolios to engage
in transactions involving options and futures contracts.
If each Portfolio qualifies as a regulated investment company, it will not
be subject to federal income tax on its "investment company taxable income"
(calculated by excluding the amount of its net capital gain, if any, and by
excluding the dividends-received and net operating loss deductions) or "net
capital gain" (the excess of its long-term capital gain over its net short-term
capital loss) which is distributed to shareholders. In determining taxable
income, however, a regulated investment company holding stock on the record date
for a dividend is required to include the dividend in income on the later of the
ex-dividend date or the date of acquisition.
Dividends paid out of net investment income and net short-term capital
gains of a Portfolio will be taxable to shareholders as ordinary income
regardless of whether such distributions are reinvested in additional shares or
paid in cash. If a portion of a Portfolio's net investment income is derived
from dividends from domestic corporations, a corresponding portion of the
dividends paid out of such income may be eligible for the dividends-received
deduction. Corporate shareholders will be informed as to the portion, if any,
of dividends received by them which will qualify for the dividends-received
deduction.
17
<PAGE>
Dividends paid out of the net capital gain of a Portfolio that are
designated as capital gain dividends by the Fund will be taxable to shareholders
as long-term capital gains regardless of how long the shareholders have held
their shares. Such dividends will not be eligible for the dividends-received
deduction. If shares of the Fund to which such capital gains dividends are
attributable are held by a shareholder for less than 31 days and there is a loss
on the sale or exchange of such shares, then the loss, to the extent of the
capital gain dividend or undistributed capital gain, is treated as a long-term
capital loss.
All distributions, whether received in shares or cash, must be reported by
each shareholder on his federal income tax return. Taxable dividends declared
in October, November, or December of any year and payable to shareholders of
record on a specified date in such a month will be deemed to have been paid by
the Fund and received by such shareholders on December 31 of the year if such
dividend is actually paid by the Fund during January of the following year.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
The redemption of all or part of the shares of a series held by any
shareholder will generally be treated as a sale or exchange unless the
redemption fails to substantially reduce the shareholder's percentage ownership
interest in the related Portfolio (determined for this purpose using certain
specific rules of constructive ownership). Any redemption that does not
substantially reduce a shareholder's percentage ownership interest in a
Portfolio may be treated as a dividend.
If a redemption is treated as a sale or exchange, the shareholder will
generally recognize gain or loss measured by the difference between the
redemption price and the basis of the shares. This gain will generally be
treated as capital gain (long-term or short-term, depending upon the
shareholder's holding period for the redeemed shares).
The exchange of the shares in one Portfolio for shares in another Portfolio
will be treated as a taxable exchange for federal income tax purposes. If the
exchange occurs within 90 days of the acquisition of the original shares,
however, the shareholder's basis in the original shares will not include the
sales charge, if any, to the extent such charge does not exceed the amount that
would have been charged on the acquisition of the second-acquired shares if such
shares were acquired directly. To the extent that the sales charge, if any,
paid upon acquisition of the original shares is not taken into account in
determining the shareholder's gain or loss from the disposition of the original
shares, it is added to the basis of the newly acquired shares.
18
<PAGE>
On or before January 31 of each year, the Fund will issue to each person
who was a shareholder at any time in the prior year a statement of the federal
income tax status of all distributions made to such shareholder.
Shareholders who fail to provide correct taxpayer identification numbers or
fail to certify as to no loss of exemption from backup withholding or otherwise
fail to comply with applicable requirements of the law relating to backup
withholding will be subject to backup withholding with respect to dividends at
the rate of 31% unless they are corporations or come within other exempt
categories. Any amounts paid as backup withholding will be creditable against
the federal income tax liabilities of the affected shareholders. All
shareholders should consult their own tax advisers with regard to the tax
consequences applicable to their respective investments in the Fund.
The foregoing discussion relates solely to United States federal income tax
laws as applicable to United States persons (that is, citizens and residents of
the United States and domestic corporations, partnerships, trusts, and estates).
Each shareholder who is not a United States person should consult his tax
adviser regarding the United States and non-United States tax consequences of
ownership of shares, including the possibility that distributions by the Fund
may be subject to a United States withholding tax at the rate of 30% (or at a
lower rate under an applicable United States income tax treaty).
Each Portfolio will be subject to a nondeductible excise tax for any year
equal to 4% of the "required distribution" for the year over the "distributed
amount" for the year. For this purpose, the term "required distribution" means,
with respect to any year, the sum of (a) 98% of the Portfolio's "ordinary
income" (that is, its taxable income determined by excluding its net capital
gain, if any, by disallowing the dividends-received and net operating loss
deductions, and by not taking into account any capital gain or loss), (b) 98% of
its net capital gain income (that is, the excess of capital gains over capital
losses) for the one-year period ending on December 31 of the year, and (c) the
"prior year shortfall" (that is, the excess, if any, of the "grossed-up required
distribution" for the prior year over the "distributed amount" for such year).
For this purpose, the term "grossed-up required distribution" means, with
respect to any year, the required distribution for the year (determined by
including 100% of the Portfolio's ordinary income and capital gain net income)
and the term "distributed amount" means, with respect to any year, the sum of
(a) the amount of dividends-paid or deemed paid during the year, (b) any amount
on which the Portfolio is required to pay corporate tax for the year, and (c)
the excess, if any, of the distributed amount for the prior year over the
required distribution for such year.
The individual Portfolios will not be subject to tax in Delaware for any
year in which they each qualify as a regulated investment company. They may,
however, be subject to such tax for any year in which they do not so qualify and
may be subject to tax in certain other states where they are deemed to be doing
business. Moreover, distributions may be subject to state and local taxes. In
those states which have income tax laws, the tax treatment of such Portfolios
and the tax treatment of shareholders with respect to distributions may be
different from the federal income tax treatment of such persons.
19
<PAGE>
UNDERWRITERS
The Fund's shares will be continuously distributed through Navellier
Securities Corp. (the "Distributor") located at One East Liberty, Third Floor,
Reno, Nevada 89501, pursuant to a distribution agreement dated October 17, 1995.
The Distributor has a two year business history but only a nine month history of
selling this Fund's shares.
The Distributor acts as the sole principal underwriter of the Fund's
shares. Through a network established by the Distributor, the Fund's shares may
also be sold through selected investment brokers and dealers. For a description
of the Distributor's obligations to distribute the Fund's securities, see "The
Investment Adviser, Distributor, Custodian and Transfer Agent - Distributor."
20
<PAGE>
CALCULATION OF PERFORMANCE DATA
Performance information for each Portfolio may appear in advertisements,
sales literature, or reports to shareholders or prospective shareholders.
Performance information in advertisements and sales literature may be expressed
as total return on the applicable Portfolio.
The average annual total return on such Portfolios represents an
annualization of each Portfolio's total return ("T" in the formula below) over a
particular period and is computed by finding the current percentage rate which
will result in the ending redeemable value ("ERV" in the formula below) of a
$1,000 payment/*/ ("P" in the formula below) made at the beginning of a one-,
five-, or ten-year period, or for the period from the date of commencement of
the Portfolio's operation, if shorter ("n" in the formula below). The following
formula will be used to compute the average annual total return for the
Portfolio:
P (1 + T) /N/ = ERV
In addition to the foregoing, each Portfolio may advertise its total return
over different periods of time by means of aggregate, average, year-by-year, or
other types of total return figures.
The Navellier Aggressive Growth Portfolio had a total return of 30.63% for
the six months ending June 30, 1996. Since the Mid Cap Growth Portfolio and the
Aggressive Small Cap Portfolio are newly formed portfolios and therefore have no
history of operation, no performance figures for these portfolios are included.
Performance information for the Portfolios shall reflect only the
performance of a hypothetical investment in the Portfolios during the particular
time period on which the calculations are based. Performance information should
be considered in light of the investment objectives and policies,
characteristics and quality of the particular Portfolio, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.
Each Portfolio may, from time to time, include in advertisements containing
total return the ranking of those performance figures relative to such figures
for groups of mutual funds categorized by Lipper Analytical Services, or other
services, as having the same investment objectives. The total return may also
be used to compare the performance of the Portfolio against certain widely
acknowledged outside standards or indices for stock and bond market performance.
The Standard & Poor's Composite Index of 500 stocks ("S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is
composed almost entirely of common stocks of companies listed on the New York
Stock Exchange, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included.
As summarized in the Prospectus under the heading "Performance and Yield," the
total return of each Portfolio may be quoted in advertisements and sales
literature.
21
<PAGE>
FINANCIAL STATEMENTS
Seed Audit and Independent Accountant's Report
June 30, 1996 Unaudited Financial Statement
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder of
The Navellier Performance Funds
We have audited the statement of assets and liabilities of the Aggressive Growth
Portfolio of the Navellier Performance Funds (the Fund) as of December 28, 1995.
The financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on the financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities presents fairly, in all
material respects, the financial position of the Aggressive Growth Portfolio of
the Navellier Performance Funds as of December 28, 1995 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Washington, D.C.
December 29, 1995
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 28, 1995
<TABLE>
<CAPTION>
Navellier
Aggressive
Growth
Portfolio
----------
<S> <C>
ASSETS
Cash in Custodian Bank $100,000
Deferred Organizational Expenses 126,000
--------
Total Assets 226,000
--------
LIABILITIES
Accrued Organizational Expenses 126,000
--------
NET ASSETS $100,000
========
Shares Outstanding 10,000
========
Net Asset Value Per Share $10.00
========
</TABLE>
See Notes to Financial Statement.
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
NOTES TO FINANCIAL STATEMENT
DECEMBER 28, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
The Navellier Performance Funds (the "Fund") is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended
(the "Act") as an open-end investment company which offers its shares in a
series of no-load non-diversified and diversified portfolios. The Fund presently
consists of one portfolio, the Navellier Aggressive Growth Portfolio
("Portfolio"), a non-diversified open-end management portfolio. The following is
a summary of significant accounting policies which the Fund follows:
(a) Listed securities are valued at the last sales price of the New York
Stock Exchange and other major exchanges. Over-the Counter securities
are valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Fund's securities in
good faith. The Trustees will periodically review this method of
valuation and recommend changes which may be necessary to assure that
the Fund's instruments are valued at fair value.
(b) Security transactions are recorded on the trade-date (the date the order
to buy or sell is executed). Interest income is accrued on a daily
basis. Dividend income is recorded on the ex-dividend date. Realized
gains and losses from securities transactions are computed on an
identified cost basis.
(c) Dividends from net investment income are declared and paid annually.
Dividends are re-invested in additional shares unless shareholders
request payment in cash. Net capital gains, if any, are distributed
annually.
(d) The Fund intends to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies and will distribute
all net investment income to its shareholders. Therefore, no Federal
income tax provision is required.
(e) Organizational expenses of the Fund totaling $126,000 as of December 28,
1995 are being deferred and will be amortized over 60 months beginning
with the public offering of shares. Any redemption by an initial
investor during the amortization period will be reduced by a prorata
portion of any of the unamortized organization expenses. Such proration
is to be calculated by dividing the number of initial shares redeemed by
the number of initial shares outstanding at the date of redemption.
<PAGE>
2. INVESTMENT ADVISORY AND DISTRIBUTOR AGREEMENTS
Investment advisory services are provided by Navellier Management, Inc.
("Adviser"). Under an agreement with the Adviser, the Fund pays a fee at the
annual rate of 1.25% of the daily net assets of the Portfolio. The Adviser
also receives an annual fee equal to 0.25% of the Fund's average daily net
assets in connection with the rendering of services under the administrative
services agreement and is reimbursed by the Fund for operating expenses
incurred on behalf of the Fund. An officer and trustee of the Fund is also
an officer and director of the Adviser.
Navellier Securities Corp. acts as the Fund's Distributor (the "Distributor")
and is registered as a broker-dealer under the Securities and Exchange Act of
1934. The Distributor, which is the principal underwriter of the Fund's
shares, renders its services to the Fund pursuant to a distribution
agreement. An officer and trustee of the Fund is also an officer and
director of the Adviser.
3. TRANSFER AGENT AND CUSTODIAN
Rushmore Trust and Savings, FSB, ("Rushmore Trust"), provides transfer
agency, dividend disbursing and some shareholder services to the Fund. In
addition, Rushmore Trust serves as custodian of the Fund's assets. Fees paid
to Rushmore Trust are based upon a fee schedule approved by the Board of
Trustees.
4. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act, whereby it reimburses the Distributor or others in an amount
not to exceed 0.25% per annum of the average daily net assets of the
Portfolio for expenses incurred in the promotion and distribution of shares
of the Portfolio. These expenses include, but are not limited to, the
printing of prospectuses, statements of additional information, and reports
used for sales purposes, expenses of preparation of sale literature and
related expenses (including Distributor personnel), advertisements and other
distribution-related expenses, including a prorated portion of the
Distributor's overhead expenses attributable to the distribution of such
Portfolio Fund shares. Such payments are made monthly. The 12b-1 fee
includes, in addition to promotional activities, the amount the Fund may pay
to the Distributor or others as a service fee to reimburse such parties for
personal services provided to shareholders of the Fund and/or the maintenance
of shareholder accounts. Such Rule 12b-1 fees are made pursuant to the Plan
and distribution agreements entered into between such service providers and
the Distributor or the Fund directly.
<PAGE>
JUNE 30, 1996 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30, 1996 NAVELLIER AGGRESSIVE GROWTH PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS PORTFOLIO OF INVESTMENTS
- - ----------------------------------------------------------- -----------------------------------------------------------
Market Value Market Value
Shares (Note 1) Shares (Note 1)
- - ----------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS COMMON STOCKS (CONTINUED)
ADVANCED MEDICAL DEVICES-5.27% DIVERSIFIED TECHNOLOGY-6.70%
167,300 BioSource International, Inc.* $ 1,510,936 53,000 Computer Horizons Corp.* $ 2,093,500
60,000 Hologic, Inc.* 2,655,000 65,500 Galileo Electro Optics Corp.* 1,572,000
----------- 15,500 Quintiles Transactional Corp.* 1,019,125
4,165,936 18,000 Zoitek Companies, Inc.* 616,500
----------- -----------
ADVERTISING AND MARKETING-1.48% 5,301,125
45,000 Ha-Lo Industries, Inc.* 1,170,000 -----------
----------- EDUCATION-5.28%
AEROSPACE AND DEFENSE-1.49% 30,000 Apollo Group, Inc.* 840,000
40,000 Oregon Metallurgical Corp.* 1,180,000 84,000 Childrens Comprehensive Services* 1,806,000
----------- 70,000 National Education Corp.* 997,500
AGRICULTURE-1.44% 30,000 Youth Services International, Inc.* 532,500
27,000 Delta and Pine Land Co. 1,140,750 -----------
----------- 4,176,000
AIRLINES-0.31% -----------
8,950 Comair Holdings, Inc. 241,650 ELECTRONICS-5.69%
----------- 125,000 LaBarge, Inc.* 1,148,438
APPAREL/FABRIC-2.70% 188,000 WPI Group, Inc.* 1,833,000
61,500 Ross Stores, Inc. 2,137,125 84,000 Zytec* 1,522,500
----------- -----------
BIOTECHNOLOGY-2.99% 4,503,938
136,000 Prime Medical Service, Inc.* 2,363,000 -----------
----------- ENGINEERING/DESIGN-0.21
CASINOS/GAMING-1.43% 15,000 IMP, Inc.* 168,750
75,000 Casino Data Systems* 1,134,375 -----------
----------- ENVIRONMENTAL CONTROL/WASTE
CHEMICALS-0.10% MANAGEMENT-1.65%
5,000 Ambar, Inc.* 79,750 28,000 USA Waste Services, Inc.* 839,500
----------- 22,500 Watsco, Inc. 472,500
COMPUTER HARDWARE-3.62% -----------
30,000 Iomega Corp.* 870,000 1,302,000
67,000 Meridian Data, Inc.* 599,063 -----------
91,500 Odetics, Inc.* 1,395,375 FINANCIAL SERVICES-7.82
----------- 21,000 Money Store, Inc. 464,625
2,864,438 150,000 PMT Services, Inc.* 4,293,750
----------- 10,000 Student Loan Marketing
COMPUTER SOFTWARE-3.76% Association 740,000
22,500 Brooktrout Technology, Inc.* 630,000 30,000 Total System Services, Inc. 686,250
22,400 HBO and Co. 1,517,600 -----------
10,000 Security Dynamics* 822,500 6,184,625
----------- -----------
2,970,100 HEALTHCARE-3.80%
----------- 42,450 ABR Information Services, Inc.* 2,133,112
COSMETICS/PERSONAL CARE-2.96% 10,000 Access Health, Inc.* 472,500
91,900 Natures Sunshine Products, Inc. 2,343,450 -----------
----------- 2,605,612
DATA COMMUNICATIONS/NETWORKING-2.77% -----------
10,300 Ascend Communications, Inc.* 579,375 HOME CONSTRUCTION-0.82%
40,000 Proxim, Inc.* 1,610,000 28,000 Cavalier Homes, Inc. 647,500
----------- -----------
2,189,375 HOME FURNISHINGS-0.77%
----------- 18,000 Bush Industries, Inc. 612,000
-----------
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Non-income producing.
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
June 30, 1996 NAVELLIER AGGRESSIVE GROWTH PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
- - ---------------------------------------------------------- ----------------------------------------------------------
Market Value Market Value
Shares (Note 1) Shares (Note 1)
- - ---------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (continued) COMMON STOCKS (continued)
Industrial and Commercial Services - 0.70% TEMPORARY STAFFING -- 1.84%
15,000 Memtec Ltd. $ 551,250 53,500 AccuStaff, Inc. $ 1,457,875
------------ ------------
LODGING -- 0.62% TOYS -- 2.14%
7,000 HFS, Inc.* 490,000 60,000 Galoob Lewis Toys, Inc.* 1,605,000
------------ ------------
MEDICAL SUPPLIES -- 1.31% TOTAL COMMON STOCKS -- 92.18%
81,00 Orthologic Corp.* 1,032,750 (COST $70,909,920) 72,904,549
------------ ------------
OFFICE EQUIPMENT/SUPPLIES -- 3.24% MUTUAL FUNDS -- 7.82%
61,000 U.S. Office Products Co.* 2,562,000 6,188,662 Fund for Government Investors
------------ (Cost $6,188,662) 6,188,662
OIL AND GAS EXPLORATION -- 0.77% ------------
60,000 Marine Drilling Companies, Inc.* 607,500 TOTAL INVESTMENTS -- 100.00%
------------ (COST $77,098,582) $ 79,093,211
PHARMACCUTICALS -- 5.67% ============
50,000 Capstone Pharmacy Services, Inc.* 643,750
85,800 Jones Medical Industries, Inc. 2,852,850
50,000 PCT Services, Inc.* 987,500
------------
4,484,100
------------
PRINTING/PAPER PRODUCTS -- 0.71%
21,800 Day Runner, Inc.* 564,075
------------
PRISON MANAGEMENT -- 1.77%
20,000 Corrections Corp. of America* 1,400,000
------------
RETAILERS -- 0.99%
26,000 Orchard Supply Hardware
Stores Corp.* 783,250
------------
SAVINGS AND LOANS -- 1.13%
29,500 Imperial Credit Industries, Inc.* 892,375
------------
SEMICONDUCTORS AND RELATED -- 1.52%
29,500 Vitesse Semiconductor Corp. 1,200,000
------------
TELECOMMUNICATIONS -- 6.16%
179,800 ATC Communications, Inc.* 2,359,875
20,000 Aspect Telecommunications Corp.* 990,000
24,500 Pairgain Technologies, Inc.* 1,519,000
------------
4,868,875
------------
TELEPHONE SYSTEMS -- 1.05%
16,000 Cincinnati Bell, Inc. 834,000
------------
</TABLE>
* Non-income producing.
See Notes to Financial Statements.
<PAGE>
JUNE 30, 1996 FINANCIAL STATEMENTS
June 30, 1996 Navellier Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Securities at Value (Note 1, see portfolio for cost information.. $79,093,211
Cash in Custodian Bank........................................... 139,877
Receivable for Shares Sold....................................... 1,291,768
Receivable for Securities Sold................................... 557,342
Interest Receivable.............................................. 24,607
Dividends Receivable............................................. 6,208
Unamortized Organizational Costs (Note 1)........................ 113,190
-----------
Total Assets................................................... 81,226,203
-----------
Liabilities
Payable for Securities Purchased................................. 649,639
Payable for Shares Redeemed...................................... 116,195
Investment Advisory Fee Payable (Note 2)......................... 76,447
Administrative Fee Payable (Note 2).............................. 15,289
Distribution Plan Fee Payable (Note 4)........................... 15,289
Other Payables and Accrued Expenses.............................. 15,289
Organizational Expenses Payable to Adviser (Note 1).............. 113,190
-----------
Total Liabilities.............................................. 1,001,338
-----------
Net Assets......................................................... $80,224,865
-----------
Shares Outstanding................................................. 6,149,318
-----------
Net Asset Value Per Share.......................................... $13.05
===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
For the Six Months Ended
June 30, 1996 Navellier Aggressive Growth Portfolio
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Interest (Note 1)................................................ $ 82,169
Dividends (Note 1)............................................... 15,899
----------
Total Investment Income........................................ 98,068
----------
Expenses
Investment Advisory Fee (Note 2)................................. 167,709
</TABLE>
<PAGE>
Administrative Fee (Note 2)...................................... 33,542
Distribution Plan Fees (Note 4).................................. 33,542
Transfer Agent and Custodian Fee (Note 3)........................ 28,668
Trustees' Fees................................................... 15,000
Organizational Expense (Note 1).................................. 12,600
Insurance........................................................ 8,125
Printing......................................................... 7,160
Registration Fees................................................ 4,393
Audit Fees....................................................... 4,250
Other Expenses................................................... 2,923
----------
Total Expenses................................................. 317,912
Less Expenses Reimbursed by Investment Adviser (Note 2)........ (49,577)
----------
Net Expenses................................................. 268,335
----------
Net Investment Loss................................................ (170,267)
----------
Net Realized Gain on Investment Transactions....................... 7,664
Net Change in Unrealized Appreciation of Investments............... 1,994,713
----------
Net Gains on Investments........................................... 2,002,377
----------
Net Increase in Net Assets Resulting from Operations............... $1,832,110
==========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
Navellier Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six For the
Months Ended Period Ended
June 30, 1996 December 31, 1995*
------------- ------------------
<S> <C> <C>
From Investment Activities
Net Investment Income (Loss)................................... $ (170,267) $ 21
Net Realized Gain on Investment Transactions................... 7,664 --
Net Change in Unrealized Appreciation (Depreciation)
of Investments............................................... 1,994,713 (84)
------------ -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations............................................ 1,832,110 (63)
------------ -----------
Distributions to Shareholders
From Net Investment Income..................................... -- --
From Net Realized Capital Gains................................ -- --
------------ -----------
Total Distributions to Shareholders.......................... -- --
------------ -----------
From Share Transactions
Net Proceeds from Sales of Shares.............................. 88,894,714 200,000
Reinvestment of Distributions.................................. -- --
Cost of Shares Redeemed........................................ (10,801,896) --
------------ -----------
Net Increase in Net Assets Resulting from
Share Transactions......................................... 78,092,818 200,000
------------ -----------
Total Increase in Net Assets............................... 79,924,928 199,937
Net Assets--Beginning of Period.................................. 299,937 100,000
------------ -----------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Net Assets--End of Period........................................ $ 80,224,865 $ 299,937
============ ===========
Shares
Sold........................................................... 6,955,701 20,020
Issued in Reinvestment of Distributions........................ -- --
Redeemed....................................................... (836,403) --
------------ -----------
Net Increase in Shares....................................... 6,119,298 20,020
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
*From Commencement of Operations December 28, 1995.
See Notes to Financial Statements.
Navellier Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six For the
Months Ended Period Ended
June 30, 1996 December 31, 1995*
------------- ------------------
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value--Beginning of Period........................... $ 9.99 $ 10.00
-------- --------
Income from Investment Operations:
Net Investment Income (Loss)................................. (0.081) 0.002
Net Realized and Unrealized Gains (Losses) on Securities..... 3.141 (0.008)
-------- --------
Total from Investment Operations........................... 3.060 (0.006)
-------- --------
Distributions to Shareholders:
From Net Investment Income................................... -- --
From Net Realized Capital Gains.............................. -- --
-------- --------
Total Distributions to Shareholders........................ -- --
-------- --------
Net Increase (Decrease) in Net Asset Value..................... 3.06 (0.01)
-------- --------
Net Asset Value--End of Period................................. $ 13.05 $ 9.99
======== ========
Total Investment Return/A/....................................... 30.63 % (0.10) %
Ratios to Average Net Assets:
Expenses After Reimbursement (Note 2)/B/....................... 2.00 % 2.00 %
Expenses Before Reimbursement (Note 2)/B/...................... 2.37 % 27.25 %
Net Investment Income (Loss)/B/................................ (1.27)% 2.59 %
Supplementary Data:
Portfolio Turnover Rate........................................ 33.2 % --
Net Assets at End of Period (000's omitted).................... $80.225 $300
Number of Shares Outstanding at End of Period (000's omitted).. 6.149 30
</TABLE>
- - ---------
/A/Total returns for periods of less than one year are not annualized.
/B/Annualized.
<PAGE>
- --------------------------------------------------------------------------------
*From Commencement of Operations December 28, 1995.
See Notes to Financial Statements.
June 30, 1996 Navellier Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The Navellier Performance Funds (the "Fund") is registered with the Secu-
rities and Exchange Commission under the Investment Company Act of 1940, as
amended, (the "Act") as an open-end investment company which offers its shares
in a series of no-load non-diversified portfolios. The Fund is authorized to
issue an unlimited number of shares of capital stock with no slated par value.
The Fund presently consists of one portfolio, the Navellier Aggressive Growth
Portfolio (the "Portfolio"), a non diversified open-end management portfolio.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain esti-
mates and assumptions at the date of the financial statements. The following
is a summary of significant accounting policies which the Fund follows:
(a) Listed securities are valued at the last sales price of the New
York Stock Exchange and other major exchanges. Over-the-Counter securities
are valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Fund's securities in good
faith. The Trustees will periodically review this method of valuation and
recommend changes which may be necessary to assume that the Fund's instru-
ments are valued at fair value.
(b) Security transactions are recorded on the trade date (the date the
order to buy or sell is executed). Interest income is accrued on a daily
basis. Dividend income is recorded on the ex-dividend date. Realized gains
and losses from securities transactions are computed on an identified cost
basis.
(c) Dividends from net investment income are declared and paid annually.
Dividends are re-invested in additional shares unless shareholders request
payment in cash. Net capital gains, if any, are distributed annually.
(d) The Fund intends to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and will distribute
all net investment income to its shareholders. Therefore, no Federal income
tax provision is required.
(e) Organizational expenses of the Fund totaling $126,000 are being
deferred and amortized over 60 months beginning with the public offering of
shares. Any redemption by an initial investor during the amortization period
will be reduced by a prorata portion of any of the unamortized organizational
expenses. Such proration is to be calculated by dividing the number of
initial shares redeemed by the number of initial shares outstanding at the
date of redemption. At June 30, 1996, unamortized organizational costs were
$113,190.
2. Investment Advisory Fees and Other Transactions with Affiliates
Investment advisory services are provided by Navellier Management, Inc.
("the Adviser"). Under an agreement with the Adviser, the Fund pays a fee at the
annual rate of 1.25% of the daily net assets of the Portfolio. The Adviser also
receives an annual fee equal to 0.25% of the Fund's average daily net assets in
connection with the rendering of services under the administrative services
agreement and is reimbursed by the Fund for operating expenses incurred on
behalf of the Fund. An officer and trustee of the Fund is also an officer and
director of the Adviser.
<PAGE>
Under an agreement between the Fund and the Adviser related to payment of
operating expenses, the Adviser has reserved the right to seek reimbursement for
the past, present and future operating expenses of the Fund paid by the Adviser,
at any time upon notice to the Fund. At December 31, 1995, the Adviser
voluntarily agreed not to seek future reimbursement of all unreimbursed past
expenses incurred on behalf of the Fund. During the period ended June 30, 1996,
the Adviser paid operating expenses of the Fund totaling $83,119. Under the
operating expense agreement, the Adviser requested, and the Fund reimbursed,
$33,542 of such expenses. The Adviser voluntarily agreed not to seek future
reimbursement of $49,577 of such 1996 expenses.
June 30, 1996 Navellier Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
Navellier Securities Corp. (the "Distributor") acts as the Fund's Distri-
butor and is registered as a broker-dealer under the Securities and Exchange
Act of 1934. The Distributor, which is the principal underwriter of the Fund's
shares, renders its services to the Fund pursuant to a distribution agreement.
An officer and trustee of the Fund is also an officer and director of the
Distributor.
3. Transfer Agent and Custodian
Rushmore Trust and Savings, FSB ("Rushmore Trust"), provides transfer
agency, dividend disbursing and other shareholder services to the Fund. In
addition, Rushmore Trust serves as custodian of the Fund's assets. Fees paid to
Rushmore Trust are based upon a fee schedule approved by the Board of Trustees.
4. Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act, whereby it reimburses the Distributor or others in an
amount not to exceed 0.25% per annum of the average daily net assets of the
Portfolio for expenses incurred in the promotion and distribution of shares of
the Portfolio. These expenses include, but are not limited to, the printing of
prospectuses, statements of additional information, and reports used for sales
purposes, expenses of preparation of sales literature and related expenses
(including Distributor personnel), advertisements and other distribution-related
expenses, including a prorated portion of the Distributor's overhead expenses
attributable to the distribution of shares. Such payments are made monthly. The
12b-1 fee includes, in addition to promotional activities, the amount the Fund
may pay to the Distributor or others as a service fee to reimburse such parties
for personal services provided to shareholders of the Fund and/or the
maintenance of shareholder accounts. Such Rule 12b-1 fees are made pursuant to
the Plan and distribution agreements entered into between such service providers
and the Distributor or the Fund directly.
5. Securities Transactions
For the period ended June 30, 1996, purchases of securities were
$79,545,548 and sales of securities were $8,874,532. These totals exclude
short-term securities.
6. Net Unrealized Appreciation/Depreciation of Investments
As of June 30, 1996, net appreciation of investments for Federal income tax
purposes was $1,480,820 of which $6,147,467 related to appreciated investments
and $4,666,647 related to depreciated investments. At June 30, 1996, the cost of
the Fund's securities for Federal income tax purposes was $77,612,391.
<PAGE>
7. Net Assets
At June 30, 1996, net assets consisted of the following:
Paid-In-Capital $78,392,818
Net Investment Loss (170,246)
Accumulated Realized Gain on Investments 7,664
Net Unrealized Appreciation of Investments 1,994,629
-----------
NET ASSETS $80,224,865
===========
<PAGE>
APPENDIX
--------
A-1 AND P-1 COMMERCIAL PAPER RATINGS
- - ------------------------------------
Each of the Portfolios will invest only in commercial paper which, at the
date of investment, is rated A-1 by Standard & Poor's Corporation ("S&P") or P-
1 by Moody's Investors Services, Inc. ("Moody's"), or, if not rated, is issued
or guaranteed by companies which at the date of investment have an outstanding
debt issue rated AA or higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationship which exists with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
23
<PAGE>
PROSPECTUS
THE MFS-REGISTERED TRADEMARK- AGGRESSIVE SMALL CAP EQUITY FUND MAY 1, 1997
- --------------------------------------------------------------------------------
The MFS-Registered Trademark- Aggressive Small Cap Equity Fund (the "Fund")
is a diversified series of The MFS Series Trust (the "Trust"), an open-end
management investment company. The sole objective of the Fund is to seek to
achieve long-term growth of capital primarily through investments in stocks of
small cap companies (companies with market capitalization of less than one
billion dollars) with appreciation potential.
Massachusetts Financial Services Company ("MFS" or the "Adviser") is the
Fund's investment adviser and administrator, and MFS Fund Distributors, Inc.
("MFD") is the Fund's distributor. Prior to March 16, 1997 Navellier Management,
Inc. ("Navellier Management" or the "Prior Adviser") was the Fund's investment
adviser and administrator and Navellier Securities Corp. ("Navellier
Securities") was the Fund's distributor. The investment advisory agreement
pursuant to which MFS provides advisory services to the Fund will be submitted
for approval by Fund shareholders at a special shareholders' meeting called for
that purpose on or prior to July 14, 1997. See "Special Considerations."
Rushmore Trust and Savings, FSB is the Fund's transfer agent and custodian
(referred to as the "Transfer Agent" or the "Custodian," as appropriate).
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be read and
retained for future reference. A Statement of Additional Information ("SAI")
about the Fund has been filed with the Securities and Exchange Commission and is
available upon request and without charge by calling or writing MFS Service
Center, Inc., 500 Boylston St., Boston, MA 02116, telephone: (800) 225-2606. The
SAI bears the same date as this Prospectus and is incorporated by reference into
this Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No dealer, salesman, or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Fund, its investment
adviser, or its distributor. This Prospectus does not constitute an offer to buy
any of the securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
<PAGE>
<TABLE>
<S> <C>
Expense Summary__________________________________________________ 2
Special Considerations___________________________________________ 3
Financial Highlights_____________________________________________ 4
Fund Highlights__________________________________________________ 5
Investment Objective and Policies________________________________ 7
Special Investment Methods and Risks_____________________________ 8
Investment Restrictions__________________________________________ 9
Risk Factors_____________________________________________________ 10
Performance______________________________________________________ 11
Management of the Fund___________________________________________ 11
Expenses of the Fund_____________________________________________ 13
Reports and Information__________________________________________ 14
Description of Shares____________________________________________ 14
Dividends and Distributions______________________________________ 15
Taxes____________________________________________________________ 16
Purchase and Pricing of Shares___________________________________ 17
Redemption of Shares_____________________________________________ 22
Certain Services Provided to Shareholders________________________ 24
Additional Information___________________________________________ 24
Assent to Trust Instrument_______________________________________ 24
Terms Applicable to Letter of Intent_____________________________ 24
</TABLE>
<PAGE>
EXPENSE SUMMARY
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 3%
(as a percentage of offering price)(1)
Maximum Sales Load Imposed on Reinvested
Dividends None
Redemption Fees None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees 1.25%
Other Expenses
Administrative Fee 0.25%
Other (after expense limitation)(2) 0.25%
TOTAL FUND OPERATING EXPENSES (after expense
limitation)(2) 1.75%
</TABLE>
(1) The sales load is reduced to 2-1/2% for purchases between $25,000 and
$49,999.99, 2% for purchases between $50,000 and $74,999.99, 1-1/2% for
purchases between $75,000 and $99,999.99, and 1% for purchases of $100,000 or
more. There is no sales load for purchases of $1 million or more, or for
Trustees of the Fund, the Adviser, the Distributor, the Transfer Agent, the
Custodian, retirement or deferred compensation plans and trusts used to fund
such plans, or the employees of any of the above. There is no sales load for
brokers or their employees directly involved in selling the Fund's shares and
whose firm has executed a selling agreement with the Distributor. There is no
sales load on accounts as to which an investment adviser, financial planner,
agent, bank or broker-dealer that charges an account management or transaction
fee ("wrap accounts") receives a transaction fee as part of a "wrap fee"
account, provided the investment advisor, financial planner, agent, bank or
broker-dealer has an agreement with the Distributor; there is no sales load for
the spouse or child of any of the above. (See also "Reduced Sales Charges").
(2) The Adviser has agreed to bear the Fund's normal operating expenses which
accrue on and after March 16, 1997, subject to reimbursement by the Fund, such
that "Total Fund Operating Expenses" do not exceed 1.75% per annum of the Fund's
average daily net assets during the current fiscal year; otherwise, "Other
Expenses," excluding the "Administrative Fee," and "Total Operating Expenses"
are estimated to be 0.36% and 1.86% per annum, respectively, based on the Fund's
average daily net assets for the fiscal year ended December 31, 1996. If this
arrangement had not been in place for the Fund's fiscal year ended December 31,
1996, and the Fund's average daily net assets were $80 million (based on the
Fund's approximate net assets as of April 15, 1997) the Fund's "Other Expenses,"
excluding the "Administrative Fee," and "Total Fund Operating Expenses" are
estimated to be 0.705% and 2.205% per annum, respectively. See "Special
Considerations" and "Expenses of the Fund."
EXAMPLES: The following example indicates the direct and indirect expenses an
investor (maintaining an average annual investment of $1,000) could expect to
incur in a one-year, three-year, five-year and ten-year period, respectively:
<TABLE>
<S> <C> <C> <C>
One-Year______ $ 47 Five-Year_____ $ 122
Three-Year____ $ 83 Ten-Year______ $ 230
</TABLE>
The foregoing example assumes (a) that an investor maintains an average of
$1,000 invested in the Fund; (b) payment of the maximum 3% sales load, (c) a 5%
annual return; (d) percentage amounts listed above for Annual Fund Operating
Expenses remain constant (for all periods shown above); and (e) reinvestment of
all dividends and distributions. The purpose of the expense table is to assist
investors in understanding the various costs and expenses that a shareholder
will bear directly or indirectly.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS THAN THOSE
SHOWN ABOVE.
2
<PAGE>
SPECIAL CONSIDERATIONS
- -------------------------------------------------------------------------------
CHANGE IN FUND'S INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
On March 16, 1997, MFS commenced providing investment advisory and
administrative services to the Fund, and MFD commenced providing distribution
services to the Fund. Prior to that date, Navellier Management provided
investment advisory and administrative services to the Fund and Navellier
Securities provided distribution services to the Fund.
At a meeting held on March 13, 1997, the Board of Trustees which oversees
the Fund (the "Board") decided not to renew the Fund's contractual arrangements
with Navellier Management and Navellier Securities but instead to retain MFS and
MFD. The Board has removed representatives of Navellier Management and Navellier
Securities from all positions with the Trust and the Fund.
SUBSEQUENT SHAREHOLDER APPROVAL
Pursuant to the requirements of applicable law, the Fund's investment
advisory agreement with MFS will be submitted for approval by Fund shareholders
(the "MFS Advisory Agreement Proposal") at a special shareholders' meeting
called for that purpose on or prior to July 14, 1997. If this proposal is
approved by Fund shareholders, MFS anticipates that the investment advisory fee
and administrative services fee paid by the Fund to MFS would be lowered at that
time from 1.25% per annum and 0.25% per annum, respectively, to approximately
0.75% per annum and 0.015% per annum, respectively, for a total reduction of
approximately 0.735% per annum.
If the proposal is not approved by Fund shareholders, the Board would then
decide what action would be appropriate to serve the shareholders' best
interests.
OTHER CONSIDERATIONS
MFS has agreed to bear the Fund's normal operating expenses which accrue on
and after March 16, 1997, subject to reimbursement by the Fund, such that the
Fund's total operating expenses do no exceed 1.75% per annum of the Fund's
average daily net assets during the current fiscal year. This expense limitation
arrangement does not cover extraordinary Fund expenses, such as
litigation-related expenses, or any expenses which were borne or accrued prior
to March 16, 1997. Under an agreement between the Fund and Navellier Management
relating to the payment of the Fund's operating expenses, Navellier Management
may be able to seek reimbursement for operating expenses of the Fund paid by
Navellier Management on behalf of the Fund during the period commencing January
1, 1997 through March 15, 1997. The amount of this possible reimbursement, if
any, has not been determined as of the date of this Prospectus.
Two of the former trustees of the Trust, Louis G. Navellier and Alan Alpers,
have brought two legal actions in federal district court against two of the
Trust's sitting trustees, Donald A. Simon and Kenneth Sletten, one seeking to
prevent the removal of Messrs. Navellier and Alpers as trustees of the Trust and
the other seeking to prevent the Fund from conducting the shareholders meeting
to approve the Fund's investment advisory agreement with MFS. While the first
legal action was dismissed by the court, the second legal action remains
pending. The Trust has entered into indemnification agreements with members of
the Board of Trustees which provide that the Trust will indemnify and hold
harmless the Trustees against any claim by any of
3
<PAGE>
the Fund's shareholders for any error of judgment or mistake of law or fact, for
any act or omission by the Trustees, or for any losses sustained by the Trustees
or the Fund's shareholders except to the extent that the Trustees have engaged
in willful misfeasance, bad faith, gross negligence or reckless disregard of
their obligations. While the Trust has a Directors' and Officers' Errors and
Omissions Liability Insurance Policy (the "Insurance Policy"), the deductible
under the Insurance Policy is $250,000. Expenses up to the amount of the
deductible incurred in defending these legal actions will be borne by the Fund,
and expenses exceeding the amount of the deductible will be borne by the Fund if
the claims made in these legal actions are not covered by the Fund's Insurance
Policy (however, the Fund believes that these claims are so covered).
Due to these litigation expenses and the possibility that Navellier
Management may seek reimbursement from the Fund of operating expenses paid by
Navellier Management on behalf of the Fund during the period commencing January
1, 1997 and ending on March 15, 1997 (or thereafter), the Fund's "Total
Operating Expenses" may exceed 1.75%, as set forth under the "Expense Summary"
above. Assuming that the Fund incurs $250,000 in litigation-related expenses on
account of the claims discussed above (I.E., the amount of the deductible under
the Insurance Policy), the Fund's "Total Operating Expenses" for its current
fiscal year are estimated to be 2.205% per annum at the current levels of the
Fund's management fee (1.25% per annum) and administrative services fee (0.25%
per annum), and are estimated to be 1.78% per annum assuming shareholder
approval of the Fund's investment advisory agreement with MFS and the reductions
in the Fund's management fee (to 0.75% per annum) and administrative services
fee (to 0.015% per annum) discussed above. These estimated expense ratios are
based upon the Fund's net assets of $80 million as of April 15, 1997.
4
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following audited financial highlights shows the per share income and
capital changes for an outstanding share of the Fund for the fiscal years ended
December 31, 1996 and December 31, 1995 and for the period ended December 31,
1994. As noted under "Special Considerations" above, Navellier Management served
as the Fund's investment adviser during this period. The information in the
table should be read in conjunction with the financial statements included in
the Fund's Annual Report to shareholders which are incorporated by reference
into the SAI in reliance upon the report of the Fund's independent auditors
given upon their authority, as experts in accounting and auditing. The Fund's
current independent auditors are Deloitte & Touche LLP.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Period Ended
December 31, December 31, December 31,
1996 1995 1994*
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value--Beginning of Period $ 15.41 $ 10.98 $ 10.00
-------- -------- -------
Net Investment Loss (0.23) (0.16) (0.08)
Net Realized and Unrealized Gains on Securities 2.61 4.97 1.06
-------- -------- -------
Net Increase in Net Asset Value Resulting from
Operations 2.38 4.81 0.98
Distributions to Shareholders:
From Net Investment Income
----- ----- -----
From Net Realized Capital Gains (0.38)
----- -----
--------
-------- -------
Net Increase in Net Asset Value 2.38 4.43 0.98
-------- -------- -------
Net Asset Value--End of Period $ 17.79 $ 15.41 $ 10.98
-------- -------- -------
-------- -------- -------
Total Investment Return(1) 15.44% 43.80% 9.80%
Ratios to Average Net Assets:
Expenses After Reimbursement(2) 1.75% 1.75% 1.68%**
Expenses Before Reimbursement (Note 2)(2) 1.86% 2.10% 4.52%**
Net Investment Loss (1.33%) (1.15%) (0.81%)
Supplementary Data:
Portfolio Turnover Rate 136.9% 169.6% 139.9%
Number of Shares Outstanding at End of Period
(000s omitted) 10,683 6,831 1,660
Net Assets at End of Year (000s omitted) $190,035 $105,299 $18,224
Average Commission Rate Paid(3) $ 0.0424
</TABLE>
4
<PAGE>
(1) Total returns do not include the maximum sales load. Total returns for
periods of less than one year are not annualized.
(2) Under an agreement between the Fund and the Prior Adviser related to
payment of operating expenses, the Prior Adviser has reserved the right to seek
reimbursement for the past, present and future operating expenses of the Fund
paid by the Prior Adviser, at any time upon notice to the Fund. At December 31,
1995, the prior adviser voluntarily agreed not to seek future reimbursement of
all unreimbursed past expenses of the Fund. During the year ended December 31,
1996, the Prior Adviser paid operating expenses of the Fund totaling $660,374.
Under the operating expense agreement, the Prior Adviser requested, and the Fund
reimbursed, $464,738 of such expenses. The Prior Adviser voluntarily agreed not
to seek future reimbursement of $195,636 of such 1996 expenses. Accordingly, at
December 31, 1996, there were no prior expenses which could be reimbursed in the
future under the agreement.
(3) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security trades
on which commissions are charged. This amount may vary from period to period and
fund to fund depending on the mix of trades executed in various markets where
trading practices and commission rate structures may differ.
- - ------------------------
* From Commencement of Operations January 3, 1994.
** Annualized
FUND HIGHLIGHTS
- - -------------------------------------------------------
THE FUND
The Fund is a diversified series of the Trust, an open-end management
investment company organized as a business trust under the laws of the State of
Delaware on May 28, 1993.
INVESTMENT OBJECTIVE
The Fund invests in securities traded in the United States securities
markets of domestic issuers and of foreign issuers. The sole objective of the
Fund will be to seek to achieve long-term growth of capital primarily through
investments in stocks of small cap companies (companies with market
capitalization of less than one billion dollars) with appreciation potential.
There can be no assurance that the Fund will achieve its investment objective.
The Fund's investment objective may not be changed without shareholder approval.
The Fund should not be considered suitable for investors seeking current income.
INVESTMENT ADVISER
The Fund has retained MFS to provide it with a continuous investment
program, including investment research and management with respect to all
securities and investments. The Adviser will determine from time to time what
securities and other investments will be selected and purchased, retained, or
sold by the Fund. MFS receives an annual fee, equal to 1.25% of the value of
assets under management for the Fund, payable monthly, based upon a percentage
of the Fund's average daily net assets. The advisory fees paid by the Fund to
the Adviser are higher than those paid by most other investment companies. MFS
also receives an annual administrative fee of 0.25% of the value of assets under
management.
5
<PAGE>
DISTRIBUTION OF SHARES
MFD acts as the sole distributor of the Fund's shares and also serves as
distributor for each of the other funds in the MFS Family of Funds. It is a
wholly owned subsidiary of MFS, the Fund's Adviser. The Distributor may sell
shares of the Fund directly to investors or through a network of broker-dealers
selected by the Distributor. The Distributor will compensate these selected
dealers by paying them directly or allowing them to receive directly from the
investor some or all of the sales charge paid by the Fund investors.
HOW TO INVEST
Shares of the Fund are available for purchase through selected
broker-dealers. The Fund was closed to new investors after April 15, 1996.
Existing shareholders and mutual fund wrap fee advisers, financial advisers and
planners have been able to continue to purchase additional shares after April
15, 1996. The Fund may resume sales to new investors at some future date.
The daily public offering price for shares is the net asset value per share
next computed after receipt of your order plus the sales charge. As described in
the foregoing table (see "Expense Summary"), the Fund has a sliding sales charge
beginning at 3% on initial investments of between $2,000 and $24,999.99. The
sales charge is incrementally reduced to 1% on purchases of $100,000 or more. No
sales charge is charged on investments of $1 million or more, or to Trustees of
the Fund, the Adviser, the Distributor, the Transfer Agent, the Custodian, their
employees, or a retirement plan or deferred compensation plan and trust to fund
such plan; or to brokers directly involved in selling the Fund's shares and
whose firm has executed a selling agreement with the Distributor, or their
employees; or on purchases through accounts as to which an investment advisor,
financial planner, agent, banker or broker-dealer charges an account management
or transaction fee as part of a "wrap fee", provided the investment advisor,
financial planner, agent, bank or broker-dealer has an agreement with the
Distributor; or the spouse or child of any of the above. (See also "Reduced
Sales Charges".) The sales charge is paid at the time of the investor's
purchase. Initial purchases must be at least $2,000 ($500 in the case of IRA and
other retirement plans or qualifying group plans) and subsequent investments
must be $100 or more. Investments in the Fund can be made through selected
securities dealers (who have the responsibility to transmit orders promptly and
may charge a fee for the purchase or redemption of Fund shares), or through the
transfer agent, Rushmore Trust and Savings, FSB. (See "Purchase and Pricing of
Shares"). Investors can also invest in the Fund by completing an application
authorizing the transfer agent to transfer funds automatically every month from
the investor's checking account to the Fund for purchase of Fund shares for the
investor's account.
REDEMPTION OF SHARES
On any day the Fund and the stock exchanges are open for business the shares
will be redeemed at the next determined net asset value per share after receipt
of the redemption order. Redemption orders received after 4:00 p.m. E.S.T. will
be given the next days' net asset value.
If the investor requests payment of redemptions to a third party or to a
location other than his/her address of record listed on the account application,
the request must be in writing and the investor's signature must be guaranteed
by an eligible bank, broker, dealer, credit union, national securities exchange,
registered securities association, clearing agency or savings association.
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The Fund will redeem its shares in cash at a redemption price equal to their
net asset value as next computed following the receipt of a request for
redemption. Payment for the redemption price will be made within seven days
after the Fund's receipt of the request for redemption. For investments that
have been made by check, payment on withdrawal requests may be delayed only
until such time as it is reasonably necessary to assure that good payment has
been collected for the purchase of such shares which may be up to fifteen (15)
days from purchase date. This delay is necessary to assure the Fund that
investments made by check are good funds. The proceeds of the redemption will be
forwarded promptly upon confirmation of receipt of good funds.
The right of redemption may also be suspended, or the date of payment
postponed, (a) for any period during which the New York Stock Exchange is closed
(other than customary weekend or holiday closings); or (b) when trading on the
Exchange is restricted, or an emergency exists, as determined by the Securities
and Exchange Commission, so that disposal of the Fund's investments or
determination of net asset value is not reasonably practical; or (c) for such
other periods as the Commission, by order, may permit for protection of the
Fund's investors.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issuers. These considerations include, among others,
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under laws applicable
to foreign securities markets, the impact of political, social, or diplomatic
developments, difficulties in invoking legal process abroad, and the difficulty
of assessing economic trends in foreign countries.
While to some extent the risks to the Fund of investing in foreign
securities may be limited, since the Fund may not invest more than 25% of its
total net assets in such securities and the Fund may only invest in foreign
securities which are traded in the United States securities markets, the risks
nonetheless exist.
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The investment objective of the Fund is to achieve long-term growth of
capital primarily through investments in stocks of companies with appreciation
potential.
The Fund will invest primarily in the common stock of small cap companies
(companies with market capitalization of less than one billion dollars) believed
by the Adviser to have appreciation potential. This Fund should not be
considered suitable for investors seeking current income. Since no one class or
type of security necessarily affords the greatest promise for capital
appreciation at all times, the Fund may invest up to 35% of its assets in
non-small cap securities of any issuer believed by the Adviser to offer
potential for capital appreciation over both the intermediate and long term.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in small cap equities. However, that projected minimum percentage could
be temporarily lowered during adverse market conditions. Equity securities
include, but are not limited to, common and preferred stock, and preferred
stocks that are convertible into common stock.
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The Fund may also invest in debt securities and money market instruments if,
in the opinion of the Adviser, such investment will further the investment
objective of the Fund. In addition, for temporary defensive purposes, the Fund
may retain cash or invest all or any portion of its assets in cash equivalents.
The Fund's holdings in such non-equity, non-small cap securities will not exceed
35% of the total assets of the Fund. If the Fund's assets or a portion thereof
are retained in cash, such cash will, in all probability, be deposited in
short-term commercial paper.
It is anticipated that all of the Fund's investments in corporate debt
securities (other than commercial paper) and preferred stocks will be
represented by debt securities and preferred stocks which have, at the time of
purchase, a rating within the four highest grades as determined by Moody's
Investors Service, Inc. (Aaa, Aa, A, Baa) or Standard & Poor's Corporation (AAA,
AA, A, BBB). Although investment-quality securities are subject to market
fluctuations, the risk of loss of income and principal is generally expected to
be less than with lower quality securities. In the event the rating of a debt
security or preferred stock in which the Fund has invested drops below
investment grade, the Fund will promptly dispose of such investment.
The Fund invests primarily in undervalued common stocks believed to have
long-term growth potential. Stocks are selected on the basis of an evaluation of
factors such as earnings growth, expanding profit margins, market dominance
and/or factors that create the potential for market dominance, sales growth, and
other factors that indicate a company's potential for growth.
There are no limitations on the type or dividend paying record of small
capitalization companies or industries in which the Fund may invest, the
principal criteria for investment being that the securities provide
opportunities for capital growth. The Fund will invest up to 100% of its capital
in equity securities selected for their capital growth potential.
The Adviser will typically (but not always) purchase common stocks of
issuers which have records of profitability and strong earnings momentum. Such
companies are likely to be lesser known companies moving from a lower to a
higher market share position within their industry groups rather than the
largest and best known companies in such groups. The Adviser may, however,
purchase common stocks of well known, highly researched, large companies if it
believes such common stocks offer opportunity for long-term capital growth.
Investments in such large company stocks will not exceed 35% of the Fund's total
assets.
Diversification is a consideration in selecting investments for the Fund.
However, greater emphasis will be placed upon selection of securities believed
to have good potential for appreciation rather than upon wide diversification.
SPECIAL INVESTMENT METHODS AND RISKS
- -------------------------------------------------------------------------------
"SHORT SALES AGAINST THE BOX"
The Fund is permitted to make short sales if at the time of the short sale
the Fund owns or has the right to acquire a security equal in kind and amount to
the security being sold short, at no additional cost. This investment technique
is known as a "short sale against the box."
In a short sale, the seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
To make delivery to the purchaser, the
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<PAGE>
executing broker borrows the securities being sold short on behalf of the
seller. While the short position is maintained, the seller collateralizes its
obligation to deliver the securities sold short in an amount equal to the
proceeds of the short sale plus an additional margin amount established by the
Board of Governors of the Federal Reserve. If the Fund engages in a short sale,
the collateral account will be maintained by the Fund's custodian. While the
short sale is open, the Fund will maintain, in a segregated custodial account,
an amount of securities equal in kind and amount to the securities sold short or
securities convertible into or exchangeable for such equivalent securities at no
additional cost. These securities would constitute the Fund's long position.
The Fund may make a short sale against the box, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible into or exchangeable for such
security), or when the Fund desires to sell the security it owns at a current
attractive price, but also wishes to defer recognition of gain or loss for
federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such a case, any future losses in the Fund's long position should be reduced by
a gain in the short position. The extent to which such gains or losses are
reduced would depend upon the amount of the security sold short relative to the
amount the Fund owns. There will be certain additional transaction costs
associated with short sales against the box, but the Fund will endeavor to
offset these costs with income from the investment of the cash proceeds of short
sales.
Short sales of securities, other than "short sales against the box," will
not be permitted by the Fund.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund may not invest 25% or more of its total assets in any one industry.
The Fund may not make investments in real estate or commodities or commodity
contracts, including futures contracts, but may purchase securities of issuers
which deal in real estate or commodities. The Fund is also prohibited from
investing in or selling puts, calls, or straddles (or any combination thereof).
The Fund may borrow money only from banks for temporary or emergency (not
leveraging) purposes (provided that, after each borrowing, there is an asset
coverage of at least 300%). In order to secure any such borrowing, the Fund may
pledge, mortgage, or hypothecate up to 10% of the market value of the assets of
the Fund. The investment by the Fund in securities, including American
Depository Receipts, of issuers incorporated or organized, or any governmental
entity or political subdivision thereof, located outside of the United States is
limited to 25% of the net asset value of the Fund, provided that no
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<PAGE>
such foreign securities may be purchased unless they are traded in United States
securities markets.
The Fund may not purchase "restricted securities" (as defined in Rule
144(a)(3) of the Securities Act of 1933) if, as a result of such purchase, more
than 10% of the net assets (taken at market value) of the Fund would be invested
in such securities, nor will the Fund invest in illiquid or unseasoned
securities if as a result of such purchase more than 5% of the net assets of the
Fund would be invested in either illiquid or unseasoned securities.
In addition to the investment restrictions described above, the investment
program of the Fund is subject to further restrictions which are described in
the SAI. The restrictions for the Fund are fundamental and may not be changed
without shareholder approval.
RISK FACTORS
- ------------------------------------------------------------------------------
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issuers. These considerations include, among others,
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under laws applicable
to foreign securities markets, the impact of political, social, or diplomatic
developments, difficulties in invoking legal process abroad, and the difficulty
of assessing economic trends in foreign countries. The Adviser will use the same
basic selection criteria for investing in foreign securities as it uses in
selecting domestic securities as described in the "Investment Objective and
Policies" section.
While to some extent the risks to the Fund of investing in foreign
securities may be limited, since the Fund may not invest more than 25% of its
net asset value in such securities and the Fund may only invest in foreign
securities which are traded in the United States securities markets, the risks
nonetheless exist.
PORTFOLIO TURNOVER
The annual rate of portfolio turnover for the Fund was 136.9% for its fiscal
year ended December 31, 1996. The Fund does not generally intend to have a
portfolio turnover rate in excess of 100% per annum, however, given the
transition of management responsibilities from Navellier Management to MFS
discussed under "Special Considerations" above, the Fund expects its portfolio
turnover rate for its current fiscal year to be up to 200%. These anticipated
portfolio turnover rates are NOT restrictions on the Fund and if in the
Adviser's judgment a higher annual portfolio turnover rate is required in order
to attempt to achieve a higher overall performance then the Adviser is permitted
to do so. However, high portfolio turnover (100% or more) will result in
increased brokerage commissions, dealer mark-ups, and other transaction costs on
the sale of securities and on reinvestment in other securities, may result in
increased levels of capital gain distributions to shareholders and could
therefore adversely affect Fund performance and the level of taxable capital
gains received by shareholders. See "Taxes." To the extent that increased
portfolio turnover results in sales at a profit of securities held less than
three months, the Fund's ability to qualify as a "regulated investment company"
under the Internal Revenue Code may be affected. (See the SAI, "Taxes").
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<PAGE>
SPECIAL RISK CONSIDERATIONS RELATING TO SECURITIES OF THE PORTFOLIO
For a description of certain other factors, including certain risk factors,
which investors should consider relating to the securities in which the Fund
will invest, see "Investment Objective and Policies."
PERFORMANCE
- -------------------------------------------------------------------------------
From time to time the Fund may include its performance history in
advertisements, sales literature, or reports to current or prospective
shareholders. Performance information about the Fund is based on its past
performance only and is not an indication of future performance. Performance
history may be expressed as yield or as total return of the Fund.
The "total return" of the Fund refers to the average annual compounded rate
of return over some representative period that would equate an initial payment
of $1,000 (after deduction of the maximum sales load) at the beginning of a
stated period to the ending redeemable value of the investment, after giving
effect to the reinvestment of all dividends and distributions and deductions of
expenses during the period. For more information about calculation of the
investment performance of the Fund, see the SAI. For further information about
the Fund's performance for the fiscal year ended December 31, 1996, please see
the Fund's Annual Report. A copy of the Annual Report may be obtained without
charge by contacting the MFS Service Center, Inc. (see back cover for address
and phone number).
MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
THE BOARD OF TRUSTEES
The Trust's Board of Trustees directs the business and affairs of the Fund
as well as supervises the Adviser, Administrator, Distributor, Accountant,
Transfer Agent and Custodian, as described below.
THE ADVISER
The Adviser is responsible for selecting the securities which will
constitute the pool of securities which will be selected for investment.
Pursuant to a separate Administrative Services Agreement, the Adviser provides
the Fund with certain administrative services, including accounting and
bookkeeping services and supervising the Fund's compliance with its reporting
obligations. The Adviser may contract for the performance of such services to
the Custodian, Transfer Agent, or others, and may share some or all of its fee
with such other person(s). The Adviser also provides the Fund with a continuous
investment program for the Fund's portfolio, including investment research and
management with respect to all securities and investments. The Adviser will
determine from time to time what securities and other investments will be
selected to be purchased, retained, or sold by the Fund.
Since the inception of the Fund through March 15, 1997, Navellier Management
acted as the investment adviser and administrator of the Fund. On March 15,
1997, the investment advisory agreement and administrative services agreement
between the Trust and Navellier
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<PAGE>
Management with respect to the Fund terminated due to the decision of the
Trust's Board of Trustees not to renew these agreements.
Effective March 16, 1997, the Trust entered into a new investment advisory
agreement and a new administrative services agreement with MFS. As noted under
"Special Considerations" above, the Fund's investment advisory agreement with
MFS will be submitted for approval by Fund shareholders at a special
shareholders' meeting called for that purpose on or prior to July 14, 1997.
John W. Ballen, a Senior Vice President of MFS and MFS' Chief Equity
Officer, is the Fund's portfolio manager. Mr. Ballen has been employed as a
portfolio manager by the Adviser since 1984.
MFS is America's oldest mutual fund organization and, together with its
predecessor organizations, has a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS serves as the investment adviser to the MFS Family of Funds
and a number of closed-end funds, funds underlying insurance products and
offshore funds. As of March 31, 1997, net assets under management of the MFS
organization were approximately $51.5 billion on behalf of 2.4 million investor
accounts, and the MFS organization managed approximately $27.9 billion of assets
invested in equity securities.
The new investment advisory and administrative services agreements with MFS
contain substantially the same terms and conditions as the terminated agreements
with Navellier Management. As required by these terminated agreements with
Navellier Management, the Trust and the Fund have changed their names to
eliminate the use of the term "Navellier" and, reflecting the new relationship
with MFS, have adopted the names "The MFS Series Trust" and "MFS Aggressive
Small Cap Equity Fund," respectively.
The Adviser receives an annual 1.25% investment advisory fee from the Fund,
payable monthly, based upon the Fund's average daily net assets. The advisory
fee paid by the Fund is higher than that paid by most other investment
companies. The Adviser also receives a 0.25% annual fee from the Fund for the
provision of administration services.
THE DISTRIBUTOR
Since the inception of the Fund through March 15, 1997, Navellier Securities
acted as the Fund's Distributor. On March 15, 1997, the distribution agreement
for the Fund between the Trust and Navellier Securities terminated due to the
decision of the Trust's Board of Trustees not to renew this agreement.
Effective March 16, 1997, the Trust entered into a new distribution
agreement with MFD. The new agreement with MFD contains substantially the same
terms and conditions as the terminated agreement with Navellier Securities.
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<PAGE>
THE CUSTODIAN AND THE TRANSFER AGENT
Rushmore Trust and Savings, FSB, 4922 Fairmont Avenue, Bethesda, Maryland,
20814, telephone: (301) 657-1517 or (800) 621-7874, is Custodian for the Fund's
securities and cash and Transfer Agent for the Fund shares.
EXPENSES OF THE FUND
- -------------------------------------------------------------------------------
GENERAL
The Fund is responsible for the payment of its own expenses. These expenses
are deducted from investment income before dividends are paid. These expenses
include, but are not limited to: fees paid to the Adviser, the Custodian, the
Transfer Agent, and the Accountant; Trustees' fees; taxes; interest; brokerage
commissions; organization expenses; securities registration ("blue sky") fees;
legal and auditing fees; insurance; and printing and other expenses which are
not directly assumed by the Adviser under its investment advisory and
administrative services agreements with the Fund.
Under an agreement between the Fund and the Prior Adviser related to payment
of operating expenses, the Prior Adviser has reserved the right to seek
reimbursement for the past, present and future operating expenses of the Fund
paid by the Prior Adviser, at any time upon notice to the Fund. At December 31,
1995, the prior adviser voluntarily agreed not to seek future reimbursement of
all unreimbursed past expenses of the Fund. During the year ended December 31,
1996, the Prior Adviser paid operating expenses of the Fund totaling $660,374.
Under the operating expense agreement, the Prior Adviser requested, and the Fund
reimbursed, $464,738 of such expenses. The Prior Adviser voluntarily agreed not
to seek future reimbursement of $195,636 of such 1996 expenses. Accordingly, at
December 31, 1996, there were no prior expenses which could be reimbursed in the
future under the agreement.
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the Fund's normal operating expenses which accrue on and after
March 16, 1997 such that the Fund's "Total Fund Operating Expenses" do not
exceed 1.75% per annum of its average daily net assets (the "Maximum
Percentage"). MFS has not agreed to bear the Fund's extraordinary expenses. The
obligation of MFS to bear these expenses terminates on the last day of the
Fund's fiscal year in which the Fund's "Total Fund Operating Expenses" are less
than or equal to the Maximum Percentage. The payments made by MFS on behalf of
the Fund under this arrangement are subject to reimbursement by the Fund to MFS,
which will be accomplished by the payment of an expense reimbursement fee by the
Fund to MFS computed and paid monthly at a percentage of its average daily net
assets for its then current fiscal year, with a limitation that immediately
after such payment the Fund's "Total Fund Operating Expenses" will not exceed
the Maximum Percentage. This expense reimbursement by the Fund to MFS terminates
on the earlier of the date on which payments made by the Fund equal the prior
payment of such reimbursable expenses by MFS or March 16, 2000.
BROKERAGE COMMISSIONS
The Adviser may use selected broker-dealers to execute portfolio
transactions for the Fund, provided that the commissions, fees, or other
remuneration received by such party in exchange for executing such transactions
are reasonable and fair compared to those paid to other brokers
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in connection with comparable transactions. The Adviser may consider sales of
shares of the Fund and of the other investment company clients of MFD as a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions. From time to time, the Adviser may direct certain portfolio
transactions to broker-dealer firms which, in turn, have agreed to pay a portion
of the Fund's operating expenses (e.g., fees charged by the custodian of the
Fund's assets). (See the SAI).
REPORTS AND INFORMATION
- -------------------------------------------------------------------------------
The Fund will distribute to its shareholders semi-annual reports containing
unaudited financial statements and information pertaining to matters of the
Fund. An annual report containing financial statements together with the report
of the independent auditors of the Fund is distributed to shareholders each
year.
Shareholder inquiries should be addressed to the Transfer Agent, Rushmore
Trust and Savings FSB, 4922 Fairmont Avenue, Bethesda, Maryland, 20814, Tel:
(301) 657-1510 or (800) 622-1386.
DESCRIPTION OF SHARES
- -------------------------------------------------------------------------------
The Trust is a Delaware business trust organized on May 28, 1993. The
Declaration of Trust permits the Trustees to issue an unlimited number of shares
of beneficial interest. The Board of Trustees has the power to designate one or
more classes of shares of beneficial interest and to classify or reclassify any
unissued shares with respect to such classes. Presently the Trust is only
offering shares of the Fund.
The shares of the Fund, when issued, are fully paid and non-assessable, are
redeemable at the option of the holder, are fully transferable, and have no
conversion or preemptive rights. Shares are also redeemable at the option of the
Fund under certain circumstances (see "Redemption of Shares"). Each share of the
Fund is equal as to earnings, expenses, and assets of the Fund and, in the event
of liquidation of the Fund, is entitled to an equal portion of all of the Fund's
net assets. Shareholders of the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Voting rights are
not cumulative, so that the holders of more than 50% of the shares voting in any
election of Trustees can, if they so choose, elect all of the Trustees. While
the Fund is not required, and does not intend, to hold annual meetings of
shareholders, such meetings may be called by the Trustees at their discretion,
or upon demand by the holders of 10% or more of the outstanding shares of the
Fund for the purpose of electing or removing Trustees.
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All shares (including reinvested dividends and capital gain distributions)
are issued or redeemed in full or fractional shares rounded to the third decimal
place. No share certificates will be issued. Instead, an account will be
established for each shareholder and all shares purchased will be held in
book-entry form by the Fund.
DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
All dividends and distributions with respect to the shares of the Fund will
be payable in shares at net asset value or, at the option of the shareholder, in
cash. Any shareholder who purchases shares of the Fund prior to the close of
business on the record date for a dividend or distribution will be entitled to
receive such dividend or distribution. Dividends and distributions (whether
received in shares or in cash) are treated either as ordinary income or
short-term or long-term capital gain for federal income tax purposes. Between
the record date and the cash payment date, the Fund retains the use and benefits
of such monies as would be paid as cash dividends.
The Fund will distribute all of its net investment income and net realized
capital gains, if any, annually in December. If a cash payment is requested with
respect to the Fund, a check will be mailed to the shareholder. Unless otherwise
instructed, the Transfer Agent will mail checks or confirmations to the
shareholder's address of record.
The federal income tax laws impose a four percent (4%) nondeductible excise
tax on each regulated investment company with respect to the amount, if any, by
which such company does not meet distribution requirements specified in the
federal income tax laws. The Fund intends to comply with the distribution
requirements and thus does not expect to incur the four percent (4%)
nondeductible excise tax, although the imposition of such excise tax may
possibly occur.
Shareholders will have their dividends and/or capital gain distributions
reinvested in additional shares of the Fund unless they elect in writing to
receive such distributions in cash. Shareholders whose shares are held in the
name of a broker or nominee should contact such broker or nominee to determine
whether they want dividends reinvested or distributed.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions. (See "Taxes" following).
In the case of foreign participants whose dividends are subject to U.S.
income tax withholding and in the case of any participants subject to 31%
federal backup withholding, the Transfer Agent will reinvest dividends after
deduction of the amount required to be withheld.
Experience may indicate that changes in the automatic reinvestment of
dividends are desirable. Accordingly, the Fund reserves the right to amend or
terminate this provision as applied to any dividend or distribution paid
subsequent to written notice of the change sent to shareholders at least 90 days
before the record date for such dividend or distribution.
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<PAGE>
TAXES
- -------------------------------------------------------------------------------
FEDERAL TAXES
The Fund is a separate taxpayer and intends to meet the requirements of
Subchapter M of the Internal Revenue Code of 1986 (relating to regulated
investment companies) with respect to diversification of assets, sources of
income, and distributions of taxable income and will elect to be taxed as a
regulated investment company for federal income tax purposes.
However, the Code contains a number of complex tests relating to
qualification which a fund might not meet in any particular year. For example,
if a fund derives 30% or more of its gross income from the sale of securities
held for less than three months, it may fail to qualify. If a fund did not
qualify as a regulated investment company, it would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for payments made to
shareholders and all Fund distributions would be taxable to shareholders as
ordinary dividend income.
Because the Fund intends to distribute all of its net investment income and
net realized capital gains at least annually, it is not expected that the Fund
will be required to pay federal income tax for any year throughout which it was
a regulated investment company nor, for this reason, is it expected that the
Fund will be required to pay the 4% federal excise tax imposed on regulated
investment companies that fail to satisfy certain minimum distribution
requirements. However, the possibility of federal or state income tax and/or
imposition of the federal excise tax does exist.
Dividends (other than capital gains dividends) will be taxable to
shareholders as ordinary income, whether received in shares or cash and will, in
the case of corporate shareholders, generally qualify for the dividends-received
deduction to the extent paid out of qualifying dividends received by the Fund.
Capital gains dividends will ordinarily be taxable to shareholders as
long-term capital gain, regardless of how long they have held their shares. A
dividend is a capital gains dividend if it is so designated by the Fund and is
paid out of the Fund's net capital gain (that is, the excess of the Fund's net
long-term capital gain over its net short-term capital loss).
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of dividends. Furthermore, such dividends, although in effect a
return of capital, are subject to federal income taxes. Therefore, prior to
purchasing shares of the Fund, the investor should carefully consider the impact
of dividends, including capital gains distributions, which are expected to be or
have been announced.
Upon a disposition or redemption of shares of the Fund, the shareholder will
generally recognize taxable gain or loss measured by the difference between the
redemption price and the basis of the shares. This gain or loss will generally
be treated as capital gain or loss (long-term or short-term, depending upon the
holding period for the redeemed shares).
Shortly after the end of each calendar year, each Fund shareholder will
receive a statement setting forth the federal income tax status of all dividends
and distributions for that year,
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including the portion taxable as ordinary income, the portion taxable as
long-term capital gain, the portion, if any, representing a return of capital
(which is free of current taxes but results in a basis reduction) and the
amount, if any, of federal income tax withheld. Shareholders may be subject to
backup withholding at the rate of 31% on dividends and redemption proceeds
unless (a) they are corporations or come within other exempt categories or (b)
they provide correct taxpayer identification numbers, certify as to no loss of
exemption from backup withholding, and otherwise comply with applicable
requirements of the law relating to backup withholding. Any amounts paid as
backup withholding will be creditable against the federal income tax liabilities
of the affected shareholders. The Fund intends to withhold U.S. federal income
tax at the rate of 30% on dividends and certain other payments that are subject
to such withholding and are made to persons who are neither citizens nor
residents of the U.S., regardless of whether a lower rate may be permitted under
an applicable treaty. Backup withholding will not be applied to payments that
are subject to 30% withholding.
The Fund may pay taxes to foreign countries with respect to dividends or
interest it receives from foreign issuers or from domestic issuers that derive a
substantial amount of their revenues in foreign countries, or such taxes may be
withheld at the source by such issuers. The Fund will generally be entitled to
deduct such taxes in computing its taxable income.
STATE AND LOCAL TAXES
The Fund may be subject to state or local taxation in jurisdictions in which
it may be deemed to be doing business. Taxable income of the Fund and its
shareholders for state and local purposes may be different from taxable income
calculated for federal income tax purposes.
Each prospective investor is advised to consult his or her tax adviser for
advice as to the federal, state, and local taxation which may be applicable to
such investor in connection with an investment in the Fund.
PURCHASE AND PRICING OF SHARES
- -------------------------------------------------------------------------------
PURCHASE OF SHARES
The Fund's shares are sold to the general public on a continuous basis
through the Distributor and its network of broker-dealers and Transfer Agent.
The Fund closed to new investors on April 15, 1996. Shareholders of the Fund
as of such closing date may continue to add to an account through the
reinvestment of dividends and cash distributions on any Fund shares owned, and
through the purchase of additional Fund shares. Shareholders of the Fund as of
the April 15, 1996 closing date may also open and add to additional accounts
that use the same social security number as the account existing as of April 15,
1996, such as accounts where the shareholder is the owner, a joint owner or a
custodian for a minor child. Shares of the Fund may continue to be purchased
through mutual fund wrap fee advisers and financial planners. Additionally,
Trustees of the Fund and employees and directors of the Fund's Adviser may
continue to open new Fund accounts. The Fund may resume sales to new investors
at some future date.
17
<PAGE>
PURCHASE BY MAIL
Investments in the Fund can be made through selected securities dealers, who
have the responsibility to transmit orders promptly and may charge a processing
fee, or through the Transfer Agent, Rushmore Trust and Savings, FSB.
TO INVEST BY MAIL: Fill out an application and make a check payable to "MFS
Aggressive Small Cap Equity Fund." Mail the check along with the application to:
MFS Aggressive Small Cap Equity Fund
c/o Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
Purchases by check will normally be credited to an account at the closing
net asset value next determined after receipt of payment in good order. Foreign
checks will not be accepted.
Net asset value per share is calculated once daily as of 4:00 p.m. E.S.T. on
each business day. In the event that the New York Stock Exchange or the national
securities exchanges on which stocks are traded adopt different trading hours on
either a permanent or temporary basis, the Trustees of the Trust will reconsider
the time at which net asset value is to be computed. (See "Purchase and Pricing
of Shares--Valuation of Shares").
PURCHASES THROUGH DEALERS
Shares purchased through Dealers will be effected at the net asset value
next determined after the Dealer receives the purchase order, provided that the
Dealer transmits the order to the Transfer Agent and the Transfer Agent accepts
the order by 4:00 p.m. E.S.T. The investor must settle his or her entitlement to
that day's net asset value with the Dealer.
Certain selected Dealers may effect transactions in shares of the Fund on a
"three-day settlement" basis through the National Securities Clearing
Corporation's Fund/SERV system.
Purchases of shares through Dealers not utilizing the National Securities
Clearing Corporation's Fund/SERV system will be effected when received in proper
form by the Transfer Agent, as described above, in the same manner and subject
to the same terms and conditions as are applicable to shares purchased directly
through the Transfer Agent. The sales charge applicable to the investor's
purchase (See "Pricing of Shares" below) is the same when purchased through a
Dealer as when purchased directly through the Transfer Agent.
Shareholders who wish to transfer fund shares from one broker-dealer to
another should contact the Transfer Agent at (800) 622-1386.
TO INVEST BY BANK WIRE: Request a wire transfer to:
Rushmore Federal Savings Bank
Bethesda, MD
Routing Number 0550 71084
For Account of MFS Aggressive Small Cap Equity Fund
Account Number 0293 85770
18
<PAGE>
AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE, YOU MUST TELEPHONE
THE TRANSFER AGENT AT (800) 622-1386 OR (301) 657-1510 BETWEEN 8:30 A.M. AND
4:00 P.M. E.S.T. AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK
SENDING THE TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. IF THE
PURCHASE IS CANCELLED BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE
LIABLE FOR ANY LOSS THE FUND MAY INCUR.
Such wire should identify the name of the Fund, the account number, the
order number (if available), and your name.
TO INVEST BY AUTOMATIC MONTHLY INVESTMENT PLAN:
Shareholders may make automatic monthly purchases of the Fund's shares by
executing an automatic monthly withdrawl application authorizing his/her/its
bank to transfer money from his/ her/its checking account to the Transfer Agent
for the automatic monthly purchase of shares of the Fund for the shareholder.
There is no charge by the Fund for this automatic monthly investment plan and
the shareholder can discontinue the service at any time.
PRICING OF SHARES
The shares of the Fund are sold at their net asset value per share next
determined after an order in proper form (completely filled out application form
and additional information or documentation) is received by the Transfer Agent,
plus a maximum sales charge of 3% on a single purchase of between $2,000 and
$24,999.99. The sales load is reduced to 2-1/2% for purchases of between $25,000
and $49,999.99, 2% for purchases of between of between $50,000 and $74,999.99,
1-1/2% for purchases of between $75,000 and $99,999.99, and 1% for purchases of
$100,000 or more. There is no sales charge for purchases of $1 Million or more.
The sales charge is payable at the time shares are purchased and is deducted
from the amount credited to the investor's account. If an order for shares of
the Fund is received by the Transfer Agent by 4:00 p.m. on any business day,
such shares will be purchased at the net asset value determined as of 4:00 p.m.
on that day (plus the applicable sales charge). Otherwise, such shares will be
purchased at the net asset value determined as of 4:00 p.m on the next day (plus
the applicable sales charge). However, orders received by the Transfer Agent
from dealers or brokers after the net asset value is determined that day will
receive such offering price if the orders were received by the broker or dealer
from its customer prior to such determination and were transmitted to and
received by the Transfer Agent prior to its close of business on that day
(normally 4:00 p.m. E.S.T.). Shares are entitled to receive any declared
dividends on the day following the date of purchase.
ABATEMENT OF SALES CHARGES FOR TRANSFERRED ACCOUNTS
Any investor who transfers all or any portion of his investment from any
other registered investment company which charges a sales load (other than those
which charge a deferred sales load) to the Fund will not be required to pay a
sales charge on the amount invested. The Fund Trustees, the Distributor, the
Custodian, the Transfer Agent, retirement or deferred compensation plans and
trusts used to fund such plans, and their employees; or brokers directly
involved in selling the Fund's shares and whose firm has executed a selling
agreement with the Distributor or the Adviser or their employees or the spouse
or child of any of the above will not be required to pay any sales charge, nor
will any investor who purchases more than $1 million of the Fund's
19
<PAGE>
shares nor will any investor who purchases through an account as to which an
investment adviser, financial planner, agent, bank or broker-dealer charges an
account management or transaction fee ("wrap fee"), provided the investment
adviser, financial planner, agent, bank or broker-dealer has an Agreement with
Distributor.
Purchases may also be made at net asset value (no load) by investment
advisers or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; and clients of such investment advisers or financial
planners who place trades for their own accounts if the accounts are linked to
the master account of such investment adviser or financial planner on the books
and records of the broker or agent; and by retirement and deferred compensation
plans and trusts used to fund those plans, including, but not limited to, those
defined in section 401(a), 403(b), or 457 of the Internal Revenue Code and
"rabbi trusts."
GENERAL PURCHASING INFORMATION
The Fund has established a minimum initial investment of $2,000 ($500 in the
case of IRA and other retirement plans or qualifying group plans) and $100 for
subsequent investments. A shareholder who wishes to place an order for shares
should contact MFS Service Center, Inc. at (800) 225-2606.
REDUCED SALES CHARGES
A reduction in the sales charge rate applicable to sales of Fund shares may
be obtained by volume discounts as described in the Prospectus. In addition,
members of qualified groups or persons purchasing shares for retirement plans or
individual retirement accounts (IRAs) may purchase shares of the Fund at the
same discounts charged on volume discount purchases. Also, persons who transfer
their investments from another investment company, to which they paid a sales
charge, will not be charged a sales charge.
Purchases of Fund shares are made at the public offering price next
determined after the Transfer Agent receives payment, including the applicable
sales charge. To receive the group rate on their individual purchase, group
members must purchase shares through a single investment dealer designated by
the group. After the initial purchase, a member may send funds for the purchase
of shares directly to the Transfer Agent. Sales to members of qualified groups
are made at a reduced sales charge because such sales normally involve less
sales effort and sales-related expense than would usually be associated with
sales to individual investors. Also, it is believed that such reduced sales
charges will provide an incentive for increased investment in the Fund by
members of qualified groups which could benefit the Fund and its shareholders by
enabling the Fund to achieve certain economies of scale and benefits of size
more rapidly than would otherwise be the case.
As determined by the Distributor, qualified groups include the employees of
a corporation or a sole proprietorship, members, and employees of a partnership
or association (including, without limitation, members of tax-exempt
organizations enumerated under Sections 501(c)(3) and 501(c)(13) of the Internal
Revenue Code of 1986), or other organized groups of persons (the members of
which may include other qualified groups), provided that: (i) the group has at
least 25 members, of which at least 10 members participate in the initial
purchase; (ii) the group has been in existence for at least six months; (iii)
the group has some purpose in addition to the purchase of investment company
shares at a reduced sales charge; and (iv) the group's sole
20
<PAGE>
organizational nexus or connection is not that the members are credit card
holders of a company, policy holders of an insurance company, customers of a
bank or a broker-dealer, clients of an investment adviser, or security holders
of a company.
Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is carried
on the records of the group or on the records of any constituent member of the
group as being a good standing employee, partner member, or person of like
status of the group or constituent member; or (iii) any fiduciary purchasing
shares for the account of a member of a qualified group or a member's
beneficiary, or participants in a qualified retirement plan, or contributors to
an individual retirement account (IRA). For example, a qualified group could
consist of a trade association which would have as its members individuals, sole
proprietors, partnerships, and corporations. The members of the group would then
consist of the individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, as well as trustees of
employment benefit trusts acquiring Fund shares for the benefit of any of the
foregoing. The Fund reserves the right to revise the terms of, or to suspend or
discontinue, group sales charge discounts at any time.
LETTER OF INTENT
An investor may pay reduced sales charges by signing and fulfilling a Letter
of Intent which is on the Application Form. The Letter of Intent confirms the
investor's intention as to the total investment in shares of the Fund within the
following 13 consecutive months, and thereby the investor will become eligible
for the reduced sales charges applicable to the total amount to be purchased.
Purchases made within 90 days prior to the signing of the Letter of Intent may
be included in the total amount and will be valued on the effective date of the
Letter of Intent. The Letter of Intent will not be a binding obligation on
either the purchaser or the Fund. Purchases made under the Letter of Intent are
made at the sales charge applicable to the aggregate amount to be invested in
shares of the Fund under the Letter of Intent as if all the shares were
purchased in a single transaction. During the period of the Letter of Intent,
the Transfer Agent will hold shares representing 5% of the intended purchase in
escrow to provide payment of additional sales commissions that may have to be
paid if the Letter of Intent is reduced. If the total shares stated in the
Letter of Intent are not purchased, a price adjustment is made, depending upon
the actual amount invested within the period covered by the Letter of Intent, by
the redemption of sufficient shares held in escrow for the account of the
investor. Otherwise, shares held in escrow will be released upon completion of
the intended investment. A Letter of Intent can be amended: (a) during the
13-month period if the purchaser files an amended Letter of Intent with the same
expiration date as the original and (b) automatically after the end of the
period, if the total purchases credited to the Letter of Intent qualify for an
additional reduction in sales charge. For more information concerning the Letter
of Intent, see the Application Form or contact the Transfer Agent.
VALUATION OF SHARES
The net asset value of the shares of the Fund is calculated by adding the
values of all securities and other assets of the Fund, subtracting liabilities
of the Fund, and dividing by the number of outstanding shares. It is determined
once daily as of 4:00 p.m E.S.T., on days when the New York Stock Exchange is
open for trading. In the event that the New York Stock Exchange or the national
securities exchanges on which stocks are traded adopt different trading hours on
21
<PAGE>
either a permanent or temporary basis, the Trustees of the Fund will reconsider
the time at which net asset value is to be computed. The net asset value is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the number of outstanding shares of the
Fund. The price at which a purchase is effected is based on the next calculation
of net asset value after the order is received.
In determining the value of the assets of the Fund, the securities for which
market quotations are readily available are valued at market value. Debt
securities (other than short-term obligations) are normally valued on the basis
of valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. Use of a pricing service has been
approved by the Trustees of the Fund. All other securities and assets are valued
at their fair value as determined in good faith by the Trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the Trustees. (See "Purchase, Redemption, and Pricing of Shares--Determination
of Net Asset Value" in the SAI.)
REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
GENERAL
A shareholder may redeem shares of the Fund at the net asset value next
determined after receipt of a notice of redemption in accordance with the
procedures set forth below and compliance with the further redemption
information and/or additional documentation requirements described in this
Section. As used in this Prospectus, the term "business day" refers to those
days on which stock exchanges trading small cap stocks are open for business.
The Fund may change the following procedures at its discretion.
Any shareholder who redeems shares of the Fund prior to the close of
business on the record date for a dividend or distribution will not be entitled
to receive the dividend or distribution. A check for the proceeds of redemption
will normally be mailed within seven days of receipt of any redemption request
received by the Transfer Agent. Payments in redemption of shares will be reduced
by any income tax required to be withheld. See "Taxes," above. If shares to be
redeemed were purchased by check, the Fund may delay transmittal of redemption
proceeds only until such times as it is reasonably assured that good payment has
been collected for the purchase of such shares, which may be up to 15 days from
purchase date. Such delays can be avoided by wiring Federal Funds in effecting
share purchases.
If a shareholder wishes to redeem his or her entire shareholdings in the
Fund, he or she will receive, in addition to the net asset value of shares, all
declared but unpaid dividends thereon. The net asset value of the shares may be
more or less than a shareholder's cost depending on the market value of the
portfolio securities at the time of the redemption.
22
<PAGE>
REDEMPTION BY MAIL
A shareholder may redeem shares by mail on each day that the New York Stock
Exchange is open by submitting a written redemption request to:
MFS Aggressive Small Cap Equity Fund
c/o Rushmore Trust and Savings FSB
4922 Fairmont Avenue
Bethesda, MD 20814
The request for redemption should include the name of the Fund, the account
name and number, and should be signed by all registered owners of the shares in
the exact names in which they are registered. Each request should specify the
number or dollar amount of shares to be redeemed or that all shares in the
account are to be redeemed.
OPTION TO MAKE SYSTEMATIC WITHDRAWALS
The owner of $25,000 or more worth of the shares of the Fund may provide for
the payment from his account of any requested dollar amount (but not less than
$1,000) to him or his designated payee monthly, quarterly, or annually. Shares
will be redeemed on the last business day of each month. Unless otherwise
instructed, the Transfer Agent will mail checks to the shareholder at its
address of record. A sufficient number of shares will be redeemed to make the
designated payment. This redemption option is not available with respect to
shares for which certificates are held by a shareholder. Since a sales charge is
imposed on investors, investors should not purchase shares in the Fund while
they are participating in the withdrawal plan.
FURTHER REDEMPTION INFORMATION
Additional documentation regarding a redemption by any means may be required
when deemed appropriate by the Transfer Agent, and the request for such
redemption will not be considered to have been received in proper form until
such additional documentation has been received. An investor should contact the
Transfer Agent to inquire what, if any, additional documentation may be
required.
The Fund reserves the right to modify any of the methods of redemption or to
charge a fee for providing these services upon 30 days' written notice to
shareholders.
Due to the high cost of maintaining accounts of less than $2,000 ($500 for
IRA or other qualifying plan accounts), the Fund reserves the right to redeem
shares involuntarily in any such account at their then current net asset value.
Shareholders will first be notified and allowed 30 days to make additional share
purchases to bring their accounts to more than $2,000 ($500 for IRA or other
qualifying plan accounts). An account will not be redeemed involuntarily if the
balance falls below $2,000 ($500 for IRA or other qualifying plan accounts) by
virtue of fluctuations in net asset value rather than through investor
redemptions.
Under certain circumstances, the right of redemption may be suspended or the
redemption may be satisfied by distribution of portfolio securities rather than
cash. Information as to those matters is set forth in the SAI.
23
<PAGE>
CERTAIN SERVICES PROVIDED TO SHAREHOLDERS
- -------------------------------------------------------------------------------
STATEMENTS OF ACCOUNT
Statements of Account for the Fund will be sent to each shareholder at least
quarterly.
DIVIDEND ELECTION
A shareholder may elect to receive dividends in shares or in cash. If no
election is made, dividends will automatically be credited to a shareholder's
account in additional shares.
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
The SAI, available upon request, without charge from the Fund, provides a
further discussion of certain sections of the Prospectus and other information
which may be of interest to certain investors. This Prospectus and the SAI do
not contain all the information included in the Registration Statement filed
with the Securities and Exchange Commission with respect to the securities being
sold, certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Registration
Statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the SAI and the copy of such contract or other
document filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, each such statement being qualified in all respects by
such reference.
ASSENT TO TRUST INSTRUMENT
- -------------------------------------------------------------------------------
Every shareholder, by virtue of having purchased a Share shall become a
shareholder and shall be held to have expressly assented and agreed to be bound
by the terms hereof.
TERMS APPLICABLE TO LETTER OF INTENT
- -------------------------------------------------------------------------------
By indicating in the Letter of Intent Section of the Account Application
that the provisions of the Letter of Intent have been selected, the investor
agrees as follows:
Each purchase of shares under the Letter of Intent will be made at the
public offering price which, at the time of such purchase, is applicable to a
single transaction of the dollar amount checked on the Account Application, as
described in the current Prospectus relating to such shares.
Out of the initial purchase (or subsequent purchases if necessary), 5% of
the total purchases required to complete the Letter of Intent will be held in
escrow in the form of shares (valued at the purchase price thereof) registered
in the investor's name. The Letter of Intent will terminate
24
<PAGE>
and the escrow will be released when the total purchases made under the Letter
of Intent, together with the value on the date of the Letter of Intent of any
shares of the Fund then owned by the investor, equal the aggregate amount
checked on the Account Application. All dividends and any capital gain
distributions on the escrowed shares will be paid to the investor or to the
investor's order, but the receipt of dividends and capital gain distributions in
shares computed at net asset value will not apply towards the completion of the
Letter of Intent.
No commitment is made to purchase additional shares. If, within 13 months
from the date of the Letter of Intent, the investor's total purchases under the
Letter of Intent, together with the value on the date of the Letter of Intent of
any shares of the Fund then owned by such investor, do not equal or exceed the
aggregate amount checked on the Account Application, the Investor will remit to
Rushmore Trust and Savings FSB, the difference in the sales charge actually paid
and the sales charge which the investor would have paid if total purchases made
under the Letter of Intent had been made at a single time. If, within 20 days
after written request by Rushmore Trust and Savings, FSB or the appropriate
dealer, the investor does not pay such difference in the sales charge, such
investor irrevocably constitutes and appoints Rushmore Trust and Savings, FSB as
his/her attorney to surrender for redemption any or all escrowed shares, with
full power of substitution in the premises, to be redeemed in order to realize
such difference.
For purposes of a Letter of Intent, a "single purchaser" means:
(i) an individual, or an individual, his spouse and their children under
the age of 21 purchasing for his or their own account (including an IRA
account) including his or their own trusts, commonly known as living trusts;
or
(ii) a trustee or other fiduciary purchasing for a single trust estate
or single fiduciary account, although more than one beneficiary is involved;
or
(iii) multiple trusts for the same employer, or
(iv) trust companies and bank trust departments placing orders with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial, or similar capacity,
provided all shares are held of record in the name, or nominee name, of the
trust company or bank.
Except as provided above, a "single purchaser" does not include a group of
individuals whose funds are combined, directly or indirectly, for the purchase
of redeemable securities of a registered investment company jointly or through a
trustee, agent, custodian, or other representative, nor shall it include a
trustee, agent, custodian, or other representative of such a group of
individuals.
25
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services
Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Funds Distributor, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
TRANSFER AGENT AND CUSTODIAN
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
(800) 622-1386
SHAREHOLDER INQUIRIES
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
(800) 622-1386
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1900 M Street
Washington, D.C. 20036
(202) 955-4000
<PAGE>
MFS AGGRESSIVE SMALL CAP EQUITY FUND ("THE FUND")
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1997
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the Prospectus of the MFS Aggressive Small Cap
Equity Fund, a series of The MFS Series Trust (the "Trust"), dated May 1, 1997,
a copy of which Prospectus may be obtained, without charge, by contacting the
MFS Service Center, Inc., 500 Boylston Street, Boston, MA 02116, telephone:
(800) 225-2606.
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
General Information and History________________________________ 2
Investment Objective and Policies______________________________ 2
Trustees and Officers of the Fund______________________________ 5
Officers_______________________________________________________ 7
Control Persons and Principal Holders of Securities____________ 8
Adviser, Distributor, Custodian and Transfer Agent_____________ 8
Brokerage Allocation and Other Practices_______________________ 9
Capital Stock and Other Securities_____________________________ 11
Purchase, Redemption, and Pricing of Shares____________________ 12
Taxes__________________________________________________________ 15
Calculation of Performance Data________________________________ 18
Independent Auditors and Financial Statements__________________ 21
Appendix_______________________________________________________ 22
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
- -------------------------------------------------------
The Trust is a business trust company (organized under the laws of the State
of Delaware on May 28, 1993). The Trust was known as The Navellier Series Fund
until March 16, 1997, when the Trust entered into an investment advisory
agreement with a new investment adviser and its name was changed to The MFS
Series Trust. The Trust's only series was known as the Aggressive Small Cap
Equity Portfolio, and as of March 16, 1997 became known as the MFS Aggressive
Small Cap Equity Fund.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------
INVESTMENT POLICIES. The investment objective and policies of the Fund are
described in the "Investment Objective and Policies" section of the Prospectus.
The following general policies supplement the information contained in that
section of the Prospectus. Prior to being considered as a permissible investment
for the Fund, each issuer of the following instruments will first have to be
determined by the Adviser to qualify as a "Qualified Issuer" (as defined by the
Prospectus).
CERTIFICATES OF DEPOSIT. Certificates of deposit are generally short-term,
interest-bearing, negotiable certificates issued by banks or savings and loan
associates against funds deposited in the issuing institution.
TIME DEPOSITS. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received.
BANKER'S ACCEPTANCES. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer, or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
COMMERCIAL PAPER. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months.
CORPORATE DEBT SECURITIES. Corporate debt securities with a remaining
maturity of less than one year tend to become liquid and can sometimes be traded
as money market securities.
UNITED STATES GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to
principal and interest by the United States government include a variety of
Treasury securities, which differ only in their interest rates, maturities, and
times of issuance. Treasury bills have a maturity of one year or less. Treasury
notes have maturities of one to seven years, and Treasury bonds generally have a
maturity of greater than five years.
Agencies of the United States government which issue or guarantee
obligations include, among others, export-import banks of the United States,
Farmers' Home Administration, Federal Housing Administration, Government
National Mortgage Association, Maritime Administration, Small Business
Administration, the Defense Security Assistance Agency of the Department of
Defense, and the Tennessee Valley Authority. Obligations of instrumentalities of
the United States government include securities issued or guaranteed by, among
others, the Federal National Mortgage Associates, Federal Intermediate Credit
Banks, Banks for Cooperatives, and the United States Postal Service. Some of the
securities are supported by the full faith and credit of the United States
government; others are supported by the right of the issuer to
2
<PAGE>
borrow from the Treasury, while still others are supported only by the credit of
the instrumentality.
INVESTMENT RESTRICTIONS. The Fund's fundamental policies cannot be changed
without the approval of a vote of a majority of the outstanding securities of
the Fund. A proposed change in fundamental policy or investment objective will
be deemed to have been effectively acted upon with respect to the Fund if a
majority of the outstanding voting securities of the Fund votes for the matter.
Such a majority is defined as the lesser of (a) 67% or more of the voting shares
of the Fund present at a meeting of shareholders, if the holders of more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. For purposes of the following restrictions
and those contained in the Prospectus: (i) all percentage limitations apply
immediately after a purchase or initial investment; and (ii) any subsequent
change in any applicable percentage resulting from market fluctuations or other
changes in the amount of total assets does not require elimination of any
security from the Fund.
The following investment restrictions are fundamental policies of the Fund
(unless otherwise specified below) and may not be changed except as described
above. The Fund may not:
1. Purchase for the Fund securities of any issuer, other than obligations
issued or guaranteed as to principal and interest by the United States
government or its agencies or instrumentalities, if immediately thereafter (i)
more than 5% of the Fund's total assets (taken at market value) would be
invested in the securities of such issuer, or (ii) more than 10% of the voting
securities of any class of such issuer would be held by the Fund.
2. Concentrate the portfolio investments in any one industry. To comply with
this restriction, no security may be purchased for the Fund if such purchase
would cause the value of the aggregate investment of the Fund in any one
industry to be 25% or more of that Fund's total assets (taken at market value).
3. Purchase any securities or other property on margin, or engage in short
sales of securities (unless it owns, or by virtue of its ownership of other
securities has the right to obtain without payment of any additional
consideration securities equivalent in kind and amount to the securities sold);
PROVIDED, HOWEVER, that the Fund may obtain short-term credit as may be
necessary for the clearance of purchases and sales of securities.
4. Make cash loans, except that the Fund may purchase bonds, notes,
debentures, or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not.
5. Make securities loans, except that the Fund may make loans of the
portfolio securities, provided that the market value of the securities subject
to any such loans does not exceed 33 1/3% of the value of the total assets
(taken at market value) of the Fund.
6. Make investments in real estate or commodities or commodity contracts,
including futures contracts, although the Fund may purchase securities of
issuers which deal in real estate or commodities although this is not a primary
objective of the Fund but only if such securities are small cap equity
securities or constitute less than 35% of the Fund's total assets.
7. Invest in oil, gas, or other mineral exploration or development programs,
although the Fund may purchase securities of issuers which engage in whole or in
part of such activities, but only if such securities are small cap equity
securities or constitute less than 35% of the Fund's total assets, although the
Fund may purchase securities of issuers which engage in whole or in part of such
activities.
3
<PAGE>
8. Invest in or sell puts, calls, straddles, and any combination thereof.
9. Purchase securities of companies for the purpose of exercising management
or control.
10. Participate in a joint or joint and several trading account in
securities.
11. Purchase the securities of (i) other open-end investment companies, or
(ii) closed-end investment companies.
12. Issue senior securities or borrow money, except that the Fund may (i)
borrow money only from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests, that might otherwise
require the untimely disposition of securities, provided that any such borrowing
does not exceed 10% of the value of the total assets (taken at market value),
and (ii) borrow money only from banks for investment purposes, provided that (a)
after each such borrowing, when added to any borrowing described in clause (i)
of this paragraph, there is an asset coverage of at least 300% as defined in the
Investment Company Act of 1940, and (b) is subject to an agreement by the lender
that any recourse is limited to the assets with respect to which the borrowing
has been made. The Fund may not invest in portfolio securities while the amount
of borrowing of the Fund exceeds 5% of the total assets of such Fund.
13. Pledge, mortgage, or hypothecate the assets of the Fund to an extent
greater than 10% of the total assets to secure borrowings made pursuant to the
provisions of Item 12 above.
14. Purchase for the Fund "restricted securities" (as defined in Rule
144(a)(3) of the Securities Act of 1933), if, as a result of such purchase, more
than 10% of the net assets (taken at market value) of the Fund would then be
invested in such securities nor will the Fund invest in illiquid or unseasoned
securities if as a result of such purchase more than 5% of the net assets of
such portfolio would be invested in either illiquid or unseasoned securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of portfolio securities or amount of net assets shall not be
considered a violation of the restrictions, except as to the 5%, 10% and 300%
percentage restrictions on borrowing specified in Restriction Number 12 above.
PORTFOLIO TURNOVER. The portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities during the fiscal year
by the monthly average of the value of the Fund's securities (excluding from the
computation all securities, including options, with maturities at the time of
acquisition of one year or less). A high rate of portfolio turnover generally
involves correspondingly greater expenses to the Fund, including brokerage
commission expenses, dealer mark-ups, and other transaction costs on the sale of
securities, which must be borne directly by the Fund. Turnover rates may vary
greatly from year to year as well as within a particular year and may also be
affected by cash requirements for redemptions of each Fund's shares and by
requirements which enable the Fund to receive certain favorable tax treatment.
The portfolio turnover rate for the Fund during 1996 was 136.9%. The Fund will
attempt to generally limit the annual portfolio turnover rate to 300% or less,
however this rate may be exceeded if in the Adviser's discretion securities are
or should be sold or purchased in order to attempt to increase the Fund's
performance.
4
<PAGE>
TRUSTEES AND OFFICERS OF THE FUND
- -------------------------------------------------------------------------------
The following information, as of April 10, 1997, is provided with respect to
each director and officer of the Fund:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS REGISTRANT AND ITS AFFILIATES PAST FIVE YEARS
- ----------------------------- ----------------------------------- -------------------------------------
<S> <C> <C>
Donald A. Simon Independent Trustee, Chairman and Currently the President of American
American Aeromedical President Aeromedical Services Corp., a
Services Corporation provider and marketer of traveler's
21893 Skywest Dr. assistance programs, and the
Hayward, CA 94541 Executive Vice President and Director
of Air Ambulance Inc., an aeromedical
transportation company. Mr. Simon was
formerly Chairman of KangaROOS USA,
Inc., a footwear importer; Executive
Vice President of Life Insurance RX
Corp., a computer services firm; and
President of Air Chaparral/Inland
Empire Airlines, a regional commuter
airline. He has over 35 years of
experience in the mutual fund,
financial planning, insurance, and
corporate areas of large and small
companies.
Lawrence Bianchi Independent Trustee Currently Chairman of the Board of
Codman Company Directors of The Codman Company,
211 Congress Street Inc., and a member of The American
Boston, MA 02210 Society of Real Estate Consultants,
Mr. Bianchi has been in the Boston
real estate market for 28 years. He
has been a Commissioner for 16 years,
representing the Greater Boston Real
Estate Board on the Boston Landmarks
Commission, served 20 years on the
Industrial Development Financing
Authority of the City of Boston, and
for the past 11 years has been its
Chairman. He was President in 1989 of
the New England Chapter of The
Society of Industrial and Office
Realtors. He is an incorporator of
both Massachusetts General Hospital
and University Hospital and a
Director of Historic Boston, Inc.,
and the Bostonian Society. Prior
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS REGISTRANT AND ITS AFFILIATES PAST FIVE YEARS
- ----------------------------- ----------------------------------- -------------------------------------
to its sale in 1992 to the John
Hancock Insurance Company, Mr.
Bianchi served for 3-1/2 years as one
of four outside directors of the 750
million dollar Patriot Group of three
closed-end mutual funds listed on the
New York Stock Exchange.
<S> <C> <C>
Kenneth Sletten Independent Trustee President of Rudolph & Sletten, Inc.,
Rudolph & Sletten a prominent construction company in
989 E. Hillsdale California. He has been Chairman of
Foster City, CA 94404 the Board of Directors in the Santa
Clara District of the Associated
General Contractors (AGC), and is a
member of the Board of Directors of
their Building Division. He is a
lifetime member of the Northern
California Construction Institute
(NCCI), and a member of the American
Institute of Plant Engineers (AIPE).
He serves on the boards of the
Children's Health Council and Menlo
School and College.
Arnold D. Scott* Trustee Senior Executive Vice President,
Secretary and Director of
Massachusetts Financial Services
Company
W. Thomas London* Treasurer Senior Vice President of
Massachusetts Financial Services
Company
James O. Yost* Assistant Treasurer Vice President of Massachusetts
Financial Services Company
Stephen E. Cavan* Secretary and Clerk Senior Vice President, General
Counsel and Assistant Secretary of
Massachusetts Financial Services
Company
James R. Bordewick, Jr.* Assistant Secretary Senior Vice President and Associate
General Counsel of Massachusetts
Financial Services Company
</TABLE>
- -------------------------
* "Interested persons" (as defined in the Investment Company Act of 1940) of
the Adviser whose address is 500 Boylston Street, Boston, Massachusetts
02116.
6
<PAGE>
OFFICERS
- --------------------------------------------------------
The officers of the Fund are affiliated with the Adviser and receive no
salary or fee from the Fund. The Fund's disinterested Trustees are each
compensated by the Fund with an annual fee, payable quarterly (calculated at an
annualized rate), of $10,000, if the Fund's net assets are $200 million or less,
and $20,000 if the Fund's net assets are over $200 million. The Trustees' fees
may be adjusted according to increased responsibilities if the Fund's assets
exceed one billion dollars. In addition, each disinterested Trustee receives an
attendance fee from the Fund of $500 per board meeting and for attendance at any
meeting of a committee of the board, as well as reimbursement for actual
expenses of such attendance.
The Board of Trustees is permitted by the Fund's By-Laws to appoint an
advisory committee which shall be composed of persons who do not serve the Fund
in any other capacity and which shall have no power to dictate corporate
operations or to determine the investments of the Fund. The Fund currently has
no advisory committee.
7
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- -------------------------------------------------------------------------------
The Fund does not control and is not under common control of any person. As
of February 28, 1997, National Financial Services Corp., P.O. Box 3908, Church
Street Station, NY, NY 10008 was the record owner of 7.96% of the outstanding
shares of the Fund, Charles Schwab & Company, 101 Montgomery Street, San
Francisco, CA, 94104-4122 was the record owner in two accounts of 7.62% and
10.42% of the outstanding shares of the Fund.
As of March 31, 1997, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund.
ADVISER, DISTRIBUTOR, CUSTODIAN
AND TRANSFER AGENT
- -------------------------------------------------------------------------------
ADVISER
The management fee payable to the Adviser under the terms of the Investment
Advisory Agreement (the "Advisory Agreement") between the Adviser and the Fund
is payable monthly and is based upon a percentage of the Fund's average daily
net assets, equal to 1.25%. The Investment Adviser has the right, but not the
obligation, to waive any portion or all of its management fee, from time to
time. For the fiscal years ended December 31, 1996 and 1995 and the period ended
December 31, 1994, the Prior Adviser received management fees from the Fund of
$2,323,690, $664,744 and $56,866, respectively.
Expenses not expressly assumed by the Adviser under the Advisory Agreement
and administrative services agreement are paid by the Fund. The Advisory
Agreement lists examples of expenses paid by the Fund, the major categories of
which relate to taxes, fees to Trustees, legal, accounting, and audit expenses,
custodian and transfer agent expenses, certain printing and registration costs,
and non-recurring expenses, including litigation.
The Advisory Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund or its
investors except for losses (i) resulting from the willful misfeasance, bad
faith, or gross negligence on its part, or (ii) resulting from reckless
disregard by it of its obligations and duties under the Advisory Agreement.
Pursuant to an Administrative Services Agreement, the Adviser receives an
annual fee of 0.25% of the value of the Fund's average daily net assets and
provides or is responsible for the provision of certain administrative services
to the Fund, including, among others, the preparation and maintenance of certain
books and records required to be maintained by the Fund under the Investment
Company Act of 1940. The Administrative Services Agreement permits the
Investment Adviser to contract out for all of its duties thereunder; however, in
the event of such contracting, the Adviser remains responsible for the
performance of its obligations under the Administrative Services Agreement. The
Adviser has entered into an agreement with Rushmore Trust and Savings, FSB, to
perform, in addition to custodian and transfer agent services, some or all
administrative services.
8
<PAGE>
The Advisory Agreement permits the Adviser to act as investment adviser for
any other person, firm, or corporation, and designates the Adviser as the owner
of the name "MFS" or any use or derivation of the word MFS. If the Adviser shall
no longer act as investment adviser to the Fund, the right of the Fund to use
the name "MFS" as part of its title may, solely at the Adviser's option, be
withdrawn.
The Prior Adviser advanced the Fund's organizational expenses which have
been estimated to be $143,294, of which $18,118 remained unamortized as of
December 31, 1996. The Fund agreed to reimburse the Prior Adviser for the
organizational expenses it advances, without interest on a date or dates to be
chosen at the sole discretion of the Prior Adviser, at any time after the Fund
has $20 million in total net assets or is breaking even or making a profit,
which ever first occurs.
DISTRIBUTOR
The Fund's Distributor is MFS Funds Distributor, Inc. ("MFD"). MFD is
registered as a broker-dealer with the Securities Exchange Commission and
National Association of Securities Dealers and the various states in which the
Fund's securities are offered for sale. The Fund's shares will be continuously
distributed by MFD pursuant to a Distribution Agreement, dated March 16, 1997.
Prior to March 16, 1997, Navellier Securities Corp. was the Fund's distributor.
The Distribution Agreement obligates the Distributor to pay certain expenses in
connection with the offering of the shares of the Fund. The Distributor is
responsible for the cost of printing and mailing Prospectuses to potential
investors and of any advertising incurred by it in connection with the
distribution of shares of the Fund.
For the years ended December 31, 1996 and 1995, and for the period ended
December 31, 1994, the Prior Distributor received $924,050, $731,298 and
$162,441, respectively from sales loads earned on sales of the Fund's shares.
CUSTODIAN AND TRANSFER AGENT
Rushmore Trust and Savings, FSB, 4922 Fairmont Avenue, Bethesda, Maryland
20814, serves as the custodian of the Fund's portfolio securities and as the
Fund's transfer agent and, in those capacities, maintains certain accounting and
other records of the Fund and processes requests for the purchase or the
redemption of shares, maintains records of ownership for shareholders, and
performs certain other shareholder and administrative services on behalf of the
Fund.
BROKERAGE ALLOCATION AND OTHER PRACTICES
- -------------------------------------------------------------------------------
Specific decisions to purchase or sell securities for the Fund are made by
employees of the Adviser, who are appointed and supervised by its senior
officers. Changes in the Fund's investments are reviewed by the Board of
Trustees. The Fund's portfolio manager may serve other clients of the Adviser or
any subsidiary of MFS in a similar capacity.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
9
<PAGE>
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities, such as government securities, which are
principally traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser
normally seeks to deal directly with the primary market makers, unless in its
opinion, better prices are available elsewhere. In the case of securities
purchased from underwriters, the cost of such securities generally includes a
fixed underwriting commission or concession. From time to time, soliciting
dealer fees are available to the Adviser on the tender of the Fund's portfolio
securities in so-called tender or exchange offers. Such soliciting dealer fees
are in effect recaptured for the Fund by the Adviser. At present no other
recapture arrangements are in effect.
Under the Advisory Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Adviser may cause the Fund to pay a
broker-dealer which provides brokerage and research services to the Adviser an
amount of commission for effecting a securities transaction for the Fund in
excess of the amount other broker-dealers would have charged for the transaction
if the Adviser determines in good faith that the greater commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer viewed in terms of either a particular
transaction or the Adviser's overall responsibilities to the Fund or to its
other clients. Not all of such services are useful or of value in advising the
Fund.
The term "brokerage and research services" includes advice as to the value
of securities, the advisability of purchasing or selling securities, and the
availability of purchasers or sellers of securities; furnishing analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; and effecting securities
transactions and performing functions incidental thereto such as clearance and
settlement.
Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to the
availability of purchasers or sellers of securities and services in effecting
securities transactions and performing functions incidental thereto such as
clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other
factual information or services ("Research") to the Adviser for no consideration
other than brokerage or underwriting commissions. Securities may be bought or
sold from time to time through such broker-dealers on behalf of the Fund. The
Trust's Trustees (together with the Trustees of the other MFS Funds) have
directed the Adviser to allocate a total of $39,100 of commission business from
the MFS Funds to the Pershing Division of Donaldson Lufkin & Jenrette as
consideration for the annual renewal of certain publications provided by the
Lipper Analytical Securities Corporation (which provides information useful to
the Trustees in reviewing the relationship between the Fund and the Adviser).
The Adviser's investment management personnel attempt to evaluate the
quality of Research provided by brokers. Results of this effort are sometimes
used by the Adviser as a
10
<PAGE>
consideration in the selection of brokers to execute portfolio transactions.
However, the Adviser is unable to quantify the amount of commissions which will
be paid as a result of such Research because a substantial number of
transactions will be effected through brokers which provide Research but which
were selected principally because of their execution capabilities.
The management fee that the Fund pays to the Adviser will not be reduced as
a consequence of the Adviser's receipt of brokerage and research services. To
the extent the Fund's portfolio transactions are used to obtain such services,
the brokerage commissions paid by the Fund will exceed those that might
otherwise be paid, by an amount which cannot be presently determined. Such
services would be useful and of value to the Adviser in serving both the Fund
and other clients and, conversely, such services obtained by the placement of
brokerage business of other clients would be useful to the Adviser in carrying
out its obligations to the Fund. While such services are not expected to reduce
the expenses of the Adviser, the Adviser would, through use of the services,
avoid the additional expenses which would be incurred if it should attempt to
develop comparable information through its own staff.
For the Fund's fiscal year ended December 31, 1996, total brokerage
commissions of $379,000 were paid on transactions (other than U.S. Government
securities, purchased options transactions and short-term obligations) of
$539,713,521. For the Fund's fiscal year ended December 31, 1995, total
brokerage commissions of $254,000 were paid on total transactions (other than
U.S. Government securities, purchased options transactions and short-term
obligations) of $222,132,611. For the Fund's fiscal period ended December 31,
1994, total brokerage commissions of $90,000 were paid on total transactions
(other than U.S. Government securities, purchased options transactions and
short-term obligations) of $30,530,921.
In certain instances there may be securities which are suitable for the
Fund's portfolio as well as for that of one or more of the clients of the
Adviser or MFS or any subsidiary of MFS. Investment decisions for the Fund and
for such other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed by the Adviser
to be equitable to each. It is recognized that in some cases this system could
have a detrimental effect on the price or volume of the security as far as the
Fund is concerned. In other cases, however, it is believed that the Fund's
ability to participate in volume transactions will produce better executions for
the Fund.
CAPITAL STOCK AND OTHER SECURITIES
- -------------------------------------------------------------------------------
The rights and preferences attached to the shares of the Fund are described
in the Prospectus (see "Description of Shares"). The Investment Company Act of
1940 requires that where more than one class or series of shares exists, each
class or series must be preferred over all other classes or series in respect of
assets specifically allocated to such class or series. Rule 18f-2 under the Act
provides that any matter required to be submitted by the provisions of the
Investment Company Act or applicable state law, or otherwise, to the holders of
the
11
<PAGE>
outstanding voting securities of an investment company such as the Fund shall
not be deemed to have been effectively acted upon unless approved by the holders
of a majority of the outstanding shares of each class or series affected by such
matter. Rule 18f-2 further provides that a class or series shall be deemed to be
affected by a matter unless the interests of each class or series in the matter
are substantially identical or that the matter does not affect any interest of
such class or series. However, the Rule exempts the selection of independent
public accountants, the approval of principal distribution contracts, and the
election of Trustees from the separate voting requirements of the Rule.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
- -------------------------------------------------------------------------------
REDUCED SALES CHARGES. A reduction in the sales charge rate applicable to
sales of Fund shares may be obtained by volume discounts as described in the
Prospectus. In addition, members of qualified groups or persons purchasing
shares for retirement plans or individual retirement accounts (IRA's) may
purchase shares of the Fund at the same discounts charged on volume discount
purchases. Also, persons who transfer their investments from another investment
company, to which they paid a sales charge, will not be charged a sales charge.
Nor will the Fund Trustees, the Distributor, the Custodian, the Transfer Agent,
retirement or deferred compensation plans or trusts used to fund such plans or
the employees of any of the above, or investment advisers, financial planners,
agents, banks, or brokers directly involved in selling the Fund's shares and
whose firm has executed a selling agreement with the Distributor, or their
employees or the spouse or child of any of the above have to pay a sales charge.
Nor will investors who invest through an account as to which an investment
advisor, financial planner, agent, a bank or broker-dealer charges an account
management or transaction fee ("wrap fee"), provided the bank or broker-dealer
has a selling agreement with Distributor, have to pay a sales charge.
Purchases may also be made at net asset value (no load) by investment
advisers or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; and clients of such investment advisers or financial
planners who place trades for their own accounts if the accounts are linked to
the master account of such investment adviser or financial planner on the books
and records of the broker or agent; and by retirement and deferred compensation
plans and trusts used to fund those plans, including, but not limited to, those
defined in section 401(a), 403(b), or 457 of the Internal Revenue Code and
"rabbi trusts".
Purchases of Fund shares are made at the public offering price next
determined after the Transfer Agent receives payment, including the applicable
sales charge. To receive the group rate on their individual purchase, group
members must purchase shares through a single investment dealer designated by
the group. After the initial purchase, a member may send funds for the purchase
of shares directly to the Transfer Agent. Sales to members of qualified groups
are made at a reduced sales charge because such sales normally involve less
sales effort and sales-related expense than would usually be associated with
sales to individual investors. Also, it is believed that such reduced sales
charges will provide an incentive for increased investment in the Fund by
members of qualified groups which could benefit the Fund and its shareholders by
enabling the Fund to achieve certain economies of scale and benefits of size
more rapidly than would otherwise be the case.
12
<PAGE>
As determined by the Distributor, qualified groups include the employees of
a corporation or a sole proprietorship, members, and employees of a partnership
or association (including, without limitation, members of tax-exempt
organizations enumerated under Sections 501(c)(3) and 501(c)(13) of the Internal
Revenue Code of 1986, or other organized groups of persons (the members of which
may include other qualified groups), provided that: (i) the group has at least
25 members, of which at least 10 members participate in the initial purchase;
(ii) the group has been in existence for at least six months; (iii) the group
has some purpose in addition to the purchase of investment company shares at a
reduced sales charge; and (iv) the group's sole organizational nexus or
connection is not that the members are credit card holders of a company, policy
holders of an insurance company, customers of a bank or a broker-dealer, clients
of an investment adviser, or security holders of a company.
Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is carried
on the records of the group or on the records of any constituent member of the
group as being a good standing employee, partner member, or person of like
status of the group or constituent member; or (iii) any fiduciary purchasing
shares for the account of a member of a qualified group or a member's
beneficiary, or participants in a qualified retirement plan, or contributors to
an individual retirement account (IRA). For example, a qualified group could
consist of a trade association which would have as its members individuals, sole
proprietors, partnerships, and corporations. The members of the group would then
consist of the individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, as well as trustees of
employment benefit trusts acquiring Fund shares for the benefit of any of the
foregoing. The Fund reserves the right to revise the terms of, or to suspend or
discontinue, group sales charge discounts at any time.
An investor who purchases shares in amounts of $25,000 or more shall be
charged a reduced sales charge in accordance with the breakpoints set forth in
the Prospectus.
In addition, purchases of shares of the Fund by (i) Trustees, officers, and
full-time employees of the Fund, (ii) directors, officers, and full-time
employees of the Distributor or the Adviser, (iii) selected dealers, (iv)
Trustees, officers, partners, and full-time employees of selected dealers which
are not individuals, and (v) the spouse or child of those individuals included
in (i) and (iv) will not be subject to any sales charge nor will investors who
invest through an account as to which a bank or broker-dealer charges an account
management fee, provided the bank or broker-dealer has a selling agreement with
Distributor, have to pay a sales charge. Any of the persons listed in clauses
(i)-(iv) above and their spouses can also purchase shares for custodial or trust
accounts for their minor children.
LETTERS OF INTENT. Shares of the Fund may be purchased by a "single
purchaser," within a period of 13 months, pursuant to a Letter of Intent in the
form provided by the Transfer Agent. Such Letter of Intent shall state the
investor's intention to invest in such shares during such period in an amount
which, together with the value (at their maximum offering prices on the date of
the Letter of Intent) of the shares of the Fund then owned by such investor,
equals a specified dollar amount ($25,000 or more). Each purchase of shares made
pursuant to a Letter of Intent will be made at the public offering price, as
described in the then current Prospectus relating to such shares, which at the
time of purchase is applicable to a single transaction of the dollar amount
specified in the Letter of Intent. The term "single purchaser" includes an
individual, or an individual, his spouse and their children under the age of 21
purchasing for his
13
<PAGE>
or their own account (including an IRA account) including his or their own
trust, commonly known as living trusts; a trustee or other fiduciary purchasing
for a single trust, estate, or single fiduciary account, although more than one
beneficiary is involved; multiple trusts for the same employer; or trust
companies and bank trust departments placing orders with respect to funds over
which they exercise discretionary investment authority and which are held in a
fiduciary, agency, custodial, or similar capacity, provided all shares are held
of record in the name, or nominee name, of the trust company or bank.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Fund or the Distributor to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete the
investor's investment is held in escrow in the form of shares (valued at the
purchase price thereof) registered in the investor's name until he completes his
investment, at which time escrowed shares are deposited to his account. If the
investor does not complete his investment and does not within 20 days after
written request by the Transfer Agent or his dealer pay the difference between
the sales charge on the dollar amount specified in his Letter of Intent and the
sales charge on the dollar amount of actual purchases, the difference will be
realized through the redemption of an appropriate number of the escrowed shares
and any remaining escrowed shares will be deposited to the investor's account.
COMBINATION PURCHASE PRIVILEGE. Purchases, either singly or in any
combination, of shares of the Fund, if made at a single time by a single
purchaser, will be combined for the purpose of determining whether the total
dollar amount of such purchases entitles the purchaser to a reduced sales charge
on any of such purchases. Each purchase of shares will then be made at the
public offering price, as described in the then current Prospectus relating to
such shares, which at the time of such purchase is applicable to a single
transaction of the total dollar amount of all such purchases. The term "single
purchaser" includes an individual, or an individual, his spouse and their
children under the age of 21, purchasing for his or their own account (including
an IRA account), including his or their own trust, commonly known as living
trusts; a trustee or other fiduciary purchasing for a single trust, estate, or
single fiduciary account, although more than one beneficiary is involved;
multiple trusts for the same employer; or trust companies and bank trust
departments placing orders with respect to funds over which they exercise
discretionary investment authority and which are held in a fiduciary, agency,
custodial, or similar capacity, provided all shares are held of record in the
name, or nominee name, of the trust company or bank.
RIGHTS OF ACCUMULATION. Purchases, either singly or in any combination, of
shares of the Fund, if made at a single time by a "single purchaser" (as defined
above) who already owns shares of the Fund, will be combined for the purpose of
determining whether the dollar amount of such purchases plus the current value
(at their maximum offering price) of shares of the Fund then owned by such
purchaser equals a dollar amount of purchases entitling the purchaser to a
reduced sales charge on any of such purchases, provided that at the time of any
such purchases, the purchaser, either directly or through his broker or dealer,
furnishes the Transfer Agent with sufficient information as to account
registrations and account numbers to permit verification that one or more of his
purchases qualifies for a reduced sales charge.
REDEMPTION OF SHARES. The Prospectus, under "Redemption of Shares"
describes the requirements and methods available for effecting redemption. The
Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange or any other applicable
exchange, is closed (other than a customary weekend
14
<PAGE>
and holiday closing), (b) when trading on the New York Stock Exchange, or any
other applicable exchange, is restricted, or an emergency exists as determined
by the Securities and Exchange Commission ("SEC") or the Fund so that disposal
of the Fund's investments or a fair determination of the net asset value of the
Fund is not reasonably practicable, or (c) for such other periods as the SEC by
order may permit for protection of the Fund's shareholders.
The Fund normally redeems shares for cash. However, the Board of Trustees
can determine that conditions exist making cash payments undesirable. If they
should so determine, redemption payments could be made in securities valued at
the value used in determining net asset value. There may be brokerage and other
costs incurred by the redeeming shareholder in selling such securities.
DETERMINATION OF NET ASSET VALUE. As described in the Prospectus under
"Purchase and Pricing of Shares--Valuation of Shares," the net asset value of
shares of the Fund is determined once daily as of 4:00 p.m. New York time on
each day during which the New York Stock Exchange, or other applicable exchange,
is open for trading. The New York Stock Exchange is scheduled to be closed for
trading on the following days: New Year's Day, Washington's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Board of Trustees of the Exchange reserves the right to
change this schedule. In the event that the New York Stock Exchange or the
national securities exchanges on which small cap equities are traded adopt
different trading hours on either a permanent or temporary basis, the Board of
Trustees of the Fund will reconsider the time at which net asset value is to be
computed.
In determining the value of the assets of the Fund, the securities for which
market quotations are readily available are valued at market value, which is
currently determined using the last reported sale price, or, if no sales are
reported--as is the case with many securities traded over-the-counter--the last
reported bid price. Debt securities (other than short-term obligations, which
are valued on the basis of amortized cost) are normally valued on the basis of
valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices and take
into account appropriate factors such as institution-size trading in similar
groups of securities, yield, quality of issue, trading characteristics, and
other market data. Use of a pricing service has been approved by the Board of
Trustees. All other securities and assets are valued at their fair value as
determined in good faith by the Board of Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board of Trustees.
TAXES
- -------------------------------------------------------------------------------
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986 as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing requirements imposed by the Code, it is not expected
that the Fund will be required to pay any federal income or excise taxes,
although the Fund's foreign-source income may be subject to foreign withholding
taxes. If the Fund should fail to qualify as a
15
<PAGE>
"regulated investment company" in any year, the Fund would incur a regular
corporate federal income tax upon its taxable income and Fund distributions
would generally be taxable as ordinary dividend income to shareholders.
Shareholders normally will have to pay federal income taxes, and any state
or local taxes, on the ordinary dividends and capital gain dividends they
receive from the Fund. Dividends paid out of net investment income and net
short-term capital gains of the Fund will be taxable to shareholders as ordinary
income regardless of whether such distributions are reinvested in additional
shares or paid in cash. If a portion of the Fund's net investment income is
derived from dividends from domestic corporations, a corresponding portion of
the dividends paid out of such income may be eligible for the dividends-received
deduction. Shareholders will be informed as to the portion, if any, of dividends
received by them which will qualify for the dividends-received deduction,
provided that the recipient otherwise qualifies for that deduction with respect
to its holding of Fund shares. Availability of the deduction for particular
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax or result in certain basis adjustments.
Dividends paid out of the net capital gain of the Fund that are designated
as capital gain dividends by the Fund will be taxable to shareholders as
long-term capital gains regardless of how long the shareholders have held their
shares. Such dividends will not be eligible for the dividends-received
deduction.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. Any
investment in certain securities purchased at a market discount will cause the
Fund to recognize income prior to the receipt of cash payments with respect to
those securities. In order to distribute its recognized income and avoid a tax
on the Fund, the Fund may be required to liquidate portfolio securities that it
might otherwise have continued to hold, potentially resulting in additional
taxable gain or loss to the Fund. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses. Use of foreign currencies for non-hedging
purposes may be limited in order to avoid a tax on the Fund. Investment by the
Fund in certain "passive foreign investment companies" may also be limited in
order to avoid a tax on the Fund. Investment income received by the Fund from
foreign securities may be subject to foreign income taxes withheld at the
source; the Fund does not expect to be able to pass through to shareholders
foreign tax credits or deductions with respect to such foreign taxes. The United
States has entered into tax treaties with many foreign
16
<PAGE>
countries that may entitle the Fund to a reduced rate of tax or an exemption
from tax on such income; the Fund intends to qualify for treaty reduced rates
where available. It is not possible, however, to determine the Fund's effective
rate of foreign tax in advance since the amount of the Fund's assets to be
invested within various countries is not known.
Upon a disposition or redemption of shares of the Fund that are held as a
capital asset, the shareholder will generally recognize capital gain or loss
(long-term or short-term, depending upon the shareholder's holding period for
the redeemed shares) measured by the difference between the redemption price and
the basis of the shares. Any loss recognized upon the sale or exchange of shares
of the Fund within six months from the date of their purchase will be treated as
long-term capital loss to the extent of any amounts treated as dividends paid
during such period out of the net long-term capital gain of the Fund. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of shares of the Fund within 90 days after their purchase followed by
any purchase without payment of an additional sales charge (including purchases
by exchange or by reinvestment) of shares of the Fund or Class A shares of
another MFS Fund (or any other shares of an MFS Fund generally sold subject to a
sales charge).
Shortly after the end of each year, the Fund will issue to each person who
was a shareholder at any time in the prior year a statement of the federal
income tax status of all distributions made to such shareholder.
Shareholders who fail to provide correct taxpayer identification numbers or
fail to certify as to no loss of exemption from backup withholding or otherwise
fail to comply with applicable requirements of the law relating to backup
withholding will be subject to backup withholding with respect to dividends and
redemptions at the rate of 31% unless they are corporations or come within other
exempt categories. Any amounts paid as backup withholding will be creditable
against the federal income tax liabilities of the affected shareholders. All
shareholders should consult their own tax advisers with regard to the tax
consequences applicable to their respective investments in the Fund.
The foregoing discussion relates solely to United States federal income tax
laws as applicable to United States persons (that is, citizens and residents of
the United States and domestic corporations, partnerships, trusts, and estates).
Each shareholder who is not a United States person should consult his tax
adviser regarding the United States and non-United States tax consequences of
ownership of shares, including the possibility that distributions by the Fund
may be subject to a United States withholding tax at the rate of 30%.
The Fund will be subject to a nondeductible excise tax for any year equal to
4% of the "required distribution" for the year over the "distributed amount" for
the year. For this purpose, the term "required distribution" means, with respect
to any year, the sum of (a) 98% of the Fund's "ordinary income" (that is, its
taxable income determined by excluding its net capital gain, if any, by
disallowing the dividends-received and net operating loss deductions, and by not
taking into account any capital gain or loss), (b) 98% of its capital gain net
income (that is, the excess of capital gains over capital losses) for the
one-year period ending on December 31 of the year, and (c) the "prior year
shortfall" (that is, the excess, if any, of the "grossed-up required
distribution" for the prior year over the "distributed amount" for such year).
For this purpose, the term "grossed-up required distribution" means, with
respect to any year, the required distribution for the year (determined by
including 100% of the Fund's ordinary income and capital gain net income) and
the term "distributed amount" means, with respect to any year, the
17
<PAGE>
sum of (a) the amount of dividends-paid or deemed paid during the year, (b) any
amount on which the Fund is required to pay corporate tax for the year, and (c)
the excess, if any, of the distributed amount for the prior year over the
required distribution for such year.
The Fund will not be subject to income tax in Delaware for any year in which
it qualifies as a regulated investment company.
CALCULATION OF PERFORMANCE DATA
- -------------------------------------------------------------------------------
Performance information for the Fund may appear in advertisements, sales
literature, or reports to shareholders or prospective shareholders. Performance
information in advertisements and sales literature may be expressed as yield or
total return on the Fund.
Quotations of yield for the Fund will be based on all investment income per
share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the value of the Fund on
the last day of the period, according to the following formula:
<TABLE>
<C> <C> <S>
YIELD = 2[[a-b+1]/6/-1]
---
cd
where a = dividends and interest earned, as calculated in accordance
with the SEC's instructions, during the period by the Fund
b = expenses accrued for the period (net of any reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period
</TABLE>
The average annual total return on the Fund represents an annualization of
the Fund's total return ("T" in the formula below) over a particular period and
is computed by finding the current percentage rate which will result in the
ending redeemable value ("ERV" in the formula below) of a $1,000 payment* ("P"
in the formula below) made at the beginning of a one-, five-, or ten-year
period, or for the period from the date of commencement of the Fund's operation,
if shorter ("n" in the formula below). The following formula will be used to
compute the average annual total return for the Fund:
P (1 + T)/n/ = ERV
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year, or other
types of total return figures.
The manner in which total return will be calculated for public use is
described above. The average annual total return for the Fund for the fiscal
year ended December 31, 1996, and for the period from commencement of operations
on January 3, 1994 to December 31, 1996 was 11.96% and 33.03%, respectively,
including the effect of the sales charge and 15.44% and 35.01%, respectively,
without the effect of the sales charge. The average annual total return for the
Fund would have been lower had an expense limitation not been in effect.
Performance information for the Fund shall reflect only the performance of a
hypothetical investment during the particular time period on which the
calculations are based. Performance
18
<PAGE>
information should be considered in light of the investment objective and
policies, characteristics and quality of the Fund, and the market conditions
during the given time period, and should not be considered as a representation
of what may be achieved in the future.
As summarized in the Prospectus under the heading "Performance and Yield,"
the total return of the Fund may be quoted in advertisements and sales
literature.
* The Fund's Total Return Calculation assumes the maximum sales load is deducted
from the initial $1,000 payment.
From time to time the Fund may, as appropriate, quote Fund rankings or
reprint all or a portion of evaluations of fund performance and operations
appearing in various independent publications, including but not limited to the
following: Money, Fortune, U.S. News and World Report, Kiplinger's Personal
Finance, The Wall Street Journal, Barron's, Investors Business Daily, Newsweek,
Financial World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Saloman Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Advisor, Financial Planning on Wall Street, Standard and Poor's,
Individual Investor, THE 100 BEST MUTUAL FUNDS YOU CAN BUY by Gordon K.
Williamson, Consumer Price Index, and Sanford C. Bernstein & Co. Fund
performance may also be compared to the performance of other mutual funds
tracked by financial or business publications or periodicals. The Fund may also
quote evaluations mentioned in independent radio or television broadcasts and
may use charts and graphs to illustrate the past performance of various indices
such as those mentioned above and illustrations using hypothetical rates of
return to illustrate the effects of compounding and tax-deferral. The Fund may
advertise examples of the effects of periodic investment plans, including the
principle of dollar cost averaging. In such a program, an investor invests a
fixed dollar amount in a fund at periodic intervals, thereby purchasing fewer
shares when prices are high and more shares when prices are low. While such a
strategy does not assure a profit or guard against a loss in a declining market,
the investor's average cost per share can be lower than if fixed numbers of
shares are purchased at the same intervals.
From time to time, the Fund may discuss or quote its current portfolio
manager as well as other investment personnel, including such persons' views on:
the economy; securities markets; portfolio securities and their issuers;
investment philosophies, strategies, techniques and criteria used in the
selection of securities to be purchased or sold for the Fund; the Fund's
portfolio holdings; the investment research and analysis process; the
formulation and evaluation of investment recommendations; and the assessment and
evaluation of credit, interest rate, market and economic risks and similar or
related matters.
From time to time the Fund may also discuss or quote the views of its
distributor, its investment adviser and other financial planning, legal, tax,
accounting, insurance, estate planning and other professionals, or from surveys,
regarding individual and family financial planning. Such views may include
information regarding: retirement planning; tax management strategies; estate
planning; general investment techniques (E.G., asset allocation and disciplined
saving and investing); business succession; ideas and information provided
through the MFS Heritage Planning-SM- program, an inter-generational financial
planning assistance program; issues with respect to insurance (E.G., disability
and life insurance and Medicare supplemental insurance); issues
19
<PAGE>
regarding financial and health care management for elderly family members; and
other similar or related matters.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established as the first
open-end mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make
full public disclosure of its operations in shareholder reports.
-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to
register under the Securities Act of 1933 ("Truth in Securities Act" or
"Full Disclosure Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional
shares or cash.
-- 1976 -- MFS-Registered Trademark- Municipal Bond Fund is among the first
municipal bond funds established.
-- 1979 -- Spectrum becomes the first combination fixed/variable annuity
with no initial sales charge.
-- 1981 -- MFS-Registered Trademark- World Governments Fund is established
as America's first globally fixed-income mutual fund.
-- 1984 -- MFS-Registered Trademark- Municipal High Income Fund is the first
open-end mutual fund to seek high tax-free income from lower-rated
municipal securities.
-- 1986 -- MFS-Registered Trademark- Managed Sectors Fund becomes the first
mutual fund to target and shift investments among industry sectors for
shareholders.
-- 1986 -- MFS-Registered Trademark- Municipal Income Trust is the first
closed-end, high-yield municipal bond fund traded on the New York Stock
Exchange.
-- 1987 -- MFS-Registered Trademark- Multimarket Income Trust is the first
closed-end, multimarket high income fund listed on the New York Stock
Exchange.
-- 1989 -- MFS-Registered Trademark- Regatta becomes America's first
non-qualified market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS-Registered Trademark- World Total Return Fund is the first
global balanced fund.
-- 1993 -- MFS-Registered Trademark- World Growth Fund is the first global
emerging markets fund to offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes money manager of MFS-Registered Trademark- Union
Standard Trust, the first Trust to invest in companies deemed to be
union-friendly by an Advisory Board of senior labor officials, senior
managers of companies with significant labor contracts, academics and
other national labor leaders or experts.
20
<PAGE>
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Deloitte & Touche LLP are the Fund's independent auditors, providing audit
services and assistance and consulation with respect to the preparation of
filings with the SEC.
The Portfolio of Investments at December 31, 1996, the Statement of Assets
and Liabilities at December 31, 1996, the Statement of Operations for the year
ended December 31, 1996, the Statement of Changes in Net Assets for each of the
two years in the period ended December 31, 1996, the Notes to Financial
Statements and the Independent Auditors' Report, each of which is included in
the Annual Report to shareholders of the Fund, are incorporated by reference
into this SAI and have been so incorporated in reliance upon the report of
Deloitte & Touche LLP, independent auditors, given upon their authority as
experts in accounting and auditing. A copy of the Annual Report accompanies this
SAI.
21
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Fund will invest only in commercial paper which, at the date of
investment, is rated A-1 by Standard & Poor's Corporation ("S&P") or P-1 by
Moody's Investors Services, Inc. ("Moody's"), or, if not rated, is issued or
guaranteed by companies which at the date of investment have an outstanding debt
issue rated AA or higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationship which exists with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
22
<PAGE>
ANNUAL REPORT, December 31,1996
NAVELLIER SERIES FUND
1 East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
- --------------------------------------------------------------------------------
February 1997
Dear Shareholder:
For the year 1996, the Navellier Aggressive Small Cap Equity Portfolio ("the
Fund") returned the 15.44% (11.98% after the maximum load). This compares
favorably to 14.76% for the Russell 2000*, 14.51% for the Lipper Small
Company Index** and not so favorably to the Nasdaq Composite*** which
returned 22.71% over the same period. The Fund's annualized return since
public offering (April 1,1994) is 26.21% (24.81% after the maximum load). The
annualized returns for the Russell 2000 and the Nasdaq Composite over the
same period were 14.30% and 22.22%, respectively. During the first six months
of 1996, the Navellier Aggressive Small Cap Equity Portfolio gained 27.64%
(23.79% after the maximum load), compared to a 12.63% gain for the Nasdaq
Composite and a 9.70% gain for the Russell 2000. During the second half of
1996 the Fund lost 9.56% (12.27% after the maximum load), compared to a 8.95%
positive return for the Nasdaq Composite and a 4.61% positive return for the
Russell 2000.
Navellier Aggressive Small Cap Equity Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHICS
<TABLE>
<CAPTION>
NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
<S> <C> <C> <C>
DATE Small Cap Portfolio NASDAQ Composite Russell 2000
3/31/1994 $10,000 $10,000 $10,000
4/30/1994 $9,889 $9,871 $10,059
5/31/1994 $9,667 $9,889 $9,929
6/30/1994 $9,213 $9,496 $9,571
7/31/1994 $9,384 $9,714 $9,721
8/31/1994 $9,768 $10,298 $10,249
9/30/1994 $10,030 $10,280 $10,202
10/31/1994 $10,494 $10,458 $10,158
11/30/1994 $10,555 $10,092 $9,729
12/31/1994 $10,616 $10,114 $9,972
1/31/1995 $10,484 $10,158 $9,832
2/28/1995 $10,989 $10,676 $10,219
3/31/1995 $11,372 $10,992 $10,387
4/30/1995 $11,726 $11,352 $10,602
</TABLE>
The above chart indicates the return of $10,000 invested in the Navellier
Aggressive Small Cap Equity Portfolio on April 1, 1994. As the chart shows
December 31, 1996, the value of the investment would have grown to $18,393, a
83.93% increase. For comparison purposes, look at how the NASDAQ Composite
and the Russell 2000 performed over the same period. An investment of $10,000
in the NASDAQ Composite in the same period would have grown to $17,365, a
73.65% increase. Similarly an investment of $10,000 in the Russell 2000 over
the same period would have grown to $14,443, a 44.43% increase.
The above charts and performance numbers assume reinvestment of all
distributions.
Please be aware that past performance is no indication of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
<PAGE>
The Fund generally lagged behind the overall stock market during the last six
months of 1996 since primarily large capitalization stocks performed well
during the second half of 1996. One of the startling statistics for 1996 was
highlighted in an article in the January 13, 1997 issue of Fortune, which
stated that the Nasdaq Composite, excluding the 100 largest stocks, was
actually up less than 3% in 1996. In other words, 1996 was predominantly a
large capitalization stock market rally, especially in the second half of the
year. Virtually none of the largest 100 Nasdaq stocks were in the Navellier
Aggressive Small Cap Equity Portfolio. Considering that the Nasdaq Composite
was up less than 3% in 1996 when the 100 largest stocks are excluded, we are
quite satisfied that the Fund had positive results in 1996.
The historical valuation of the stocks in the Navellier Aggressive Small Cap
Equity Portfolio remain very cheap relative to the Dow Industrials and S&P
500. Wave after wave of money flowing into index funds has benefited the S&P
500 and moved it into the high range of its historical price/earnings ratio.
At over 21 times current earnings, the S&P 500 is very expensive, especially
since the most optimistic analysts call for only 14% to 15% earnings growth
in fiscal 1997. The median P/E for stocks in the Navellier Aggressive Small
Cap Equity Portfolio is 17.5 and they literally have much more earnings
growth that the S&P 500. Looking forward, the average stock in the Fund
should continue to have far greater earnings growth than the S&P 500 despite
similar price/earnings ratios. When the current mania fueling index funds
settles down and Wall Street starts rotating into stocks that represent
outstanding fundamental values, my favorite stocks in the Fund should benefit
tremendously. In my opinion, we are now on the verge of a "stock picking"
environment, where predominantly stocks with outstanding fundamental
characteristics, such as those in the Navellier Aggressive Small Cap Equity
Portfolio, will benefit.
On the large scale, economists are having a hard time predicting growth
because increasing productivity is hard to account for in their economic
models. Most economists are predicting 2% to 3% economic growth in 1997,
which would be a slowdown from the more than 4% growth experienced in the
second half of 1996. However, these economists are not factoring in
continuing productivity gains that have bolstered the U.S. economy, resulting
in exceptionally high growth without inflation. The implicit price deflator
is an inflation indicator without volatile food and energy prices. It is most
reliable indicator of inflation and is now at its lowest point in decades.
The recent 0.3% drop in wholesale prices in January is further evidence that
inflation is now deader than dead. The bond market has celebrated this
positive inflation news and as of this writing, Treasury Bond yields are near
the 6.5% level. The low inflation and low interest rate environment sets a
very positive tone for the stock market for the next several months.
Long-term, the Navellier Aggressive Small Cap Equity Portfolio continues to
perform quite well relative to other small capitalization growth funds. We
are eagerly awaiting our three year Lipper and Morningstar Ratings and are
confident that we will receive an outstanding long-term rating. To ensure our
high performance standard, the Fund was closed to new investors on April 16,
1996. Existing shareholders and fee-based financial advisors can continue to
purchase additional shares in the Fund. Existing shareholders will be
receiving a proxy to convert the Navellier Aggressive Small Cap Equity
Portfolio to a pure no-load fund. This conversion will allow us to cut
management fees and save operating expenses. After conversion, existing
shareholders will be able to purchase new shares with no load charged. We
would appreciate it if you could mail back your proxy votes as soon as
possible.
2
<PAGE>
I want to personally thank all shareholders in the Navellier Aggressive Small
Cap Equity Portfolio for selecting us to manage some of your assets. We feel
very obligated to our shareholders and have already closed the Fund to ensure
our high performance standard. Always feel free to contact us if you have any
questions or we can help you in any way.
Sincerely,
/s/ Louis G. Navellier
LOUIS G. NAVELLIER
This material has been preceded by a Navellier Aggressive Small Cap Equity
Portfolio prospectus.
* The Russell 2000 index is an unmanaged index consisting of the smallest
2000 stocks in the Russell 3000 Index. It is considered representative of
the small cap market in general. It is not an investment product available
for purchase.
** The Lipper Small Company Index is an unmanaged net asset value weighted
index of 30 mutual funds that invest primarily in companies with small
market capitalizations.
*** The Nasdaq Composite is an unmanaged index consisting of approximately
5,500 stocks. It is considered representative of the stock market as a
whole. It is not an investment product available for purchase.
3
<PAGE>
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
Market Value
Shares (Note 1)
- ------------------------------------------------------------------
COMMON STOCKS
Aerospace and Defense -- 0.66%
40,000 Oregon Metallurgical Corp.* $ 1,290,000
------------
Airlines -- 1.33%
174,200 Mesaba Holdings, Inc.* 2,591,225
------------
Aluminum/Metals -- 1.62%
50,000 RMI Titanium Co.* 1,406,250
50,100 Reliance Steel and
Aluminum Co. 1,753,500
------------
3,159,750
------------
Banks - 1.68%
40,000 Andover Bancorp, Inc. 1,025,000
50,000 City National Corp. 1,081,250
40,000 RCSB Financial, Inc. 1,160,000
------------
3,266,250
------------
Basic Materials -- 0.76%
40,000 Lone Star Industries, Inc. 1,475,000
------------
Computer Hardware -- 4.92%
50,000 Centennial Technologies,
Inc.* 2,600,000
35,000 ENCAD, Inc.* 1,443,750
200,000 Iomega Corp.* 3,475,000
75,000 Tech Data Corp.* 2,053,125
------------
9,571,875
------------
Computer Software -- 8.14%
35,500 Acceler8 Tech Corp.* 694,469
140,000 Brooktrout Technology, Inc.* 3,920,000
50,000 Legato Systems, Inc.* 1,631,250
101,000 Rational Software Corp.* 3,995,813
47,000 Remedy Corp.* 2,526,250
65,000 Viasoft, Inc.* 3,071,250
------------
15,839,032
------------
Diversified Technology -- 5.24%
60,000 Dyantech Corp.* 2,655,000
70,000 Engineered Support
Systems, Inc. 1,032,500
42,000 Lindsay Manufacturing Co. 1,963,500
125,200 Zoltek Companies, Inc.* 4,554,150
------------
10,205,150
------------
Education -- 3.42%
159,525 Apollo Group, Inc.* 5,334,117
100,000 Childrens Comprehensive
Services* 1,312,500
------------
6,646,617
------------
Electronics -- 1.73%
37,800 Kuhlman Corp. 732,375
248,000 Zytec* 2,635,000
------------
3,367,375
------------
Energy -- 0.55%
40,000 Holly Corp. 1,070,000
------------
Food -- 1.74%
70,000 Fresh America Corp.* 1,155,000
70,000 Riser Foods, Inc. 2,222,500
------------
3,377,500
------------
Healthcare -- 0.76%
50,000 SONUS Pharmaceuticals,
Inc.* 1,487,500
------------
Heavy Machinery/Construction -- 1.07%
60,800 Gardner Denver Machinery* 2,082,400
------------
Home Furnishings -- 1.45%
30,000 Ethan Allen Interiors, Inc. 1,155,000
58,900 Stanley Furniture Company,
Inc. * 1,170,637
50,000 Winsloew Furniture, Inc.* 487,500
------------
2,813,137
------------
Home Construction -- 0.58%
40,000 Palm Harbor Homes, Inc.* 1,120,000
------------
Insurance -- 0.63%
20,000 Orion Capital Corp. 1,222,500
------------
Industrial and Commercial
Services -- 3.61%
44,200 Amerco, Inc.* 1,547,000
40,000 DT Industries, Inc. 1,400,000
75,000 Mail Well, Inc.* 1,228,125
122,000 Shaw Group, Inc.* 2,851,750
------------
7,026,875
------------
* Non-income producing.
See Notes to Financial Statements.
4
<PAGE>
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
- ------------------------------------------------------------------
Market Value
Shares (Note 1)
- -------------------------------------------------------------------
Manufactured Housing -- 1.46%
100,000 Coachmen Industries, Inc. $ 2,837,500
------------
Natural Gas -- 1.16%
100,000 NUI Corp. 2,262,500
------------
Nonclassifiable Establishment -- 1.17%
65,000 Oppenheimer Capital LP 2,275,000
------------
Oil -- 4.10%
84,400 Cliffs Drilling Co.* 5,338,300
100,000 Comstock Resources, Inc.* 1,300,000
45,200 Swift Energy Co.* 1,350,350
------------
7,988,650
------------
Oil & Gas Exploration -- 7.64%
50,000 American Oilfield Divers,
Inc.* 593,750
20,000 Cooper Cameron Corp.* 1,530,000
30,000 Flores & Rucks, Inc.* 1,597,500
135,000 Marine Drilling Companies,
Inc.* 2,657,812
100,000 Plains Resources, Inc.* 1,562,500
110,000 Seacor Holdings, Inc.* 6,930,000
------------
14,871,562
------------
Pharmaceuticals -- 7.23%
50,400 Cardinal Health, Inc. 2,935,800
100,000 Herbalife International, Inc. 3,262,500
124,875 Jones Medical Industries, Inc. 4,573,547
75,000 Medicis Pharmaceutical
Corp.* 3,300,000
------------
14,071,847
------------
Real Estate -- 0.86%
68,000 Fairfield Communities, Inc.* 1,683,000
------------
Retailers -- 13.24%
100,000 American Eagle Outfitters,
Inc.* 787,500
292,500 Claires Stores, Inc. 3,802,500
140,000 Eagle Hardware and Garden,
Inc.* 2,905,000
100,000 Equity Marketing, Inc.* 1,850,000
100,000 Finish Line, Inc.* 2,112,500
100,000 Funco, Inc.* 837,500
60,000 Pacific Sunwear of California* 1,545,000
164,500 Paul Harris Stores, Inc.* 2,919,875
93,000 Ross Stores, Inc. 4,650,000
104,000 Wet Seal, Inc.* 2,223,000
100,000 Tuesday Morning Corp.* 2,137,500
------------
25,770,375
------------
Savings and Loans -- 3.37%
312,000 Imperial Credit Industries,
Inc.* 6,552,000
------------
Semiconductors and Related -- 1.56%
100,000 Chips and Technologies, Inc.* 1,825,000
25,000 Radisys Corp.* 1,218,750
------------
3,043,750
------------
Steel -- 1.12%
85,900 Olympic Steel, Inc.* 2,179,713
------------
Technical Services -- 0.52%
27,400 SBS Technologies, Inc.* 1,013,800
------------
Telecommunications -- 4.20%
120,600 ATC Communications, Inc.* 1,597,950
216,000 Pairgain Technologies, Inc.* 6,574,500
------------
8,172,450
------------
Temporary Staffing - 4.56%
152,500 AccuStaff, Inc.* 3,221,562
276,000 Employee Solutions, Inc. 5,658,000
------------
8,879,562
------------
Vehicle Parts and Equipment - 0.57%
44,500 Arvin Industries, Inc. 1,101,375
------------
Vitamins/Health Foods -- 1.40%
100,000 Rexall Sundown, Inc.* 2,718,750
------------
Total Common Stocks -- 94.05%
(Cost $146,155,936) 183,034,020
------------
* Non-income producing.
See Notes to Financial Statements.
5
<PAGE>
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
- ------------------------------------------------------------------
Market Value
Shares (Note 1)
- ------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.95%
With PaineWebber at 6.00%, dated
12/31/96, due 1/2/97, collateralized by
U.S. Treasury Bills, due 5/1/97 (Cost
$11,578,000) 11,578,000
------------
Total Investments -- 100.00%
(Cost $157,733,936) $194,612,020
============
See Notes to Financial Statements.
6
<PAGE>
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
Assets
Securities at Value (Note 1, see portfolio for cost
information) .............................................. $194,612,020
Cash in Custodian Bank ...................................... 18,324
Receivable for Securities Sold .............................. 748,475
Receivable for Shares Sold .................................. 157,806
Dividends Receivable ........................................ 26,370
Interest Receivable ......................................... 1,930
Unamortized Organizational Costs (Note 1) ................... 18,118
-----------
Total Assets .............................................. 195,583,043
-----------
Liabilities
Payable for Securities Purchased ............................ 4,444,194
Payable for Shares Redeemed ................................. 738,267
Investment Advisory Fee Payable (Note 2) .................... 204,806
Other Payables and Accrued Expenses ......................... 82,115
Administrative Fee Payable (Note 2) ......................... 40,961
Commissions Payable ......................................... 20,069
Organizational Expenses Payable to Adviser (Note 1) ......... 18,118
-----------
Total Liabilities ......................................... 5,548,530
-----------
Net Assets .................................................... $190,034,513
============
Shares Outstanding ............................................ 10,683,004
============
Net Asset Value Per Share ..................................... $17.79
======
Maximum Offering Price Per Share (100/97.00 of $17.79) ........ $18.34
======
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
7
<PAGE>
For the Year Ended
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Investment Income
Interest (Note 1) ........................................... $ 603,796
Dividends (Note 1) .......................................... 171,544
------------
Total Investment Income .................................. 775,340
------------
Expenses
Investment Advisory Fee (Note 2) ............................ 2,323,690
Administrative Fee (Note 2) ................................. 464,738
Transfer Agent and Custodian Fee (Note 3) ................... 330,390
Registration Fees ........................................... 108,309
Shareholder Reports and Notices ............................. 62,983
Legal Fees .................................................. 60,915
Trustees' Fees and Expenses (Note 2) ........................ 51,381
Audit Fees .................................................. 19,600
Organizational Expense (Note 1) ............................. 8,053
Other Expenses .............................................. 18,743
------------
Total Expenses ........................................... 3,448,802
Less Expenses Reimbursed by Investment Adviser (Note 2) .. (195,636)
------------
Net Expenses ........................................... 3,253,166
------------
Net Investment Loss ............................................ (2,477,826)
------------
Net Realized Gain on Investment Transactions ................... 463,797
Net Change in Unrealized Appreciation of Investments ........... 18,466,247
------------
Net Gain on Investments ........................................ 18,930,044
------------
Net Increase in Net Assets Resulting from Operations ........... $ 16,452,218
============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8
<PAGE>
Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
For the Year Ended
December 31,
-----------------------------
1996 1995
------------- -------------
<S> <C> <C>
From Investment Activities
Net Investment Loss ........................................... $ (2,477,826) $ (610,524)
Net Realized Gain on Investment Transactions .................. 463,797 1,524,157
Net Change in Unrealized Appreciation of Investments .......... 18,466,247 15,989,475
------------- -------------
Net Increase in Net Assets Resulting from Operations ....... 16,452,218 16,903,108
------------- -------------
Distributions to Shareholders
From Net Investment Income .................................... -- --
From Net Realized Capital Gains ............................... -- (2,499,314)
------------- -------------
Total Distributions to Shareholders ........................ -- (2,499,314)
------------- -------------
From Share Transactions
Net Proceeds from Sales of Shares ............................. 286,125,562 130,265,618
Reinvestment of Distributions ................................. -- 2,355,336
Cost of Shares Redeemed ....................................... (217,842,421) (59,949,289)
------------- -------------
Net Increase in Net Assets Resulting from
Share Transactions ........................................ 68,283,141 72,671,665
------------- -------------
Total Increase in Net Assets ............................... 84,735,359 87,075,459
Net Assets -- Beginning of Year .................................. 105,299,154 18,223,695
------------- -------------
Net Assets -- End of Year ........................................ $ 190,034,513 $ 105,299,154
============= =============
Shares
Sold .......................................................... 16,325,181 9,128,613
Issued in Reinvestment of Distributions ....................... -- 152,845
Redeemed ...................................................... (12,473,362) (4,110,315)
------------- -------------
Net Increase in Shares ..................................... 3,851,819 5,171,143
============= =============
</TABLE>
See Notes to Financial Statements.
- -
- --------------------------------------------------------------------------------
9
<PAGE>
Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For The Year Ended For The
December 31, Period Ended
---------------------- December 31,
1996 1995 1994*
--------- --------- ---------
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value - Beginning of Year ............. $ 15.41 $ 10.98 $ 10.00
--------- --------- ---------
Income from Investment Operations:
Net Investment Loss ........................... (0.23) (0.16) (0.08)
Net Realized and Unrealized Gains on Securities 2.61 4.97 0.98
--------- --------- ---------
Total from Investment Operations ............ 2.38 4.81 0.98
--------- --------- ---------
Distributions to Shareholders:
From Net Investment Income .................... -- -- --
From Net Realized Capital Gains ............... -- (0.38) --
--------- --------- ---------
Total Distributions to Shareholders ......... -- (0.38) --
--------- --------- ---------
Net Increase in Net Asset Value ................. 2.38 4.43 0.98
--------- --------- ---------
Net Asset Value - End of Year ................... $ 17.79 $ 15.41 $ 10.98
========= ========= =========
Total Investment Return(A) ...................... 15.44% 43.80% 9.80%
Ratios to Average Net Assets:
Expenses After Reimbursement (Note 2) ........... 1.75% 1.75% 1.68%(B)
Expenses Before Reimbursement (Note 2) .......... 1.86% 2.10% 4.52%(B)
Net Investment Loss ............................. (1.33)% (1.15)% (0.81)%(B)
Supplementary Data:
Portfolio Turnover Rate ......................... 136.9% 169.6% 139.9%
Net Assets at End of Year (000's omitted) ....... $ 190,035 $ 105,299 $ 18,224
Number of Shares Outstanding at
End of Year (000's omitted) ................... 10,683 6,831 1,660
Average Commission Rate Paid(C) ................. $0.0424
</TABLE>
- - ----------
(A) Total returns do not include the maximum sales load. Total returns for
periods of less than one year are not annualized.
(B) Annualized.
(C) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.
*From Commencement of Operations January 3, 1994.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Navellier Series Fund (the "Fund") is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a diversified,
open-end investment company. The Fund consists of one portfolio, Navellier
Aggressive Small Cap Equity Portfolio (the "Portfolio"). Shares of the Fund are
purchased at the public offering price which includes a maximum sales charge of
up to 3.00% depending on the size of the purchase. The Fund is authorized to
issue an unlimited number of shares of capital stock with no stated par value.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain estimates
and assumptions at the date of the financial statements. The following is a
summary of significant accounting policies which the Fund follows:
(a) Listed securities are valued at the last sales price of the New
York Stock Exchange and other major exchanges. Over-the-Counter securities
are valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Portfolio's securities in
good faith. The Board of Trustees will periodically review this method of
valuation and recommend changes which may be necessary to assure that the
Portfolio's instruments are valued at fair value.
(b) Security transactions are recorded on the trade date (the date
the order to buy or sell is executed). Interest income is accrued on a
daily basis. Dividend income is recorded on the ex-dividend date. Realized
gains and losses from securities transactions are computed on an identified
cost basis.
(c) Dividends from net investment income are declared and paid
annually. Dividends are reinvested in additional shares unless shareholders
request payment in cash. Net capital gains, if any, are distributed
annually.
(d) The Fund complies with the provisions of the Internal Revenue Code
applicable to regulated investment companies and distributes all net
investment income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Organizational expenses of the Fund totaling $143,294 are being
deferred and amortized over 60 months beginning with the public offering of
shares. Any redemption by an initial investor during the amortization
period will be reduced by a prorata portion of any of the unamortized
organization expenses. Such proration is calculated by dividing the number
of initial shares redeemed by the number of initial shares outstanding at
the date of redemption. At December 31,1996, unamortized organization costs
were $18,118.
2. Investment Advisory Fees and Other Transactions with Affiliates
Investment advisory services are provided by Navellier Management, Inc.,
(the "Adviser"). Under an agreement with the Adviser, the Fund pays a fee at the
annual rate of 1.25% of the daily net assets for the Navellier Aggressive Small
Cap Equity Portfolio. The Adviser also receives a 0.25% annual fee in connection
with the rendering of services under the administrative services agreement and
is reimbursed by the Fund for operating expenses incurred on behalf of the Fund.
An officer and trustee of the Fund is also an officer and director of the
Adviser.
Under an agreement between the Fund and the Adviser related to payment of
operating expenses, the Adviser has reserved the right to seek reimbursement for
the past, present and future operating expenses of the Fund paid by the Adviser,
at any time upon notice to the Fund. At December 31, 1995, the Adviser
voluntarily agreed not to seek future reimbursement of all unreimbursed past
expenses incurred on behalf of the Fund. During the year ended December 31,
1996, the Adviser paid operating expenses of the Fund totaling $660,374. Under
the operating expense agreement, the Adviser requested, and the Fund reimbursed,
$464,738 of such expenses. The Adviser voluntarily agreed not to seek future
reimbursement of $195,636 of such 1996 expenses. Accordingly, at December
31,1996, there were no prior expenses which could be reimbursed in the future
under the agreement.
11
<PAGE>
December 31, 1996 Navellier Aggressive Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
Navellier Securities Corp. (the "Distributor") acts as the Fund's
Distributor and is registered as a broker-dealer under the Securities and
Exchange Act of 1934. The Distributor, which is the principal underwriter of the
Funds shares, renders its services to the Fund pursuant to a distribution
agreement. An officer and trustee of the Fund is also an officer and director of
the Distributor.
For the Year ended December 31, 1996, the Fund was advised that the
Distributor received $924,050 from sales loads earned on sales of the Fund's
capital stock.
The Fund pays each of its Trustees not affiliated with the Adviser a fee of
$10,000 annually plus specific amounts for attended board and committee
meetings. When the Fund exceeds $200,000,000 in total net assets, then the
Trustees' fee is raised to $20,000 annually. For the year ended December 31,1996
Trustees' fees and expenses totaled $51,381.
3. TRANSFER AGENT AND CUSTODIAN
Rushmore Trust and Savings, FSB, (Rushmore Trust"), provides transfer
agency, dividend disbursing and other shareholder services to the Fund. In
addition, Rushmore Trust serves as custodian of the Fund's assets. Fees paid to
Rushmore Trust are based upon a fee schedule approved by the Board of Trustees.
4. SECURITIES TRANSACTIONS
For the year ended December 31,1996, purchases of securities were
$302,971,553 and sales of securities were $ 236,741,968. These totals exclude
short-term securities.
5. NET UNREALIZED APPRECIATION/DEPRECIATION OF INVESTMENTS
As of December 31, 1996, net appreciation of investments for Federal income
tax purposes was $36,878,084 of which $44,036,260 related to appreciated
investments and $7,158,176 related to depreciated investments. At December 31,
1996, the cost of the Fund's securities for Federal income tax purposes was
$157,733,936.
6. NET ASSETS
At December 31, 1996, net assets consisted of the following:
Paid-in-Capital ...................................... $ 155,066,631
Undistributed Net Investment Income .................. --
Accumulated Net Realized Loss on Investments ......... (1,910,202)
Net Unrealized Appreciation on Investments ........... 36,878,084
-------------
NET ASSETS ........................................... $ 190,034,513
=============
7. FEDERAL INCOME TAX
No provision is made for federal income taxes as it is the Fund's intention to
continue to qualify as a regulated investment company and to make requisite
distributions to the shareholders which will be sufficient to relieve it from
all or substantially all Federal income and excise taxes.
Permanent differences between tax and financial reporting of net investment
income and realized gains/(losses) are reclassified to paid-in-capital. As of
December 31, 1996, net investment losses of $2,477,826 were reclassified to
paid-in-capital.
At December 31, 1996, for Federal income tax purposes, the Fund had capital loss
carryovers which may be applied against future net taxable realized gains of
each succeeding year until the earlier of its utilization or its expiration as
follows:
Expires December 31,
2004 ................................................... $ 1,910,202
=============
12
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
of the Navellier Series Fund:
We have audited the Statement of assets and liabilities of the Navellier
Aggressive Small Cap Equity Portfolio of the Navellier Series Fund (the Fund) as
of December 31, 1996, the related statement of operations for the year then
ended and of changes in net assets for the years ended December 31, 1996 and
1995, and the financial highlights for each of the two years in the period ended
December 31, 1996 and the period ended December 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Navellier Small
Cap Equity Portfolio of the Navellier Series Fund at December 31, 1996, the
results of its operations, the changes in its net assets, and the financial
highlights for the presented periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Washington, DC
January 31, 1997
13
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
[Artwork Omitted]
NAVELLIER
Series Fund
ANNUAL REPORT
December 31, 1996
Navellier Offices:
One East Liberty Third Floor
Reno, Nevada 89501
800-887-8671 P.S.T.
Custodian & Transfer Agent:
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
800-622-1386 E.S.T.
<PAGE>
ANNUAL REPORT, December 31, 1996
NAVELLIER PERFORMANCE FUNDS
1 East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
- --------------------------------------------------------------------------------
February 1997
Dear Shareholder:
For the year 1996, the Navellier Aggressive Growth Portfolio ("the Fund")
returned 22.62%. This compares favorably to 14.76% for the Russell 2000*, 17.48%
for the Lipper Growth Funds Index** and the Nasdaq Composite*** which returned
22.71% over the same period. During the first six months of 1996, the Navellier
Aggressive Growth Portfolio gained 30.63%, compared to a 12.63% gain for the
Nasdaq Composite and a 9.70% gain for the Russell 2000. During the second half
of 1996 the Fund lost 6.13%, compared to a positive 8.95% return for the Nasdaq
Composite and a positive 4.61% return for the Russell 2000.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NAVELLIER AGGRESSIVE GROWTH PORTFOLIO
<S> <C> <C> <C>
DATE Aggressive Growth Portfolio NASDAQ Composite Russell 2000
12/31/95 $10,000 $10,000 $10000
1/31/96 $9,540 $10,073 $9981
2/29/96 $10,600 $10,455 $10284
3/31/96 $11,330 $10,468 $10468
4/30/96 $12,900 $11,315 $11023
5/31/96 $14,040 $11,818 $11452
6/30/96 $13,050 $11,263 $10970
7/31/96 $11,190 $10,270 $10001
8/31/96 $11,850 $10,849 $10567
9/30/96 $12,760 $11,661 $10963
10/31/96 $12,540 $11,610 $10779
11/30/96 $12,220 $12,286 $11207
12/31/96 $12,160 $12,271 $11476
</TABLE>
The above chart indicates the return of $10,000 invested in the NAVELLIER
AGGRESSIVE GROWTH PORTFOLIO on December 29, 1995. As the chart shows by December
31, 1996, the value of the investment would have grown to $12,262, a 22.62%
increase. For comparison purposes, look at how the NASDAQ Composite and the
Russell 2000 performed over the same period. An investment of $10,000 in the
NASDAQ Composite over the same period would have grown to $12,271, a 22.71%
increase. Similarly, an investment of $10,000 in the Russell 2000 over the same
period would have grown to $11,476, a 14.76% increase.
The above charts and performance numbers assume reinvestment of all
distributions.
Please be aware that past performance is no indication of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
<PAGE>
The Fund generally lagged behind the overall stock market during the last six
months of 1996 since primarily large capitalization stocks performed well during
the second half of the year. Although the Fund can buy large cap stocks, growth
stocks are generally found in the small cap arena. One of the startling
statistics for 1996 was highlighted in an article in the January 13, 1997 issue
of Fortune, which stated that the Nasdaq Composite, excluding the 100 largest
stocks, was actually up less than 3% in 1996. In other words, 1996 was
predominantly a large capitalization stock market rally, especially in the
second half of 1996. Virtually none of the largest 100 Nasdaq stocks were in the
Navellier Aggressive Growth Portfolio. Considering that the Nasdaq Composite was
up less than 3% in 1996 when the 100 largest stocks are excluded, we are quite
satisfied that the Fund had strong results in 1996.
The historical valuations of the stocks in the Navellier Aggressive Growth
Portfolio remain reasonable relative to the Dow Industrials and S&P 500. Wave
after wave of money flowing into index funds has benefited the S&P 500 and moved
it into the high range of its historical price/earnings ratio. At over 21 times
current earnings, the S&P 500 is very expensive, especially since the most
optimistic analysts call for only 14% to 15% earnings growth in fiscal 1997. The
average stock in the Navellier Aggressive Growth Portfolio continues to trade at
approximately 30 times earnings, but literally has over 15 times the historical
earnings growth of the S&P 500. Looking forward, the average stock in the Fund
should continue to have far greater earnings growth than the S&P 500. When the
current mania fueling index funds settles down and Wall Street starts rotating
into stocks that represent outstanding fundamental values, my favorite stocks in
the Fund should benefit tremendously. In my opinion, we are now on the verge of
a "stock picking" environment, where predominantly stocks with outstanding
fundamental characteristics, such as those in the Navellier Aggressive Growth
Portfolio, will benefit.
We were proud to introduce the Navellier Mid Cap Growth Portfolio ("the
Portfolio") on November 27, 1996. The Portfolio returned 2.75% for the month of
December. This compares favorably to 2.40% for the Russell 2000*, a negative
1.89% for the Lipper Growth Funds Index** and a negative 0.12% for the Nasdaq
Composite*** over the same short period. We want to emphasize that although we
hope to have excellent returns for this Portfolio, such a short reporting period
says very little for future expectations for any investment.
The fundamentals for the stocks in the Navellier Mid Cap Growth Portfolio remain
very strong. The average stock in the Portfolio continues to trade at
approximately 22 times earnings, but has far more powerful earnings growth
potential than that of the S&P 500. We use the same techniques for the Navellier
Mid Cap Growth Portfolio as we have used for the highly successful Navellier
Aggressive Small Cap Equity Portfolio. The main difference between the two funds
is that we only purchase stocks with a market cap of between $1 and $5 billion
for the Navellier Mid Cap Growth Portfolio. The average cap size for the
companies we are buying for the Navellier Mid Cap Growth Portfolio is
approximately $2.2 billion. This makes the Portfolio an excellent opportunity
for our investors to diversify into a larger cap sector of the market.
On the large scale, economists are having a hard time predicting economic growth
because increasing productivity is hard to account for in their economic models.
Most economists are predicting 2% to 3% economic growth in 1997, which would be
a slowdown from the more than 4% growth experienced in the second half of 1996.
However, these economists are not factoring in continuing productivity gains
that have bolstered the U.S. economy, resulting in exceptionally high growth
without inflation. The implicit price deflator is an inflation indicator without
volatile food and energy prices. It is the most reliable indicator of inflation
and is now at its lowest point in decades. The recent 0.3% drop in wholesale
prices in
2
<PAGE>
January is further evidence that inflation is now deader than dead. The bond
market has celebrated this positive inflation news and as of this writing,
Treasury Bond yields are near the 6.5% level. The low inflation and low interest
rate environment sets a very positive tone for the stock market for the next
several months.
In 1996, the Navellier Aggressive Growth Portfolio performed quite well relative
to other growth funds. In fact, the Fund was our best performing mutual fund in
1996. Through its non-diversified charter, the Navellier Aggressive Growth
Portfolio can better concentrate on key stocks and key industry groups than the
diversified funds that we manage. As a result, the Navellier Aggressive Growth
Portfolio is designed to be our most aggressive growth fund. We were quite happy
with the short experience of our new Navellier Mid Cap Growth Portfolio. The new
Navellier Mid Cap Growth Portfolio should prove to have very strong upside
potential with less volatility than our other smaller cap funds.
I want to personally thank all shareholders in the Navellier Performance Funds
for selecting us to manage some of your assets. We feel very obligated to our
shareholders and plan to close the funds in the future to ensure our high
performance standard. Always feel free to contact us if you have any questions
or we can help you in any way.
Sincerely,
<TABLE>
<S> <C>
[/S/ LOUIS G. NAVELLIER] [/S/ ALAN ALPERS]
LOUIS G. NAVELLIER ALAN ALPERS
</TABLE>
THIS MATERIAL HAS BEEN PRECEDED BY A NAVELLIER PERFORMANCE FUNDS PROSPECTUS.
* THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX CONSISTING OF THE SMALLEST 2000
STOCKS IN THE RUSSELL 3000 INDEX. IT IS CONSIDERED REPRESENTATIVE OF THE
SMALL CAP MARKET IN GENERAL. IT IS NOT AN INVESTMENT PRODUCT AVAILABLE FOR
PURCHASE.
** THE LIPPER GROWTH FUND INDEX IS AN UNMANAGED NET ASSET VALUE WEIGHTED INDEX
OF 30 MUTUAL FUNDS THAT HAVE "GROWTH" INVESTMENT OBJECTIVES.
*** THE NASDAQ COMPOSITE IS AN UNMANAGED INDEX CONSISTING OF APPROXIMATELY 5,500
STOCKS. IT IS CONSIDERED REPRESENTATIVE OF THE STOCK MARKET AS A WHOLE. IT
IS NOT AN INVESTMENT PRODUCT AVAILABLE FOR PURCHASE.
3
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- - ------------------------------------------------------
<C> <S> <C>
MARKET VALUE
SHARES (NOTE 1)
<CAPTION>
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS
AEROSPACE AND DEFENSE -- 1.38%
40,000 Oregon Metallurgical Corp.* $ 1,290,000
-------------
BUSINESS/MANAGEMENT SERVICES -- 2.92%
100,000 FPA Medical Management,
Inc.* 2,237,500
34,293 Sitel Corp.* 484,389
-------------
2,721,889
-------------
CHEMICALS -- 0.80%
27,000 MacDermid, Inc. 742,500
-------------
COMPUTER HARDWARE -- 5.70%
70,000 ENCAD, Inc.* 2,887,500
50,000 QLogic Corp.* 1,287,500
20,000 Western Digital Corp.* 1,137,500
-------------
5,312,500
-------------
COMPUTER SOFTWARE -- 3.04%
20,500 Aspen Technology, Inc.* 1,645,125
30,000 Rational Software Corp.* 1,186,875
-------------
2,832,000
-------------
DATA COMMUNICATIONS/NETWORKING -- 3.32%
75,000 Davox Corp.* 3,093,750
-------------
DIVERSIFIED TECHNOLOGY -- 1.48%
38,000 Zoltek Companies, Inc.* 1,382,250
-------------
ELECTRONICS -- 3.11%
50,000 Inacom Corp.* 2,000,000
84,000 Zytec* 892,500
-------------
2,892,500
-------------
HEALTHCARE -- 2.62%
50,000 Safeskin Corp.* 2,437,500
-------------
HEAVY MACHINERY/CONSTRUCTION -- 3.76%
78,000 Smith International, Inc.* 3,500,250
-------------
HOME FURNISHINGS -- 1.07%
50,000 Stanley Furniture Co., Inc.* 993,750
-------------
<CAPTION>
- - ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL AND COMMERCIAL SERVICES -- 7.50%
100,000 DT Industries, Inc. $ 3,500,000
90,000 SPX Corp. 3,487,500
-------------
6,987,500
-------------
METALS -- 2.27%
35,000 Olympic Steel, Inc.* 888,125
35,000 Reliance Steel and Aluminum
Co. 1,225,000
-------------
2,113,125
-------------
NATURAL GAS -- 1.45%
46,800 North Carolina Natural Gas
Corp. 1,351,350
-------------
OIL -- 10.80%
22,000 Cliffs Drilling Co.* 1,391,500
140,000 Comstock Resources, Inc.* 1,820,000
39,000 Ensco International, Inc.* 1,891,500
30,000 KCS Energy, Inc. 1,072,500
130,000 Swift Energy Co.* 3,883,750
-------------
10,059,250
-------------
OIL AND GAS EXPLORATION -- 11.92%
110,300 Global Industries, Ltd.* 2,054,338
180,000 Marine Drilling Companies,
Inc.* 3,543,750
20,000 Seacor Holdings, Inc.* 1,260,000
120,000 UTI Energy Corp.* 4,245,000
-------------
11,103,088
-------------
PHARMACEUTICALS -- 10.04%
103,600 Herbalife International,
Inc. 3,379,950
60,800 Jones Medical Industries,
Inc. 2,226,800
85,000 Medicis Pharmaceutical
Corp.* 3,740,000
-------------
9,346,750
-------------
REAL ESTATE -- 1.99%
75,000 Fairfield Communities, Inc.* 1,856,250
-------------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- - ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAILERS -- 17.24%
90,000 Eagle Hardware and Garden,
Inc.* $ 1,867,500
100,000 Equity Marketing, Inc.* 1,850,000
150,000 Finish Line, Inc.* 3,168,750
200,000 Paul Harris Stores, Inc.* 3,550,000
61,500 Ross Stores, Inc. 3,075,000
42,700 West Marine, Inc.* 1,206,275
62,500 Wet Seal, Inc.* 1,335,937
-------------
16,053,462
-------------
SEMICONDUCTORS AND RELATED -- 2.44%
50,000 Vitesse Semiconductor Corp.* 2,275,000
-------------
TECHNICAL SERVICES -- 1.34%
30,000 Technology Solutions Co.* 1,245,000
-------------
<CAPTION>
- - ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS -- 1.96%
60,000 Pairgain Technologies, Inc.* $ 1,826,250
-------------
VEHICLE PARTS AND EQUIPMENT -- 1.29%
60,000 Miller Industries, Inc.* 1,200,000
-------------
TOTAL COMMON STOCKS -- 99.44%
(COST $82,787,597) 92,615,914
-------------
MUTUAL FUNDS -- 0.56%
520,346 Fund for Government Investors
(Cost $520,346) 520,346
-------------
TOTAL INVESTMENTS -- 100.00%
(COST $83,307,943) $ 93,136,260
-------------
-------------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MID CAP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- - ------------------------------------------------------
<C> <S> <C>
MARKET VALUE
SHARES (NOTE 1)
<CAPTION>
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS
AGRICULTURAL -- 1.77%
1,500 Grupo Industrial Maseca (ADR) $ 28,687
------------
AIRLINES -- 1.44%
1,000 USAir Group, Inc.* 23,375
------------
APPAREL/FABRIC -- 2.54%
1,100 Jones Apparel Group, Inc.* 41,113
------------
AUTO/TRUCK MANUFACTURING -- 1.26%
300 Paccar, Inc. 20,400
------------
BANKING -- 7.43%
500 Commerce Bancshares, Inc. 23,125
500 Greenpoint Financial Corp. 23,625
600 Provident Bancorp, Inc. 20,400
500 Regions Financial Corp. 25,844
300 Star Banc Corp 27,562
------------
120,556
------------
BEVERAGES -- 1.73%
600 Panamerican Beverages, Inc. 28,125
------------
BUSINESS/MANAGEMENT SERVICES -- 1.70%
800 Robert Half International,
Inc.* 27,500
------------
CASINOS/GAMING -- 1.46%
1,300 International Game Technology 23,725
------------
CHEMICALS -- 1.50%
600 Cytec Industries, Inc.* 24,375
------------
COMPUTER HARDWARE -- 3.94%
700 Cognos, Inc.* 19,688
400 Gateway 2000, Inc.* 21,425
400 Western Digital Corp.* 22,750
------------
63,863
------------
CONTAINERS AND PACKAGING -- 1.98%
2,000 Jefferson Smurfit Corp.* 32,125
------------
COSMETICS/PERSONAL CARE -- 1.48%
500 Alberto Culver Co. 24,000
------------
<CAPTION>
- - ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED TECHNOLOGY -- 3.88%
1,200 BMC Industries, Inc. $ 37,800
400 Diebold, Inc. 25,150
------------
62,950
------------
ELECTRIC UTILITIES -- 1.29%
500 Portland General Corp. 21,000
------------
ELECTRONICS -- 1.60%
600 Hubbell, Inc. 25,950
------------
ENERGY -- 3.15%
2,200 NGC Corp. 51,150
------------
FINANCIAL SERVICES -- 2.90%
800 Alliance Capital Management,
LP 21,300
400 Finova Financial Trust 25,700
------------
47,000
------------
FOODS -- 2.99%
500 Interstate Bakeries Corp. 24,562
400 Vons Companies, Inc.* 23,950
------------
48,512
------------
HEALTHCARE -- 1.91%
700 Mallinckrodt, Inc. 30,887
------------
HEAVY MACHINERY -- 1.66%
600 Smith International, Inc.* 26,925
------------
HOUSEHOLD PRODUCTS -- 3.57%
1,100 Fort Howard Corp.* 30,456
800 US Industries, Inc.* 27,500
------------
57,956
------------
INDUSTRIAL AND COMMERCIAL
SERVICES -- 1.40%
400 Valspar Corp. 22,650
------------
INSURANCE -- 6.33%
400 Ace, Ltd. 24,050
400 Conseco, Inc. 25,500
</TABLE>
* NON-INCOME PRODUCING.
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
MID CAP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- - ------------------------------------------------------
<C> <S> <C>
MARKET VALUE
SHARES (NOTE 1)
<CAPTION>
- - ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
500 Mid Ocean, Ltd. $ 26,250
400 Progressive Corp. 26,950
------------
102,750
------------
NATURAL GAS -- 3.63%
700 Nicor, Inc. 25,025
2,200 Noram Energy Corp. 33,825
------------
58,850
------------
OFFICE EQUIPMENT/SUPPLIES -- 1.31%
600 Avery Dennison Corp. 21,225
------------
OIL -- 3.38%
600 Ensco International, Inc.* 29,100
700 Parker and Parsley Petroleum
Co. 25,725
------------
54,825
------------
OIL AND GAS EXPLORATION -- 6.29%
500 Camco International, Inc. 23,063
1,500 Global Marine, Inc.* 30,937
500 Louisiana Land and
Exploration 26,813
800 Reading and Bates Corp.* 21,200
------------
102,013
------------
POWER SUPPLY -- 1.51%
900 American Power Conversion
Corp.* 24,525
------------
- - ------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - ------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAILERS -- 2.99%
400 Ross Stores, Inc. $ 20,000
600 TJX Companies, Inc. 28,425
------------
48,425
------------
TELECOMMUNICATIONS -- 3.65%
600 Andrew Corp.* 31,838
900 Pairgain Technologies, Inc.* 27,394
------------
59,232
------------
TOBACCO -- 1.58%
800 Universal Corp. 25,700
------------
UTILITIES -- 1.53%
600 National Fuel Gas Co. 24,750
------------
TOTAL COMMON STOCKS -- 84.78% (COST
$1,339,675) 1,375,119
------------
MUTUAL FUNDS -- 15.22%
246,952 Fund for Government Investors
(Cost $246,952) 246,952
------------
TOTAL INVESTMENTS -- 100.00%
(COST $1,586,627) $ 1,622,071
------------
------------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
------------ -----------
<S> <C> <C>
ASSETS
Securities at Value (Note 1, see portfolios for cost information).................. $ 93,136,260 $ 1,622,071
Receivable for Securities Sold..................................................... 1,904,357 --
Receivable for Shares Sold......................................................... 919,126 29,100
Interest Receivable................................................................ 15,266 29
Dividends Receivable............................................................... 7,921 1,330
Unamortized Organizational Costs (Note 1).......................................... 100,590 --
------------ -----------
Total Assets..................................................................... 96,083,520 1,652,530
------------ -----------
LIABILITIES
Payable for Shares Redeemed........................................................ 366,219 8,740
Payable for Securities Purchased................................................... 204,376 --
Investment Advisory Fee Payable (Note 2)........................................... 103,779 1,107
Administrative Fee Payable (Note 2)................................................ 20,756 221
Distribution Plan Fee Payable (Note 4)............................................. 20,756 221
Other Payables and Accrued Expenses................................................ 20,756 221
Organizational Expenses Payable to Adviser (Note 1)................................ 100,590 --
------------ -----------
Total Liabilities................................................................ 837,232 10,510
------------ -----------
NET ASSETS........................................................................... $ 95,246,288 $ 1,642,020
------------ -----------
------------ -----------
SHARES OUTSTANDING................................................................... 7,773,720 159,948
------------ -----------
------------ -----------
NET ASSET VALUE PER SHARE............................................................ $12.25 $10.27
------ -----------
------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
------------- -------------
FOR THE YEAR FOR THE
ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1996 1996*
------------- -------------
INVESTMENT INCOME
<S> <C> <C>
Interest (Note 1)..................................................... $ 187,721 $ 1,188
Dividends (Note 1).................................................... 67,395 1,354
------------- -------------
Total Investment Income............................................. 255,116 2,542
------------- -------------
EXPENSES
Investment Advisory Fee (Note 2)...................................... 739,162 1,107
Administrative Fee (Note 2)........................................... 147,832 221
Distribution Plan Fees (Note 4)....................................... 147,832 221
Transfer Agent and Custodian Fee (Note 3)............................. 123,286 785
Registration Fees..................................................... 36,699 22,694
Trustees' Fees (Note 2)............................................... 30,000 --
Organizational Expense (Note 1)....................................... 25,200 --
Shareholder Reports and Notices....................................... 21,997 --
Legal Fees............................................................ 15,179 75,000
Audit Fees............................................................ 4,250 --
Other Expenses........................................................ 18,625 --
------------- -------------
Total Expenses...................................................... 1,310,062 100,028
Less Expenses Reimbursed by Investment Adviser (Note 2)............. (127,403) (98,258)
------------- -------------
Net Expenses...................................................... 1,182,659 1,770
------------- -------------
NET INVESTMENT INCOME (LOSS)............................................ (927,543) 772
------------- -------------
Net Realized Loss on Investment Transactions............................ (12,055,596) --
Net Change in Unrealized Appreciation of Investments.................... 9,828,401 35,444
------------- -------------
NET GAIN (LOSS) ON INVESTMENTS.......................................... (2,227,195) 35,444
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... $ (3,154,738) $ 36,216
------------- -------------
------------- -------------
</TABLE>
*FROM COMMENCEMENT OF OPERATIONS NOVEMBER 26, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MID CAP
AGGRESSIVE GROWTH GROWTH
PORTFOLIO PORTFOLIO
-------------------------- ------------
FOR THE YEAR FOR THE FOR THE
ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995* 1996**
------------ ------------ ------------
FROM INVESTMENT ACTIVITIES
<S> <C> <C> <C>
Net Investment Income (Loss)............................. $ (927,543) $ 21 $ 772
Net Realized Loss on Investment Transactions............. (12,055,596) -- --
Net Change in Unrealized Appreciation (Depreciation) of
Investments............................................ 9,828,401 (84) 35,444
------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Operations........................................... (3,154,738) (63) 36,216
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income............................... -- -- (772)
From Net Realized Capital Gains.......................... -- -- --
------------ ------------ ------------
Total Distributions to Shareholders.................... -- -- (772)
------------ ------------ ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares........................ 172,216,916 200,000 1,614,544
Reinvestment of Distributions............................ -- -- 772
Cost of Shares Redeemed.................................. (74,115,827) -- (8,740)
------------ ------------ ------------
Net Increase in Net Assets Resulting from Share
Transactions......................................... 98,101,089 200,000 1,606,576
------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS........................... 94,946,351 199,937 1,642,020
NET ASSETS -- Beginning of Year............................ 299,937 100,000 --
------------ ------------ ------------
NET ASSETS -- End of Year.................................. $95,246,288 $ 299,937 $1,642,020
------------ ------------ ------------
------------ ------------ ------------
SHARES
Sold..................................................... 13,842,072 20,020 160,724
Issued in Reinvestment of Distributions.................. -- -- 75
Redeemed................................................. (6,098,372) -- (851)
------------ ------------ ------------
Net Increase in Shares................................. 7,743,700 20,020 159,948
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
*FROM COMMENCEMENT OF OPERATIONS DECEMBER 28, 1995.
**FROM COMMENCEMENT OF OPERATIONS NOVEMBER 26, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH MID CAP GROWTH
PORTFOLIO PORTFOLIO
------------------------------- --------------
FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995* 1996**
------------ ------------ --------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C>
Net Asset Value -- Beginning of Year...................... $9.99 $10.00 $10.00
------------ ------------ -------
Income from Investment Operations:
Net Investment Income (Loss)............................ (0.120) 0.002 0.005
Net Realized and Unrealized Gains (Losses) on
Securities............................................ 2.380 (0.008) 0.270
------------ ------------ -------
Total from Investment Operations...................... 2.260 (0.006) 0.275
------------ ------------ -------
Distributions to Shareholders:
From Net Investment Income.............................. -- -- (0.005)
From Net Realized Capital Gains......................... -- -- --
------------ ------------ -------
Total Distributions to Shareholders................... -- -- (0.005)
------------ ------------ -------
Net Increase (Decrease) in Net Asset Value................ 2.26 (0.01) 0.27
------------ ------------ -------
Net Asset Value -- End of Year............................ $12.25 $9.99 $10.27
------------ ------------ -------
------------ ------------ -------
TOTAL INVESTMENT RETURN..................................... 22.62% (0.10)%(A) 2.75%(A)
RATIOS TO AVERAGE NET ASSETS:
Expenses After Reimbursement (Note 2)..................... 2.00% 2.00%(B) 2.00%(B)
Expenses Before Reimbursement (Note 2).................... 2.22% 27.25%(B) 113.02%(B)
Net Investment Income (Loss).............................. (1.57)% 2.59%(B) 0.87%(B)
SUPPLEMENTARY DATA:
Portfolio Turnover Rate................................... 169.0% -- --
Net Assets at End of Year (000's omitted)................. $95,246 $300 $1,642
Number of Shares Outstanding at End of Year (000's
omitted)................................................ 7,774 30 160
Average Commission Rate Paid (C).......................... $0.0389 $0.0300
</TABLE>
- - --------------------------------------------------------
(A) Total returns for periods of less than one year are not annualized.
(B) Annualized.
(C) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
* FROM COMMENCEMENT OF OPERATIONS DECEMBER 28, 1995
**FROM COMMENCEMENT OF OPERATIONS NOVEMBER 26, 1996
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The Navellier Performance Funds (the "Fund") is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, (the "Act") as an open-end investment company which offers its shares
in a series of no-load, non-diversified and diversified portfolios. The Fund is
authorized to issue an unlimited number of shares of capital stock with no
stated par value. The Fund presently consists of three separate portfolios each
with its own investment objectives and policies. These financial statements
report on two of the three portfolios: Aggressive Growth Portfolio, a
non-diversified open-end management company portfolio, and Mid Cap Growth
Portfolio, a diversified open-end management company portfolio. The Aggressive
Small Cap Portfolio, has been inactive since November 26, 1996, the date of its
commencement of operations. The financial statements have been prepared in
conformity with generally accepted accounting principles which permit management
to make certain estimates and assumptions at the date of the financial
statements. The following is a summary of significant accounting policies which
the Fund follows:
(a) Listed securities are valued at the last sales price of the New York
Stock Exchange and other major exchanges. Over-the-Counter securities are
valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Fund's securities in good
faith. The Trustees will periodically review this method of valuation and
recommend changes which may be necessary to assure that the Fund's instruments
are valued at fair value.
(b) Security transactions are recorded on the trade date (the date the
order to buy or sell is executed). Interest income is accrued on a daily
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities transactions are computed on an identified cost basis.
(c) Dividends from net investment income are declared and paid annually.
Dividends are re-invested in additional shares unless shareholders request
payment in cash. Net capital gains, if any, are distributed annually.
(d) The Fund intends to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies and will distribute all net
investment income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Organizational expenses of the Fund totaling $126,000 are being
deferred and amortized over 60 months beginning with the public offering of
shares. Any redemption by an initial investor during the amortization period
will be reduced by a prorata portion of any of the unamortized organization
expenses. Such proration is to be calculated by dividing the number of initial
shares redeemed by the number of initial shares outstanding at the date of
redemption. At December 31, 1996, unamortized organization costs were
$100,590.
2. Investment Advisory Fees and Other Transactions With Affiliates
Investment advisory services are provided by Navellier Management, Inc.
("Adviser"). Under an agreement with the Adviser, each portfolio of the Fund
pays a fee for such services at the annual rate of 1.25% of the daily net assets
of the portfolio. The Adviser also receives an annual fee equal to 0.25% of the
Fund's average daily net assets in connection with the rendering of services
under the administrative services agreement and is reimbursed by the Fund for
operating expenses incurred on behalf of the Fund. An officer and trustee of the
Fund is also an officer and director of the Adviser.
Under an agreement between the Fund and the Adviser related to payment of
operating expenses, the Adviser has reserved the right to seek reimbursement for
the past, present and future operating expenses of the Fund paid by the Adviser,
at any time upon notice to the Fund. At December 31, 1995, the Adviser
voluntarily agreed not to seek future reimbursement of all unreimbursed past
expense incurred on behalf of the Fund. During the year ended
12
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
December 31, 1996, the Adviser paid operating expenses of the Aggressive Growth
Portfolio totaling $275,236. Under the operating expense agreement, the Adviser
requested, and the Aggressive Growth Portfolio reimbursed, $147,833 of such
expenses. The Adviser voluntarily agreed not to seek future reimbursement of
$127,403 of such 1996 expenses. During the period November 26, 1996
(commencement of operations) to December 31, 1996, the Adviser voluntarily
waived reimbursement for substantially all the operating expenses which were
paid on behalf of the Mid Cap Growth Portfolio. Accordingly, at December 31,
1996, there were no prior expenses which could be reimbursed in the future under
the agreement.
Navellier Securities Corp. (the "Distributor") acts as the Fund's
Distributor and is registered as a broker-dealer under the Securities and
Exchange Act of 1934. The Distributor, which is the principal underwriter of the
Fund's shares, renders its services to the Fund pursuant to a distribution
agreement. An officer and trustee of the Fund is also an officer and director of
the Distributor.
The Fund pays each of its Trustees not affiliated with the Adviser $7,500
annually. For the year ended December 31, 1996, Trustees' fees totaled $30,000.
3. Transfer Agent and Custodian
Rushmore Trust and Savings, FSB ("Rushmore Trust"), provides transfer
agency, dividend disbursing and other shareholder services to the Fund. In
addition, Rushmore Trust serves as custodian of the Fund's assets. Fees paid to
Rushmore Trust are based upon a fee schedule approved by the Board of Trustees.
4. Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act, whereby it reimburses the Distributor or others in an amount not
to exceed 0.25% per annum of the average daily net assets of each portfolio for
expenses incurred in the promotion and distribution of shares of the portfolio.
These expenses include, but are not limited to, the printing of prospectuses,
statements of additional information, and reports used for sales purposes,
expenses of preparation of sales literature and related expenses (including
Distributor personnel), advertisements and other distribution-related expenses,
including a prorated portion of the Distributor's overhead expenses attributable
to the distribution of shares. Such payments are made monthly. The 12b-1 fee
includes, in addition to promotional activities, the amount the Fund may pay to
the Distributor or others as a service fee to reimburse such parties for
personal services provided to shareholders of the Fund and/or the maintenance of
shareholder accounts. Such Rule 12b-1 fees are made pursuant to the Plan and
distribution agreements entered into between such service providers and the
Distributor or the Fund directly.
5. Securities Transactions
For the year ended December 31, 1996, purchases and sales (including
maturities) of securities (excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
------------- -----------
<S> <C> <C>
Purchases........................................................................... $ 187,396,704 $ 1,339,676
------------- -----------
Sales............................................................................... $ 92,784,752 $ --
------------- -----------
</TABLE>
13
<PAGE>
DECEMBER 31, 1996 THE NAVELLIER PERFORMANCE FUNDS
- - ------------------------------------------------------------------
6. Net Unrealized Appreciation/Depreciation of Investments
Unrealized appreciation (depreciation) as of December 31, 1996, based on the
cost for Federal income tax purposes is as follows:
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
------------ -----------
<S> <C> <C>
Gross Unrealized Appreciation........................................................ $ 13,557,766 $ 51,729
Gross Unrealized Depreciation........................................................ (3,791,976) (16,285)
------------ -----------
Net Unrealized Appreciation.......................................................... $ 9,765,790 $ 35,444
------------ -----------
------------ -----------
Cost of Investments for Federal Income Tax Purposes.................................. $ 83,370,470 $ 1,586,627
------------ -----------
------------ -----------
</TABLE>
7. Net Assets
At December 31, 1996, net assets consisted of the following:
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
------------- -----------
<S> <C> <C>
Paid-in-Capital..................................................................... $ 97,473,567 $ 1,606,576
Undistributed Net Investment Income................................................. -- --
Accumulated Net Realized Loss on Investments........................................ (12,055,596) --
Net Unrealized Appreciation of Investments.......................................... 9,828,317 35,444
------------- -----------
NET ASSETS.......................................................................... $ 95,246,288 $ 1,642,020
------------- -----------
------------- -----------
</TABLE>
8. Federal Income Tax
Permanent differences between tax and financial reporting of net investment
income and realized gains/(losses) are reclassified to paid-in-capital. As of
December 31, 1996, net investment losses were reclassified to paid-in-capital as
follows:
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
PORTFOLIO PORTFOLIO
------------ ------------
<S> <C> <C>
Reduction of paid-in-capital........................................................ $ 927,543 --
</TABLE>
At December 31, 1996, for Federal income tax purposes, the following Funds
had capital loss carryovers which may be applied against future net taxable
realized gains of each succeeding year until the earlier of its utilization or
its expiration:
<TABLE>
<CAPTION>
AGGRESSIVE MID CAP
GROWTH GROWTH
EXPIRES DECEMBER 31, PORTFOLIO PORTFOLIO
- - ------------------------------------------------------------------------------------ ------------ ------------
<S> <C> <C>
2004................................................................................ $ 11,993,069 --
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
of The Navellier Performance Funds:
We have audited the statements of assets and liabilities, including the
portfolios of investments of the Aggressive Growth and the Mid Cap Portfolios
(two of the portfolios) of The Navellier Performance Funds (the Fund) as of
December 31, 1996, the related statements of operations, changes in net assets,
and financial highlights for the periods presented. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Aggressive
Growth and Mid Cap Portfolios of The Navellier Performance Funds at December 31,
1996, the results of their operations, the changes in their net assets, and
financial highlights for the presented periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Washington, DC
January 31, 1997
15
<PAGE>
[LOGO]
NAVELLIER
Performance Funds
ANNUAL REPORT
December 31, 1996
Navellier Offices:
One East Liberty Third Floor
Reno, Nevada 89501
800-887-8671 P.S.T.
Custodian & Transfer Agent:
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
800-532-2268 E.S.T.
<PAGE>
NAVELLIER
SERIES FUND
------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
ANNUAL REPORT, December 31, 1996
NAVELLIER SERIES FUND
1 East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
- --------------------------------------------------------------------------------
February 1997
Dear Shareholder:
For the year 1996, the Navellier Aggressive Small Cap Equity Portfolio ("the
Fund") returned 15.44% (11.98% after the maximum load). This compares favorably
to 14.76% for the Russell 2000*, 14.51% for the Lipper Small Company Index** and
not so favorably to the Nasdaq Composite*** which returned 22.71% over the same
period. The Fund's annualized return since public offering (April 1, 1994) is
26.21% (24.81% after the maximum load). The annualized returns for the Russell
2000 and the Nasdaq Composite over the same period were 14.30% and 22.22%,
respectively. During the first six months of 1996, the Navellier Aggressive
Small Cap Equity Portfolio gained 27.64% (23.79% after the maximum load),
compared to a 12.63% gain for the Nasdaq Composite and a 9.70% gain for the
Russell 2000. During the second half of 1996 the Fund lost 9.56% (12.27% after
the maximum load), compared to a 8.95% positive return for the Nasdaq Composite
and a 4.61% positive return for the Russell 2000.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
<S> <C> <C> <C>
DATE Small Cap Portfolio NASDAQ Composite Russell 2000
3/31/1994 $10,000 $10,000 $10,000
4/30/1994 $9,889 $9,871 $10,059
5/31/1994 $9,667 $9,889 $9,929
6/30/1994 $9,213 $9,496 $9,571
7/31/1994 $9,384 $9,714 $9,721
8/31/1994 $9,768 $10,298 $10,249
9/30/1994 $10,030 $10,280 $10,202
10/31/1994 $10,494 $10,458 $10,158
11/30/1994 $10,555 $10,092 $9,729
12/31/1994 $10,616 $10,114 $9,972
1/31/1995 $10,484 $10,158 $9,832
2/28/1995 $10,989 $10,676 $10,219
3/31/1995 $11,372 $10,992 $10,387
4/30/1995 $11,726 $11,352 $10,602
5/31/1995 $12,089 $11,629 $10,764
6/30/1995 $14,541 $12,555 $11,297
7/31/1995 $15,409 $13,467 $11,938
8/31/1995 $15,257 $13,721 $12,161
9/30/1995 $14,884 $14,036 $12,363
10/31/1995 $15,691 $13,936 $11,800
11/30/1995 $16,034 $14,247 $12,291
12/31/1995 $14,521 $14,152 $12,585
1/31/1996 $15,188 $14,255 $12,562
2/29/1996 $16,118 $14,796 $12,942
3/31/1996 $18,248 $14,815 $13,175
4/30/1996 $20,460 $16,013 $13,872
5/31/1996 $21,257 $16,725 $14,413
6/30/1996 $19,509 $15,939 $13,806
7/31/1996 $17,938 $14,535 $12,587
8/31/1996 $18,062 $15,354 $13,299
9/30/1996 $19,923 $16,503 $13,797
10/31/1996 $18,537 $16,430 $13,565
11/30/1996 $18,662 $17,386 $14,105
12/31/1996 $18,196 $17,365 $14,443
</TABLE>
The above chart indicates the return of $10,000 invested in the NAVELLIER
AGGRESSIVE SMALL CAP EQUITY PORTFOLIO on April 1, 1994. As the chart shows by
December 31, 1996, the value of the investment would have grown to $18,393, a
83.93% increase. For comparison purposes, look at how the NASDAQ Composite and
the Russell 2000 performed over the same period. An investment of $10,000 in the
NASDAQ Composite over the same period would have grown to $17,365, a 73.65%
increase. Similarly an investment of $10,000 in the Russell 2000 over the same
period would have grown to $14,443, a 44.43% increase.
The above charts and performance numbers assume reinvestment of all
distributions.
Please be aware that past performance is no indication of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
<PAGE>
The Fund generally lagged behind the overall stock market during the last six
months of 1996 since primarily large capitalization stocks performed well during
the second half of 1996. One of the startling statistics for 1996 was
highlighted in an article in the January 13, 1997 issue of FORTUNE, which stated
that the Nasdaq Composite, excluding the 100 largest stocks, was actually up
less than 3% in 1996. In other words, 1996 was predominantly a large
capitalization stock market rally, especially in the second half of the year.
Virtually none of the largest 100 Nasdaq stocks were in the Navellier Aggressive
Small Cap Equity Portfolio. Considering that the Nasdaq Composite was up less
than 3% in 1996 when the 100 largest stocks are excluded, we are quite satisfied
that the Fund had positive results in 1996.
The historical valuations of the stocks in the Navellier Aggressive Small Cap
Equity Portfolio remain very cheap relative to the Dow Industrials and S&P 500.
Wave after wave of money flowing into index funds has benefited the S&P 500 and
moved it into the high range of its historical price/earnings ratio. At over 21
times current earnings, the S&P 500 is very expensive, especially since the most
optimistic analysts call for only 14% to 15% earnings growth in fiscal 1997. The
median P/E for stocks in the Navellier Aggressive Small Cap Equity Portfolio is
17.5 and they literally have much more earnings growth than the S&P 500. Looking
forward, the average stock in the Fund should continue to have far greater
earnings growth than the S&P 500 despite similar price/earnings ratios. When the
current mania fueling index funds settles down and Wall Street starts rotating
into stocks that represent outstanding fundamental values, my favorite stocks in
the Fund should benefit tremendously. In my opinion, we are now on the verge of
a "stock picking" environment, where predominantly stocks with outstanding
fundamental characteristics, such as those in the Navellier Aggressive Small Cap
Equity Portfolio, will benefit.
On the large scale, economists are having a hard time predicting economic growth
because increasing productivity is hard to account for in their economic models.
Most economists are predicting 2% to 3% economic growth in 1997, which would be
a slowdown from the more than 4% growth experienced in the second half of 1996.
However, these economists are not factoring in continuing productivity gains
that have bolstered the U.S. economy, resulting in exceptionally high growth
without inflation. The implicit price deflator is an inflation indicator without
volatile food and energy prices. It is the most reliable indicator of inflation
and is now at its lowest point in decades. The recent 0.3% drop in wholesale
prices in January is further evidence that inflation is now deader than dead.
The bond market has celebrated this positive inflation news and as of this
writing, Treasury Bond yields are near the 6.5% level. The low inflation and low
interest rate environment sets a very positive tone for the stock market for the
next several months.
Long-term, the Navellier Aggressive Small Cap Equity Portfolio continues to
perform quite well relative to other small capitalization growth funds. We are
eagerly awaiting our three year Lipper and Morningstar Ratings and are confident
that we will receive an outstanding long-term rating. To ensure our high
performance standard, the Fund was closed to new investors on April 16, 1996.
Existing shareholders and fee-based financial advisors can continue to purchase
additional shares in the Fund. Existing shareholders will be receiving a proxy
to convert the Navellier Aggressive Small Cap Equity Portfolio to a pure no-load
fund. This conversion will allow us to cut management fees and save operating
expenses. After conversion, existing shareholders will be able to purchase new
shares with no load charged. We would appreciate it if you could mail back your
proxy votes as soon as possible.
2
<PAGE>
I want to personally thank all shareholders in the Navellier Aggressive Small
Cap Equity Portfolio for selecting us to manage some of your assets. We feel
very obligated to our shareholders and have already closed the Fund to ensure
our high performance standard. Always feel free to contact us if you have any
questions or we can help you in any way.
Sincerely,
[SIG]
LOUIS G. NAVELLIER
THIS MATERIAL HAS BEEN PRECEDED BY A NAVELLIER AGGRESSIVE SMALL CAP EQUITY
PORTFOLIO PROSPECTUS.
* THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX CONSISTING OF THE SMALLEST 2000
STOCKS IN THE RUSSELL 3000 INDEX. IT IS CONSIDERED REPRESENTATIVE OF THE
SMALL CAP MARKET IN GENERAL. IT IS NOT AN INVESTMENT PRODUCT AVAILABLE FOR
PURCHASE.
** THE LIPPER SMALL COMPANY INDEX IS AN UNMANAGED NET ASSET VALUE WEIGHTED
INDEX OF 30 MUTUAL FUNDS THAT INVEST PRIMARILY IN COMPANIES WITH SMALL
MARKET CAPITILIZATIONS.
*** THE NASDAQ COMPOSITE IS AN UNMANAGED INDEX CONSISTING OF APPROXIMATELY 5,500
STOCKS. IT IS CONSIDERED REPRESENTATIVE OF THE STOCK MARKET AS A WHOLE. IT
IS NOT AN INVESTMENT PRODUCT AVAILABLE FOR PURCHASE.
3
<PAGE>
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- - -------------------------------------------------------
<C> <S> <C>
MARKET VALUE
SHARES (NOTE 1)
<CAPTION>
- - -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS
AEROSPACE AND DEFENSE -- 0.66%
40,000 Oregon Metallurgical Corp.* $ 1,290,000
--------------
AIRLINES -- 1.33%
174,200 Mesaba Holdings, Inc.* 2,591,225
--------------
ALUMINUM/METALS -- 1.62%
50,000 RMI Titanium Co.* 1,406,250
50,100 Reliance Steel and Aluminum
Co. 1,753,500
--------------
3,159,750
--------------
BANKS -- 1.68%
40,000 Andover Bancorp, Inc. 1,025,000
50,000 City National Corp. 1,081,250
40,000 RCSB Financial, Inc. 1,160,000
--------------
3,266,250
--------------
BASIC MATERIALS -- 0.76%
40,000 Lone Star Industries, Inc. 1,475,000
--------------
COMPUTER HARDWARE -- 4.92%
50,000 Centennial Technologies,
Inc.* 2,600,000
35,000 ENCAD, Inc.* 1,443,750
200,000 Iomega Corp.* 3,475,000
75,000 Tech Data Corp.* 2,053,125
--------------
9,571,875
--------------
COMPUTER SOFTWARE -- 8.14%
35,500 Acceler8 Tech Corp.* 694,469
140,000 Brooktrout Technology, Inc.* 3,920,000
50,000 Legato Systems, Inc.* 1,631,250
101,000 Rational Software Corp.* 3,995,813
47,000 Remedy Corp.* 2,526,250
65,000 Viasoft, Inc.* 3,071,250
--------------
15,839,032
--------------
DIVERSIFIED TECHNOLOGY -- 5.24%
60,000 Dyantech Corp.* 2,655,000
70,000 Engineered Support Systems,
Inc. 1,032,500
42,000 Lindsay Manfacturing Co. 1,963,500
125,200 Zoltek Companies, Inc.* 4,554,150
--------------
10,205,150
--------------
<CAPTION>
- - -------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
EDUCATION -- 3.42%
159,525 Apollo Group, Inc.* $ 5,334,117
100,000 Childrens Comprehensive
Services* 1,312,500
--------------
6,646,617
--------------
ELECTRONICS -- 1.73%
37,800 Kuhlman Corp. 732,375
248,000 Zytec* 2,635,000
--------------
3,367,375
--------------
ENERGY -- 0.55%
40,000 Holly Corp. 1,070,000
--------------
FOOD -- 1.74%
70,000 Fresh America Corp.* 1,155,000
70,000 Riser Foods, Inc. 2,222,500
--------------
3,377,500
--------------
HEALTHCARE -- 0.76%
50,000 SONUS Pharmaceuticals, Inc.* 1,487,500
--------------
HEAVY MACHINERY/CONSTRUCTION -- 1.07%
60,800 Gardner Denver Machinery* 2,082,400
--------------
HOME FURNISHINGS -- 1.45%
30,000 Ethan Allen Interiors, Inc. 1,155,000
58,900 Stanley Furniture Company,
Inc.* 1,170,637
50,000 Winsloew Furniture, Inc.* 487,500
--------------
2,813,137
--------------
HOME CONSTRUCTION -- 0.58%
40,000 Palm Harbor Homes, Inc.* 1,120,000
--------------
INSURANCE -- 0.63%
20,000 Orion Capital Corp. 1,222,500
--------------
INDUSTRIAL AND COMMERCIAL
SERVICES -- 3.61%
44,200 Amerco, Inc.* 1,547,000
40,000 DT Industries, Inc. 1,400,000
75,000 Mail Well, Inc.* 1,228,125
122,000 Shaw Group, Inc.* 2,851,750
--------------
7,026,875
--------------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
- - -------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MANUFACTURED HOUSING -- 1.46%
100,000 Coachmen Industries, Inc. $ 2,837,500
--------------
NATURAL GAS -- 1.16%
100,000 NUI Corp. 2,262,500
--------------
NONCLASSIFIABLE ESTABLISHMENT -- 1.17%
65,000 Oppenheimer Capital LP 2,275,000
--------------
OIL -- 4.10%
84,400 Cliffs Drilling Co.* 5,338,300
100,000 Comstock Resources, Inc.* 1,300,000
45,200 Swift Energy Co.* 1,350,350
--------------
7,988,650
--------------
OIL & GAS EXPLORATION -- 7.64%
50,000 American Oilfield Divers,
Inc.* 593,750
20,000 Cooper Cameron Corp.* 1,530,000
30,000 Flores & Rucks, Inc.* 1,597,500
135,000 Marine Drilling Companies,
Inc.* 2,657,812
100,000 Plains Resources, Inc.* 1,562,500
110,000 Seacor Holdings, Inc.* 6,930,000
--------------
14,871,562
--------------
PHARMACEUTICALS -- 7.23%
50,400 Cardinal Health, Inc. 2,935,800
100,000 Herbalife International,
Inc. 3,262,500
124,875 Jones Medical Industries,
Inc. 4,573,547
75,000 Medicis Pharmaceutical
Corp.* 3,300,000
--------------
14,071,847
--------------
REAL ESTATE -- 0.86%
68,000 Fairfield Communities, Inc.* 1,683,000
--------------
RETAILERS -- 13.24%
100,000 American Eagle Outfitters,
Inc.* 787,500
292,500 Claires Stores, Inc. 3,802,500
140,000 Eagle Hardware and Garden,
Inc.* 2,905,000
100,000 Equity Marketing, Inc.* 1,850,000
<CAPTION>
- - -------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAILERS (CONTINUED)
100,000 Finish Line, Inc.* $ 2,112,500
100,000 Funco, Inc.* 837,500
60,000 Pacific Sunwear of
California* 1,545,000
164,500 Paul Harris Stores, Inc.* 2,919,875
93,000 Ross Stores, Inc. 4,650,000
104,000 Wet Seal, Inc.* 2,223,000
100,000 Tuesday Morning Corp.* 2,137,500
--------------
25,770,375
--------------
SAVINGS AND LOANS -- 3.37%
312,000 Imperial Credit Indusries,
Inc.* 6,552,000
--------------
SEMICONDUCTORS AND RELATED -- 1.56%
100,000 Chips and Technologies,
Inc.* 1,825,000
25,000 Radisys Corp.* 1,218,750
--------------
3,043,750
--------------
STEEL -- 1.12%
85,900 Olympic Steel, Inc.* 2,179,713
--------------
TECHNICAL SERVICES -- 0.52%
27,400 SBS Technologies, Inc.* 1,013,800
--------------
TELECOMMUNICATIONS -- 4.20%
120,600 ATC Communications, Inc.* 1,597,950
216,000 Pairgain Technologies, Inc.* 6,574,500
--------------
8,172,450
--------------
TEMPORARY STAFFING -- 4.56%
152,500 AccuStaff, Inc.* 3,221,562
276,000 Employee Solutions, Inc.* 5,658,000
--------------
8,879,562
--------------
VEHICLE PARTS AND EQUIPMENT -- 0.57%
44,500 Arvin Industries, Inc. 1,101,375
--------------
VITAMINS/HEALTH FOODS -- 1.40%
100,000 Rexall Sundown, Inc.* 2,718,750
--------------
TOTAL COMMON STOCKS -- 94.05%
(COST $146,155,936) 183,034,020
--------------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
- - -------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- - -------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENTS -- 5.95%
With PaineWebber at 6.00%, dated
12/31/96, due 1/2/97, collateralized
by U.S. Treasury Bills, due 5/1/97
(Cost $11,578,000) $ 11,578,000
--------------
TOTAL INVESTMENTS -- 100.00%
(COST $157,733,936) $ 194,612,020
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
ASSETS
Securities at Value (Note 1, see portfolio for cost information)...................... $194,612,020
Cash in Custodian Bank................................................................ 18,324
Receivable for Securities Sold........................................................ 748,475
Receivable for Shares Sold............................................................ 157,806
Dividends Receivable.................................................................. 26,370
Interest Receivable................................................................... 1,930
Unamortized Organizational Costs (Note 1)............................................. 18,118
------------
Total Assets........................................................................ 195,583,043
------------
LIABILITIES
Payable for Securities Purchased...................................................... 4,444,194
Payable for Shares Redeemed........................................................... 738,267
Investment Advisory Fee Payable (Note 2).............................................. 204,806
Other Payables and Accrued Expenses................................................... 82,115
Administrative Fee Payable (Note 2)................................................... 40,961
Commissions Payable................................................................... 20,069
Organizational Expenses Payable to Adviser (Note 1)................................... 18,118
------------
Total Liabilities................................................................... 5,548,530
------------
NET ASSETS.............................................................................. $190,034,513
------------
------------
SHARES OUTSTANDING...................................................................... 10,683,004
------------
------------
NET ASSET VALUE PER SHARE............................................................... $17.79
------
------
MAXIMUM OFFERING PRICE PER SHARE (100/97.00 of $17.79).................................. $18.34
------
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
FOR THE YEAR ENDED
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest (Note 1)...................................................................... $ 603,796
Dividends (Note 1)..................................................................... 171,544
-----------
Total Investment Income.............................................................. 775,340
-----------
EXPENSES
Investment Advisory Fee (Note 2)....................................................... 2,323,690
Administrative Fee (Note 2)............................................................ 464,738
Transfer Agent and Custodian Fee (Note 3).............................................. 330,390
Registration Fees...................................................................... 108,309
Shareholder Reports and Notices........................................................ 62,983
Legal Fees............................................................................. 60,915
Trustees' Fees and Expenses (Note 2)................................................... 51,381
Audit Fees............................................................................. 19,600
Organizational Expense (Note 1)........................................................ 8,053
Other Expenses......................................................................... 18,743
-----------
Total Expenses....................................................................... 3,448,802
Less Expenses Reimbursed by Investment Adviser (Note 2).............................. (195,636)
-----------
Net Expenses....................................................................... 3,253,166
-----------
NET INVESTMENT LOSS...................................................................... (2,477,826)
-----------
Net Realized Gain on Investment Transactions............................................. 463,797
Net Change in Unrealized Appreciation of Investments..................................... 18,466,247
-----------
NET GAIN ON INVESTMENTS.................................................................. 18,930,044
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................... $16,452,218
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
1996 1995
------------- ------------
FROM INVESTMENT ACTIVITIES
<S> <C> <C>
Net Investment Loss................................................... $ (2,477,826) $ (610,524)
Net Realized Gain on Investment Transactions.......................... 463,797 1,524,157
Net Change in Unrealized Appreciation of Investments.................. 18,466,247 15,989,475
------------- ------------
Net Increase in Net Assets Resulting from Operations................ 16,452,218 16,903,108
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
From Net Investment Income............................................ -- --
From Net Realized Capital Gains....................................... -- (2,499,314)
------------- ------------
Total Distributions to Shareholders................................. -- (2,499,314)
------------- ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares..................................... 286,125,562 130,265,618
Reinvestment of Distributions......................................... -- 2,355,336
Cost of Shares Redeemed............................................... (217,842,421) (59,949,289)
------------- ------------
Net Increase in Net Assets Resulting from Share Transactions........ 68,283,141 72,671,665
------------- ------------
TOTAL INCREASE IN NET ASSETS........................................ 84,735,359 87,075,459
NET ASSETS -- Beginning of Year......................................... 105,299,154 18,223,695
------------- ------------
NET ASSETS -- End of Year............................................... $ 190,034,513 $105,299,154
------------- ------------
------------- ------------
SHARES
Sold.................................................................. 16,325,181 9,128,613
Issued in Reinvestment of Distributions............................... -- 152,845
Redeemed.............................................................. (12,473,362) (4,110,315)
------------- ------------
Net Increase in Shares.............................................. 3,851,819 5,171,143
------------- ------------
------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
DECEMBER 31, PERIOD ENDED
-------------------- DECEMBER 31,
1996 1995 1994*
--------- --------- -------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C>
Net Asset Value -- Beginning of Year............................ $ 15.41 $ 10.98 $ 10.00
--------- --------- -------------
Income from Investment Operations:
Net Investment Loss........................................... (0.23) (0.16) (0.08)
Net Realized and Unrealized Gains on Securities............... 2.61 4.97 1.06
--------- --------- -------------
Total from Investment Operations............................ 2.38 4.81 0.98
--------- --------- -------------
Distributions to Shareholders:
From Net Investment Income.................................... -- -- --
From Net Realized Capital Gains............................... -- (0.38) --
--------- --------- -------------
Total Distributions to Shareholders......................... -- (0.38) --
--------- --------- -------------
Net Increase in Net Asset Value................................. 2.38 4.43 0.98
--------- --------- -------------
Net Asset Value -- End of Year.................................. $ 17.79 $ 15.41 $ 10.98
--------- --------- -------------
--------- --------- -------------
TOTAL INVESTMENT RETURN(A)...................................... 15.44% 43.80% 9.80%
RATIOS TO AVERAGE NET ASSETS:
Expenses After Reimbursement (Note 2)........................... 1.75% 1.75% 1.68%(B)
Expenses Before Reimbursement (Note 2).......................... 1.86% 2.10% 4.52%(B)
Net Investment Loss............................................. (1.33)% (1.15)% (0.81 )%(B)
SUPPLEMENTARY DATA:
Portfolio Turnover Rate......................................... 136.9% 169.6% 139.9%
Net Assets at End of Year (000's omitted)....................... $190,035 $105,299 $18,224
Number of Shares Outstanding at End of Year (000's omitted)..... 10,683 6,831 1,660
Average Commission Rate Paid(C)................................. $0.0424
- - ----------------
</TABLE>
(A) Total returns do not include the maximum sales load. Total returns for
periods of less than one year are not annualized.
(B) Annualized.
(C) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary
from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
rate structures may differ.
*FROM COMMENCEMENT OF OPERATIONS JANUARY 3, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Navellier Series Fund (the "Fund") is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a diversified,
open-end investment company. The Fund consists of one portfolio, Navellier
Aggressive Small Cap Equity Portfolio (the "Portfolio"). Shares of the Fund are
purchased at the public offering price which includes a maximum sales charge of
up to 3.00% depending on the size of the purchase. The Fund is authorized to
issue an unlimited number of shares of capital stock with no stated par value.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain estimates
and assumptions at the date of the financial statements. The following is a
summary of significant accounting policies which the Fund follows:
(a) Listed securities are valued at the last sales price of the New York
Stock Exchange and other major exchanges. Over-the-Counter securities are
valued at the last sales price. If market quotations are not readily
available, the Board of Trustees will value the Portfolio's securities in good
faith. The Board of Trustees will periodically review this method of valuation
and recommend changes which may be necessary to assure that the Portfolio's
instruments are valued at fair value.
(b) Security transactions are recorded on the trade date (the date the
order to buy or sell is executed). Interest income is accrued on a daily
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities transactions are computed on an identified cost basis.
(c) Dividends from net investment income are declared and paid annually.
Dividends are reinvested in additional shares unless shareholders request
payment in cash. Net capital gains, if any, are distributed annually.
(d) The Fund complies with the provisions of the Internal Revenue Code
applicable to regulated investment companies and distributes all net
investment income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Organizational expenses of the Fund totaling $143,294 are being
deferred and amortized over 60 months beginning with the public offering of
shares. Any redemption by an initial investor during the amortization period
will be reduced by a prorata portion of any of the unamortized organization
expenses. Such proration is calculated by dividing the number of initial
shares redeemed by the number of initial shares outstanding at the date of
redemption. At December 31, 1996, unamortized organization costs were $18,118.
2. Investment Advisory Fees and Other Transactions with Affiliates
Investment advisory services are provided by Navellier Management, Inc.,
(the "Adviser"). Under an agreement with the Adviser, the Fund pays a fee at the
annual rate of 1.25% of the daily net assets for the Navellier Aggressive Small
Cap Equity Portfolio. The Adviser also receives a 0.25% annual fee in connection
with the rendering of services under the administrative services agreement and
is reimbursed by the Fund for operating expenses incurred on behalf of the Fund.
An officer and trustee of the Fund is also an officer and director of the
Adviser.
Under an agreement between the Fund and the Adviser related to payment of
operating expenses, the Adviser has reserved the right to seek reimbursement for
the past, present and future operating expenses of the Fund paid by the Adviser,
at any time upon notice to the Fund. At December 31, 1995, the Adviser
voluntarily agreed not to seek future reimbursement of all unreimbursed past
expenses incurred on behalf of the Fund. During the year ended December 31,
1996, the Adviser paid operating expenses of the Fund totaling $660,374. Under
the operating expense agreement, the Adviser requested, and the Fund reimbursed,
$464,738 of such expenses. The Adviser voluntarily agreed not to seek future
reimbursement of $195,636 of such 1996 expenses. Accordingly, at December 31,
1996, there were no prior expenses which could be reimbursed in the future under
the agreement.
11
<PAGE>
DECEMBER 31, 1996 NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
- - ------------------------------------------------------------------
Navellier Securities Corp. (the "Distributor") acts as the Fund's
Distributor and is registered as a broker-dealer under the Securities and
Exchange Act of 1934. The Distributor, which is the principal underwriter of the
Funds shares, renders its services to the Fund pursuant to a distribution
agreement. An officer and trustee of the Fund is also an officer and director of
the Distributor.
For the year ended December 31, 1996, the Fund was advised that the
Distributor received $924,050 from sales loads earned on sales of the Fund's
capital stock.
The Fund pays each of its Trustees not affiliated with the Adviser a fee of
$10,000 annually plus specific amounts for attended board and committee
meetings. When the Fund exceeds $200,000,000 in total net assets, then the
Trustees' fee is raised to $20,000 annually. For the year ended December 31,
1996 Trustees' fees and expenses totaled $51,381.
3. Transfer Agent and Custodian
Rushmore Trust and Savings, FSB, ("Rushmore Trust"), provides transfer
agency, dividend disbursing and other shareholder services to the Fund. In
addition, Rushmore Trust serves as custodian of the Fund's assets. Fees paid to
Rushmore Trust are based upon a fee schedule approved by the Board of Trustees.
4. Securities Transactions
For the year ended December 31, 1996, purchases of securities were
$302,971,553 and sales of securities were $236,741,968. These totals exclude
short-term securities.
5. Net Unrealized Appreciation/Depreciation of Investments
As of December 31, 1996, net appreciation of investments for Federal income
tax purposes was $36,878,084 of which $44,036,260 related to appreciated
investments and $7,158,176 related to depreciated investments. At December 31,
1996, the cost of the Fund's securities for Federal income tax purposes was
$157,733,936.
6. Net Assets
At December 31, 1996, net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in-Capital....................................................................... $155,066,631
Undistributed Net Investment Income................................................... --
Accumulated Net Realized Loss on Investments.......................................... (1,910,202)
Net Unrealized Appreciation on Investments............................................ 36,878,084
------------
NET ASSETS............................................................................ $190,034,513
------------
------------
</TABLE>
7. Federal Income Tax
No provision is made for Federal income taxes as it is the Fund's intention
to continue to qualify as a regulated investment company and to make requisite
distributions to the shareholders which will be sufficient to relieve it from
all or substantially all Federal income and excise taxes.
Permanent differences between tax and financial reporting of net investment
income and realized gains/(losses) are reclassified to paid-in-capital. As of
December 31, 1996, net investment losses of $2,477,826 were reclassified to
paid-in-capital.
At December 31, 1996, for Federal income tax purposes, the Fund had capital
loss carryovers which may be applied against future net taxable realized gains
of each succeeding year until the earlier of its utilization or its expiration
as follows:
<TABLE>
<CAPTION>
EXPIRES DECEMBER 31,
- - -------------------------------------------------------------------------------------------------
<S> <C>
2004............................................................................................. $ 1,910,202
-------------
-------------
</TABLE>
12
<PAGE>
- - ------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
of the Navellier Series Fund:
We have audited the statement of assets and liabilities, of the Navellier
Aggressive Small Cap Equity Portfolio of the Navellier Series Fund (the Fund) as
of December 31, 1996, the related statement of operations for the year then
ended and of changes in net assets for the years ended December 31, 1996 and
1995, and the financial highlights for each of the two years in the period ended
December 31, 1996 and the period ended December 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Navellier Small
Cap Equity Portfolio of the Navellier Series Fund at December 31, 1996, the
results of its operations, the changes in its net assets, and the financial
highlights for the presented periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Washington, DC
January 31, 1997
13
<PAGE>
[LOGO]
NAVELLIER
Series Fund
ANNUAL REPORT
December 31, 1996
Navellier Offices:
One East Liberty Third Floor
Reno, Nevada 89501
800-887-8671 P.S.T.
Custodian & Transfer Agent:
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
800-622-1386 E.S.T.
<PAGE>
NAVELLIER PERFORMANCE AGGRESSIVE SMALL CAP PORTFOLIO
AND
NAVELLIER SERIES AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------ -----------------------------------------
Navellier Navellier
Navellier Series Navellier Series
Performance Aggressive Pro Forma Performance Aggressive Pro Forma
Aggressive Small Cap Combined Aggressive Small Cap Combined
Small Cap Equity Small Cap Equity
Portfolio Portfolio Portfolio Portfolio
(unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited)
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
AEROSPACE AND DEFENSE - 0.66%
Oregon Metallurgical Corp.* - 40,000 40,000 $ - $ 1,290,000 $ 1,290,000
----------------------------------------
AIRLINES - 1.33%
Mesaba Holdings, Inc.* - 174,200 174,200 - 2,591,225 2,591,225
----------------------------------------
ALUMINUM/METALS - 1.62%
RMI Titanium Co.* - 50,000 50,000 - 1,406,250 1,406,250
Reliance Steel and Aluminum Co. - 50,100 50,100 - 1,753,500 1,753,500
----------------------------------------
- 3,159,750 3,159,750
----------------------------------------
BANKS - 1.68%
Andover Bancorp, Inc. - 40,000 40,000 - 1,025,000 1,025,000
City National Corp. - 50,000 50,000 - 1,081,250 1,081,250
RCSB Financial, Inc. - 40,000 40,000 - 1,160,000 1,160,000
----------------------------------------
- 3,266,250 3,266,250
----------------------------------------
BASIC MATERIALS - 0.76%
Lone Star Industries, Inc. - 40,000 40,000 - 1,475,000 1,475,000
----------------------------------------
COMPUTER HARDWARE - 4.92%
Centennial Technologies, Inc.* - 50,000 50,000 - 2,600,000 2,600,000
ENCAD, Inc.* - 35,000 35,000 - 1,443,750 1,443,750
Iomega Corp.* - 200,000 200,000 - 3,475,000 3,475,000
Tech Data Corp.* - 75,000 75,000 - 2,053,125 2,053,125
----------------------------------------
- 9,571,875 9,571,875
----------------------------------------
COMPUTER SOFTWARE - 8.14%
Acceler8 Tech Corp.* - 35,500 35,500 - 694,469 694,469
Brooktrout Technology, Inc.* - 140,000 140,000 - 3,920,000 3,920,000
Legato Systems, Inc.* - 50,000 50,000 - 1,631,250 1,631,250
Rational Software Corp.* - 101,000 101,000 - 3,995,813 3,995,813
Remedy Corp.* - 47,000 47,000 - 2,526,250 2,526,250
Viasoft, Inc.* - 65,000 65,000 - 3,071,250 3,071,250
----------------------------------------
- 15,839,032 15,839,032
----------------------------------------
DIVERSIFIED TECHNOLOGY - 5.24%
Dyantech Corp.* - 60,000 60,000 - 2,655,000 2,655,000
Engineered Support Systems, Inc. - 70,000 70,000 - 1,032,500 1,032,500
Lindsay Manfacturing Co. - 42,000 42,000 - 1,963,500 1,963,500
Zoltek Companies, Inc.* - 125,200 125,200 - 4,554,150 4,554,150
----------------------------------------
- 10,205,150 10,205,150
----------------------------------------
EDUCATION - 3.42%
Apollo Group, Inc.* - 159,525 159,525 - 5,334,117 5,334,117
Childrens Comprehensive Services* - 100,000 100,000 - 1,312,500 1,312,500
----------------------------------------
- 6,646,617 6,646,617
----------------------------------------
ELECTRONICS - 1.73%
Kuhlman Corp. - 37,800 37,800 - 732,375 732,375
Zytec* - 248,000 248,000 - 2,635,000 2,635,000
----------------------------------------
- 3,367,375 3,367,375
----------------------------------------
<PAGE>
NAVELLIER PERFORMANCE AGGRESSIVE SMALL CAP PORTFOLIO
AND
NAVELLIER SERIES AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<CAPTION>
SHARES VALUE
------------------------------------------ -----------------------------------------
Navellier Navellier
Navellier Series Navellier Series
Performance Aggressive Pro Forma Performance Aggressive Pro Forma
Aggressive Small Cap Combined Aggressive Small Cap Combined
Small Cap Equity Small Cap Equity
Portfolio Portfolio Portfolio Portfolio
(unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited)
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ENERGY - 0.55%
Holly Corp. - 40,000 40,000 - 1,070,000 1,070,000
----------------------------------------
FOOD - 1.74%
Fresh America Corp.* - 70,000 70,000 - 1,155,000 1,155,000
Riser Foods, Inc. - 70,000 70,000 - 2,222,500 2,222,500
----------------------------------------
- 3,377,500 3,377,500
----------------------------------------
HEALTHCARE - 0.76%
SONUS Pharmaceuticals, Inc.* - 50,000 50,000 - 1,487,500 1,487,500
----------------------------------------
HEAVY MACHINERY/CONSTRUCTION - 1.07%
Gardner Denver Machinery* - 60,800 60,800 - 2,082,400 2,082,400
----------------------------------------
HOME FURNISHINGS - 1.45%
Ethan Allen Interiors, Inc. - 30,000 30,000 - 1,155,000 1,155,000
Stanley Furniture Company, Inc.* - 58,900 58,900 - 1,170,637 1,170,637
Winsloew Furniture, Inc.* - 50,000 50,000 - 487,500 487,500
----------------------------------------
- 2,813,137 2,813,137
----------------------------------------
HOME CONSTRUCTION - 0.58%
Palm Harbor Homes, Inc.* - 40,000 40,000 - 1,120,000 1,120,000
----------------------------------------
INSURANCE - 0.63%
Orion Capital Corp. - 20,000 20,000 - 1,222,500 1,222,500
----------------------------------------
INDUSTRIAL AND COMMERCIAL SERVICES - 3.61%
Amerco, Inc.* - 44,200 44,200 - 1,547,000 1,547,000
DT Industries, Inc. - 40,000 40,000 - 1,400,000 1,400,000
Mail Well, Inc.* - 75,000 75,000 - 1,228,125 1,228,125
Shaw Group, Inc.* - 122,000 122,000 - 2,851,750 2,851,750
----------------------------------------
- 7,026,875 7,026,875
----------------------------------------
MANUFACTURED HOUSING - 1.46%
Coachmen Industries, Inc. - 100,000 100,000 - 2,837,500 2,837,500
----------------------------------------
NATURAL GAS - 1.16%
NUI Corp. - 100,000 100,000 - 2,262,500 2,262,500
----------------------------------------
NONCLASSIFIABLE ESTABLISHMENT - 1.17%
Oppenheimer Capital LP - 65,000 65,000 - 2,275,000 2,275,000
----------------------------------------
OIL - 4.10%
Cliffs Drilling Co.* - 84,400 84,400 - 5,338,300 5,338,300
Comstock Resources, Inc.* - 100,000 100,000 - 1,300,000 1,300,000
Swift Energy Co.* - 45,200 45,200 - 1,350,350 1,350,350
----------------------------------------
- 7,988,650 7,988,650
----------------------------------------
OIL & GAS EXPLORATION - 7.64%
American Oilfield Divers, Inc.* - 50,000 50,000 - 593,750 593,750
Cooper Cameron Corp.* - 20,000 20,000 - 1,530,000 1,530,000
Flores & Rucks, Inc.* - 30,000 30,000 - 1,597,500 1,597,500
<PAGE>
NAVELLIER PERFORMANCE AGGRESSIVE SMALL CAP PORTFOLIO
AND
NAVELLIER SERIES AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<CAPTION>
SHARES VALUE
------------------------------------------ -----------------------------------------
Navellier Navellier
Navellier Series Navellier Series
Performance Aggressive Pro Forma Performance Aggressive Pro Forma
Aggressive Small Cap Combined Aggressive Small Cap Combined
Small Cap Equity Small Cap Equity
Portfolio Portfolio Portfolio Portfolio
(unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited)
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Marine Drilling Companies, Inc.* - 135,000 135,000 - 2,657,812 2,657,812
Plains Resources, Inc.* - 100,000 100,000 - 1,562,500 1,562,500
Seacor Holdings, Inc.* - 110,000 110,000 - 6,930,000 6,930,000
----------------------------------------
- 14,871,562 14,871,562
----------------------------------------
PHARMACEUTICALS - 7.23%
Cardinal Health, Inc. - 50,400 50,400 - 2,935,800 2,935,800
Herbalife International, Inc. - 100,000 100,000 - 3,262,500 3,262,500
Jones Medical Industries, Inc. - 124,875 124,875 - 4,573,547 4,573,547
Medicis Pharmaceutical Corp.* - 75,000 75,000 - 3,300,000 3,300,000
----------------------------------------
- 14,071,847 14,071,847
----------------------------------------
REAL ESTATE - 0.86%
Fairfield Communities, Inc.* - 68,000 68,000 - 1,683,000 1,683,000
----------------------------------------
RETAILERS - 13.24%
American Eagle Outfitters, Inc.* - 100,000 100,000 - 787,500 787,500
Claires Stores, Inc. - 292,500 292,500 - 3,802,500 3,802,500
Eagle Hardware and Garden, Inc.* - 140,000 140,000 - 2,905,000 2,905,000
Equity Marketing, Inc.* - 100,000 100,000 - 1,850,000 1,850,000
Finish Line, Inc.* - 100,000 100,000 - 2,112,500 2,112,500
Funco, Inc.* - 100,000 100,000 - 837,500 837,500
Pacific Sunwear of California* - 60,000 60,000 - 1,545,000 1,545,000
Paul Harris Stores, Inc.* - 164,500 164,500 - 2,919,875 2,919,875
Ross Stores, Inc. - 93,000 93,000 - 4,650,000 4,650,000
Wet Seal, Inc.* - 104,000 104,000 - 2,223,000 2,223,000
Tuesday Morning Corp.* - 100,000 100,000 - 2,137,500 2,137,500
----------------------------------------
- 25,770,375 25,770,375
----------------------------------------
SAVINGS AND LOANS - 3.37%
Imperial Credit Indusries, Inc.* - 312,000 312,000 - 6,552,000 6,552,000
----------------------------------------
SEMICONDUCTORS AND RELATED - 1.56%
Chips and Technologies, Inc.* - 100,000 100,000 - 1,825,000 1,825,000
Radisys Corp.* - 25,000 25,000 - 1,218,750 1,218,750
----------------------------------------
- 3,043,750 3,043,750
----------------------------------------
STEEL - 1.12%
Olympic Steel, Inc.* - 85,900 85,900 - 2,179,713 2,179,713
----------------------------------------
TECHNICAL SERVICES - 0.52%
SBS Technologies, Inc.* - 27,400 27,400 - 1,013,800 1,013,800
----------------------------------------
TELECOMMUNICATIONS - 4.20%
ATC Communications, Inc.* - 120,600 120,600 - 1,597,950 1,597,950
Pairgain Technologies, Inc.* - 216,000 216,000 - 6,574,500 6,574,500
----------------------------------------
- 8,172,450 8,172,450
----------------------------------------
TEMPORARY STAFFING - 4.56%
AccuStaff, Inc.* - 152,500 152,500 - 3,221,562 3,221,562
Employee Solutions, Inc.* - 276,000 276,000 - 5,658,000 5,658,000
----------------------------------------
- 8,879,562 8,879,562
----------------------------------------
<PAGE>
NAVELLIER PERFORMANCE AGGRESSIVE SMALL CAP PORTFOLIO
AND
NAVELLIER SERIES AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<CAPTION>
SHARES VALUE
------------------------------------------ -----------------------------------------
Navellier Navellier
Navellier Series Navellier Series
Performance Aggressive Pro Forma Performance Aggressive Pro Forma
Aggressive Small Cap Combined Aggressive Small Cap Combined
Small Cap Equity Small Cap Equity
Portfolio Portfolio Portfolio Portfolio
(unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited)
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
VEHICLE PARTS AND EQUIPMENT - 0.57%
Arvin Industries, Inc. - 44,500 44,500 - 1,101,375 1,101,375
----------------------------------------
VITAMINS/HEALTH FOODS - 1.40%
Rexall Sundown, Inc.* - 100,000 100,000 - 2,718,750 2,718,750
----------------------------------------
TOTAL COMMON STOCKS - 94.05%
(COST $146,155,936) 183,034,020 183,034,020
---------------------------
REPURCHASE AGREEMENTS - 5.95%
With PaineWebber at 6.00%, dated 12/31/96,
due 1/2/97, collateralized by U.S. Treasury
Bills, due 5/1/97 (Cost $11,578,000 ) 11,578,000 11,578,000
---------------------------
TOTAL INVESTMENTS - MARKET - 100% $194,612,020 $194,612,020
---------------------------
---------------------------
TOTAL INVESTMENTS - COST $157,733,936 $157,733,936
---------------------------
---------------------------
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS.
<PAGE>
PRO FORMA COMBINED
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NAVELLIER
NAVELLIER SERIES
PERFORMANCE AGGRESSIVE
AGGRESSIVE SMALL CAP
SMALL CAP EQUITY PRO FORMA PRO FORMA
PORTFOLIO PORTFOLIO ADJUSTMENTS COMBINED
(UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Securities at Value (Cost $0 and $157,733,936) $ - $194,612,020 $ - $194,612,020
Cash in Custodian Bank - 18,324 - 18,324
Receivable for Securities Sold - 748,475 - 748,475
Receivable for Shares Sold - 157,806 - 157,806
Dividends Receivable - 26,370 - 26,370
Interest Receivable - 1,930 - 1,930
Unamortized Organizational Costs - 18,118 (18,118) -
---------- ------------ ---------- ------------
Total Assets - 195,583,043 (18,118) 195,564,925
---------- ------------ ---------- ------------
LIABILITIES
Payable for Securities Purchased - 4,444,194 - 4,444,194
Payable for Shares Redeemed - 738,267 - 738,267
Investment Advisory Fee Payable - 204,806 - 204,806
Commissions Payable - 20,069 - 20,069
Administrative Fee Payable - 40,961 - 40,961
Other Payables and Accrued Expenses - 82,115 - 82,115
Organizational Expenses Payable to Adviser - 18,118 (18,118) -
---------- ------------ ---------- ------------
Total Liabilities - 5,548,530 (18,118) 5,530,412
---------- ------------ ---------- ------------
NET ASSETS $ - $190,034,513 $ - $190,034,513
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
NET ASSETS CONSIST OF:
Capital Paid in on Shares of
Common Stock $ - $155,066,631 $ - $155,066,631
Net Investment Loss - - - -
Accumulated Net Realized (Loss) on Investments - (1,910,202) - (1,910,202)
Net Unrealized Appreciation on Investments - 36,878,084 - 36,878,084
---------- ------------ ---------- ------------
Total $ - $190,034,513 $ - $190,034,513
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
SHARES OUTSTANDING - 10,683,004 0 10,683,004
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
NET ASSET VALUE PER SHARE - $17.79 - $17.79
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
MAXIMUM OFFERING PRICE PER SHARE - $18.34 - $17.79
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS.
<PAGE>
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NAVELLIER
NAVELLIER SERIES
PERFORMANCE AGGRESSIVE
AGGRESSIVE SMALL CAP
SMALL CAP EQUITY PRO FORMA PRO FORMA
PORTFOLIO PORTFOLIO ADJUSTMENTS COMBINED
(UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ - $ 603,796 $ - 603,796
Dividends - 171,544 - 171,544
---------- ----------- --------- -----------
Total Investment Income - 775,340 - 775,340
---------- ----------- --------- -----------
EXPENSES
Investment Advisory Fee - 2,323,690 (185,895) 2,137,795
Administrative Fee - 464,738 - 464,738
Transfer Agent and Custodian Fee - 330,390 (20,000) 310,390
Registration Fees - 108,309 - 108,309
Shareholder Reports and Notices - 62,983 (15,000) 47,983
Legal Fees - 60,915 (45,000) 15,915
Trustees' Fees and Expenses - 51,381 (28,800) 22,581
Audit Fees - 19,600 (10,000) 9,600
Organizational Expense - 8,053 18,118 26,171
Other Expenses - 18,743 (10,000) 8,743
---------- ----------- --------- -----------
Total Expenses - 3,448,802 (296,577) 3,152,225
Less Expenses Reimbursed by Investment Adviser - (195,636) (75,213) (270,849)
---------- ----------- --------- -----------
Net Expenses - 3,253,166 (371,790) 2,881,376
---------- ----------- --------- -----------
NET INVESTMENT LOSS - (2,477,826) 371,790 (2,106,036)
---------- ----------- --------- -----------
Net Realized Gain on Investment Transactions - 463,797 - 463,797
Net Change in Unrealized Appreciation of Investments - 18,466,247 - 18,466,247
---------- ----------- --------- -----------
NET GAIN ON INVESTMENTS - 18,930,044 - 18,930,044
---------- ----------- --------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ - $16,452,218 $ 371,790 $16,824,008
---------- ----------- --------- -----------
---------- ----------- --------- -----------
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS.
<PAGE>
NAVELLIER PERFORMANCE AGGRESSIVE SMALL CAP PORTFOLIO
AND
NAVELLIER SERIES AGGRESSIVE SMALL CAP EQUITY PORTFOLIO
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
Subject to approval of the Agreement and Plan of Reorganization (Agreement)
by the shareholders of The Navellier Aggressive Small Cap Equity Portfolio
(the Portfolio), a series of The Navellier Series Fund, the Navellier
Aggressive Small Cap Portfolio (the Acquiring Fund), a separate portfolio
of The Navellier Performance Funds would acquire substantially all of the
assets of the Portfolio in exchange for shares of the Acquiring Fund at the
net asset value of the Acquiring Fund as of the Valuation Date as defined
in the Agreement (the Reorganization). Shares of the Acquiring Fund would
then be distributed pro-rata to the shareholders of the Portfolio.
The pro forma information is intended to provide the shareholders of the
Portfolio with information about the impact of the proposed merger by
showing how it might have affected historical financial statements if the
transaction had been consummated at an earlier time. The pro forma
combined Schedule of Investments and Statement of Assets and Liabilities
have been presented as if the proposed merger had taken place on December
31, 1996; the pro forma combined Statement of Operations for the year ended
December 31, 1996, has been presented as if the proposed merger had taken
place on January 1, 1996. This information is based upon historical
financial statement data giving effect to the pro forma adjustments
described below. The accounting policies of the Portfolio and the
Acquiring Fund are not materially different. The pro forma financial
statements should be read in conjunction with the separate financial
statements of the Portfolio and the Acquiring Fund incorporated by
reference into this Registration Statement on Form N-14.
2. PRO FORMA ADJUSTMENTS
A. The pro forma combined Statement of Assets and Liabilities reflects
the number of shares that will be outstanding after the conversion of
the Portfolio shares (the converted shares) into Acquiring Fund shares
as part of the Agreement. The converted shares are calculated by
dividing the total net assets of the Portfolio by the net asset value
per share of the Acquiring Fund. These converted shares are then
added to the shares outstanding in the Acquiring Fund to arrive at the
combined shares outstanding.
B. The pro forma combined Statement of Operations of the Portfolio and
the Acquiring Fund reflects the net decrease in Investment Advisory
Fee expense and other operating expenses and a net increase in Net
Investment Income resulting from the expected lower expense ratio of
the Acquiring Fund after the proposed merger. The Portfolio pays
Navellier Management, Inc., the fund's Investment Adviser, an advisory
fee at an annual rate of 1.25% of the average daily net assets of the
Portfolio. The Acquiring Fund will pay an advisory fee at an annual
rate of 1.15% of the average daily net assets of the Acquiring Fund.
Other operating expenses are estimated to be reduced as the merger
should permit the reduction or elimination of certain duplicative
costs and expenses presently incurred for services that are separately
performed for both the Portfolio and the Acquiring Fund and by the
wavier by the investment advisor of an estimated $270,849 of expenses
advanced by the investment advisor thereby reducing the total
operating expenses from an estimated 1.86% to an estimated 1.55%
<PAGE>
3. COSTS AND EXPENSES OF REORGANIZATION
Navellier Management, Inc., the investment adviser to the Acquiring Fund,
will bear all the costs and expenses related to the Reorganization
(including costs of the N-14 filing, shareholder efforts to compel the
shareholder meeting on the Reorganization and Navellier's proxy
solicitation efforts).
4. As a result of the Reorganization, the investment advisor will lose its
right to reimbursement of the remaining $18,118 in unamortized
organizational expenses.
5. The maximum offering price per share after the Reorganization would be
equal to the net asset value per share because no sales charge would be
imposed on the sale of shares after the Reorganization.
<PAGE>
THE NAVELLIER PERFORMANCE FUNDS
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The Navellier Performance Funds (the "Registrant" or the "Trust") is an
unincorporated voluntary association, organized under the laws of the State of
Delaware as a business trust, and is operated pursuant to its Declaration of
Trust, dated October 17, 1995 (the "Declaration of Trust"), its By-Laws, and the
laws of the State of Delaware, which permit the Registrant to indemnify its
trustees and officers under certain circumstances. Such indemnification,
however, is subject to the limitations imposed by the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act"). Pursuant to Delaware Code Ann. title 12 Section 3817, a
Delaware business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article X, Section 10.02, of the Declaration of Trust
of the Registrant states that the Trust shall indemnify any present or former
trustee or officer to the fullest extent permitted by law against liability, and
all expenses reasonably incurred by him or her in connection with any claim,
action, suit, or proceeding in which he or she is involved by virtue of his or
her service as a trustee, officer, or both, and against any amount incurred in
settlement thereof. Indemnification will not be provided to a person adjudged
by a court or other adjudicatory body either to be liable to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of his or her duties (collectively, "disabling conduct"), or
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the Trust. In the event of a settlement, no
indemnification may be provided unless there has been a determination, as
specified in the Declaration of Trust, that the officer or trustee did not
engage in disabling conduct.
Insofar as indemnification for liability arising under the 1933 Act may be
permitted to trustees, officers, and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and,
therefore, is unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such trustee, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question as to whether such indemnification by the
Registrant is against public policy as expressed in the 1993 Act and will be
governed by the final adjudication of such issue.
ITEM 16. EXHIBITS
(1) Declaration of Trust Registrant.(1)
(2) By-Laws of Registrant.(1)
(3) Voting Trust Agreement.(2)
(4) Agreement and Plan of Reorganization.(3)
- -----------------------------
(1) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A previously filed December 8,
1995 (Registration Nos. 33-80195 and 811-9142).
(2) None.
(3) Incorporated by reference to Registrant's N-14 filed March 7, 1997.
<PAGE>
(5) Specimen share certificate.(2)
(6) Form of Management Contract between the Navellier Aggressive Small Cap
Portfolio of The Navellier Performance Funds and Navellier Management,
Inc.(1)
(7) Form of Underwriting Agreement.(1)
(8) Bonus, Profit Sharing, or Pension Plans.(2)
(9) Form of Custody Agreement between Registrant and Rushmore Trust &
Savings, Bank F.S.B.(1)
(10) Form of Rule 12b-1 Distribution Plan.(1)(5)
(11) Opinion of Samuel Kornhauser regarding the legality of securities
being registered.(4)
(12) Opinion of Samuel Kornhauser regarding certain tax matters and
consequences to shareholders discussed in Part A.(4)
(13) Form of Administrative Services Agreement between Registrant and
Navellier Management, Inc.(1)
(14)(a) Consent of Deloitte & Touche, independent accountants for
Registrant.(4)(6)
(14)(b) Consent of Deloitte & Touche, independent accountants for The formerly
named Navellier Series Fund.(4)(6)
(14)(c) Consent of Samuel Kornhauser (see exhibit (11)).
(14)(d) Consent of Samuel Kornhauser (see exhibit (12)).
(15) Financial Statements Omitted Pursuant to Item 14(a)(1).(2)
(16) Powers of Attorney.(1)
(17) Rule 24f-2 Notice.(4)(3)
ITEM 17 UNDERTAKINGS
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is part of
this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) under the Securities
Act of 1933, as amended, the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1), above, will be filed as part of an amendment to this
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered therein,
and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
- -----------------------------
(5) Incorporated by reference from Post-effective Amendment No. 4 to
Registrant's Registration Statement on Form N-1A filed November 26,
1996.
(4) Filed herewith
(6) Incorporated by reference to Registratant's N-14 filing filed March 7,
1997. The consents are not being updated because there have been no
material changes in the financial statements since the filing of
Registrant's N-14 on March 7, 1997.
C-2
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of the Registrant, in the City of Reno
and the State of Nevada, on the 5th day of June, 1997.
Registrant:
THE NAVELLIER PERFORMANCE FUNDS
BY:
-----------------------------------------
Louis Navellier
Chairman of the Board
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
- ---------------------------- Chairman of The June 5, 1997
Louis Navellier Board, President,
Treasurer, Trustee.
- ---------------------------- Trustee June 5, 1997
Joel Rossman
- ---------------------------- Trustee June 5, 1997
Barry Sander
- ---------------------------- Trustee June 5, 1997
Jacques Delacroix
- ---------------------------- Trustee June 5, 1997
Arnold Langsen
C-3
<PAGE>
EXHIBITS TO
PART C
<PAGE>
EXHIBIT 11
OPINION AND CONSENT OF
LAW OFFICES OF SAMUEL KORNHAUSER
<PAGE>
[LETTERHEAD]
June 5, 1997
The Navellier Performance Funds
One East Liberty Street, Third Floor
Reno, Nevada 89501
Re: The Navellier Performance Funds
Registration Statement//Proxy Statement on Form N-14
----------------------------------------------------
Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, of shares (the "Shares") of The Navellier
Aggressive Small Cap Portfolio ("Acquiring Fund") of the Navellier Performance
Funds (the "Performance Fund"), an open-end, diversified management investment
company whose Shares are the subject of a Registration Statement/Proxy Statement
on Form N-14.
In rendering my opinion, I have examined such documents, records, and
matters of law as I deemed necessary for purposes of this opinion, including the
Registration Statement/Proxy Statement on Form N-14, the Performance Fund's
Declaration of Trust, the Performance Fund's By-Laws, and the proceedings of the
Performance Fund's and the Navellier Series Fund's Boards of Trustees.
Based upon and subject to the foregoing, it is my opinion that the Shares
that will be issued by the Acquiring Fund, when sold will be legally issued,
fully paid and nonassessable.
My opinion is rendered solely in connection with the Registration
Statement/Proxy Statement on Form N-14 under which the Shares will be registered
and may not be relied upon for any other purposes without my written consent. I
hereby consent to the use of this opinion as an exhibit to such Registration
Statement/Proxy Statement on Form N-14 and to my being named under the "Legal
Matters" section therein.
By:
---------------------
Samuel Kornhauser
LAW OFFICES OF SAMUEL KORNHAUSER
<PAGE>
EXHIBIT 12
OPINION AND CONSENT OF
LAW OFFICES OF SAMUEL KORNHAUSER
<PAGE>
[LETTERHEAD]
June 5, 1997
Board of Trustees
The Formerly Named Navellier Series Fund
One East Liberty Street, Third Floor
Reno, Nevada 89501
Board of Trustees
The Navellier Performance Funds
One East Liberty Street, Third Floor
Reno, Nevada 89501
Re: Federal Income Tax Consequences of Proposed Reorganization
----------------------------------------------------------
Gentlemen:
You have requested my opinion regarding the Federal income tax consequences
arising out of the reorganization, described herein, that is to be entered into,
whereby the formerly named Navellier Aggressive Small Cap Equity Portfolio (the
"Portfolio") of the formerly named Navellier Series Fund would be merged into
the Navellier Aggressive Small Cap Portfolio (the "Acquiring Fund") of the
Navellier Performance Funds, pursuant to the Agreement and Plan of
Reorganization (the "Reorganization Plan") proposed by Louis Navellier and
Navellier Management, Inc., (the Navellier Group") and approved by the Board of
Trustees of The Navellier Performance Funds (the "Performance Funds"). The
Reorganization Plan provides that, pursuant to the reorganization transaction,
all of the assets of the Portfolio (the "Portfolio Assets") are to be
transferred into the Acquiring Fund, a portfolio of The Navellier Performance
Funds, solely in exchange for voting shares of beneficial interest in the
Acquiring Fund ("Acquiring Fund Shares") and the assumption by the Acquiring
Fund of all the liabilities of the Portfolio (hereinafter referred to as the
"Reorganization" or "merger"). Specifically, the Reorganization Plan provides
for the Reorganization of the Portfolio into the Acquiring Fund.
<PAGE>
Board of Trustees
The Navellier Series Fund Page 2
The Navellier Performance Funds
In formulating my opinion, I have examined those documents and legal
authorities that I deemed appropriate for this purpose. These authorities
included various provisions of the Internal Revenue Code of 1986 as amended (the
"Code" or "I.R.C.") and the U.S. Treasury Income Tax Regulations promulgated
thereunder ("Treasury Regulations" or "Treas. Regs.), judicial decisions, and
administrative pronouncements by the Internal Revenue Service (the "Service")
and various tax treatises on the subject. In addition to the legal authorities
mentioned above, I also have reviewed various Performance Funds and Series Fund
corporate documents, including (1) the proposed Agreement and Plan of
Reorganization (the aforementioned "Reorganization Plan"); (2) The most recent
Amendments to Form N-1A of the Performance Funds and of the Series Fund; (3) the
Declaration of Trust of the Series Fund and Performance Funds; (4) the By-Laws
of the Series Fund and Performance Funds; and (5) the minutes of the November
11, 1996 meeting of the Series Fund Board; and (6) the Registration/Proxy
Statement on Form N-14 of the Performance Funds filed with the SEC.
My opinion set forth below assumes: (1) the accuracy of the statements and
facts concerning the Reorganization as set forth in this letter, the
Reorganization Plan, the respective Fund Documents reviewed, including the
business purposes for consummating the Reorganization as stated therein; and (2)
the accuracy of the assumptions described below under the heading "ASSUMPTIONS."
My opinion also assumes that the Reorganization will be consummated in the
manner contemplated by and in accordance with the terms and conditions set forth
in the Reorganization Plan and in the Registration Statement on Form N-14 of
the Navellier Performance Funds as filed with the Commission (the
"Reorganization Registration Statement").
<PAGE>
Board of Trustees
The Navellier Series Fund Page 3
The Navellier Performance Funds
This opinion is conditioned upon there being no change in the Code,
Treasury Regulations, judicial decisions, or administrative pronouncements by
the Service between the date hereof and the closing date of the Reorganization.
Based upon the facts and assumptions stated herein, and for the reasons set
forth below, it is my opinion that, for Federal income tax purposes, the
Reorganization will constitute a tax-free "reorganization" within the meaning of
Section 368(a)(1(C) of the Code. The consequences of this tax treatment of the
Reorganization is described more fully below under the heading "CONCLUSIONS."
FACTS
1. THE NAVELLIER PERFORMANCE FUNDS ("PERFORMANCE FUNDS") AND THE ACQUIRING
FUND
The Performance Funds is an unincorporated voluntary association organized
under the laws of the State of Delaware as a business trust, pursuant to the
Declaration of Trust, and has operated as an investment company since its
organization. The Performance Funds is also registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, non-
diversified management investment company. Accordingly, the Performance Funds
is also subject to the provisions of the 1940 Act and the rules and regulations
of the Commission thereunder. The operations of the Performance Funds are
further governed by the Declaration of Trust, the Performance Funds' By-Laws,
and by Delaware law, as applicable. The Performance Funds is authorized to
issue an unlimited number of shares of beneficial interest in one or more
series. Currently, the Performance Funds is composed of three separate series:
the Navellier Aggressive Growth Portfolio, the Navellier Mid Cap
<PAGE>
Board of Trustees
The Navellier Series Fund Page 4
The Navellier Performance Funds
Growth Portfolio and the Navellier Aggressive Small Cap Portfolio (the
"Acquiring Fund"). The Performance Funds is qualified to be taxed as a
regulated investment company (a "RIC") under the Code, has elected to be taxed
as a RIC for Federal income tax purposes under Section 851 of the Code
continually since the Performance Funds' organization. The Acquiring Fund
intends to qualify each year as a RIC under Section 851 of the Code, and further
intends to distribute all or substantially all of the Acquiring Fund's income so
that the Acquiring Fund and the shareholders of the Acquiring Fund will be taxed
in accordance with Section 851 of the Code.
2. THE REORGANIZATION
The Reorganization, as described above, is not tax-motivated, and has been
proposed and is being undertaken for a number of business and economic reasons,
as described in the Reorganization Plan and the Registration Statement and as
described in part hereinbelow. Pursuant to the Reorganization, the Portfolio
will transfer to the Acquiring Fund all of its existing Portfolio Assets and the
Acquiring Fund will assume all the liabilities of the Portfolio. The Acquiring
Fund will also deliver full and fractional Acquiring Fund Shares to the
Portfolio in an amount equal in value to the net asset value of the issued and
outstanding full and fractional shares of common stock in the Portfolio as of
the date of the Reorganization. The exact number of such Acquiring Fund Shares
to be transferred will be determined by using a net asset value exchange ratio.
With respect to the Reorganization, on the closing date of the
Reorganization, pursuant to the Reorganization Plan, the Acquiring Fund Shares
received by the Portfolio in the
<PAGE>
Board of Trustees
The Navellier Series Fund Page 5
The Navellier Performance Funds
transaction will be distributed pro rata to the shareholders (the
"Shareholders") of the Portfolio, the Portfolio will be liquidated, and all
Series Fund shares ("Portfolio Shares") will be canceled. It is assumed with
respect to the Reorganization that: (1) there is no existing agreement or
prearranged plan on the part of the Shareholders of the Portfolio to sell or
dispose of the Acquiring Fund Shares that the Shareholders of the Portfolio will
receive in the Reorganization (except pursuant to investment decisions which may
be made by such Shareholders in the ordinary course of investing in mutual
funds); (2) the Acquiring Fund will continue to use the Portfolio's historic
business assets received by the Acquiring Fund in the Acquiring Fund's
continuing business enterprises; and (3) there also is no plan or intention by
the Acquiring Fund to sell or dispose of the Portfolio Assets received in the
Reorganization (other than in the normal course of the Acquiring Fund's business
operations as a mutual fund).
The Reorganization, as described herein, must be approved at a special
meeting of the Shareholders of the Portfolio pursuant to such Reorganization
(the "Special Meeting") by at least 67% of the shares of common stock of the
Portfolio present in person or represented by proxy at the Special Meeting, or
more than 50% of the outstanding voting shares of the Portfolio, whichever is
less. The Navellier Series Fund's Declaration of Trust does not entitle
Shareholders of the Portfolio to appraisal rights (i.e., to demand the fair
value of their shares) in the event of a reorganization or merger.
Consequently, the Shareholders of the Portfolio will be bound by the terms of
the Reorganization Plan if such Reorganization Plan is approved at the Special
Meeting for the Portfolio. Any Shareholder, however, may redeem his, her or its
Portfolio Shares at net asset value prior to the closing date of the proposed
Reorganization of the Portfolio.
<PAGE>
Board of Trustees
The Navellier Series Fund Page 6
The Navellier Performance Funds
The Reorganization Plan provides that Navellier Management Inc. will bear
the aggregate costs of its solicitation of the Proxy for the Reorganization.
As described below, the investment policies of the Acquiring Fund (and
consequently, the risks of investing in such Acquiring Fund) are essentially the
same as those of the Portfolio.
3. INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The Acquiring Fund and the Portfolio invest primarily in the
common stocks of small cap issuers. The Investment Adviser for the Portfolio
(Navellier Management, Inc.) is also the Investment Advisor for the Acquiring
Fund and uses the same modern portfolio theory style of investing for the
Acquiring Fund as it does for the Portfolio.
The investment objective of the Portfolio is the same as the investment
objective of the Acquiring Fund
ASSUMPTIONS
My opinion assumes the accuracy of the following assumptions in connection
with the proposed Reorganization (the "assumptions").
1. Immediately following the consummation of the Reorganization, every
Shareholder of the Portfolio will own full and fractional Acquiring
Fund Shares,
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the value of which Acquiring Fund Shares will be approximately equal
to the value of such shareholder's full and fractional Portfolio
Shares immediately prior to the Reorganization, and every such
Shareholder of the Portfolio Reorganization will own such full and
fractional Acquiring Fund Shares solely by reason of the ownership by
the Shareholder of full and fractional Portfolio Shares immediately
prior to the Reorganization.
2. To the best knowledge of the management of the Series Fund, there is
no plan or intention on the part of the Shareholders of the Portfolio
to sell, to exchange, or otherwise to dispose of any of the Acquiring
Fund Shares received in the Reorganization, except pursuant to
investment decisions made in the ordinary course of investing in
mutual funds.
3. Immediately following the consummation of the Reorganization, the
Acquiring Fund will possess all of the assets and liabilities (except
for those assets of the Portfolio, if any , which have been used to
pay the reasonable expenses incurred by the Portfolio in connection
with the Series Fund Trustees contest, if any, of the Navellier Group
Proxy solicitation or contest of the Reorganization) possessed by the
Portfolio immediately prior to the Reorganization. The Portfolio will
make no redemptions or distributions (except for regular, normal
dividends declared and paid in order to ensure the Portfolio's
continued RIC qualification under Section 851 of the Code) in
anticipation of, or in connection with, the Reorganization.
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4. The Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization, except such shares
as the Acquiring Fund will issue in the ordinary course of business as
an investment company which continuously offers its shares to the
public at net asset value.
5. The Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Reorganization, except as required
by Section 22(e) of the 1940 Act.
6. The Acquiring Fund has no plan or intention to sell or otherwise to
dispose of any of the Portfolio Assets acquired in the Reorganization,
except for dispositions made in the ordinary course of the Acquiring
Fund's business operations as an investment company.
7. All of the liabilities of the Portfolio that are to be assumed by the
Acquiring Fund and all of the liabilities, if any, to which the
transferred Portfolio Assets are subject were incurred by the
Portfolio in the ordinary course of the Portfolio's business and are
associated with the Portfolio Assets transferred in the
Reorganization.
8. Following the Reorganization, the Acquiring Fund will continue the
historic business of the Portfolio and will use a significant portion
of the Portfolio's historic business assets received by the Acquiring
Fund in the Reorganization in the Acquiring Fund's continuing business
enterprises.
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9. The Portfolio will pay its expenses, if any, incurred in connection
with the Reorganization.
10. The Acquiring Fund does not own, directly or indirectly, nor has the
Acquiring Fund owned during the past five (5) years, directly or
indirectly, any stock of the Portfolio.
11. At the time of the Reorganization, the Portfolio will not have
outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire stock
in the Portfolio.
12. There is no intercorporate indebtedness existing between the Acquiring
Fund and the Portfolio that was issued, was acquired, or will be
settled at a discount.
13. The fair market value of the assets of the Portfolio which are
transferred to the Acquiring Fund will equal or exceed the sum of the
liabilities of the Portfolio which are assumed by the Acquiring Fund,
plus the amount of liabilities, if any, to which the transferred
assets of the Portfolio are subject.
14. The Portfolio is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
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CONCLUSIONS
For the reasons set forth above, and based solely on the information and
the Assumptions set forth above, my opinion is that, for Federal income tax
purposes, the Reorganization will qualify for non-recognition treatment under
Code Section 368(a)(1)(C) of the Code. Accordingly, the following tax
consequences should result with respect the Reorganization:
1. The acquisition by the Acquiring Fund of all of the assets of the
Portfolio solely in exchange for the Acquiring Fund Shares received in
the Reorganization and the assumption of the accrued liabilities of
the Portfolio, followed by the distribution by the Portfolio to its
Shareholders of such Acquiring Fund Shares and any remaining assets of
the Portfolio, in complete liquidation, will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code.
2. The Portfolio and the Acquiring Fund each will be treated as "a party
to a reorganization" within the meaning of Code Section 368(b).
3. Pursuant to Sections 361(a) and 357(a) of the Code, no gain or loss
will be recognized by the Portfolio upon the transfer of substantially
all of the Portfolio Assets to the Acquiring Fund solely in exchange
for the Acquiring Fund Shares received in the Reorganization and the
assumption by the Acquiring Fund of all of the liabilities of the
Portfolio. In addition, pursuant to Section 361(C)(1) of
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the Code, no gain or loss will be recognized by the Portfolio upon the
distribution by the Portfolio to the Shareholders of the Portfolio of
the Acquiring Fund Shares received in the Reorganization in exchange
for those Shareholders' Portfolio Shares pursuant to the
Reorganization Plan.
4. Pursuant to Section 362(b) of the Code, the tax basis of the Portfolio
Assets in the hands of the Acquiring Fund will be the same as the tax
basis of such assets in the hands of the Portfolio immediately prior
to the proposed Reorganization.
5. Pursuant to Section 1032(a) of the Code, no gain or loss will be
recognized to the Acquiring Fund upon the Acquiring Fund's receipt of
the Portfolio Assets pursuant to the Reorganization in exchange solely
for the Acquiring Fund Shares or upon the distribution of those
Acquiring Fund Shares to the Shareholders of the Portfolio in exchange
for those Shareholders' Portfolio Shares in the Portfolio.
6. Pursuant to Section 1223(2) of the Code, the holding period of the
Portfolio Assets to be received by the Acquiring Fund in the
Reorganization will include the holding period during which such
Portfolio Assets were held by the Portfolio immediately prior to the
Reorganization.
7. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized to the Shareholders of the Portfolio pursuant to the
Reorganization upon the
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receipt by those Shareholders of the full and fractional Acquiring
Fund Shares received solely in exchange for those Shareholders' full
and fractional Portfolio Shares.
8. Pursuant to Section 358(a)(1) of the Code, the tax basis of the full
and fractional Acquiring Fund shares to be received by the
Shareholders of the Portfolio pursuant to the Reorganization will be
the same as the tax basis of the full and fractional Portfolio Shares
surrendered by those Shareholders in the exchange.
9. Pursuant to Section 1223(1) of the Code, the holding period of the
full and fractional Acquiring Fund Shares to be received by the
Shareholders of the Portfolio, will include the holding period during
which the full and fractional Portfolio Shares surrendered by those
Shareholders in exchange therefor was held; provided, that those full
and fractional Portfolio Shares were held as capital assets in the
hands of those Shareholders on the date of the Reorganization.
10. Pursuant to Section 381(a) of the Code and Section 1.381(c)(2)-1 of
the Treasury Regulations, the Acquiring Fund will succeed to and take
into account the earnings and profits, or deficit in earnings and
profits, of the Portfolio as of the date of transfer. Any deficit in
earnings and profits of either the Portfolio or the Acquiring Fund
will be used only to offset the earnings and profits accumulated after
the date of the transfer.
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* * * * *
As stated above, my opinion is based upon and subject to the facts,
assumptions, and reasons discussed herein. No opinion is expressed or implied
with respect to any entity's qualification as a RIC or with respect to any other
tax matters aside from the qualification of the Reorganization under Section
368(a)(1)(C) of the Code and the related tax consequences as set forth above.
My opinion is based upon my analysis of the current law, but neither the courts
or the Service are, in any way, bound by my analysis. I consent to the use of
this opinion as an exhibit to the Reorganization Registration Statement on Form
N-14 under which the Acquiring Fund Shares will be registered.
Sincerely,
/s/ Samuel Kornhauser
LAW OFFICES OF SAMUEL KORNHAUSER
