<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MFS(R) SERIES TRUST V ON BEHALF OF MFS(R) RESEARCH FUND
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee required
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MFS RESEARCH FUND
500 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 15, 1998
A Special Meeting of Shareholders of MFS Research Fund (the "Fund"), a series
of MFS Series Trust V (the "Trust") will be held at 500 Boylston Street,
Boston, Massachusetts, on Thursday, October 15, 1998 at 10:00 a.m. for the
following purposes:
ITEM 1. To approve or disapprove a new Investment Advisory Agreement between
Massachusetts Financial Services Company and the Trust on behalf of
the Fund.
ITEM 2. To approve or disapprove the elimination of certain fundamental
investment policies as set forth in Appendix C to the Proxy
Statement.
ITEM 3. To ratify the selection of Deloitte & Touche LLP as the independent
public accountants to be employed by the Trust on behalf of the Fund
for the fiscal year ending September 30, 1998.
ITEM 4. To consider and act upon any matter incidental to the foregoing and
to transact such other business as may properly come before the
Special Meeting of Shareholders and any adjournments thereof.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF ALL ITEMS.
Only shareholders of record as of August 24, 1998 will be entitled to vote at
the Special Meeting of Shareholders and at any adjournments thereof.
STEPHEN E. CAVAN, Secretary
September 4, 1998
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING,
DATING AND RETURNING THE ENCLOSED PROXY, WHICH WILL HELP SAVE THE NECESSARY
AND ADDITIONAL EXPENSE OF A SECOND SOLICITATION. THE ENCLOSED SELF-ADDRESSED
ENVELOPE REQUIRES NO POSTAGE AND IS PROVIDED FOR YOUR CONVENIENCE.
AS AN ALTERNATIVE TO USING THE PAPER PROXY CARD TO VOTE, SHAREHOLDERS HOLDING
SHARES REGISTERED IN THEIR NAMES, AS WELL AS BENEFICIAL OWNERS OF SHARES HELD
IN "STREET NAME" BY A BROKER, MAY VOTE ELECTRONICALLY VIA THE INTERNET OR BY
TELEPHONE. PLEASE SEE "MANNER OF VOTING PROXIES -- INTERNET AND TELEPHONE
VOTING" IN THE PROXY STATEMENT FOR MORE DETAILS.
<PAGE>
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees (the "Board of Trustees") of
MFS Series Trust V (the "Trust") on behalf of MFS Research Fund (the "Fund"),
a series of the Trust, to be used at a Special Meeting of Shareholders to be
held at 500 Boylston Street, Boston, Massachusetts on Wednesday, October 15,
1998, at 10:00 a.m., and at any adjournments thereof, for the purposes set
forth in the accompanying Notice (collectively, the "Special Meeting").
This Proxy Statement, the Notice of Special Meeting of Shareholders and the
proxy card are being mailed to shareholders on or about September 4, 1998. All
properly executed proxies received in time for the Special Meeting (either by
returning the paper proxy card or by submitting your proxy electronically via
the Internet or by telephone) will be voted as specified on the proxy or, if
no specification is made, in favor of the proposals referred to in the Proxy
Statement. Any shareholder giving a proxy has the power to revoke it by mail
(addressed to the Secretary of the Fund at the principal executive office of
the Fund, 500 Boylston Street, Boston, Massachusetts 02116) or in person at
the Special Meeting, by executing a superseding proxy or by submitting a
notice of revocation to the Fund. In the absence of a notice of revocation,
shares will be voted in accordance with the proxy received last.
Shareholders of record at the close of business as of August 24, 1998 (the
"Record Date") will be entitled to one vote for each share held. There were
[ ] shares of the Fund outstanding on the Record Date. Shareholders of
all classes of shares of the Fund will vote together on all proposals.
FOR A FREE COPY OF THE FUND'S ANNUAL REPORT DATED SEPTEMBER 30, 1997 AND ITS
SEMI-ANNUAL REPORT DATED MARCH 31, 1998, WRITE OR CALL MFS SERVICE CENTER,
INC., AT 500 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116 OR AT (800)
225-2606.
ITEM 1. TO APPROVE OR DISAPPROVE A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN
MASSACHUSETTS FINANCIAL SERVICES COMPANY AND THE TRUST ON BEHALF OF
THE FUND
GENERAL
The Board of Trustees is proposing that shareholders approve a new Investment
Advisory Agreement (the "New Agreement") with Massachusetts Financial Services
Company, a Delaware corporation ("MFS" or the "Adviser"), the effect of which
would be to increase the rate of compensation payable by the Fund to MFS for
its services as the Fund's investment adviser. The management fee payable by
the Fund has not changed since 1974. If approved by the shareholders, the
management fee payable under the New Agreement will still remain well below
the average advisory fee among a group of comparable growth funds. The
Trustees believe that the rate of compensation under the New Agreement is
reasonable in light of comparative fee information, the Fund's investment
performance, MFS' expenses and profitability in managing the Fund and the
nature, quality and scope of services provided by MFS to the Fund.
BACKGROUND
The Trust has retained MFS to provide the Fund with investment management
services pursuant to an Investment Advisory Agreement dated September 1, 1993
(the "Current Agreement"). MFS or its predecessors have been the Fund's
investment adviser since the Fund's inception in 1971. The Current Agreement
was most recently approved by the Board of Trustees, including a majority of
the Trustees who are not "interested persons," as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") (collectively, the
"Independent Trustees"), on June 17, 1998 and by shareholders on May 20, 1982.
The New Agreement was approved by the Board of Trustees, including a majority
of the Independent Trustees, on July 15, 1998, subject to shareholder
approval. Proxies were last solicited from shareholders on August 5, 1993 for
the purpose of voting on a reorganization of the Fund.
Pursuant to the Current Agreement, MFS provides the Fund with overall
investment management services, as well as general office facilities. Subject
to such policies as the Board of Trustees may determine, MFS makes investment
decisions for the Fund. For its services and facilities, MFS currently
receives an annual management fee under the Current Agreement, computed and
paid monthly, equal to a percentage of the average daily net assets and gross
income of the Fund, calculated in accordance with the table presented below:
AVERAGE DAILY NET ASSETS ($ MILLION) GROSS INCOME ($ MILLION)
- --------------------------------------- -------------------------------------
CURRENT PROPOSED CURRENT PROPOSED
APPLICABLE APPLICABLE APPLICABLE APPLICABLE
UP TO AND ANNUAL ANNUAL UP TO AND ANNUAL ANNUAL
OVER INCLUDING RATE RATE OVER INCLUDING RATE RATE
- ---- --------- ---- ---- ---- --------- ---- ----
$ 0 $100 0.40% 0.43% $ 0 $ 2 5.00% 0%
$100 $500 0.32% 0.43% $ 2 $10 4.00% 0%
$500 0.288% 0.43% $10 3.60% 0%
For the fiscal year ended September 30, 1997, MFS received management fees
under the Current Agreement of $10,295,600, equivalent on an annualized basis
to 0.34% of the Fund's average daily net assets (the "Current Effective Fee").
Shareholders of the Fund are being asked to approve the New Agreement,
pursuant to which the gross income component of the investment management fee
paid by the Fund to MFS would be eliminated and the investment management fee
paid to MFS by the Fund would be calculated at the rate of 0.43% of the
average daily net assets of the Fund (the "Proposed Fee"). This fee change is
the only material difference between the Current Agreement and the New
Agreement. If approved by shareholders at the Special Meeting, the New
Agreement will become effective on November 1, 1998. If the amendments are not
approved by shareholders, the Current Agreement will continue in effect in its
present form, subject to the continuation and termination provisions contained
therein and described below. A description of the New Agreement and the
services provided by MFS thereunder is set forth below. See "Description of
the New Agreement" below.
In approving the New Agreement and recommending its approval by shareholders,
the Trustees considered the best interests of the shareholders of the Fund,
and took into account all such factors as they deemed relevant. See "Review
Process of the Board of Trustees" below.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUND
APPROVE THE NEW AGREEMENT.
RATIONALE FOR THE PROPOSAL
At the request of MFS, the Board of Trustees discussed approval of the New
Agreement at meetings held on April 7, 1998, May 20, 1998, June 17, 1998 and
July 15, 1998. In addition, the Independent Trustees also discussed approval
of the New Agreement with their independent counsel at a meeting held on April
23, 1998. In evaluating the New Agreement, the Board of Trustees requested and
received substantial information from MFS to assist in their deliberations.
The Trustees utilized reports sourced by Lipper Analytical Services, Inc.
("Lipper"), a nationally recognized, independent service that monitors mutual
fund expenses and performance, and significant amounts of information
furnished by MFS. The Trustees reviewed these materials and considered various
matters, discussed below, in determining the reasonableness and fairness of
the proposed increase in the management fee payable by the Fund and reached
the following conclusions:
o The Trustees considered the management fees paid by comparable funds
available to investors. The Trustees concluded that the current fee rate is
substantially below average for comparable funds in the Lipper Growth
category and the Trustees unanimously recommend that it be raised,
recognizing that the Proposed Fee will remain well below the average for
comparable funds. The Trustees believe the Proposed Fee is in the best
interests of the shareholders of the Fund and is reasonable in light of the
comparative fee information, the Fund's performance, MFS' expenses and
profitability in managing the Fund and the nature, quality and scope of
services provided by MFS to the Fund.
o In today's highly complex investment world, the Trustees and MFS both
believe an increased fee will help MFS remain competitive in attracting,
retaining and motivating the top quality investment personnel and other key
personnel necessary to manage the Fund and provide new and innovative
services to an expanded shareholder base.
o The Trustees considered today's ever- expanding securities markets, which
operate continuously around the globe. The Trustees believe that additional
resources will help the Adviser maintain state-of-the-art computer systems,
access information and analyze strategies using the most sophisticated tools
and methodologies. The Trustees also believe that additional resources are
needed to administer the Fund by virtue of its size and the growing
complexities of portfolio transactions domestically and internationally.
o The Trustees considered the fact that the Fund is now managed by a team of
investment research analysts rather than a single portfolio manager. The
team of investment research analysts allocate the Fund's assets among
industries and then individually select securities within their assigned
industry responsibility. The Trustees recognized that while this approach
allows for more in-depth research, it also requires additional resources.
o The Trustees considered the fact that the production of current income is no
longer a factor in how the Fund is managed and therefore believe that an
income component to the management fee is no longer appropriate and have
eliminated this component from the Proposed Fee.
The Trustees reached these conclusions after careful discussion and analysis
and believe that they have carefully and thoroughly examined the questions and
alternatives. In recommending that the shareholders of the Fund approve the
New Agreement, the Independent Trustees have considered what they believe to
be the best interests of the shareholders of the Fund. In so doing the
Independent Trustees were advised by independent counsel, retained by the
Independent Trustees and paid by the Fund, as to the nature of the matters to
be considered and the standards to be used in reaching their decision.
REVIEW PROCESS OF THE BOARD OF TRUSTEES
In reaching its decision, the Board of Trustees examined and weighed many
factors, including: (1) the nature, quality and extent of the services
rendered and the results achieved by MFS in the areas of investment management
(including investment performance comparisons with other mutual funds and
certain indices) and administrative services; (2) changes in the mutual fund
industry that have affected the Fund; (3) the payments received by MFS and its
affiliates from all sources involving both the Fund and the other investment
companies advised by MFS; (4) extensive financial, personnel and structural
information as to MFS' organization, including the costs borne by, and
profitability of, MFS and its affiliates in providing service of all types to
the Fund and to the other investment companies advised by MFS; (5) the
organizational capabilities, financial condition and future capital
requirements of MFS; (6) an analysis of the proposed fee rate changes; (7)
information concerning the Fund's expense ratio on both an existing and pro
forma basis; (8) information as to the management fees paid by the other funds
advised by MFS; (9) competitive industry fee structures and expense ratios
including, specifically, the relationship of the proposed management fee rates
to those typically paid by funds with similar investment objectives; (10) a
comparison of the overall profitability of MFS to the profitability of certain
other investment advisers, including MFS' profitability with respect to the
Fund; and (11) other factors the Board of Trustees deemed relevant. Certain of
these factors are discussed in more detail below.
PORTFOLIO PERFORMANCE. The Board of Trustees determined that MFS has provided
high quality services with respect to the Fund. In particular, the Trustees
reviewed the performance for Class A shares of the Fund (as representative of
the Fund as a whole) against their Lipper peer group and noted that, for the
ten-year period ended December 31, 1997, the Fund was ranked 69th by Lipper
out of 177 comparable mutual funds ranked by Lipper. During this same period,
the Fund had an aggregate total return of 387.49% as compared to a return of
358.00% for the Lipper Growth Fund Average.
The Board of Trustees also determined that the Fund's absolute performance and
performance relative to comparable mutual funds and indices would not have been
materially affected if the proposed increased advisory fees had been in effect
throughout 1995, 1996 and 1997.
The Fund's average annual total return performance in comparison with the
annualized total return performances of the Lipper Growth Fund Average and the
S&P 500 Index is set forth below:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
ENDED ENDED ENDED ENDED
12/31/97 12/31/97 12/31/97 12/31/97
-------- -------- -------- --------
Lipper Growth Fund Average ....... 25.34% 25.06% 16.52% 16.09%
Standard & Poor's 500 Index ...... 33.36% 31.15% 20.27% 18.05%
MFS Research Fund
Class A ........................ 20.52% 27.63% 20.40% 17.16%
Class B ........................ 19.73% 26.72% 19.66%(1) 16.81%(1)
Class C ........................ 19.75% 26.77%(2) 19.73%(2) 16.84%(2)
Class I ........................ 22.16% 27.79%(3) 20.49%(3) 17.21%(3)
- ----------
(1) Class B share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of Class B shares on September
7, 1993. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class B shares differ. Class B share
performance has been adjusted to take into account differences in sales
charges but has not been adjusted to reflect differences in operating
expenses (e.g., Rule 12-b-1 fees), which generally are lower for Class A
shares.
(2) Class C share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of Class C shares on January 3,
1994. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class C shares differ. Class C share
performance has been adjusted to take into account differences in sales
charges but has not been adjusted to reflect differences in operating
expenses (e.g., Rule 12b-1 fees), which generally are lower for Class A
shares.
(3) Class I share performance includes the performance of the Fund's Class A
shares for the periods prior to the inception of Class I shares on January
2, 1997. Sales charges, expenses and expense ratios, and therefore
performance for Class I and A shares differ. Class I share performance has
been adjusted to take into account differences in sales charges but has
not been adjusted to reflect differences in operating expenses (e.g., Rule
12b-1 fees), which generally are lower for Class I shares.
The S&P 500 Index is unmanaged, assumes reinvestment of estimated dividends
and does not reflect fees and expenses. Investors may not invest directly in
an index. The Lipper Growth Fund Average and the Fund's performance assume
reinvestment of capital gains and dividends and do not reflect the deduction
of sale charges.
The Trustees also considered the nature, quality and extent of the investment
advisory services rendered by MFS to the Fund as well as the background of the
portfolio managers and other executive personnel of MFS. MFS provided insights
on the competition it faces in attracting top quality personnel and the
Trustees reviewed MFS' recent additions of portfolio managers, analysts and
others involved in research and quantitative analysis.
The Trustees reviewed the 27-year performance history of the Fund under MFS
and the fact that MFS and its predecessors have been the sole investment
adviser to the Fund since 1971. The Trustees gave substantial weight to that
history and the historical importance of continuity through the many market
cycles during this period.
CHANGES IN THE MUTUAL FUND INDUSTRY. The Board of Trustees considered the
effect of changes in the mutual fund industry since the Fund's last management
fee increase in 1974. Among these changes, the Trustees considered the
increasing globalization of the economy and its impact on the management of
the Fund. The Trustees also considered the increased competitiveness in the
mutual fund industry that has resulted from the growth in the total assets
under management and in the number of funds offered. They evaluated the impact
of multiple classes of shares and a need for enhanced marketing efforts by
MFS, the increased expense incurred by MFS and its affiliates (primarily the
Fund's distributor, MFD) in connection with such enhanced marketing efforts,
and their effectiveness. The Trustees reviewed these factors in assessing the
current competitive environment in the mutual fund industry. However, in
evaluating the fee increase proposal, the Trustees specifically excluded from
consideration MFS' marketing expenditures and their effect on MFS'
profitability.
ACTUAL AND PRO FORMA MANAGEMENT FEES AND EXPENSES. The Board of Trustees
considered the effect of the proposed management fee increase on the Fund's
fee rates and annual expense ratios (which include the management fee and all
other operating expenses incurred by the Fund). The table set forth below
under "Effect of an Increase in the Management Fee" provides comparative data
for the fiscal year ended September 30, 1997, assuming that the proposed fee
increase had been in effect throughout the year.
COSTS OF PROVIDING SERVICE AND PROFITABILITY. The Board of Trustees reviewed
information concerning profitability of the MFS' investment advisory and other
activities and its financial condition based on results from 1995 through
1997. The information considered by the Trustees included operating profit
margin information for MFS' investment company business alone (i.e., excluding
results of its affiliates) and on a consolidated basis both before and after
MFS' net expenditures for marketing. The Trustees also reviewed profitability
data for 1995, 1996 and 1997 for MFS on a fund-by-fund basis. In addition,
such data were reviewed on a pro forma basis assuming that the proposed
management fee increase had been in effect throughout 1995, 1996 and 1997. In
assessing this information, the Trustees considered the fact that the size of
the Fund results in certain economies of scale to the Adviser. The Trustees
recognized that the growth of assets under management by the Adviser would
have positive effects on the Adviser's profitability even without the proposed
fee increase; however, the Trustees also considered the fact that the proposed
fee increase would enhance the Adviser's ability to attract and retain highly
qualified investment and administrative professionals in a competitive
investment management environment, and thus address the expectations of the
Trustees regarding the performance of the Fund that only such professionals
can satisfy.
Certain assumptions and methods of allocation utilized by the Adviser in
preparing fund-by-fund data were reviewed by the Trustees. While the Adviser
believes that the methods of allocation used were reasonable, there are
limitations inherent in allocating costs to multiple individual advisory
products served by an organization such as the Adviser's where each of the
advisory products draws on, and benefits from, the pooled research of the
organization.
COMPARISONS WITH OTHER FUNDS. The Board of Trustees considered the management
fees paid by other funds with similar investment objectives. In addition to
comparing the proposed management fee, the Board also considered the
comparability of operating expense ratios with ratios of these other
investment companies. Notwithstanding that under the proposal the Fund's
management fee and operating expense ratios would increase, the Trustees
believe that the management fee and, accordingly, its operating expense
ratios, would remain well below industry averages. Based upon the data
reported in Lipper Directors' Analytical Data -- First Edition 1998, the
Fund's Current Effective Fee of 0.34% in 1997 was well below the 0.74% average
management fee of the 706 investment companies with a similar investment
objective, and on a pro forma basis giving effect to the Proposed Fee, its
ratio of management fee to average net assets of 0.43% would also have been
well below average. The Fund's ratios of operating expenses to average net
assets for Class A, Class B, Class C and Class I shares were 0.96%, 1.61%,
1.61% and 0.61%, respectively, for the fiscal year ended September 30, 1997.
After giving effect to the Proposed Fee, the ratios of operating expenses to
average daily net assets for Class A, Class B, Class C and Class I shares
would have been 1.05%, 1.70%, 1.70% and 0.70%, respectively.
NON-ADVISORY SERVICES PROVIDED TO THE FUND. The Board of Trustees reviewed the
general nature of the non-investment advisory services performed by MFS, such
as administrative, transfer agency and distribution services and the fees
received by MFS for performing such services. In addition to reviewing such
services, the Trustees also considered the organizational structure employed
by MFS to provide those services.
EFFECT OF AN INCREASE IN THE MANAGEMENT FEE
The effect of the proposed increase in the Fund's management fee from its
Current Effective Fee of 0.34% to the Proposed Fee of 0.43% per annum is
illustrated below. For the fiscal year ended September 30, 1997, this
information illustrates the amount the Fund paid to MFS under the Current
Effective Fee, and the amount the Fund would have paid to MFS had the Proposed
Fee been in effect for the entire period.
FISCAL YEAR ENDED SEPTEMBER 30, 1997
% OF AVERAGE
MANAGEMENT FEE DAILY NET ASSETS AMOUNT OF FEE % CHANGE
- -------------- ---------------- ------------- --------
Current Effective Fee 0.34% $10,295,600
Proposed Fee 0.43% $13,039,979
Difference 0.09% $ 2,744,379 26.7%
In addition to its provision of investment management services to the Fund,
MFS also acts as the Fund's administrator and provides administrative services
to the Fund for which it received an administrative services fee from the Fund
of $252,317 (equivalent on an annualized basis to 0.01% of the Fund's average
daily net assets) for the period March 1, 1997 (commencement of Administration
Agreement) to September 30, 1997. For fiscal year 1998, the Fund will pay MFS
a fee calculated as a percentage of the average daily net assets of the Fund
at a maximum annual rate of 0.015% for these services. MFS Service Center,
Inc. ("MFSC"), a wholly owned subsidiary of MFS, provides shareholder agency
services to the Fund for which it received a fee from the Fund of $4,118,278
(equivalent on an annualized basis to 0.13% of the Fund's average daily net
assets) for the fiscal year ended September 30, 1997. For fiscal year 1998,
the Fund will pay MFSC a fee calculated as a percentage of the average daily
net assets of the Fund at an effective annual rate of 0.1125% for these
services.
Shown below is a chart of the expenses and fees the Fund incurred during its
fiscal year ended September 30, 1997, together with pro forma fees the Fund
would have paid had the proposed management fee of 0.43% per annum been in
effect the entire period.
EXPENSE SUMMARY
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES:
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
---------------------- ---------------------- ---------------------- --------------------
PRO PRO PRO PRO
CURRENT FORMA CURRENT FORMA CURRENT FORMA CURRENT FORMA
------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Initial Sales Charge Imposed
on Purchases of Fund Shares (as a
percentage of offering price) ..... 5.75% 5.75% None None None None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption See See
proceeds, as applicable) .......... Below(1) Below(1) 4.00% 4.00% 1.00% 1.00% None None
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):
CLASS A CLASS B CLASS C CLASS I
---------------------- ---------------------- ---------------------- --------------------
PRO PRO PRO PRO
CURRENT FORMA CURRENT FORMA CURRENT FORMA CURRENT FORMA
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees ..................... 0.34% 0.43% 0.34% 0.43% 0.34% 0.43% 0.34% 0.43%
Rule 12b-1 Fees ..................... 0.35%(2) 0.35%(2) 1.00%(3) 1.00%(3) 1.00%(3) 1.00%(3) None None
Other Expenses(4) ................... 0.27% 0.27% 0.27% 0.27% 0.27% 0.27% 0.27% 0.27%
Total Operating Expenses ............ 0.96% 1.05% 1.61% 1.70% 1.61% 1.70% 0.61% 0.70%
- ----------
(1) Purchases of $1 million or more and certain purchases by retirement plans are not subject to an initial sales charge;
however, a contingent deferred sales charge ("CDSC") of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.
(2) The Fund has adopted a distribution plan for its shares in accordance with Rule 12b-1 under the 1940 Act (the "Distribution
Plan"), which provides that it will pay distribution/service fees aggregating up to (but not necessarily all of) 0.35% per
annum of the average daily net assets attributable to the Class A shares. The 0.35% per annum distribution/ service fee is
reduced to 0.25% per annum for shares purchased prior to March 1, 1991. Distribution expenses paid under the Plan, together
with the initial sales charge, may cause long-term shareholders to pay more than the maximum charge that would have been
permissible if imposed entirely as an initial sales charge.
(3) The Fund's Distribution Plan provides that it will pay distribution/ service fees aggregating up to (but not necessarily all
of) 1.00% per annum of the average daily net assets attributable to Class B shares and Class C shares, respectively.
Distribution expenses paid under the Distribution Plan with respect to Class B or Class C shares, together with any CDSC
payable upon redemption of Class B or Class C shares, may cause long-term shareholders to pay more than the maximum sales
charge that would have been permissible if imposed entirely as an initial sales charge.
(4) The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent, and may enter into other such arrangements and directed
brokerage arrangements (which would also have the effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."
</TABLE>
EXAMPLE OF EXPENSES
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) a 5% annual return and, unless otherwise
noted, (b) redemption at the end of each of the time periods indicated:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Current Effective Fee ............... $67 $86 $108 $169
Proposed Fee ........................ $68 $89 $112 $178
CLASS B SHARES (1) (1) (1) (1)
Current Effective Fee ............... $56 $16 $81 $51 $108 $88 $174(2) $174(2)
Proposed Fee ........................ $57 $17 $84 $54 $112 $92 $183 $183
CLASS C SHARES
Current Effective Fee ............... $26 $16 $51 $51 $ 88 $88 $191 $191
Proposed Fee ........................ $27 $17 $54 $54 $ 92 $92 $201 $201
CLASS I SHARES
Current Effective Fee ............... $ 6 $20
Proposed Fee ........................ $ 7 $22
- ----------
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after purchase; therefore, years nine and ten reflect
Class A expenses.
</TABLE>
The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear
directly or indirectly.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
FEES OF SIMILAR MFS FUNDS
MFS also acts as the investment adviser to several registered investment
companies having similar investment objectives to that of the Fund.
The table in Appendix A sets forth the name of each investment company managed
by MFS having similar investment objectives to the Fund that primarily invest
in equity securities, the annual rate of compensation (i.e., the fee MFS is
paid for its services as investment adviser to such funds) and the net assets
of such funds as of June 30, 1998.
FEES OF SIMILAR COMPETITIVE FUNDS
The Proposed Fee of 0.43% is significantly lower than the Lipper Growth Fund
Average of 0.74%. Moreover, the proforma total expense ratio for Class A would
have been in the third quartile of growth mutual funds as tracked by Lipper,
or more than half of all funds with similar investment objectives will still
have total expense ratios in their most recent fiscal year higher than that of
the Fund's.
INVESTMENT ADVISER
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts
Investors Trust. Net assets under the management of the MFS organization were
approximately $87.7 billion on behalf of over 3.3 million investor accounts as
of June 30, 1998. MFS is a subsidiary of Sun Life Assurance Company of Canada
(U.S.) Financial Services Holdings, Inc. ("Sun Life of Canada (U.S.)") which
in turn is an indirect wholly owned subsidiary of Sun Life Assurance Company
of Canada ("Sun Life"). The Directors of MFS are Jeffrey L. Shames, John W.
Ballen, Arnold D. Scott, Kevin R. Parke, Thomas J. Cashman, Joseph Dello
Russo, William W. Scott, Jr., John D. McNeil and Donald A. Stewart. Mr. Shames
is the Chairman and Chief Executive Officer of MFS, Mr. Ballen is the
President and the Chief Investment Officer of MFS, Mr. Arnold Scott is the
Secretary and a Senior Executive Vice President of MFS, Mr. Parke is the Chief
Equity Officer, Director of Equity Research and an Executive Vice President of
MFS, Mr. Cashman is the President of MFS Institutional Advisors, Inc., MFS'
institutional investment management subsidiary, Mr. Dello Russo is the Chief
Financial Officer and an Executive Vice President of MFS and Mr. William Scott
is the President of MFS Fund Distributors Inc., MFS' mutual fund sales company
subsidiary. Messrs. McNeil and Stewart are the Chairman and the President,
respectively, of Sun Life. The address of Messrs. Shames, Ballen, Arnold
Scott, Parke, Cashman, Dello Russo and William Scott is 500 Boylston Street,
Boston, Massachusetts 02116. The address of Messrs. McNeil and Stewart is 150
King Street West, Toronto, Canada M5H 1J9. Sun Life, a mutual life insurance
company, is one of the largest international life insurance companies and has
been operating in the United States since 1895, establishing a headquarters
office here in 1973. The executive officers of MFS report to the Chairman of
Sun Life.
James R. Bordewick, Jr., Stephen E. Cavan, W. Thomas London, James O. Yost,
Ellen M. Moynihan and Mark E. Bradley, all of whom are officers of MFS, are
also officers of the Trust. [As of [ ], 1998, no officer or Trustee
of the Fund owned beneficially greater than 1% of the outstanding shares of
the Fund. As of such date, the officers and Trustees of the Fund in the
aggregate owned beneficially less than 1% of the outstanding shares of the
Fund.]
MFS also serves as investment adviser to over 150 other funds, including the
MFS Family of Funds (the "MFS Funds"), MFS Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun Life Series
Trust, and seven variable accounts, each of which is a registered investment
company established by Sun Life of Canada (U.S.) in connection with the sales
of various fixed/variable annuity contracts. MFS and its wholly owned
subsidiary, MFS Institutional Advisors, Inc., also provide investment advice
to a large number of private clients.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS. Some simultaneous
transactions are inevitable when several clients receive investment advice
from MFS, particularly when the same security is suitable for more than one
client. While in some cases this arrangement could have a detrimental effect
on the price or availability of the security as far as the Fund is concerned,
in other cases, however, it may produce increased investment opportunities for
the Fund.
Broker-dealers may be willing to furnish statistical, research and other
factual information or services to MFS 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.
For the current fiscal year, the Board of Trustees (together with the Boards
of Trustees of the other MFS Funds) have directed MFS to allocate a total of
$54,160 of commission business from the Fund and the MFS Funds to the Pershing
Division of Donaldson, Lufkin and Jenrette as consideration for the annual
renewal of certain publications provided by Lipper (which provides information
useful to the Board of Trustees in reviewing the relationship between the Fund
and MFS).
The address of MFS and MFS Fund Distributors, Inc. ("MFD"), the Fund's
principal underwriter, is 500 Boylston Street, Boston, Massachusetts 02116.
DESCRIPTION OF THE NEW AGREEMENT
As noted above, the Current Agreement and the New Agreement are identical
except that the New Agreement eliminates the gross income component to the
investment management fee and provides for the payment by the Fund to MFS of a
management fee based solely on the Fund's average daily net assets at the rate
of 0.43% per annum, rather than the Current Effective Fee of 0.34% per annum
(the New Agreement also has a new commencement date and termination date).
Under the New Agreement, MFS provides portfolio management services for the
Fund, including investment research, advice and supervision of the Fund's
assets.
The Fund pays its expenses (other than those assumed by MFS or MFD),
including: investment advisory and administrative services; governmental fees;
interest charges; taxes; membership dues in the Investment Company Institute
allocable to the Fund; fees and expenses of independent auditors, of legal
counsel, and of any transfer agent, registrar or dividend disbursing agent of
the Fund; expenses of repurchasing and redeeming shares; expenses of
preparing, printing and mailing share certificates, shareholder reports,
notices, proxy statements and reports to governmental officers and
commissions; brokerage and other expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance
premiums; fees and expenses of the Fund's custodian and transfer agent, for
all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; and expenses of shareholder meetings. Expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
are borne by the Fund except that its Distribution Agreement with MFD, the
Fund's principal underwriter, requires MFD to pay for prospectuses that are to
be used for sales purposes.
MFS pays the compensation of the Trust's officers who are affiliated with MFS
and any Trustee who is an officer of MFS. The Adviser also furnishes at its
own expense all necessary portfolio management services, including office
space, equipment, clerical personnel, investment advisory facilities, and all
executive and supervisory personnel necessary for managing the Fund's
investments and effecting transactions in its portfolio securities.
The New Agreement provides that in the absence of willful misfeasance, bad
faith or gross negligence, MFS shall not be liable for any act or omission in
the course of, or in connection with, the rendering of its services
thereunder.
The New Agreement, if approved, will remain in effect pursuant to its terms
until August 1, 2000 (for the Current Agreement, this date is August 1, 1999),
and thereafter for successive one-year periods if and so long as such
continuation is specifically approved at least annually by (a) the Board of
Trustees or (b) the affirmative vote of a majority of the outstanding voting
securities of the Fund, provided that in either event the continuation also is
approved by a majority of the Independent Trustees by a vote cast in person at
a meeting called for the purpose of voting on such approval. Under the 1940
Act, a "vote of a majority of the outstanding voting securities" of the Fund
means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the shares present at a
shareholders' meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy (a "1940 Act Majority Vote").
The New Agreement is terminable, without penalty, by the Board of Trustees, by
a 1940 Act Majority Vote of the Fund's shareholders or by MFS, in each case on
not more than sixty nor less than thirty days' written notice to the other
party and to the Fund. The New Agreement terminates automatically in the event
of its assignment (as defined in the 1940 Act).
The description of the New Agreement is qualified in its entirety by reference
to the New Agreement which is attached as Appendix B to this proxy statement.
REQUIRED VOTE
Approval of the New Agreement requires a 1940 Act Majority Vote of the Fund's
shareholders (as defined above).
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE NEW AGREEMENT.
ITEM 2. TO APPROVE OR DISAPPROVE THE ELIMINATION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES
As described in the following proposals, the Trustees are recommending that
shareholders approve the elimination of certain investment restrictions
currently observed by the Fund. The purpose of these proposed changes is to
increase the Fund's investment flexibility and reduce administrative and
compliance burdens by eliminating certain restrictive policies which were
required at one time by various state securities authorities but which are no
longer required under current regulations.
BACKGROUND
The 1940 Act requires a registered investment company like the Fund to have
certain specific investment policies which can be changed only by a
shareholder vote. Investment companies may also elect to designate other
policies which may be changed only by a shareholder vote. Both types of
policies are often referred to as "fundamental" policies. (In this Proxy
Statement, the word "restriction" is sometimes used to describe a policy.)
Some fundamental policies have been adopted in the past by the Fund to reflect
certain regulatory, business or industry conditions which are no longer in
effect. In particular, the National Securities Markets Improvement Act of 1996
permits investment companies to eliminate investment restrictions formerly
imposed by state securities ("Blue Sky") regulations. Accordingly, MFS
undertook a review of the Fund's fundamental policies to determine whether any
policies which are not required by the 1940 Act could be eliminated.
The proposed elimination of certain of the Fund's fundamental policies are
discussed in detail below. Please refer to Appendix C for a full description
of these policies. By eliminating policies which are no longer required the
Trustees believe that MFS' ability to manage the Fund's portfolio in a
changing regulatory or investment environment will be enhanced and the process
of monitoring the compliance with investment restrictions will be simplified.
Accordingly, investment management opportunities will be increased. The
references to the Fund's investment restrictions correspond to the paragraphs
in Appendix C.
ELIMINATION OF CERTAIN RESTRICTIONS
The Trustees propose to delete Restrictions (10), (11), (12), (13), (14) and
(15) (see "Investment Objective, Policies and Restrictions" in the Fund's
Statement of Additional Information), which were formerly required by various
state Blue Sky laws, because such restrictions are not required to be
fundamental policies under the 1940 Act and/or the practices referred to
therein are otherwise governed by the 1940 Act.
A. RESTRICTION CONCERNING INVESTMENT IN OTHER INVESTMENT COMPANIES.
Restriction (10) concerns investment in other investment companies and
prohibits the Fund from investing in securities of other investment companies.
This restriction was formerly required by certain states' Blue Sky laws.
Investment in other investment companies is otherwise regulated by the 1940
Act, therefore the Trustees believe this restriction is no longer necessary.
B. RESTRICTION CONCERNING INVESTMENTS IN UNSEASONED ISSUERS.
Restriction (11) concerns investments of more than 5% of the Fund's assets in
"unseasoned issuers" (e.g., companies which have been in operation for less
than three years). This restriction was formerly required by certain states'
Blue Sky laws. The Adviser recommended the elimination of this restriction in
order to provide the Fund with the maximum amount of flexibility.
Unseasoned issuers may have relatively small equity capitalizations (e.g.,
under $1 billion). Although these companies may provide greater opportunities
for increased investment return, they also involve greater risk. These
companies often have limited product lines, markets or financial resources.
The securities of these companies may trade less frequently and in limited
volume, and only in the over-the-counter market or on a regional securities
exchange. As a result, these securities may fluctuate in value more than those
of larger, more established companies. The Trustees believe that elimination
of the policy will increase the flexibility of MFS in managing the Fund's
assets by permitting investments by the Fund in unseasoned issuers that
otherwise meet the investment objective and policies of the Fund. While
securities of these issuers may be subject to greater risk, the Trustees
believe that the increasing prevalence of unseasoned issuers, the investment
opportunities offered by such issuers, and the fact that any such investments
will be made in accordance with the investment objective and policies of the
Fund, warrants the elimination of the current restriction.
C. RESTRICTION CONCERNING TRANSACTIONS WITH AFFILIATES.
Restriction (12) prohibits the Fund from investing in securities of issuers in
which management of the Fund or MFS owns a certain percentage of securities.
This restriction was formerly required by certain states' Blue Sky laws. MFS
recommended the elimination of this restriction in order to provide the Fund
with the maximum amount of flexibility.
If this restriction is eliminated the Fund would be able to invest in the
securities of any issuer without regard to ownership in such issuer by
management of the Fund or MFS, except to the extent prohibited by the Fund's
investment objective and policies and the 1940 Act. Such transactions are
circumscribed by the 1940 Act's provisions on affiliated transactions and MFS
maintains a code of ethics to monitor transactions affecting the Fund;
therefore, the Trustees believe this restriction is no longer necessary.
D. RESTRICTION CONCERNING PURCHASING SECURITIES ON MARGIN.
Restriction (13) concerns purchasing securities on margin and was required in
the past by certain states' Blue Sky laws. MFS recommended elimination of this
restriction to provide the Fund with maximum flexibility. The Fund's potential
use of margin transactions beyond transactions in futures and options and for
the clearance of purchases and sales of securities, including the use of
margin in ordinary securities transactions, is generally limited by the
current position taken by the staff of the Securities and Exchange Commission
(the "SEC"), that margin transactions with respect to securities are
prohibited under the 1940 Act because they create senior securities. "Margin
transactions" involve the purchase of securities with money borrowed from a
broker, with cash or eligible securities being used as collateral against the
loan. The Fund's ability to engage in margin transactions is also limited by
its borrowing policies, which permit the Fund to borrow money in limited
circumstances and only from banks. The Trustees believe that there are
adequate safeguards in place and that the Fund will benefit from the increased
flexibility provided by the elimination of this restriction.
E. RESTRICTION CONCERNING SHORT SALES.
Restriction (14) concerns short sales and prohibits the Fund from engaging in
such transactions unless they are "against the box." This restriction was
formerly required by certain states' Blue Sky laws. MFS recommended the
elimination of this restriction in order to provide the Fund with the maximum
amount of flexibility.
In a typical short sale the Fund borrows securities from a broker that it
anticipates will decline in value in order to sell to a third party. The Fund
becomes obligated to return securities of the same issue and quantity at some
future date, and it realizes a profit or loss depending upon whether the
market price of the security decreases or increases between the date of the
short sale and the date on which the Fund must replace the borrowed security.
Since the value of a particular security can increase without limit, the Fund
could potentially realize losses with respect to short sales that are not
"against the box" (short sales where the Fund owns or has the right to acquire
at no added cost securities identical to those sold short), that could be
significantly greater than the value of the securities at the time they are
sold short.
F. RESTRICTION CONCERNING CERTAIN TYPES OF OPTIONS.
Restriction (15) concerns purchasing certain types of options. This
restriction was formerly required by certain states' Blue Sky laws. MFS
recommended the elimination of this restriction in order to provide the Fund
with the maximum amount of flexibility.
If the proposal is approved, the Fund would no longer be prohibited from
engaging in a variety of options transactions for hedging purposes and to
increase investment return. MFS believes that this enhanced flexibility could
assist the Fund in achieving its investment objective under certain market
conditions. A call option gives the holder the right to purchase, and
obligates the writer to sell, an asset, such as a security, a currency or a
unit of an index, at the exercise price prior to or on the expiration date. A
put option gives the holder the right to sell, and obligates the writer to
buy, an asset at the exercise price prior to or on the expiration date. In
order for a put option purchased by the Fund to be profitable, the market
price of the underlying asset must decline sufficiently below the exercise
price to cover the premium and transaction costs paid by the Fund. In order
for a call option purchased by the Fund to be profitable, the market price of
the underlying asset must rise sufficiently above the exercise price to cover
the premium and transaction costs paid by the Fund. If an option expires
unexercised, the Fund will receive nothing for its premium payment.
When the Fund writes a call option, it gives up the opportunity profit from
any increase in the price of an asset above the exercise price of the option;
when it writes a put option, the Fund takes the risk that it will be required
to purchase an asset from the option holder at a price above the current
market price of that asset. The Fund receives a premium for writing a call or
a put option (representing the cost of the option), which increases the return
if the option expires unexercised or is closed out at a net profit.
The successful use of options depends on the ability of MFS to forecast
correctly interest rate and market movements. The effective use of options
also depends on the Fund's ability to terminate option positions at times when
MFS deems it desirable to do so. There is no assurance that the Fund will be
able to effect closing transactions at any particular time or at an acceptable
price. Disruptions such as trading interruptions or restrictions on option
exercise in the markets for securities and other assets underlying options
purchased or sold by the Fund could result in losses on an option, including
the entire investment by the Fund in the option.
REQUIRED VOTE
Approval of each of these proposals requires a 1940 Act Majority Vote of the
Fund's shareholders (as defined above).
THE TRUSTEES RECOMMEND A VOTE FOR APPROVAL OF PROPOSALS 2A-F.
The adoption of any of these proposals is not contingent on the adoption of
any other proposal. If the proposals are adopted by the shareholders of the
Fund, they will take effect immediately. If any proposal is not approved by
the shareholders, the Fund's present investment restriction relating to that
proposal will remain in effect.
ITEM 3. RATIFICATION OF SELECTION OF ACCOUNTANTS
It is intended that proxies not limited to the contrary will be voted in favor
of ratifying the selection, by a majority of the Independent Trustees of the
Trust, of Deloitte & Touche LLP pursuant to Section 32 (a) of the 1940 Act as
independent public accounts to certify every financial statement of the Trust
on behalf of the Fund required by any law or regulation to be certified by
independent public accountants and filed with the SEC in respect of all or any
part of the fiscal year ending September 30, 1998. Deloitte & Touche LLP has
no direct or material indirect interest in the Trust or the Fund. A
representative of Deloitte & Touche LLP is expected to be present at the
Special Meeting and will have an opportunity to make a statement if he desires
to do so. Such representative is also expected to be available to respond to
appropriate questions.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
APPROVAL OF THIS ITEM.
MANNER OF VOTING PROXIES
If an enclosed proxy is properly executed and returned in time to be voted at
the Special Meeting, (either by returning the paper proxy card or by
submitting your proxy electronically via the Internet or by telephone) the
shares represented thereby will be voted in accordance with the instructions
marked thereon. Unless instructions to the contrary are marked thereon, a
proxy will be voted "for" the matters listed in the accompanying Notice of
Special Meeting of Shareholders and "for" any other matters deemed
appropriate. If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote (sometimes called a broker "non-
vote" (that is, a proxy from a broker or nominee indicating that this person
has not received instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to which the
broker or nominee does not have discretionary power)), or is marked with an
abstention (collectively, "abstentions"), the shares represented thereby will
be considered to be present at the Special Meeting for purposes of determining
the existence of a quorum for the transaction of business. Abstentions will
not constitute a vote "for" or "against" a matter and will be disregarded in
determining the "votes cast" on an issue. Therefore, abstentions will have the
same effect as a vote "against" proposal 1 and proposals 2 A-F, and will have
no effect on proposal 3.
Proxy solicitations will be made primarily by mail, but proxy solicitations
also may be made by telephone, telegraph, electronic means or personal
interviews conducted by officers of the Fund, MFS, MFD, and/or MFSC, the
transfer agent for the Fund. In addition, Shareholder Communications
Corporation has been retained to assist in the solicitation of proxies, at an
estimated cost of $[ ] (depending on the extent of services provided). The
costs of the proxy solicitation and expenses incurred in connection with the
preparation of this proxy solicitation and expenses incurred in connection
with the preparation, printing and mailing of this proxy statement and its
enclosures will be borne by MFS and not by the Fund. MFS will reimburse banks,
brokers and other persons holding the Fund's shares registered in their names
or in the names of their nominees, for their expenses incurred in sending
proxy material to and obtaining proxies from the beneficial owners of such
shares.
The management knows of no other matters to be brought before the Special
Meeting. If, however, any other matters properly come before the Special
Meeting and any adjournments thereof, it is the management's intention that
proxies not limited to the contrary will be voted in accordance with the
judgment of the persons named in the enclosed form of proxy.
INTERNET AND TELEPHONE VOTING -- For shares that are registered in your name,
as well as for shares that you beneficially own and hold in "street name"
through a broker, you have the opportunity to vote via the Internet or by
telephone by utilizing a program provided through ADP Investor Communication
Services ("ADP"). The giving of such a proxy will not affect your right to
vote in person should you decide to attend the Special Meeting.
To vote via the Internet or telephone you will need the 12-digit "control"
number that appears on your proxy card. To vote via the Internet, please
access MFS or ADP on the World Wide Web at www.mfs.com or www.proxyvote.com,
respectively. To vote by telephone, please call the toll-free phone number
listed on your proxy card.
The Internet voting procedures are designed to authenticate shareholder
identities, to allow shareholders to give their voting instructions and to
confirm that shareholders' instructions have been recorded properly.
Shareholders voting via the Internet should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne by the shareholders.
SUBMISSION OF CERTAIN PROPOSALS
The Trust is a Massachusetts business trust, and as such is not required to
hold annual meetings of shareholders. However, meetings of shareholders may be
held from time to time to consider such matters as the approval of investment
advisory agreements or changes in certain investment restrictions. Proposals
of shareholders which are intended to be presented at future shareholder's
meetings must be received by the Fund a reasonable time prior to the Fund's
solicitation of proxies relating to such future meeting.
ADDITIONAL INFORMATION
[As of the Record Date, Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer
Lake Drive, Jacksonville, Florida, for the sole benefit of its customers, held
[ ] shares of the Fund ([ ]% of the outstanding shares) as holder of
record, but not beneficially and the MFS Defined Contribution Plan, 500
Boylston Street, Boston, MA, owned [ ] shares of the Fund ([ ]% of the
outstanding shares).]
The information contained in this proxy statement relating to MFS has been
furnished by MFS.
In the event that sufficient votes in favor of the proposals set forth in the
Notice of Special Meeting are not received by October 15, 1998, the persons
named as appointed proxies on the enclosed proxy card may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of the holders of a
majority of the shares present in person or by proxy at the session of the
meeting to be adjourned. The persons named as appointed proxies on the
enclosed proxy card will vote in favor of any such adjournment those proxies
required to be voted in favor of the proposal for which further solicitation
of proxies is to be made. They will vote against any such adjournment those
proxies required to be voted against such proposal. The costs of any such
additional solicitation and of any adjourned session will by borne by MFS.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY
September 4, 1998 MFS Research Fund
<PAGE>
APPENDIX A
<TABLE>
SIMILAR INVESTMENT COMPANIES ADVISED BY MFS
<CAPTION>
FEES
NET ASSETS ANNUAL RATE OF WAIVED OR
NAME OF FUND INVESTMENT OBJECTIVE AS OF 6/30/98 COMPENSATION REDUCED TO
- ------------ -------------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
MFS Research Series Long-term Capital Growth $ 436,575,487 0.75% N/A
MFS Institutional Research Fund Long-term Capital Growth 100,377,228 0.60% N/A
Research Series Long-term Capital Growth 906,587,164 0.75% of first $300M N/A
0.675% in excess of $300M
Massachusetts Investors Growth Long-term Growth of Capital
Stock Series and Future Income 10,506,868 0.75% N/A
Massachusetts Investors Growth
Stock Fund Long-term Capital Growth 3,414,753,286 0.50% of first $200M
0.40% of the next $300M
0.20% in excess of $500M
MFS Blue Chip Fund Capital Appreciation 718,325 0.65% 0.00%
Capital Appreciation Series Capital Appreciation 1,592,125,808 0.75% of first $1B N/A
0.675% of next $500M
0.65% in excess of $1.5B
Capital Appreciation Variable
Account Capital Appreciation 714,507,195 0.75% of first $300M N/A
0.675% in excess of $300M
Conservative Growth Series Long-term Capital Growth 1,601,456,358 0.55% N/A
MFS Core Growth Fund Capital Appreciation 3,491,629 0.75% 0.00%
MFS Emerging Growth Fund Long-term Capital Growth 11,983,420,539 0.75% of first $2.5B N/A
0.70% of next $4.5B
0.65% in excess of $7B
MFS Emerging Growth Series Long-term Capital Growth 669,828,643 0.75% N/A
Emerging Growth Series Long-term Capital Growth 628,794,750 0.75% of first $300M N/A
0.675% in excess of $300M
MFS Growth Opportunities Fund Capital Growth 1,116,168,543 0.50% of first $200M N/A
0.40% in excess of $200M
MFS Institutional Mid-Cap Growth
Equity Fund Long-term Capital Growth 48,935,778 0.60% N/A
MFS Managed Sectors Fund Capital Appreciation 458,014,507 0.75% N/A
Managed Sectors Series Capital Appreciation 376,781,159 0.75% of first $300M N/A
0.675% in excess of $300M
Managed Sectors Variable Account Capital Appreciation 131,258,367 0.75% of first $300M N/A
0.675% in excess of $300M
MFS Mid Cap Growth Fund Long-term Capital Growth 139,101,623 0.75% N/A
MFS Science & Technology Fund Capital Appreciation 3,643,651 0.75% 0.00%
MFS Special Opportunities Fund Capital Appreciation 4,202,288 0.75% 0.00%
MFS Strategic Growth Fund Capital Appreciation 444,232,305 0.75% N/A
MFS Utilities Fund Capital Growth 506,936,364 0.375% of Average Net
Assets; 6.25% Income 0.50%
MFS Utilities Series Capital Growth 52,718,860 0.75% N/A
Utilities Series Capital Growth 175,744,714 0.75% of first $300M N/A
0.675% in excess of $300M
MFS Capital Opportunities Fund Capital Appreciation 1,538,803,018 0.75% N/A
MFS Value Series Capital Appreciation 14,509,331 0.75% N/A
Capital Opportunities Series Capital Appreciation 156,113,801 0.75% of first $300M N/A
0.675% in excess of $300M
</TABLE>
<PAGE>
APPENDIX B
[FORM OF]
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of this 1st day of November, 1998 by
and between MFS SERIES TRUST V, a Massachusetts business trust (the "Trust")
on behalf of MFS RESEARCH FUND, a series of the Trust (the "Fund"), and
Massachusetts Financial Services Company, a Delaware corporation (the
"Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business management services to the
Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereto as herein set forth, the parties covenant and agree as follows:
ARTICLE 1: Duties of the Adviser. The Adviser shall provide the Fund with
such investment advice and supervision as the latter may from time to time
consider necessary for the proper management of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an
investment program and shall determine from time to time what securities shall
be purchased, sold or exchanged and what portion of the assets of the Fund
shall be held uninvested, subject always to the restrictions of the Trust's
Declaration of Trust, dated November 7, 1984, and By-Laws, as amended from
time to time (respectively, the "Declaration" and the "By-Laws"), and to the
provisions of the Investment Company Act of 1940. The Adviser shall also make
recommendations as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Fund's portfolio
securities shall be exercised. Should the Trustees at any time, however, make
any definite determination as to investment policy and notify the Adviser
thereof in writing, the Adviser shall be bound by such determination for the
period, if any, specified in such notice or until similarly notified that such
determination has been revoked. The Adviser shall take, on behalf of the Fund,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Fund's account with brokers
or dealers selected by it, and to that end the Adviser is authorized as the
agent of the Fund to give instructions to the Custodian of the Fund as to
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser is directed to seek for the Fund execution at the
most favorable price by responsible brokerage firms at reasonably competitive
commission rates. In fulfilling this requirement the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Fund to pay
a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Adviser determined
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the Adviser's
overall responsibilities with respect to the Fund and to other clients of the
Adviser as to which the Adviser exercises investment discretion.
ARTICLE 2: Allocation of Charges and Expenses. The Adviser shall furnish at
its own expense investment advisory and administrative services, office space,
equipment and clerical personnel necessary for servicing the investments of
the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange,
if desired by the Trust, for Directors, officers and employees of the Adviser
to serve as Trustees, officers or agents of the Trust if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by law. It is understood that the Fund will pay all of its
own expenses including, without limitation, compensation of Trustees not
affiliated with the Adviser, governmental fees, interest charges, taxes,
membership dues in the Investment Company Institute allocable to the Fund,
fees and expenses of independent auditors, of legal counsel and of any
transfer agent, registrar or dividend disbursing agent of the Fund, expenses
of repurchasing and redeeming shares, expenses of preparing, printing and
mailing stock certificates, prospectuses, shareholder reports, notices, proxy
statements and reports to governmental officers and commissions, brokerage and
other expenses connected with the execution of portfolio security
transactions, insurance premiums, fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities, keeping
of books and accounts and calculation of the net asset value of shares of the
Fund, expenses of shareholder meetings, and expenses relating to the issuance,
registration and qualification of shares of the Fund.
ARTICLE 3. Compensation of the Adviser. For the services to be rendered and
the facilities to be furnished as provided in Articles 1 and 2 above, the Fund
shall pay to the Adviser an investment advisory fee computed and paid monthly
at the annual rate equal to 0.43% of the Fund's average daily net assets on an
annualized basis. If the Adviser shall serve for less than the whole of any
period specified in this Article 3, the compensation to the Adviser shall be
prorated.
ARTICLE 4: Covenants of the Adviser. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Underwriter as
principals in making purchases or sales of securities or other property for
the account of the Fund, will not take a long or short position in the shares
of the Fund except as provided by the Declaration, and will comply with all
other provisions of the Declaration and By-Laws relative to the Adviser and
its Directors and officers.
ARTICLE 5: Limitation of Liability of the Adviser. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder. As used in this Article 5, the term
"Adviser" shall include Directors, officers and employees of the Adviser as
well as the corporation itself.
ARTICLE 6: Activities of the Adviser. The services of the Adviser to the
Fund are not to be deemed to be exclusive, the Adviser being free to render
services to others. The Adviser may permit other Fund clients to use the
letters "MFS" in their names. The Fund agrees that if the Adviser shall for
any reason no longer serve as the Adviser to the Fund, the Fund will change
its name so as to delete the letters "MFS". It is understood that Trustees,
officers, and shareholders of the Trust are or may be or become interested in
the Adviser, as Directors, officers, employees, or otherwise and that
Directors, officers and employees of the Adviser are or may become similarly
interested in the Fund and that the Adviser may be or become interested in the
Fund as a shareholder or otherwise.
ARTICLE 7: Duration, Termination and Amendments of this Agreement. This
Agreement shall become effective on the date of its execution and shall govern
the relations between the parties hereto thereafter, and shall remain in force
until August 1, 2000 on which date it will terminate unless its continuance
after August 1, 2000 is specifically approved at least annually (i) by the
vote of a majority of the Trustees of the Trust who are not interested persons
of the Trust or of the Adviser at a meeting specifically called for the
purpose of voting on such approval, and (ii) by the Trustees of the Trust, or
by vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations thereunder.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser, on not more than sixty days' nor
less that thirty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
This Agreement may be amended only if such amendment is approved by vote of a
majority of the outstanding voting securities of the Fund.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person", and "interested persons", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, and their respective seals to be hereto affixed, all as of
the day and year first written above. The undersigned Trustee of the Trust has
executed this Agreement not individually, but as Trustee under the Declaration
and the obligations of this Agreement are not binding upon any of the Trustees
or shareholders of the Trust, individually, but bind only the trust estate
applicable to the Fund.
MFS SERIES TRUST V
on behalf of MFS Research Fund
By: ---------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: ---------------------------------
Arnold D. Scott
Senior Executive Vice President
<PAGE>
APPENDIX C
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED TO BE ELIMINATED
As set forth in the Fund's current Statement of Additional Information, the
Fund may not:
(10) Purchase securities issued by any other investment company or investment
trust except by purchase in the open market where no commission or profit
to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation,
provided, however, that the Fund shall not purchase the securities of any
investment company or investment trust if such purchase at the time
thereof would cause more than 10% of the Fund's total assets (taken at
market value) to be invested in the securities of such issuer, and
provided, further, that the Fund shall not purchase securities issued by
any open-end investment company.
(11) Invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years' continuous
operation.
(12) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust, or is an officer or director of the
Adviser, if after the purchase of the securities of such issuer by the
Fund one or more of such persons owns beneficially more than 1/2 of 1%
of the shares or securities, or both, all taken at market value, of such
issuer, and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or
securities, or both, all taken at market value.
(13) Purchase any securities on margin except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales of securities.
(14) Sell any security which the Fund does not own unless by virtue of its
ownership of other securities the Fund has at the time of sale a right to
obtain securities without payment of further consideration equivalent in
kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions.
(15) Purchase or sell any put or call options or any combination thereof,
provided, that this shall not prevent the purchase, ownership, holding or
sale of warrants where the grantor of the warrants is the issuer of the
underlying securities.
<PAGE>
[FORM OF PROXY CARD]
[logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
MFS FUNDS
500 BOYLSTON STREET
BOSTON, MA 02116
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF TRUSTEES OF
MFS SERIES TRUST V (THE "TRUST") ON BEHALF OF MFS(R) RESEARCH FUND
Proxy for the Special Meeting of Shareholders, October 15, 1998
The undersigned hereby appoints JAMES R. BORDEWICK, JR., STEPHEN E. CAVAN,
W. THOMAS LONDON, JEFFREY L. SHAMES and ARNOLD D. SCOTT, and each of them,
proxies with several powers of substitution, to vote for the undersigned at the
Special Meeting of Shareholders of MFS RESEARCH FUND, to be held at 500 Boylston
Street, Boston, Massachusetts, on Thursday, October 15, 1998 at 10:00 a.m.,
notice of which meeting and the Proxy Statement accompanying the same have been
received by the undersigned, or at any adjournment thereof, upon the following
matters as described in the Notice of Meeting and accompanying Proxy Statement.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. THE PROPOSALS HAVE BEEN PROPOSED BY THE BOARD OF
TRUSTEES. IF NO DIRECTION IS GIVEN ON THE PROPOSAL, THIS PROXY CARD WILL BE
VOTED "FOR" ITEM 1, ITEMS 2.A THROUGH 2.F AND ITEM 3. THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE PROXY HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTER.
OPTIONS FOR SUBMITTING PROXY
1. Return the attached proxy card using the enclosed
envelope.
2. Vote via the Internet at www.mfs.com or
www.proxyvote.com.
3. Vote via the telephone at 1-800-[690-6903].
[4. Fax this executed proxy card to 1-800-733-1885.]
To vote via the Internet or telephone, you must have the Control Number listed
below.
[ACCOUNT]
[SHARES]
[CONTROL NUMBER]
<PAGE>
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: MASSREA KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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PLEASE VOTE AND SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears. Joint owners should each sign personally. Trustees and other fiduciaries
should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation,
this signature should be that of an authorized officer who should state his or her title.
<S> <C> <C> <C> <C> <C> <C> <C>
Vote On Proposals For Against Abstain For Against Abstain
[ ] [ ] [ ] 3) RATIFICATION OF SELECTION OF ACCOUNTANTS. [ ] [ ] [ ]
1) TO APPROVE OR DISAPPROVE A NEW
INVESTMENT ADVISORY AGREEMENT
BETWEEN MASSACHUSETTS FINANCIAL
SERVICES COMPANY AND THE TRUST
ON BEHALF OF THE FUND.
2) TO APPROVE OR DISAPPROVE THE
ELIMINATION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES AS SET FORTH
ON APPENDIX C TO THE PROXY
STATEMENT.
2.A. Eliminate the restriction [ ] [ ] [ ]
concerning investment in
other investment companies.
2.B. Eliminate the restriction [ ] [ ] [ ]
concerning investments
in unseasoned issuers.
2.C. Eliminate the restriction [ ] [ ] [ ]
concerning transactions
with affiliates.
2.D. Eliminate the restriction [ ] [ ] [ ]
concerning purchasing
securities on margin.
2.E. Eliminate the restriction [ ] [ ] [ ]
concerning short sales.
2.F. Eliminate the restriction [ ] [ ] [ ] Please be sure to sign and date this Proxy.
concerning certain types
of options.
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| |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature [Joint Owners] Date
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</TABLE>
