MFS[RegTM] NEW ENDEAVOR FUND
Supplement dated October 1, 2000 to the Current Prospectus
This Supplement describes the fund's class I shares, and it supplements certain
information in the fund's Prospectus dated October 1, 2000. The caption headings
used in this Supplement correspond with the caption headings used in the
Prospectus.
You may purchase class I shares only if you are an eligible institutional
investor, as described under the caption "Description of Share Classes" below.
1. RISK RETURN SUMMARY
Performance Table. The performance table is not included because the fund
has not had a full year of operation.
2. EXPENSE SUMMARY
Expense Table. The "Expense Table" describes the fees and expenses that you
may pay when you buy, redeem and hold shares of the fund. The table is
supplemented as follows:
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
<S> <C>
Management Fees....................................... 0.90%
Distribution and Service (12b-1) Fees................. 0.00%
Other Expenses........................................ 3.88%
-----
Total Annual Fund Operating Expenses.................. 4.78%
Expense Reimbursement(1)......................... (3.58)%
-------
Net Expenses(2).................................. 1.20%
</TABLE>
-----------------------
(1) "Other Expenses" for the fund are based on estimates for the fund's
current fiscal year. MFS has contractually agreed to bear the fund's
expenses subject to reimbursement, such that "Other Expenses", after
taking into account the expense offset arrangement described below, do
not exceed 0.30%. These contractual fee arrangements will continue until
at least October 1, 2001, absent an earlier modification approved by the
board of trustees which oversees the fund.
(2) 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. The fund may enter into
other similar arrangements and directed brokerage arrangements, which
would also have the effect of reducing the fund's expenses. Any such fee
reductions are not reflected in the table. Had such fee reductions been
taken into account, "Net Expenses" would be lower.
Example of Expenses. The "Example of Expenses" table is intended to help you
compare the cost of investing in the fund with the cost of investing in other
mutual funds. The examples assume that:
o You invest $10,000 in the fund for the time periods indicated and you
redeem your shares at the end of the timer periods;
o Your investment has a 5% return each year and dividends and other
distributions are reinvested; and
o The fund's operating expenses remain the same, except that the fund's
total operating expenses are assumed to be the fund's "Net Expenses"
for the first year, and the fund's "Total Annual Operating Fund
Expenses" for subsequent years (see Expense Table).
The table is supplemented as follows:
<TABLE>
<CAPTION>
Share Class Year 1 Year 3
----------- ------ ------
<S> <C> <C>
Class I shares $123 $386
</TABLE>
-1-
<PAGE>
3. DESCRIPTION OF SHARE CLASS
The "Description of Share Classes" is supplemented as follows:
If you are an eligible institutional investor (as described below), you may
purchase class I shares at net asset value without an initial sales charge or
CDSC upon redemption. Class I shares do not have annual distribution and service
fees, and do not convert to any other class of shares of the fund.
The following eligible institutional investors may purchase class I shares:
o certain retirement plans established for the benefit of employees of
MFS and employees of MFS' affiliates;
o any fund distributed by MFD, if the fund seeks to achieve its
investment objective by investing primarily in shares of the fund and
other MFS funds;
o any retirement plan, endowment or foundation which:
> purchases shares directly through MFD (rather than through a
third party broker or dealer or other financial adviser);
> has, at the time of purchase of class I shares, aggregate assets
of at least $100 million; and
> invests at least $10 million in class I shares of the fund either
alone or in combination with investments in class I shares of
other MFS Funds (additional investments may be made in any
amount).
MFD may accept purchases from smaller plans, endowments or foundations or
in smaller amounts if it believes, in its sole discretion, that such
entity's aggregate assets will equal or exceed $100 million, or that such
entity will make additional investments which will cause its total
investment to equal or exceed $10 million, within a reasonable period of
time;
o bank trust departments or law firms acting as trustee or manager for
trust accounts which, on behalf of their clients (i) initially invest
at least $100,000 in class I shares of the fund or (ii) have, at the
time of purchase of class I shares, aggregate assets of at least $10
million invested in class I shares of the fund either alone or in
combination with investments in class I shares of other MFS Funds. MFD
may accept purchases that do not meet these dollar qualification
requirements if it believes, in its sole discretion, that these
requirements will be met within a reasonable period of time.
Additional investments may be made in any amount; and
o certain retirement plans offered, administered or sponsored by
insurance companies, provided that these plans and insurance companies
meet certain criteria established by MFD from time to time.
In no event will the fund, MFS, MFD or any of their affiliates pay any sales
commissions or compensation to any third party in connection with the sale of
class I shares. The payment of any such sales commission or compensation would,
under the fund's policies, disqualify the purchaser as an eligible investor in
class I shares.
4. HOW TO PURCHASE, EXCHANGE AND REDEEM SHARES
The discussion of "How to Purchase, Exchange and Redeem Shares" is supplemented
as follows:
You may purchase, redeem and exchange class I shares only through your MFD
representative or by contacting MFSC (see the back cover of the Prospectus for
address and phone number). You may exchange your class I shares for class I
shares of another MFS Fund (if you are eligible to purchase them) and for shares
of the MFS Money Market Fund at net asset value.
The date of this Supplement is October 1, 2000.
-2-
<PAGE>
--------------------------------
MFS[RegTM] NEW ENDEAVOR FUND
--------------------------------
O C T O B E R 1 , 2 0 0 0
Prospectus
Class A Shares
Class B Shares
Class C Shares
--------------------------------------------------------------------------------
This Prospectus describes the MFS[RegTM] New Endeavor Fund. The fund's
investment objective is capital appreciation.
This prospectus describes three classes of shares for the fund. Currently, only
Class A shares are available for purchase. These Class A shares are only
available for purchase at net asset value and may only be sold to residents of
Massachusetts who are:
o employees (or certain relatives of employees) of Massachusetts Financial
Services Company (referred to as MFS or the adviser) and its affiliates; or
o members of the governing boards of the various funds sponsored by MFS.
The Securities and Exchange Commission has not approved or disapproved the
fund's shares or determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
I Risk Return Summary ...................................... 1
II Expense Summary .......................................... 5
III Certain Investment Strategies and Risks .................. 7
IV Management of the Fund ................................... 8
V Description of Share Classes ............................. 9
VI How to Purchase, Exchange and Redeem Shares ..............13
VII Investor Services and Programs ...........................17
VIII Other Information ........................................19
Appendix A--Investment Techniques and Practices ..........A-1
</TABLE>
<PAGE>
--------------------------
I RISK RETURN SUMMARY
--------------------------
> Investment Objective
The fund's investment objective is capital appreciation. The fund's objective
may be changed without shareholder approval.
> Principal Investment Policies
The fund invests, under normal market conditions, at least 65% of its total
assets in equity securities of emerging growth companies. Equity securities
include common stocks and related securities, such as preferred stocks,
convertible securities and depositary receipts for those securities. Emerging
growth companies are companies which the fund's investment adviser,
Massachusetts Financial Services Company (referred to as MFS or the adviser),
believes offer superior prospects for growth and are either:
o early in their life cycle but which have the potential to become major
enterprises, or
o are major enterprises whose rates of earnings growth are expected to
accelerate because of special factors, such as rejuvenated management, new
products, changes in consumer demand, or basic changes in the economic
environment.
Emerging growth companies may be of any size, and MFS would expect these
companies to have products, technologies, management, markets and
opportunities which will facilitate earnings growth over time, that is well
above the growth rate of the overall economy, and the rate of inflation. The
fund's investments in emerging growth companies may include securities listed
on a securities exchange or traded in the over-the-counter markets.
The fund is flexibly managed with the ability to invest in issuers of all
market capitalizations and industry focus.
Consistent with the fund's principal investment policies described above, the
fund may invest in foreign securities (including emerging markets securities)
and may have exposure to foreign currencies through its investment in these
securities.
The fund may engage in short sales where the fund borrows a security it does
not own and then sells it in anticipation of a fall in the security's price.
The fund must replace the security it borrowed by purchasing the security at
its market value at the time of replacement. The fund may also engage in
short sales "against the box" where the fund owns or has the right to obtain
at no additional cost, the securities that are sold short.
MFS uses a bottom-up, as opposed to a top-down, investment style in managing
the equity-oriented funds (such as the fund) it advises. This means that
securities are selected based upon fundamental analysis (such as an analysis
of earnings, cash flows, competitive position and management's abilities)
performed by the fund's portfolio manager and MFS' large group of equity
research analysts.
1
<PAGE>
The fund may engage in active and frequent trading to achieve its principal
investment strategies.
> Principal Risks of an Investment
The principal risks of investing in the fund and the circumstances reasonably
likely to cause the value of your investment in the fund to decline are
described below. The share price of the fund generally changes daily based on
market conditions and other factors. Please note that there are many
circumstances which could cause the value of your investment in the fund to
decline, and which could prevent the fund from achieving its objective, that
are not described here.
The principal risks of investing in the fund are:
o Market Risk: This is the risk that the price of a security held by the fund
will fall due to changing economic, political or market conditions or
disappointing earnings results.
o Company Risk: Prices of securities react to the economic condition of the
company that issued the security. The fund's equity investments in an
issuer may rise and fall based on the issuer's actual and anticipated
earnings, changes in management and the potential for takeovers and
acquisitions.
o Emerging Growth Companies Risk: Investments in emerging growth companies
may be subject to more abrupt or erratic market movements and may involve
greater risks than investments in other companies. Emerging growth
companies often:
> have limited product lines, markets and financial resources
> are dependent on management by one or a few key individuals
> have shares which suffer steeper than average price declines after
disappointing earnings reports and are more difficult to sell at
satisfactory prices
o Over-the-Counter Risk: Over-the-counter (OTC) transactions involve risks in
addition to those associated with transactions in securities traded on
exchanges. OTC listed companies may have limited product lines, markets or
financial resources. Many OTC stocks trade less frequently and in smaller
volume than exchange listed stocks. The values of these stocks may be more
volatile than exchange listed stocks, and the fund may experience
difficulty in purchasing or selling these securities at a fair price.
o Short Sales Risk: The fund will suffer a loss if it sells a security short
and the value of the security rises rather than falls. Because the fund
must purchase the security it borrowed in a short sale at prevailing market
rates, the potential loss may be greater for a short sale than for a short
sale "against the box".
o Foreign Securities Risk: Investing in foreign securities involves risks
relating to political, social and economic developments abroad, as well as
risks resulting from the differences between the regulations to which U.S.
and foreign issuers and markets are subject:
2
<PAGE>
> These risks may include the seizure by the government of company assets,
excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or
social instability.
> Enforcing legal rights may be difficult, costly and slow in foreign
countries, and there may be special problems enforcing claims against
foreign governments.
> Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be
less public information about their operations.
> Foreign markets may be less liquid and more volatile than U.S. markets.
> Foreign securities often trade in currencies other than the U.S. dollar,
and the fund may directly hold foreign currencies and purchase and sell
foreign currencies through forward exchange contracts. Changes in
currency exchange rates will affect the fund's net asset value, the value
of dividends and interest earned, and gains and losses realized on the
sale of securities. An increase in the strength of the U.S. dollar
relative to these other currencies may cause the value of the fund to
decline. Certain foreign currencies may be particularly volatile, and
foreign governments may intervene in the currency markets, causing a
decline in value or liquidity in the fund's foreign currency holdings. By
entering into forward foreign currency exchange contracts, the fund may
be required to forego the benefits of advantageous changes in exchange
rates and, in the case of forward contracts entered into for the purpose
of increasing return, the fund may sustain losses which will reduce its
gross income. Forward foreign currency exchange contracts involve the
risk that the party with which the fund enters the contract may fail to
perform its obligations to the fund.
o Emerging Markets Risk: Emerging markets are generally defined as countries
in the initial stages of their industrialization cycles with low per capita
income. All of the risks of investing in foreign securities described above
are heightened by investing in emerging markets countries. The markets of
emerging markets countries are generally more volatile than the markets of
developed countries with more mature economies.
o Effect of IPOs: The fund may participate in the initial public offering
("IPO") market, and a significant portion of the fund's returns may be
attributable to its investment in IPO's which may have a magnified
investment performance impact during the periods when the fund has a small
asset base. Like any past performance there is no assurance that, as a
fund's assets grow, it will continue to experience substantially similar
performance by investment in IPOs.
3
<PAGE>
o Active or Frequent Trading Risk: The fund may engage in active and frequent
trading to achieve its principal investment strategies. This may result in
the realization and distribution to shareholders of higher capital gains as
compared to a fund with less active trading policies, which would increase
your tax liability. Frequent trading also increases transaction costs,
which could detract from the fund's performance.
o As with any mutual fund, you could lose money on your investment in the
fund.
An investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
> Bar Chart and Performance Table
The bar chart and performance table are not included because the fund has not
had a full calendar year of investment operations.
4
<PAGE>
------------------------
II EXPENSE SUMMARY
------------------------
> Expense Table
This table describes the fees and expenses that you may pay when you buy,
redeem and hold shares of the fund.
Shareholder Fees (fees paid directly from your investment):
.............................................................................
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) ......... 5.75% 0.00% 0.00%
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption proceeds, whichever is less) ............... See Below(1) 4.00% 1.00%
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from fund assets):
.............................................................................
<TABLE>
<S> <C> <C> <C>
Management Fees .................................. 0.90% 0.90% 0.90%
Distribution and Service (12b-1) Fees(2) ......... 0.35% 1.00% 1.00%
Other Expenses ................................... 3.88% 3.88% 3.88%
----- ----- -----
Total Annual Fund Operating Expenses ............. 5.13% 5.78% 5.78%
Expense Reimbursement(3) ......................... (3.58)% (3.58)% (3.58)%
----- ----- -----
Net Expenses(4) .................................. 1.55% 2.20% 2.20%
</TABLE>
--------
(1) An initial sales charge will not be deducted from your purchase if you
buy $1 million or more of class A shares, or if you are investing
through a retirement plan and your class A purchase meets certain
requirements. However, in this case, a contingent deferred sales charge
(referred to as a CDSC) of 1% may be deducted from your redemption
proceeds if you redeem your investment within 12 months.
(2) The fund adopted a distribution plan under Rule 12b-1 that permits it
to pay marketing and other fees to support the sale and distribution of
class A, B and C shares and the services provided to you by your
financial adviser (referred to as distribution and service fees).
(3) "Other Expenses" for the fund are based on estimates for the fund's
current fiscal year. MFS has contractually agreed to bear the fund's
expenses subject to reimbursement, such that "Other Expenses", after
taking into account the expense offset arrangement described below, do
not exceed 0.30%. This contractual fee arrangement will continue until
at least October 1, 2001, absent an earlier modification approved by
the board of trustees which oversees the fund.
(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. The fund may enter into
other similar arrangements and directed brokerage arrangements, which
would also have the effect of reducing the fund's expenses. "Other
Expenses" do not take into account these expense reductions, and
therefore are higher than the actual expenses of the fund. Had these
fee reductions been taken into account, "Net Expenses" would be lower.
5
<PAGE>
> Example of Expenses
These examples are intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.
The examples assume that:
o You invest $10,000 in the fund for the time periods indicated and you
redeem your shares at the end of the time periods;
o Your investment has a 5% return each year and dividends and other
distributions are reinvested; and
o The fund's operating expenses remain the same except that the fund's total
operating expenses are assumed to be the fund's "Net Expenses" for the
first year, and the fund's "Total Annual Fund Operating Expenses" for
subsequent years (see Expense Table).
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
<TABLE>
<CAPTION>
Share Class Year 1 Year 3
----------------------------------------------- ---------- ------------
<S> <C> <C>
Class A shares $724 $1,723
Class B shares
Assuming redemption at end of period 623 1,702
Assuming no redemption 223 1,402
Class C shares
Assuming redemption at end of period 323 1,402
Assuming no redemption 223 1,402
</TABLE>
6
<PAGE>
------------------------------------------------
III CERTAIN INVESTMENT STRATEGIES AND RISKS
------------------------------------------------
> Further Information on Investment Strategies and Risks
The fund may invest in various types of securities and engage in various
investment techniques and practices which are not the principal focus of the
fund and therefore are not described in this Prospectus. The types of
securities and investment techniques and practices in which the fund may
engage, including the principal investment techniques and practices described
above, are identified in Appendix A to this Prospectus, and are discussed,
together with their risks, in the fund's Statement of Additional Information
(referred to as the SAI), which you may obtain by contacting MFS Service
Center, Inc. (see back cover for address and phone number).
> Temporary Defensive Policies
In addition, the fund may depart from its principal investment strategies by
temporarily investing for defensive purposes when adverse market, economic or
political conditions exist. While the fund invests defensively, it may not be
able to pursue its investment objective. The fund's defensive investment
position may not be effective in protecting its value.
7
<PAGE>
-------------------------------
IV MANAGEMENT OF THE FUND
-------------------------------
> Investment Adviser
Massachusetts Financial Services Company (referred to as MFS or the adviser)
is 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,
Massachusetts Investors Trust. Net assets under the management of the MFS
organization were approximately 163.20 billion as of August 31, 2000. MFS is
located at 500 Boylston Street, Boston, MA 02116. MFS provides investment
management and related administrative services and facilities to the fund
(including portfolio management and trade execution). For these services, MFS
is entitled to an annual management fee as set forth in the Expense Summary.
> Portfolio Manager
The fund's portfolio manager is Brian E. Stack, a Senior Vice President of
MFS. Mr. Stack has been employed in the investment management area of MFS
since 1993 and has been the portfolio manager of the fund since its
inception.
> Administrator
MFS provides the fund with certain financial, legal, compliance, shareholder
communications and other administrative services. MFS is reimbursed by the
fund for a portion of the costs it incurs in providing these services.
> Distributor
MFS Fund Distributors, Inc. (referred to as MFD), a wholly owned subsidiary
of MFS, is the distributor of shares of the fund.
> Shareholder Servicing Agent
MFS Service Center, Inc. (referred to as MFSC), a wholly owned subsidiary of
MFS, performs transfer agency and certain other services for the fund, for
which it receives compensation from the fund.
8
<PAGE>
------------------------------------
V DESCRIPTION OF SHARE CLASSES
------------------------------------
The fund offers class A, B and C shares through this prospectus. The fund
also offers an additional class of shares, class I shares, exclusively to
certain institutional investors. Class I shares are made available through a
separate prospectus supplement provided to institutional investors eligible
to purchase them.
> Sales Charges
You may be subject to an initial sales charge when you purchase, or a CDSC
when you redeem, class A, B or C shares. These sales charges are described
below. In certain circumstances, these sales charges are waived. These
circumstances are described in the SAI. Special considerations concerning the
calculation of the CDSC that apply to each of these classes of shares are
described below under the heading "Calculation of CDSC."
If you purchase your fund shares through a financial adviser (such as a
broker or bank), the adviser may receive commissions or other concessions
which are paid from various sources, such as from the sales charges and
distribution and service fees, or from MFS or MFD. These commissions and
concessions are described in the SAI.
> Class A Shares
You may purchase class A shares at net asset value plus an initial sales
charge (referred to as the offering price), but in some cases you may
purchase class A shares without an initial sales charge but subject to a 1%
CDSC upon redemption within one year. Class A shares have annual distribution
and service fees up to a maximum of 0.35% of net assets annually.
Purchases Subject to an Initial Sales Charge. The amount of the initial sales
charge you pay when you buy class A shares differs depending upon the amount
you invest, as follows:
<TABLE>
<CAPTION>
Sales Charge* as Percentage of:
-------------------------------
Offering Net Amount
Amount of Purchase Price Invested
<S> <C> <C>
Less than $50,000 5.75% 6.10
$50,000 but less than $100,000 4.75 4.99
$100,000 but less than $250,000 4.00 4.17
$250,000 but less than $500,000 2.95 3.04
$500,000 but less than $1,000,000 2.20 2.25
$1,000,000 or more None** None**
</TABLE>
--------
* Because of rounding in the calculation of offering price, actual
sales charges you pay may be more or less than those calculated using
these percentages.
** A 1% CDSC will apply to such purchases, as discussed below.
9
<PAGE>
Purchases Subject to a CDSC (but not an initial sales charge). You pay no
initial sales charge when you invest $1 million or more in class A shares.
However, a CDSC of 1% will be deducted from your redemption proceeds if you
redeem within 12 months of your purchase.
In addition, purchases made under the following four categories are not
subject to an initial sales charge; however, a CDSC of 1% will be deducted
from redemption proceeds if the redemption is made within 12 months of
purchase:
o Investments in class A shares by certain retirement plans subject to the
Employee Retirement Income Security Act of 1974, as amended (referred to as
ERISA), if, prior to July 1, 1996
> the plan had established an account with MFSC; and
> the sponsoring organization had demonstrated to the satisfaction of MFD
that either;
+ the employer had at least 25 employees; or
+ the total purchases by the retirement plan of class A shares of the MFS
Family of Funds (referred to as the MFS funds) would be in the amount
of at least $250,000 within a reasonable period of time, as determined
by MFD in its sole discretion.
o Investments in class A shares by certain retirement plans subject to ERISA,
if
> the retirement plan and/or sponsoring organization participates in the
MFS Corporate Plan Services 401(k) Program or any similar recordkeeping
system made available by MFSC (referred to as the MFS participant
recordkeeping system);
> the plan establishes an account with MFSC on or after July 1, 1996;
> the total purchases by the retirement plan (or by multiple plans
maintained by the same plan sponsor) of class A shares of the MFS funds
will be in the amount of at least $500,000 within a reasonable period of
time, as determined by MFD in its sole discretion; and
o Investments in class A shares by certain retirement plans subject to
ERISA, if
> the plan establishes an account with MFSC on or after July 1, 1996; and
> the plan has, at the time of purchase, either alone or in aggregate with
other plans maintained by the same plan sponsor) a market value of
$500,000 or more invested in shares of any class or classes of the MFS
funds.
The retirement plans will qualify under this category only if the plans
or their sponsoring organization informs MFSC prior to the purchases that
the plans have a market value of $500,000 or more invested in shares of
any class or classes of the MFS funds; MFSC has no obligation
independently to determine whether such plans qualify under this
category; and
10
<PAGE>
o Investments in class A shares by certain retirement plans subject to
ERISA, if
> the plan established an account with MFSC between July 1, 1997 and
December 31, 1999;
> the plan records are maintained on a pooled basis by MFSC; and
> the sponsoring organization demonstrates to the satisfaction of MFD that,
at the time of purchase, the employer has at least 200 eligible employees
and the plan has aggregate assets of at least $2,000,000.
> Class B Shares
You may purchase class B shares at net asset value without an initial sales
charge, but if you redeem your shares within the first six years you may be
subject to a CDSC (declining from 4.00% during the first year to 0% after six
years). Class B shares have annual distribution and service fees up to a
maximum of 1.00% of net assets annually.
The CDSC is imposed according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred
Year of Redemption After Purchase Sales Charge
-----------------------------------------------------------------
<S> <C>
First 4%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
</TABLE>
If you hold class B shares for approximately eight years, they will convert
to class A shares of the fund. All class B shares you purchased through the
reinvestment of dividends and distributions will be held in a separate
sub-account. Each time any class B shares in your account convert to class A
shares, a proportionate number of the class B shares in the sub-account will
also convert to class A shares.
> Class C Shares
You may purchase class C shares at net asset value without an initial sales
charge, but if you redeem your shares within the first year you may be
subject to a CDSC of 1.00%. Class C shares have annual distribution and
service fees up to a maximum of 1.00% of net assets annually. Class C shares
do not convert to any other class of shares of the fund.
11
<PAGE>
> Calculation of CDSC
As discussed above, certain investments in class A, B and C shares will be
subject to a CDSC. Three different aging schedules apply to the calculation
of the CDSC:
Purchases of class A shares made on any day during a calendar month will age
one month on the last day of the month, and each subsequent month.
Purchases of class C shares, and purchases of class B shares on or after
January 1, 1993, made on any day during a calendar month will age one year at
the close of business on the last day of that month in the following calendar
year, and each subsequent year.
Purchases of class B shares prior to January 1, 1993 made on any day during a
calendar year will age one year at the close of business on December 31 of
that year, and each subsequent year.
No CDSC is assessed on the value of your account represented by appreciation
or additional shares acquired through the automatic reinvestment of dividends
or capital gain distributions. Therefore, when you redeem your shares, only
the value of the shares in excess of these amounts (i.e., your direct
investment) is subject to a CDSC.
The CDSC will be applied in a manner that results in the CDSC being imposed
at the lowest possible rate, which means that the CDSC will be applied
against the lesser of your direct investment or the total cost of your
shares. The applicability of a CDSC will not be affected by exchanges or
transfers of registration, except as described in the SAI.
> Distribution and Service Fees
The fund has adopted a plan under Rule 12b-1 that permits it to pay marketing
and other fees to support the sale and distribution of class A, B and C
shares and the services provided to you by your financial adviser. These
annual distribution and service fees may equal up to 0.35% for class A shares
(0.10% distribution fee and 0.25% service fee) and 1.00% for each of class B
and class C shares (a 0.75% distribution fee and a 0.25% service fee), and
are paid out of the assets of these classes. Over time, these fees will
increase the cost of your shares and may cost you more than paying other
types of sales charges.
12
<PAGE>
---------------------------------------------------
VI HOW TO PURCHASE, EXCHANGE AND REDEEM SHARES
---------------------------------------------------
You may purchase, exchange and redeem class A, B and C shares of the fund
in the manner described below. In addition, you may be eligible to
participate in certain investor services and programs to purchase,
exchange and redeem these classes of shares, which are described in the
next section under the caption "Investor Services and Programs."
> How to Purchase Shares
Initial Purchase. You can establish an account by having your financial
adviser process your purchase. The minimum initial investment is $1,000.
However, in the following circumstances the minimum initial investment is
only $50 per account:
o if you establish an automatic investment plan;
o if you establish an automatic exchange plan; or
o if you establish an account under either:
> tax-deferred retirement programs (other than IRAs) where investments are
made by means of group remittal statements; or
> employer sponsored investment programs.
The minimum initial investment for IRAs is $250 per account. The maximum
investment in class C shares is $1,000,000 per transaction. Class C shares
are not available for purchase by any retirement plan qualified under Section
401(a) or 403(b) of the Internal Revenue Code if the plan or its sponsor
subscribes to certain recordkeeping services made available by MFSC, such as
the MFS Corporate Plan Services Fundamental 401(k) Plan.
Adding to Your Account. There are several easy ways you can make additional
investments of at least $50 to your account:
o send a check with the returnable portion of your statement;
o ask your financial adviser to purchase shares on your behalf;
o wire additional investments through your bank (call MFSC first for
instructions); or
o authorize transfers by phone between your bank account and your MFS account
(the maximum purchase amount for this method is $100,000). You must elect
this privilege on your account application if you wish to use it.
> How to Exchange Shares
You can exchange your shares for shares of the same class of certain other
MFS funds at net asset value by having your financial adviser process your
exchange request or by contacting MFSC directly. The minimum exchange amount
is generally $1,000 ($50 for
13
<PAGE>
exchanges made under the automatic exchange plan). Shares otherwise subject
to a CDSC will not be charged a CDSC in an exchange. However, when you redeem
the shares acquired through the exchange, the shares you redeem may be
subject to a CDSC, depending upon when you originally purchased the shares
you exchanged. For purposes of computing the CDSC, the length of time you
have owned your shares will be measured from the date of original purchase
and will not be affected by any exchange.
Sales charges may apply to exchanges made from the MFS money market funds.
Certain qualified retirement plans may make exchanges between the MFS funds
and the MFS Fixed Fund, a bank collective investment fund, and sales charges
may also apply to these exchanges. Call MFSC for information concerning these
sales charges.
Exchanges may be subject to certain limitations and are subject to the MFS
funds' policies concerning excessive trading practices, which are policies
designed to protect the funds and their shareholders from the harmful effect
of frequent exchanges. These limitations and policies are described below
under the captions "Right to Reject or Restrict Purchase and Exchange Orders"
and "Excessive Trading Practices." You should read the prospectus of the MFS
fund into which you are exchanging and consider the differences in
objectives, policies and rules before making any exchange.
> How to Redeem Shares
You may redeem your shares either by having your financial adviser process
your redemption or by contacting MFSC directly. The fund sends out your
redemption proceeds within seven days after your request is received in good
order. "Good order" generally means that the stock power, written request for
redemption, letter of instruction or certificate must be endorsed by the
record owner(s) exactly as the shares are registered. In addition, you need
to have your signature guaranteed and/or submit additional documentation to
redeem your shares. See "Signature Guarantee/Additional Documentation" below,
or contact MFSC for details (see back cover page for address and phone
number).
Under unusual circumstances such as when the New York Stock Exchange is
closed, trading on the Exchange is restricted or if there is an emergency,
the fund may suspend redemptions or postpone payment. If you purchased the
shares you are redeeming by check, the fund may delay the payment of the
redemption proceeds until the check has cleared, which may take up to 15 days
from the purchase date.
Redeeming Directly through MFSC.
o By telephone. You can call MFSC to have shares redeemed from your account
and the proceeds wired or mailed (depending on the amount redeemed)
directly to a pre-designated bank account. MFSC will request personal or
other information from you and will generally record the calls. MFSC will
be responsible for losses that result from unauthorized telephone
transactions if it does not follow reasonable procedures designed to verify
your identity. You must elect this privilege on your account application if
you wish to use it.
14
<PAGE>
o By mail. To redeem shares by mail, you can send a letter to MFSC with the
name of your fund, your account number, and the number of shares or dollar
amount to be sold.
Redeeming through Your Financial Adviser. You can call your financial adviser
to process a redemption on your behalf. Your financial adviser will be
responsible for furnishing all necessary documents to MFSC and may charge you
for this service.
Signature Guarantee/Additional Documentation. In order to protect against
fraud, the fund requires that your signature be guaranteed in order to redeem
your shares. Your signature may be guaranteed by an eligible bank, broker,
dealer, credit union, national securities exchange, registered securities
association, clearing agency, or savings association. MFSC may require
additional documentation for certain types of registrations and transactions.
Signature guarantees and this additional documentation shall be accepted in
accordance with policies established by MFSC, and MFSC may make certain de
minimis exceptions to these requirements.
> Other Considerations
Right to Reject or Restrict Purchase and Exchange Orders. Purchases and
exchanges should be made for investment purposes only. The MFS funds each
reserve the right to reject or restrict any specific purchase or exchange
request. Because an exchange request involves both a request to redeem shares
of one fund and to purchase shares of another fund, the MFS funds consider
the underlying redemption and purchase requests conditioned upon the
acceptance of each of these underlying requests. Therefore, in the event that
the MFS funds reject an exchange request, neither the redemption nor the
purchase side of the exchange will be processed. When a fund determines that
the level of exchanges on any day may be harmful to its remaining
shareholders, the fund may delay the payment of exchange proceeds for up to
seven days to permit cash to be raised through the orderly liquidation of its
portfolio securities to pay the redemption proceeds. In this case, the
purchase side of the exchange will be delayed until the exchange proceeds are
paid by the redeeming fund.
Excessive Trading Practices. The MFS funds do not permit market-timing or
other excessive trading practices. Excessive, short-term (market-timing)
trading practices may disrupt portfolio management strategies and harm fund
performance. As noted above, the MFS funds reserve the right to reject or
restrict any purchase order (including exchanges) from any investor. To
minimize harm to the MFS funds and their shareholders, the MFS funds will
exercise these rights if an investor has a history of excessive trading or if
an investor's trading, in the judgment of the MFS funds, has been or may be
disruptive to a fund. In making this judgment, the MFS funds may consider
trading done in multiple accounts under common ownership or control.
Reinstatement Privilege. After you have redeemed shares, you have a one-time
right to reinvest the proceeds within 90 days of the redemption at the
current net asset value (without an initial sales charge). If the redemption
involved a CDSC, your account will be credited with the appropriate amount of
the CDSC paid; however, your new shares will
15
<PAGE>
be subject to a CDSC which will be determined from the date you originally
purchased the shares redeemed.
In-kind Distributions. The MFS funds have reserved the right to pay
redemption proceeds by a distribution in-kind of portfolio securities (rather
than cash). In the event that the fund makes an in-kind distribution, you
could incur the brokerage and transaction charges when converting the
securities to cash. The fund does not expect to make in-kind distributions,
and if it does, the fund will pay, during any 90-day period, your redemption
proceeds in cash up to either $250,000 or 1% of the fund's net assets,
whichever is less.
Involuntary Redemptions/Small Accounts. Because it is costly to maintain
small accounts, the MFS funds have generally reserved the right to
automatically redeem shares and close your account when it contains less than
$500 due to your redemptions or exchanges. Before making this automatic
redemption, you will be notified and given 60 days to make additional
investments to avoid having your shares redeemed.
16
<PAGE>
---------------------------------------
VII INVESTOR SERVICES AND PROGRAMS
---------------------------------------
As a shareholder of the fund, you have available to you a number of services
and investment programs. Some of these services and programs may not be
available to you if your shares are held in the name of your financial
adviser or if your investment in the fund is made through a retirement plan.
> Distribution Options
The following distribution options are generally available to all accounts
and you may change your distribution option as often as you desire by
notifying MFSC:
o Dividend and capital gain distributions reinvested in additional shares
(this option will be assigned if no other option is specified);
o Dividend distributions in cash; capital gain distributions reinvested in
additional shares; or
o Dividend and capital gain distributions in cash.
Reinvestments (net of any tax withholding) will be made in additional full
and fractional shares of the same class of shares at the net asset value as
of the close of business on the record date. Distributions in amounts less
than $10 will automatically be reinvested in additional shares of the fund.
If you have elected to receive distributions in cash, and the postal or other
delivery service is unable to deliver checks to your address of record, or
you do not respond to mailings from MFSC with regard to uncashed distribution
checks, your distribution option will automatically be converted to having
all distributions reinvested in additional shares. Your request to change a
distribution option must be received by MFSC by the record date for a
distribution in order to be effective for that distribution. No interest will
accrue on amounts represented by uncashed distribution or redemption checks.
> Purchase and Redemption Programs
For your convenience, the following purchase and redemption programs are made
available to you with respect to class A, B and C shares, without extra
charge:
Automatic Investment Plan. You can make cash investments of $50 or more
through your checking account or savings account on any day of the month. If
you do not specify a date, the investment will automatically occur on the
first business day of the month.
Automatic Exchange Plan. If you have an account balance of at least $5,000 in
any MFS fund, you may participate in the automatic exchange plan, a
dollar-cost averaging program. This plan permits you to make automatic
monthly or quarterly exchanges from your account in an MFS fund for shares of
the same class of shares of other MFS funds. You may make exchanges of at
least $50 to up to six different funds under this plan.
17
<PAGE>
Exchanges will generally be made at net asset value without any sales
charges. If you exchange shares out of the MFS Money Market Fund or MFS
Government Money Market Fund, or if you exchange class A shares out of the
MFS Cash Reserve Fund, into class A shares of any other MFS fund, you will
pay the initial sales charge if you have not already paid this charge on
these shares.
Reinvest Without a Sales Charge. You can reinvest dividend and capital gain
distributions into your account without a sales charge to add to your
investment easily and automatically.
Distribution Investment Program. You may purchase shares of any MFS fund
without paying an initial sales charge or a CDSC upon redemption by
automatically reinvesting a minimum of $50 of dividend and capital gain
distributions from the same class of another MFS fund.
Letter of Intent (LOI). If you intend to invest $50,000 or more in the MFS
funds (including the MFS Fixed Fund) within 13 months, you may buy class A
shares of the funds at the reduced sales charge as though the total amount
were invested in class A shares in one lump sum. If you intend to invest $1
million or more under this program, the time period is extended to 36 months.
If the intended purchases are not completed within the time period, shares
will automatically be redeemed from a special escrow account established with
a portion of your investment at the time of purchase to cover the higher
sales charge you would have paid had you not purchased your shares through
this program.
Right of Accumulation. You will qualify for a lower sales charge on your
purchases of class A shares when your new investment in class A shares,
together with the current (offering price) value of all your holdings in the
MFS funds (including the MFS Fixed Fund), reaches a reduced sales charge
level.
Systematic Withdrawal Plan. You may elect to automatically receive (or
designate someone else to receive) regular periodic payments of at least
$100. Each payment under this systematic withdrawal is funded through the
redemption of your fund shares. For class B and C shares, you can receive up
to 10% (15% for certain IRA distributions) of the value of your account
through these payments in any one year (measured at the time you establish
this plan). You will incur no CDSC on class B and C shares redeemed under
this plan. For class A shares, there is no similar percentage limitation;
however, you may incur the CDSC (if applicable) when class A shares are
redeemed under this plan.
18
<PAGE>
---------------------------
VIII OTHER INFORMATION
---------------------------
> Pricing of Fund Shares
The price of each class of the fund's shares is based on its net asset value.
The net asset value of each class of shares is determined at the close of
regular trading each day that the New York Stock Exchange is open for trading
(generally, 4:00 p.m., Eastern time) (referred to as the valuation time). The
New York Stock Exchange is closed on most national holidays and Good Friday.
To determine net asset value, the fund values its assets at current market
values, or at fair value as determined by the adviser under the direction of
the Board of Trustees that oversees the fund if current market values are
unavailable. Fair value pricing may be used by the fund when current market
values are unavailable or when an event occurs after the close of the
exchange on which the fund's portfolio securities are principally traded that
is likely to have changed the value of the securities. The use of fair value
pricing by the fund may cause the net asset value of its shares to differ
significantly from the net asset value that would be calculated using current
market values.
You will receive the net asset value next calculated, after the deduction of
applicable sales charges and any required tax withholding, if your order is
complete (has all required information) and MFSC receives your order by:
o the valuation time, if placed directly by you (not through a financial
adviser such as a broker or bank) to MFSC; or
o MFSC's close of business, if placed through a financial adviser, so long as
the financial adviser (or its authorized designee) received your order by
the valuation time.
The fund invests in certain securities which are primarily listed on foreign
exchanges that trade on weekends and other days when the fund does not price
its shares. Therefore, the value of the fund's shares may change on days when
you will not be able to purchase or redeem the fund's shares.
> Distributions
The fund intends to pay substantially all of its net income (including any
realized net capital gains) to shareholders as dividends at least annually.
> Tax Considerations
The following discussion is very general. You are urged to consult your tax
adviser regarding the effect that an investment in the fund may have on your
particular tax situation.
Taxability of Distributions. As long as the fund qualifies for treatment as a
regulated investment company (which it intends to do in its first and each
subsequent taxable year), it pays no federal income tax on the earnings it
distributes to shareholders.
19
<PAGE>
You will normally have to pay federal income taxes, and any state or local
taxes, on the distributions you receive from the fund, whether you take the
distributions in cash or reinvest them in additional shares. Distributions
designated as capital gain dividends are taxable as long-term capital gains.
Other distributions are generally taxable as ordinary income. Some dividends
paid in January may be taxable as if they had been paid the previous
December.
The Form 1099 that is mailed to you every January details your distributions
and how they are treated for federal tax purposes.
Fund distributions will reduce the fund's net asset value per share.
Therefore, if you buy shares shortly before the record date of a
distribution, you may pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
If you are neither a citizen nor a resident of the U.S., the fund will
withhold U.S. federal income tax at the rate of 30% on taxable dividends and
other payments that are subject to such withholding. You may be able to
arrange for a lower withholding rate under an applicable tax treaty if you
supply the appropriate documentation required by the fund. The fund is also
required in certain circumstances to apply backup withholding at the rate of
31% on taxable dividends and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the fund certain information and certifications or
who is otherwise subject to backup withholding. Backup withholding will not,
however, be applied to payments that have been subject to 30% withholding.
Prospective investors should read the fund's Account Application for
additional information regarding backup withholding of federal income tax.
Taxability of Transactions. When you redeem, sell or exchange shares, it is
generally considered a taxable event for you. Depending on the purchase price
and the sale price of the shares you redeem, sell or exchange, you may have a
gain or a loss on the transaction. You are responsible for any tax
liabilities generated by your transaction.
> Unique Nature of Fund
MFS may serve as the investment adviser to other funds which have investment
goals and principal investment policies and risks similar to those of the
fund, and which may be managed by the fund's portfolio manager(s). While the
fund may have many similarities to these other funds, its investment
performance will differ from their investment performance. This is due to a
number of differences between the funds, including differences in sales
charges, expense ratios and cash flows.
20
<PAGE>
> Provision of Annual and Semiannual Reports and Prospectuses
The fund produces financial reports every six months and updates its
prospectus annually. To avoid sending duplicate copies of materials to
households, only one copy of the fund's annual and semiannual report and
prospectus will be mailed to shareholders having the same residential address
on the fund's records. However, any shareholder may contact MFSC (see back
cover for address and phone number) to request that copies of these reports
and prospectuses be sent personally to that shareholder.
21
<PAGE>
-----------------------
A p p e n d i x A
-----------------------
> Investment Techniques and Practices
In pursuing its investment objective, the fund may engage in the following
principal and non-principal investment techniques and practices. Investment
techniques and practices which are the principal focus of the fund are also
described, together with their risks, in the Risk Return Summary of the
Prospectus. Both principal and non-principal investment techniques and
practices are described, together with their risks, in the SAI.
Investment Techniques/Practices
.............................................................................
<TABLE>
<CAPTION>
Symbols X permitted -- not permitted
---------------------------------------------------------------------------
<S> <C>
Debt Securities
Asset-Backed Securities
Collateralized Mortgage Obligations and
MulticlassPass-Through Securities --
Corporate Asset-Backed Securities --
Mortgage Pass-Through Securities --
Stripped Mortgage-Backed Securities --
Corporate Securities X
Loans and Other Direct Indebtedness --
Lower Rated Bonds X
Municipal Bonds --
Speculative Bonds X
U.S. Government Securities X
Variable and Floating Rate Obligations X
Zero Coupon Bonds, Deferred Interest Bonds and
PIK Bonds X
Equity Securities X
Foreign Securities Exposure
Brady Bonds --
Depositary Receipts X
Dollar-Denominated Foreign Debt Securities X
Emerging Markets X
Foreign Securities X
Forward Contracts X
Futures Contracts X
Indexed Securities X
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Inverse Floating Rate Obligations --
Investment in Other Investment Companies
Open-End Funds X
Closed-End Funds X
Lending of Portfolio Securities X
Leveraging Transactions
Bank Borrowings X
Mortgage "Dollar-Roll" Transactions --
Reverse Repurchase Agreements --
Options
Options on Foreign Currencies X
Options on Futures Contracts X
Options on Securities X
Options on Stock Indices X
Reset Options X
"Yield Curve" Options X
Repurchase Agreements X
Restricted Securities X
Short Sales X
Short Sales Against the Box X
Short Term Instruments X
Swaps and Related Derivative Instruments X
Temporary Borrowings X
Temporary Defensive Positions X
Warrants X
"When-issued" Securities X
</TABLE>
A-2
<PAGE>
MFS[RegTM] NEW ENDEAVOR FUND
If you want more information about the fund, the following documents are
available free upon request:
Annual/Semiannual Reports. These reports contain information about the fund's
actual investments. Annual reports discuss the effect of recent market
conditions and the fund's investment strategy on the fund's performance
during its last fiscal year.
Statement of Additional Information (SAI).The SAI, dated October 1, 2000,
provides more detailed information about the fund and is incorporated into
this prospectus by reference.
You can get free copies of the annual/semiannual reports, the SAI and other
information about the fund, and make inquiries about the fund, by contacting:
MFS Service Center, Inc.
2 Avenue de Lafayette
Boston, MA 02111-1738
Telephone: 1-800-225-2606
Internet: http://www.mfs.com
Information about the fund (including its prospectus, SAI and shareholder
reports) can be reviewed and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C., 20549-0102
Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-202-942-8090. Reports and other information
about the fund are available on the EDGAR Databases on the Commission's
Internet website at http://www.sec.gov, and copies of this information may
be obtained, upon payment of a duplicating fee, by electronic request at
the following e-mail address: [email protected] or, by writing the Public
Reference Section at the above address.
The fund's Investment Company Act file number is 811-4492
MND-1 12/99 339M 97/297/397/897
<PAGE>
[MFS
INVESTMENT MANAGEMENT
We invented the mutual fund[RegTM] LOGO]
A series of MFS Series Trust X
500 Boylston Street, Boston, MA 02116
(617) 954-5000
This Statement of Additional Information, as amended or supplemented from time
to time (the "SAI"), sets forth information which may be of interest to
investors but which is not necessarily included in the Fund's Prospectus dated
October 1, 2000. This SAI should be read in conjunction with the Prospectus.
You may obtain a copy of the Fund's Prospectus without charge by contacting MFS
Service Center, Inc. (see back cover of Part II of this SAI for address and
phone number).
--------------------------------
MFS[RegTM] NEW ENDEAVOR FUND
--------------------------------
O C T O B E R 1 , 2 0 0 0
Statement of Additional
Information
This SAI is divided into two Parts--Part I and Part II. Part I contains
information that is particular to the Fund, while Part II contains information
that generally applies to each of the funds in the MFS Family of Funds (the
"MFS Funds"). Each Part of the SAI has a variety of appendices which can be
found at the end of Part I and Part II, respectively.
This SAI is NOT a prospectus and is authorized for distribution to prospective
investors only if preceded or accompanied by a current prospectus.
MND-13 12/99 600
<PAGE>
Statement of Additional Information
PART I
Part I of this SAI contains information that is particular to the Fund.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
I Definitions ............................................................... 1
II Management of the Fund .................................................... 1
The Fund .................................................................. 1
Trustees and Officers--Identification and Background ...................... 1
Trustee Compensation ...................................................... 1
Affiliated Service Provider Compensation .................................. 1
III Sales Charges and Distribution Plan Payments .............................. 1
Sales Charges ............................................................. 1
Distribution Plan Payments ................................................ 1
IV Portfolio Transactions and Brokerage Commissions .......................... 1
V Share Ownership ........................................................... 1
VI Performance Information ................................................... 1
VII Investment Techniques, Practices, Risks and Restrictions .................. 1
Investment Techniques, Practices and Risks ................................ 1
Investment Restrictions ................................................... 2
VIII Tax Considerations ........................................................ 3
IX Independent Auditors and Financial Statements ............................. 3
Appendix A--Trustees and Officers--Identification and Background .......... A-1
Appendix B--Trustee Compensation .......................................... B-1
Appendix C--Affiliated Service Provider Compensation ...................... C-1
Appendix D--Sales Charges and Distribution Plan Payments .................. D-1
Appendix E--Portfolio Transactions and Brokerage Commissions .............. E-1
Appendix F--Share Ownership ............................................... F-1
Appendix G--Performance Information ....................................... G-1
</TABLE>
<PAGE>
(I) DEFINITIONS
"Fund" - MFS New Endeavor Fund, a diversified series of the Trust.
"Trust" - MFS Series Trust X, a Massachusetts business Trust, organized
in 1985. The Trust has changed its name several times during the past
several years. The Trust was previously known as MFS Government Mortgage
Fund prior to June 2, 1995, MFS Government Income Plus Fund prior to
March 1, 1993, MFS Government Income Plus Trust prior to August 3, 1992,
and MFS Government Securities High Yield Trust prior to October 16,
1989.
"MFD" - MF Fund Distributors, Inc., a Delaware corporation.
"Prospectus" - The Prospectus of the Fund, dated October 1, 2000, as
amended or supplemented from time to time.
(II) MANAGEMENT OF THE FUND
The Fund
The Fund is a diversified series of the Trust. This means that, with
respect to 75% of its total assets, the Fund may not (1) purchase more
than 10% of the outstanding voting securities of any one issuer, or (2)
purchase securities of any issuer if as a result more than 5% of the
Fund's total assets would be invested in that issuer's securities. This
limitation does not apply to obligations of the U.S. Government or its
agencies or instrumentalities. The Trust is an open-end management
investment company.
The Fund and its Adviser and Distributor have adopted a code of ethics
as required under the Investment Company Act of 1940 ("the 1940 Act").
Subject to certain conditions and restrictions, this code permits
personnel subject to the code to invest in securities for their own
accounts, including securities that may be purchased, held or sold by
the Fund. Securities transactions by some of these persons may be
subject to prior approval of the Adviser's Compliance Department.
Securities transactions of certain personnel are subject to quarterly
reporting and review requirements. The code is on public file with, and
is available from, the SEC. See the back cover of the prospectus for
information on obtaining a copy.
Trustees and Officers - Identification and Background
The identification and background of the Trustees and officers of the
Trust are set forth in Appendix A of this Part I.
Trustee Compensation
Compensation paid to the non-interested Trustees and to Trustees who
are not officers of the Trust, for certain specified periods, is set
forth in Appendix B of this Part I.
Affiliated Service Provider Compensation
Compensation paid by the Fund to its affiliated service providers - to
MFS, for investment advisory and administrative services, and to MFSC,
for transfer agency services - for certain specified periods is set
forth in Appendix C to this Part I.
(III) SALES CHARGES AND DISTRIBUTION PLAN
PAYMENTS
Sales Charges
Sales charges paid in connection with the purchase and sale of Fund
shares for certain specified periods are set forth in Appendix D to
this Part I, together with the Fund's schedule of dealer reallowances.
Distribution Plan Payments
Payments made by the Fund under the Distribution Plan for its most
recent fiscal year end are set forth in Appendix D to this Part I.
(IV) PORTFOLIO TRANSACTIONS AND BROKERAGE
COMMISSIONS
Brokerage commissions paid by the Fund for certain specified periods,
and information concerning purchases by the Fund of securities issued
by its regular broker-dealers for its most recent fiscal year, are set
forth in Appendix E to this Part I.
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 Trustees (together with the
Trustees of certain other MFS Funds) have directed the Adviser to
allocate a total of $43,800 of commission business from certain MFS
Funds (including the Fund) to the Pershing Division of Donaldson Lufkin
& Jenrette as consideration for the annual renewal of certain
publications provided by Lipper Analytical Securities Corporation
(which provides information useful to the Trustees in reviewing the
relationship between the Fund and the Adviser).
(V) SHARE OWNERSHIP
Information concerning the ownership of Fund shares by Trustees and
officers of the Trust as a group, by investors who control the Fund, if
any, and by investors who own 5% or more of any class of Fund shares,
if any, is set forth in Appendix F to this Part I.
(VI) PERFORMANCE INFORMATION
Performance information, as quoted by the Fund in sales literature and
marketing materials, is set forth in Appendix G to this Part I.
(VII) INVESTMENT TECHNIQUES, PRACTICES, RISKS
AND RESTRICTIONS
Investment Techniques, Practices and Risks
The investment objective and principal investment policies of the Fund
are described in the Prospectus. In pursuing its investment objective
and principal investment policies, the
Part I -- 1
<PAGE>
Fund may engage in a number of investment techniques and practices,
which involve certain risks. These investment techniques and practices,
which may be changed without shareholder approval unless indicated
otherwise, are identified in Appendix A to the Prospectus, and are more
fully described, together with their associated risks, in Part II of
this SAI. The following percentage limitations apply to these
investment techniques and practices:
o Foreign Securities may be up to (but not including) 20% of net assets
o Lower Rated Bonds may not exceed 10% of net assets
o Short Sales - value of underlying securities may not exceed 40% of
net assets
o Lending of Portfolio Securities may not exceed 30% of the Fund's net
assets
Investment Restrictions
The Fund has adopted the following restrictions which cannot be changed
without the approval of the holders of a majority of the Fund's shares
(which, as used in this SAI, means the lesser of (i) more than 50% of
the outstanding shares of the Trust or the Fund or class, as
applicable, or (ii) 67% or more of the outstanding shares of the Trust
or the Fund or class, as applicable, present at a meeting at which
holders of more than 50% of the outstanding shares of the Trust or the
Fund or class, as applicable, are represented in person or by proxy).
Except with respect to the Fund's policy on borrowing and investing in
illiquid securities, these investment restrictions and policies are
adhered to at the time of purchase or utilization of assets; a
subsequent change in circumstances will not be considered to result in
a violation of policy. In the event of a violation of nonfundamental
investment policy (1), the Fund will reduce the percentage of its
assets invested in illiquid investments in due course, taking into
account the best interests of shareholders.
Terms used below (such as Options and Futures Contracts) are defined
in Part II of this SAI.
The Fund may not:
(1) borrow amounts in excess of 331/3% of its assets including amounts
borrowed;
(2) underwrite securities issued by other persons except insofar as the
Fund may technically be deemed an underwriter under the Securities
Act of 1933 in selling a portfolio security;
(3) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or
interests therein and securities of companies, such as real estate
investment trusts, which deal in real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity
contracts (excluding Options, Options on Futures Contracts, Options
on Stock Indices, Options on Foreign Currency and any other type of
option, Futures Contracts, any other type of futures contract, and
Forward Contracts) in the ordinary course of its business. The Fund
reserves the freedom of action to hold and to sell real estate,
mineral leases, commodities or commodity contracts (including
Options, Options on Futures Contracts, Options on Stock Indices,
Options on Foreign Currency and any other type of option, Futures
Contracts, any other type of futures contract, and Forward
Contracts) acquired as a result of the ownership of securities;
(4) issue any senior securities except as permitted by the Investment
Company Act of 1940, as amended (the "1940 Act"). For purposes of
this restriction, collateral arrangements with respect to any type
of option (including Options on Futures Contracts, Options, Options
on Stock Indices and Options on Foreign Currencies), short sale,
Forward Contracts, Futures Contracts, any other type of futures
contract, and collateral arrangements with respect to initial and
variation margin, are not deemed to be the issuance of a senior
security;
(5) make loans to other persons. For these purposes, the purchase of
short-term commercial paper, the purchase of a portion or all of an
issue of debt securities, the lending of portfolio securities, or
the investment of the Fund's assets in repurchase agreements shall
not be considered the making of a loan; or
(6) purchase any securities of an issuer of a particular industry, if as
a result, more than 25% of its gross assets would be invested in
securities of issuers whose principal business activities are in the
same industry (except obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and repurchase
agreements collateralized by such obligations).
In addition, the Fund has the following nonfundamental policies which
may be changed without shareholder approval. The Fund will not:
(1) invest in illiquid investments, including securities subject to
legal or contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the security is
suspended, or, in the case of unlisted securities, where no market
exists) if more than 15% of the Fund's net assets (taken at market
value) would be invested in such securities. Repurchase agreements
maturing in more than seven days will be deemed to be illiquid for
purposes of the Fund's limitation on investment in illiquid
securities. Securities that are not registered under the 1933 Act
and sold in reliance on Rule 144A thereunder, but are determined to
be liquid by the Trust's Board of Trustees (or its delegee), will
not be subject to this 15% limitation;
(2) invest for the purpose of exercising control or management;
Part I -- 2
<PAGE>
(3) pledge, mortgage or hypothecate in excess of 331/3% of its gross
assets. For purposes of this restriction, collateral arrangements
with respect to any type of option (including Options on Futures
Contracts, Options, Options on Stock Indices and Options on Foreign
Currencies), any short sale, any type of futures contract (including
Futures Contracts), Forward Contracts and payments of initial and
variation margin in connection therewith, are not considered a
pledge of assets.
(VIII) TAX CONSIDERATIONS
For a discussion of tax considerations, see Part II of this SAI.
(IX) INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS
Ernst & Young LLP are the Fund's independent auditors, providing audit
services, tax services, and assistance and consultation with respect to
the preparation of filings with the Securities and Exchange Commission.
Part I -- 3
<PAGE>
-----------------------
PART I - APPENDIX A
-----------------------
TRUSTEES AND OFFICERS - IDENTIFICATION
AND BACKGROUND
The Trustees and officers of the Trust are listed below, together with
their principal occupations during the past five years. (Their titles may
have varied during that period.)
Trustees
J. ATWOOD IVES (born 5/1/36)
Eastern Enterprises (diversified company), Chairman, Trustee and Chief
Executive Officer
Address: Weston, Massachusetts
LAWRENCE T. PERERA (born 6/23/35)
Hemenway & Barnes (attorneys), Partner
Address: Boston, Massachusetts
WILLIAM J. POORVU (born 4/10/35)
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (real estate investment
trust), Director; The Baupost Fund (a mutual fund), Vice Chairman and
Trustee
Address: Harvard Business School, Cambridge,
Massachusetts
CHARLES W. SCHMIDT (born 3/18/28)
Private investor; IT Group, Inc. (diversified environmental services and
consulting), Director
Address: Weston, Massachusetts
ARNOLD D. SCOTT* (born 12/16/42)
Massachusetts Financial Services Company, Senior Executive Vice President
and Director
JEFFREY L. SHAMES* Chairman and President (born 6/2/55)
Massachusetts Financial Services Company, Chairman and Chief Executive
Officer
ELAINE R. SMITH (born 4/25/46)
Independent Consultant
Address: Weston, Massachusetts
DAVID B. STONE (born 9/2/27)
North American Management Corp. (investment adviser), Chairman; Eastern
Enterprises (diversified services company), Trustee
Address: Boston, Massachusetts
Officers
STEPHEN E. CAVAN,* Clerk and Secretary (born 11/6/53) Massachusetts
Financial Services Company, Senior Vice President, General Counsel and
Assistant Secretary
JAMES R. BORDEWICK, JR.,* Assistant Clerk and Assistant Secretary (born
3/6/59)
Massachusetts Financial Services Company, Senior Vice President and
Associate General Counsel
JAMES O. YOST,* Treasurer (born 6/12/60) Massachusetts Financial Services
Company, Senior Vice President
MARK E. BRADLEY,* Assistant Treasurer (born 11/23/59) Massachusetts
Financial Services Company, Vice President (since March 1997); Putnam
Investments, Vice President (from September 1994 until March 1997)
ELLEN MOYNIHAN,* Assistant Treasurer (born 11/13/57) Massachusetts
Financial Services Company, Vice President (since September 1996);
Deloitte & Touche LLP, Senior Manager (prior to September 1996)
LAURA F. HEALY,* Assistant Treasurer (born 3/20/64) Massachusetts
Financial Services Company, Vice President (since December 1996); State
Street Bank Fund Administration Group, Assistant Vice President (prior to
December 1996)
ROBERT R. FLAHERTY,* Assistant Treasurer (born 9/18/63)
Massachusetts Financial Services Company, Vice President (since August
2000); VAM Fund Services, Senior Vice President (since 1996); Chase
Global Fund Services, Vice President (1995 to 1996)
------------------------------
* "Interested persons" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Adviser, whose address is 500
Boylston Street, Boston, Massachusetts 02116.
Each Trustee and officer holds comparable positions with certain MFS
affiliates or with certain other funds of which MFS or a subsidiary of
MFS is the investment adviser or distributor. Messrs. Shames and Scott,
Directors of MFD, and Mr. Cavan, the Secretary of MFD, hold similar
positions with certain other MFS affiliates.
Part I -- A-1
<PAGE>
-----------------------
PART I - APPENDIX B
-----------------------
TRUSTEE COMPENSATION
The Fund pays the compensation of non-interested Trustees and of Trustees
who are not officers of the Trust, who currently receive a fee of $250
per year plus $25 per meeting and $20 per committee meeting attended,
together with such Trustee's out-of-pocket expenses.
Trustee Compensation Table
..........................................................................
<TABLE>
<CAPTION>
Total Trustee
Trustee Fees Fees from Fund
Trustee from Fund(1) and Fund Complex(2)
---------------------------------------------------------------
<S> <C> <C>
J. Atwood Ives $0 $132,623
Lawrence T. Perera 0 144,098
William J. Poorvu 0 141,338
Charles W. Schmidt 0 137,678
Arnold D. Scott 0 0
Jeffrey L. Shames 0 0
Elaine R. Smith 0 144,098
David B. Stone 0 151,418
</TABLE>
--------------------
(1) These fees are estimated for the current fiscal year. The Trustees are
currently waiving their right to receive fees.
(2) Information provided is provided for calendar year 1999. All Trustees
served as Trustees of 34 funds within the MFS fund complex (having
aggregate net assets at December 31, 1999, of approximately $59 billion).
Part I -- B-1
<PAGE>
------------------------
PART I -- APPENDIX C
------------------------
AFFILIATED SERVICE PROVIDER COMPENSATION
..........................................................................
The Fund paid compensation to its affiliated service providers over the
specified periods as follows:
<TABLE>
<CAPTION>
Paid to MFS Amount Paid to MFS for Paid to MFSC Amount Aggregate
for Advisory Waived Administrative for Transfer Waived Amount Paid
Fiscal Year Ended Services by MFS Services Agency Services by MFSC to MFS and MFSC
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Not Applicable
</TABLE>
-------------------
Part I -- C-1
<PAGE>
-----------------------
PART I - APPENDIX D
-----------------------
SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS
Sales Charges
..........................................................................
The following sales charges were paid during the specified periods:
<TABLE>
<CAPTION>
Class A Initial Sales Charges: CDSC Paid to MFD on:
Retained Reallowed Class A Class B Class C
Fiscal Year Ended Total by MFD to Dealers Shares Shares Shares
-------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Not Applicable
</TABLE>
Dealer Reallowances
..........................................................................
As shown above, MFD pays (or "reallows") a portion of the Class A initial
sales charge to dealers. The dealer reallowance as expressed as a
percentage of the Class A shares' offering price is:
<TABLE>
<CAPTION>
Dealer Reallowance as a
Amount of Purchase percent of Offering Price
<S> <C>
Less than $50,000 5.00%
$50,000 but less than $100,000 4.00%
$100,000 but less than $250,000 3.20%
$250,000 but less than $500,000 2.25%
$500,000 but less than $1,000,00 0 1.70%
$1,000,000 or more None*
</TABLE>
--------------
* A CDSC will apply to such purchase.
Distribution Plan Payments
..........................................................................
The Fund is newly organized and has not made payments under the
Distribution Plan as of the date of this SAI.
Distribution plan payments retained by MFD are used to compensate MFD for
commissions advanced by MFD to dealers upon sale of fund shares.
Part I -- D-1
<PAGE>
-----------------------
PART I - APPENDIX E
-----------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Brokerage Commissions
..........................................................................
The Fund is newly organized and has not paid brokerage commissions as of
the date of this SAI.
Securities Issued by Regular Broker-Dealers
..........................................................................
The Fund is newly organized and has not purchased securities issued by its
regular broker-dealers as of the date of this SAI.
Part I -- E-1
<PAGE>
-----------------------
PART I - APPENDIX F
-----------------------
SHARE OWNERSHIP
Ownership by Trustees and Officers
Not Applicable.
25% or Greater Ownership
The following table identifies those investors who own 25% or more of the
Fund's shares (all share classes taken together) and are therefore
presumed to control the Fund:
<TABLE>
<CAPTION>
Jurisdiction of Organization
Name and Address of Investor (if a Company) Percentage Ownership
----------------------------------------------------------------------------------
<S> <C> <C>
Not Applicable
</TABLE>
5% or Greater Ownership of Share Class
The following table identifies those investors who own 5% or more of any
class of the Fund's shares:
<TABLE>
<CAPTION>
Name and Address of Investor Ownership Percentage
---------------------------------------------------------------------------
<S> <C>
Not Applicable
</TABLE>
Part I -- F-1
<PAGE>
-----------------------
PART I - APPENDIX G
-----------------------
PERFORMANCE INFORMATION
..........................................................................
The Fund is newly organized and has no performance quotations as of the
date of this SAI.
Part I -- G-1
