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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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14a-6(e)(2))
THE MFS SERIES TRUST
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
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FOR IMMEDIATE RELEASE
MEDIA CONTACTS:
John F. Reilly
MFS Investment Management
(617) 954-5305
Internet: [email protected]
Donald A. Simon
Chairman of the Board and President
The MFS Series Trust
(510) 293-5950
Internet: [email protected]
Roy W. Adams, Jr.
Counsel to the Independent Trustees of
The MFS Series Trust
(510) 631-0222
Internet: [email protected]
INVESTOR CONTACTS MFS Service Center, Inc.
(800) 225-2606
INDEPENDENT TRUSTEES OF MFS AGGRESSIVE SMALL CAP EQUITY FUND RESPOND TO
NAVELLIER MANAGEMENT PRESS RELEASE
Hayward, California, March 26, 1997 -- The independent trustees (the
"Independent Trustees") of the MFS Aggressive Small Cap Equity Fund, formerly,
the Navellier Aggressive Small Cap Equity Portfolio (the "Fund"), responded
today to statements by Navellier Management, Inc. ("Navellier Management") in
its March 14, 1997, press release.
SUMMARY
On March 13, 1997, the Independent Trustees, who are responsible for
overseeing the Fund, determined not to renew the Fund's investment advisory and
administrative services agreements with Navellier Management and the Fund's
distribution agreement with Navellier Securities Corp. ("Navellier Securities").
The Independent Trustees also determined that, effective March 16, 1997, MFS
Investment Management ("MFS") would serve as the investment manager and
administrator to the Fund and that an MFS subsidiary, MFS Fund Distributors,
Inc. ("MFD"), would serve as the Fund's distributor.
On March 14, 1997, Navellier Management issued a press release (the
"Navellier Release"), mailed it to certain shareholders of the Fund and
distributed it over the Internet. Navellier Management made certain statements
therein that the Independent Trustees believe
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to be both unwarranted and inaccurate. Specifically, Navellier Management
alleged that the Independent Trustees:
o Failed to act in the best interest of Fund shareholders
o Chose a path that keeps the Independent Trustees in control
of the Fund
o Rebuffed Navellier Management's proposal to merge the Fund
into another fund also advised by Navellier Management
The purpose of this press release is to respond to these unwarranted
and inaccurate statements and to briefly set forth certain reasons for the
Independent Trustees' decision to replace Navellier Management and Navellier
Securities. In summary, the Independent Trustees' decision was based primarily
upon:
o Navellier Management's repeated failures to provide the
Independent Trustees with information as required by
applicable federal securities laws, including the Investment
Company Act of 1940, as well as state business trust and other
laws, that the Independent Trustees believed to be reasonably
necessary to fulfill their duties to the Fund and its
shareholders
o The Independent Trustees' loss of confidence in Navellier
Management's operation of the Fund
BACKGROUND
The Independent Trustees constitute a majority of the Board of Trustees
of The MFS Series Trust (formerly, "The Navellier Series Fund") (the "Trust").
The Fund is the sole series of the Trust. On March 13, 1997, the Independent
Trustees issued a press release announcing that, effective March 16, 1997, MFS
would serve as the investment manager and administrator to the Fund and MFD
would serve as the Fund's distributor. MFS and MFD were retained by the
Independent Trustees after they decided not to renew the Fund's investment
advisory and administrative services agreements with Navellier Management or the
Fund's distribution agreement with Navellier Securities.
In explaining the reasons for their actions, the Independent Trustees
stated that their decision was based on the totality of the facts and
circumstances. They also stated that they had determined that MFS and MFD would
be able to provide superior levels of support and service to the Fund and its
shareholders and that they were particularly impressed with MFS' professionalism
and its demonstrated record of strong performance, investor service and
management.
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NAVELLIER PRESS RELEASE
On March 14, 1997, Navellier Management issued the Navellier Release,
apparently mailed it to shareholders of the Fund and distributed it over the
Internet. The mailing of the Navellier Release to Fund shareholders was not
authorized by the Fund. In the Navellier Release, Navellier Management made
certain statements that the Independent Trustees believe to be unwarranted and
inaccurate. Specifically, Navellier Management alleged that the Independent
Trustees:
o Failed to act in the best interest of the Fund's shareholders
o Chose instead a path that keeps them in control of the Fund
o Repeatedly rebuffed Navellier Management's proposal to merge
the assets of the Fund into the no-load Navellier Performance
Funds by repeatedly refusing to act on this merger proposal.
INDEPENDENT TRUSTEES' RESPONSE
The Independent Trustees emphatically disagree with all of these
allegations.
Best Interests of Shareholders With No Self Interest. The Independent
Trustees believe that they acted (i) on behalf of the Fund and its shareholders
and not themselves, (ii) in the best interest of the Fund and its shareholders
and (iii) in accordance with their fiduciary duties thereto. Their decision to
replace Navellier Management and Navellier Securities with MFS and MFD was made
only after (i) repeated attempts by the Independent Trustees to work with
Navellier Management and its counsel to address Trust management issues, (ii)
extensive discussions with independent legal counsel to the Independent Trustees
and (iii) consultation with the staff of the Securities and Exchange Commission
(the "SEC").
Contrary to the suggestion of Navellier Management, the Independent
Trustees have not acted in any way to further their own interests. By replacing
Navellier Management with MFS and MFD, the Independent Trustees in no way were
attempting to perpetuate their control of the Fund or to perpetuate their modest
Trustees' fees. The Independent Trustees are not affiliated with MFS or MFD.
No matter what the Fund's shareholders determine to be the best course
of action for the Fund -- whether to continue as a separately managed MFS Fund,
to be acquired by an existing MFS Fund or to seek a different investment adviser
to the Fund -- the Independent Trustees will not continue as Trustees following
the vote of the Fund's shareholders. Their actions therefore cannot have been
for the purposes of perpetuating their control or fees.
Rather, the Independent Trustees' decision was based primarily upon:
o Navellier Management's repeated failure to provide the
Independent Trustees with information that (i) the
Independent Trustees had requested as required under
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applicable federal securities laws and state business trust
and other laws and (ii) was reasonably necessary to evaluate
(A) the continuation of the existing investment advisory,
administrative services and distribution agreements with
Navellier Management and its affiliates, and (B) Navellier
Management's proposal to merge the assets of the Fund into
one of the Navellier Performance Funds (the "Merger
Proposal")
o The Independent Trustees' lack of confidence, ultimately, in
Navellier Management's operation of the Fund
In considering whether to retain MFS, the Independent Trustees reviewed
information provided to them by MFS showing, among other things, the level of
investment advisory fees received by MFS from funds managed by MFS which are
similar in investment style to the Fund, and the investment performance of those
funds. The Independent Trustees noted that the fees generally received by MFS
for the provision of investment advisory and administrative services are
substantially less than the fees the Fund has paid to Navellier Management for
the provision of these services. MFS has indicated that it plans to propose that
the Fund either be reorganized into an existing MFS Fund or continued as a
separate fund restructured as a member of the MFS Family of Funds, which would
result, in either case, in a substantial reduction in the investment advisory
and administrative services fees paid by the Fund. In either event, the
Independent Trustees would not continue as trustees of the Fund following the
vote of the Fund's shareholders and would receive no further compensation from
the Fund.
The Independent Trustees Did Not Rebuff the Merger Proposal. The
Independent Trustees emphatically disagree with Navellier Management's
allegation that they repeatedly rebuffed the Merger Proposal. Under the Merger
Proposal, the Fund would merge into another fund sponsored by Navellier
Management that, as of December 31, 1996, had no assets or operating history.
Prior to their March 13, 1997, decision not to renew the advisory and
other agreements with Navellier Management and Navellier Securities, the
Independent Trustees at all times were willing to consider the Merger Proposal.
However, the federal securities laws as well as state business trust and other
laws, required the Independent Trustees to request, and Navellier Management to
provide them, with all information reasonably necessary for the Independent
Trustees to prudently consider the Merger Proposal and to make certain findings
required to be made by them under such laws. Despite repeated requests,
Navellier Management never provided the Independent Trustees with any of the
necessary information. The Independent Trustees determined that without such
information, they were unable to carry out their statutory and fiduciary duties
to the Fund and its shareholders.
In an effort to break this stalemate, on November 11, 1996, the
Independent Trustees authorized Navellier Management to draft proxy and other
materials necessary to present the Merger Proposal to shareholders for their
consideration, subject, however, to two important conditions. First, the proxy
materials had to be reviewed and cleared by the appropriate staff of the SEC,
the Independent Trustees and by the Board of Trustees of the Performance Funds,
and, second, the proxy materials had to be filed with the SEC not later than
November 30, 1996.
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To the Independent Trustees' knowledge, Navellier Management did not
file any proxy materials with the SEC until March 7, 1997. In addition, the
proxy materials that were filed were on behalf of Navellier Management and Louis
Navellier, not the Fund (the "Navellier Proxy Materials"). Despite repeated
requests by the Independent Trustees to review any proposed proxy materials and
to be informed of the progress toward filing, Navellier Management did not give
the Independent Trustees an opportunity to review even these materials in
advance of this filing.
The Navellier Proxy Materials state that Navellier Management believes
that the Proposed Merger would benefit Fund shareholders by reducing the Fund's
operating costs and expenses by an estimated $100,000 per year, thereby
promoting more efficient operations. They also state that "the projected $75,000
per annum in Independent Trustees' Fees and expenses expected to be paid to the
Independent Trustees of the [Fund] would be eliminated, as would the $25,000 per
year in liability insurance and the approximately $155,000 in attorney's fees
and costs of the outside independent counsel for the Independent Trustees."
However, the Independent Trustees note that, as disclosed in the Fund's
1996 Annual Report to shareholders, the Fund's "Trustees' Fees and Expenses"
were $51,381, and all of the Fund's "Legal Fees" were $60,915, for the fiscal
year ended December 31, 1996. The Independent Trustees also note that the Fund,
through its participation in joint liability insurance policies covering other
MFS funds, has obtained Directors' and Officers' Errors and Omissions liability
insurance for an annual cost to the Fund of approximately $1,300. Therefore,
these expenses for 1996 ($113,596) were substantially less than Navellier
Management's projection of these expenses ($255,000). This remains true even if
the $100,000 savings Navellier Management believes would result if the Merger
Proposal was consummated is taken into effect (i.e., the $255,000 projection
would be reduced to $155,000, which is still greater than the 1996 expenses of
$133,596).
While the merger would result in a reduction in the amount paid by the
Fund in investment advisory fees by 0.10% per annum and the elimination of the
3% initial sales charge, the Independent Trustees informed Navellier Management
in April 1996 that these goals could be achieved without merging the Fund.
Rather, Navellier Management merely had to agree to reduce its investment
advisory fee and Navellier Securities merely had to agree to eliminate the
initial sales charge, including the portion retained by Navellier Securities.
Unfortunately, proposals to this effect were never made to the Independent
Trustees.
To the Independent Trustees' knowledge, the SEC has not completed its
review of the Navellier Proxy Materials. The conditions established by the
Independent Trustees have not been satisfied, and the filing of these materials
has not been duly authorized by the Fund. Currently, the Independent Trustees
have no intention to convene a shareholder meeting to consider the Merger
Proposal.
Other Considerations. The circumstances described above were preceded
by other events that also influenced the Board's decision to replace Navellier
Management and Navellier Securities. Despite the Independent Trustees' repeated
requests for information from Navellier Management necessary to evaluate the
terms of the investment advisory, administrative services
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and distribution agreements, Navellier Management never provided the Independent
Trustees with information upon which the Independent Trustees believed they
could properly discharge their statutory and fiduciary duties.
In 1995, the SEC inspected Navellier Management and the Fund and issued
a letter to them noting a number of regulatory deficiencies and demanding that
corrective action be taken promptly. The Independent Trustees were concerned by
the number and nature of the deficiencies cited by the SEC and the manner in
which Navellier Management addressed these deficiencies. In addition, certain
events led the Independent Trustees to question the accuracy of the information
contained in Navellier Management's Form ADV as filed with the SEC concerning
the ownership and control of Navellier Management. Finally, the Independent
Trustees, on November 11, 1996, directed Navellier Management to reinstate the
Fund's Directors' and Officers' Errors and Omissions liability insurance, which
had been in effect since the Fund's inception but which had lapsed due to
nonpayment of the premium on August 31, 1996. Navellier Management did not
reinstate this policy as directed, thus exposing the Fund to potential
significant liability.
As noted above, on March 13, 1997, the Board held a meeting to
determine whether to continue the contractual arrangements with Navellier
Management and Navellier Securities or to engage MFS and MFD. At that meeting
and prior to the Independent Trustees' selection of MFS and MFD, Louis
Navellier, a Trustee of the Trust and President of Navellier Management, made a
number of alternative proposals:
o While Mr. Navellier stated in the Navellier Release and the
Navellier Proxy Materials that the Merger Proposal was in
the best interest of the Fund and its shareholders, he
nevertheless offered to abandon the Merger Proposal if the
Independent Trustees would agree to continue the contractual
arrangements with Navellier Management and Navellier
Securities or if MFS would agree to pay Navellier Management
for the right to provide management, administrative and
distribution services to the Fund
o Alternatively, Mr. Navellier offered to abandon the Merger
Proposal if the Independent Trustees would authorize
Navellier Management to assign the right to manage the Fund
to another investment manager in return for compensation to
be paid by that investment manager to Navellier Management.
When questioned by the Independent Trustees, Mr. Navellier
stated that he had not discussed this proposal with the
other investment manager
In addition, in attempting to persuade the Independent Trustees not to
replace Navellier Management and Navellier Securities with MFS and MFD, Mr.
Navellier stated at the March 13, 1997, Board meeting that doing so likely would
cause the Fund to fail the federal tax qualification rules (which permit the
Fund to distribute its earnings and profits without the imposition of a
corporate level tax) and would prevent the Fund from selling its portfolio
securities at the price for which they are carried by the Fund on its books.
Based on the Fund's portfolio holdings at the time of the meeting and the Fund's
current portfolio holdings, MFS has informed the Independent Trustees that these
events do not appear likely to occur.
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CONCLUSION
Based on these and other considerations, the Board determined that it
was not in the Fund's or its shareholders' best interests to continue the
contractual relationships with Navellier Management and Navellier Securities.
The Board requested that MFS and MFD assume these contractual responsibilities,
based upon their professionalism and their demonstrated record of strong
performance, investor service and management.
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FOR IMMEDIATE RELEASE
MEDIA CONTACT:
John F. Reilly
MFS Investment Management
(617) 954-5305
Internet: [email protected]
INVESTOR CONTACT:
MFS Service Center, Inc.
(800) 225-2606
MFS AGGRESSIVE SMALL CAP EQUITY FUND ANNOUNCES CHANGES
TO BOARD
Boston, Massachusetts, April 10, 1997 - The MFS Aggressive Small Cap
Equity Fund (the "Fund") announced that at a meeting today of the Board of
Trustees (the "Board"), the Board elected Arnold D. Scott, the Senior Executive
Vice President and a Director of Massachusetts Financial Services Company
("MFS"), the Fund's investment adviser, as a Trustee of the Fund and removed
Louis G. Navellier and Alan Alpers from their positions as Trustees of the Fund.
The Board is now comprised of four members, Lawrence Bianchi, Arnold D. Scott,
Donald A. Simon and Kenneth Sletten. None of the Trustees is affiliated with
Navellier Management, Inc. ("Navellier Management"), the Fund's prior adviser,
or any of Navellier Management's affiliates.
The Board's action to elect Mr. Scott as a Trustee of the Fund and to
remove Messrs. Navellier and Alpers as Trustees of the Fund was based upon the
fact that MFS, rather than Navellier Management, is the Fund's investment
adviser. It is customary in the mutual fund industry for representatives of an
investment adviser to a mutual fund to serve as members of its governing board.
The Board believes it to be appropriate and in the best interests of the Fund to
have a representative of MFS serve as a Trustee of the Fund. In particular, the
Board believes that, given Mr. Scott's affiliation with MFS and his business and
industry experience, he will provide the Board with valuable insight and
guidance. Mr. Scott has been with MFS since 1969 and serves on MFS' Executive
Committee. He has extensive experience serving as a trustee of mutual funds and
is currently a trustee or director of over 100 funds managed by the MFS
organization. He is an active member of the mutual fund industry and currently
is a member of the Executive Committee of the Investment Company Institute, the
mutual fund industry's trade group.
The Board did not believe it appropriate or in the Fund's best
interests for Messrs. Alpers and Navellier to continue their service as Trustees
given that Navellier Management, with which Messrs. Alpers and Navellier are
affiliated, no longer serves as the Fund's investment adviser.
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In addition, the Board believes that, since March 16, 1997 when MFS
assumed management responsibilities for the Fund from Navellier Management, Mr.
Navellier has acted in a manner that is not consistent with his fiduciary duties
as a sitting trustee of the Fund. Specifically, despite the Board's demand and
the repeated requests of Fund representatives, Mr. Navellier and Navellier
Management have failed to provide MFS with any of the Fund's books. Moreover,
the Board believes, based on information provided to them, that Mr. Navellier
has engaged in deliberate misstatements to Fund shareholders, their brokers,
investment advisers and the public.
On April 10, 1997, Messrs. Navellier and Alpers filed an application
with The United States District Court for the Northern District of California
(the "Application") for a temporary restraining order against Messrs. Simon and
Sletten to prohibit them from removing Messrs. Navellier and Alpers as Trustees
of the Fund. The Fund has been informed that the Court has denied this
Application.
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