<PAGE>
As filed with the Securities and Exchange Commission on April 10, 1997
1933 Act File No. 33-64010
1940 Act File No. 811-7768
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 7
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9
THE MFS SERIES TRUST
(FORMERLY KNOWN AS THE NAVELLIER SERIES FUND)
(Exact Name of Registrant as Specified in Charter)
500 Boylston, Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 617-954-5000
Stephen E. Cavan, Massachusetts Financial Services Company
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on [DATE] pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(i)
/ / on [DATE] pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on [DATE] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
its shares of Beneficial Interest (without par value), under the Securities Act
of 1933. The Registrant filed a Rule 24f-2 Notice with respect to its fiscal
year ended December 31, 1996 on February 28, 1997.
- --------------------------------------------------------------------------------
<PAGE>
THE MFS SERIES TRUST
(FORMERLY KNOWN AS THE NAVELLIER SERIES TRUST)
on Behalf of
MFS-Registered Trademark- AGGRESSIVE SMALL CAP EQUITY FUND
(FORMERLY KNOWN AS THE NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO)
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<TABLE>
<CAPTION>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART A PROSPECTUS CAPTION ADDITIONAL INFORMATION
- ----------------- ------------------ ----------------------
<S> <C> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Financial Highlights *
(b) * *
(c), (d) Performance & Yield Calculation of Performance Data
4 (a) Front Cover Page; Fund Highlights - *
The Fund; Fund Highlights -
Investment Objective; Fund -
Highlights - Investing in Securities
of Foreign Issuers; Investment
Objective and Policies; Special
Investment Methods and Risks -
"Short Sales Against the Box"
(b) Investment Restrictions; *
(c) Special Investment Methods and *
Risks; Risk Factors
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART A PROSPECTUS CAPTION ADDITIONAL INFORMATION
- ----------------- ------------------ ----------------------
<S> <C> <C>
5 (a) Management of the Fund - Board *
of Trustees; Management of the Fund -
The Adviser
(b), (d), (e) Front Cover Page; Special Considerations; *
Fund Highlights - Investment Adviser;
Management of the Fund - The Adviser;
Back Cover Page
(c) Management of the Fund - *
The Adviser
(f) Management of the Fund - The Custodian and *
the Transfer Agent; Back Cover Page
(g) Expense Summary; Expenses of the *
Fund - General
(h) Information Concerning Shares of *
the Fund - Expenses
5A (a), (b), (c) ** **
6 (a) Description of Shares; *
Redemption of Shares
(b), (c), (d) * *
(e) Reports and Information; *
Back Cover Page
(f) Dividends and Distribution *
(g) Taxes *
(h) * *
7 (a) Front Cover Page; Management of *
the Fund - the Distributor; Back Cover
Page
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART A PROSPECTUS CAPTION ADDITIONAL INFORMATION
- ----------------- ------------------ ----------------------
<S> <C> <C>
(b) Purchase and Pricing of Shares *
(c) Special Considerations; Purchase *
and Pricing of Shares; Certain
Services Provided to Shareholders -
Dividend Election; Terms Applicable
to Letter of Intent
(d) Fund Highlights - How to Invest; *
Purchase and Pricing of Shares
(e), (f), (g) * *
8(a), (b), (c), (d) Redemption of Shares *
Information Concerning Shares of *
the Fund - Redemptions and
Repurchases
9 * *
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART B PROSPECTUS CAPTION ADDITIONAL INFORMATION
- ----------------- ------------------ ----------------------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * *
13 (a), (b), (c) * Investment Objective,
and Policies
(d) * *
14 (a), (b) * Trustees and Officers of the Fund
(c) * Officers
15 (a) * Control Persons and Principal
Holders of Securities
(b), (c) * Trustees and Officers of the Fund
16 (a), (b) Special Considerations; Adviser, Distributor, Custodian
Management of the Fund - and Transfer Agent
The Adviser
(c) * *
(d) * Adviser, Distributor, Custodian
and Transfer Agent
(e) * Brokerage Allocation and Other
Practices
(f) Dividends and Distributions Adviser, Distributor, Custodian
and Transfer Agent
(g) * *
(h) Independent Auditors and Adviser, Distributor, Custodian
Financial Statements and Transfer Agent; Independent
Auditors and Financial Statements
<PAGE>
<CAPTION>
ITEM NUMBER STATEMENT OF
FORM N-1A, PART B PROSPECTUS CAPTION ADDITIONAL INFORMATION
- ----------------- ------------------ ----------------------
<S> <C> <C>
(i) * Adviser, Distributor, Custodian
and Transfer Agent
17 (a), (b), (c) * Brokerage Allocation and Other
(d), (e) Practices
18 (a) * Capital Stock and Other Securities
(b) * *
19 (a), (b) * Purchase, Redemption, and Pricing
of Shares
(c) * *
20 * Taxes
21 (a), (b) Adviser, Distributor, Custodian
and Transfer Agent
(c) * *
22 (a) * *
(b) * Calculation of Performance Data
23 * Independent Auditors and Financial
Statements
</TABLE>
- --------------------------
* Not Applicable
** Contained in Annual Report
<PAGE>
PROSPECTUS
THE MFS-REGISTERED TRADEMARK- AGGRESSIVE SMALL CAP EQUITY FUND MAY 1, 1997
- --------------------------------------------------------------------------------
The MFS-Registered Trademark- Aggressive Small Cap Equity Fund (the "Fund")
is a diversified series of The MFS Series Trust (the "Trust"), an open-end
management investment company. The Fund invests primarily in securities traded
in the United States' over-the-counter securities markets of domestic small cap
issuers and of foreign small cap issuers.
Massachusetts Financial Services Company ("MFS" or the "Adviser") is the
Fund's investment adviser and administrator, and MFS Fund Distributors, Inc.
("MFD") is the Fund's distributor. Prior to March 16, 1997 Navellier Management,
Inc. ("Navellier Management" or the "Prior Adviser") was the Fund's investment
adviser and administrator and Navellier Securities Corp. ("Navellier
Securities") was the Fund's distributor. The investment advisory agreement
pursuant to which MFS provides advisory services to the Fund will be submitted
for approval by Fund shareholders at a special stockholder meeting called for
that purpose on or prior to July 14, 1997. See "Special Considerations."
Rushmore Trust and Savings, FSB is the Fund's transfer agent and custodian
(referred to as the "Transfer Agent" or the "Custodian," as appropriate).
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be read and
retained for future reference. A Statement of Additional Information ("SAI")
about the Fund has been filed with the Securities and Exchange Commission and is
available upon request and without charge by calling or writing MFS Service
Center, Inc., 500 Boylston St., Boston, MA 02116, Toll-Free: (800) 225-2606. The
SAI bears the same date as this Prospectus and is incorporated by reference into
this Prospectus in its entirety.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No dealer, salesman, or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Fund, its investment
adviser, or its distributor. This Prospectus does not constitute an offer to buy
any of the securities offered hereby in any state to any person to whom it is
unlawful to make such an offer in such state.
<PAGE>
<TABLE>
<S> <C>
Expense Summary__________________________________________________ 2
Special Considerations___________________________________________ 3
Financial Highlights_____________________________________________ 4
Fund Highlights__________________________________________________ 5
Investment Objective and Policies________________________________ 7
Special Investment Methods and Risks_____________________________ 9
Investment Restrictions__________________________________________ 9
Risk Factors_____________________________________________________ 10
Performance and Yield____________________________________________ 11
Management of the Fund___________________________________________ 11
Expenses of the Fund_____________________________________________ 13
Reports and Information__________________________________________ 14
Description of Shares____________________________________________ 14
Dividends and Distributions______________________________________ 15
Taxes____________________________________________________________ 16
Purchase and Pricing of Shares___________________________________ 17
Redemption of Shares_____________________________________________ 22
Certain Services Provided to Shareholders________________________ 24
Additional Information___________________________________________ 24
Assent to Trust Instrument_______________________________________ 24
Terms Applicable to Letter of Intent_____________________________ 24
</TABLE>
<PAGE>
EXPENSE SUMMARY
- -------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 3%
(as a percentage of offering price)(1)
Maximum Sales Load Imposed on Reinvested
Dividends None
Redemption Fees None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees 1.25%
Administrative Fee 0.25%
Other Expenses (after expense limitation)(2) 0.25%
TOTAL FUND OPERATING EXPENSES (after expense
limitation)(2) 1.75%
</TABLE>
(1) The sales load is reduced to 2-1/2% for purchases between $25,000 and
$49,999.99, 2% for purchases between $50,000 and $74,999.99, 1-1/2% for
purchases between $75,000 and $99,999.99, and 1% for purchases of $100,000 or
more. There is no sales load for purchases of $1 million or more, or for
Trustees of the Fund, the Adviser, the Distributor, the Transfer Agent, the
Custodian, retirement or deferred compensation plans and trusts used to fund
such plans, or the employees of any of the above. There is no sales load for
brokers or their employees directly involved in selling the Fund's shares and
whose firm has executed a selling agreement with the Distributor. There is no
sales load on accounts as to which an investment adviser, financial planner,
agent, bank or broker-dealer that charges an account management or transaction
fee ("wrap accounts") receives a transaction fee as part of a "wrap fee"
account, provided the investment advisor, financial planner, agent, bank or
broker-dealer has an agreement with the Distributor; there is no sales load for
the spouse or child of any of the above. (See also "Reduced Sales Charges").
(2) The Adviser has agreed to bear the Fund's normal operating expenses which
accrue on and after March 16, 1997, subject to reimbursement by the Fund, such
that "Total Operating Expenses" do not exceed 1.75% per annum of the Fund's
average daily net assets during the current fiscal year. Otherwise, "Other
Expenses" and "Total Fund Operating Expenses" are estimated to be [ ]% and
[ ]% per annum, respectively. See "Special Considerations" and "Expenses of
the Fund."
EXAMPLES: The following example indicates the direct and indirect expenses an
investor (maintaining an average annual investment of $1,000) could expect to
incur in a one-year, three-year, five-year and ten-year period, respectively:
<TABLE>
<S> <C> <C> <C>
One-Year______ $ Five-Year_____ $
Three-Year____ $ Ten-Year______ $
</TABLE>
The foregoing example assumes (a) that an investor maintains an average of
$1,000 invested in the Fund; (b) payment of the maximum 3% sales load, (c) a 5%
annual return; (d) percentage amounts listed above for Annual Fund Operating
Expenses remain constant (for all periods shown above); and (e) reinvestment of
all dividends and distributions. The purpose of the expense table is to assist
investors in understanding the various costs and expenses that a shareholder
will bear directly or indirectly.
2
<PAGE>
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS THAN THOSE
SHOWN ABOVE.
SPECIAL CONSIDERATIONS
- -------------------------------------------------------
CHANGE IN FUND'S INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
On March 16, 1997, MFS commenced providing investment advisory and
administrative services to the Fund, and MFD commenced providing distribution
services to the Fund. Prior to that date, Navellier Management provided
investment advisory and administrative services to the Fund and Navellier
Securities provided distribution services to the Fund.
At a meeting held on March 13, 1997, the Board of Trustees which oversees
the Fund (the "Board") decided not to renew the Fund's contractual arrangements
with Navellier Management and Navellier Securities but instead to retain MFS and
MFD. The Board has removed representatives of Navellier Management and Navellier
Securities from all positions with the Trust and the Fund.
SUBSEQUENT SHAREHOLDER APPROVAL
Pursuant to the requirements of applicable law, the Fund's investment
advisory agreement with MFS will be submitted for approval by Fund shareholders
(the "MFS Advisory Agreement Proposal") at a special shareholders' meeting
called for that purpose on or prior to July 14, 1997. If this proposal is
approved by Fund shareholders, MFS anticipates that the investment advisory fee
and administrative services fee paid by the Fund to MFS would be lowered at that
time from 1.25% per annum and 0.25% per annum, respectively, to approximately
0.75% per annum and 0.015% per annum, respectively, for a total reduction of
approximately 0.735% per annum.
If the proposal is not approved by Fund shareholders, the Board would then
decide what action would be appropriate to serve the shareholder's best
interests.
OTHER CONSIDERATIONS
MFS has agreed to bear the Fund's normal operating expenses which accrue on
and after March 16, 1997, subject to reimbursement by the Fund, such that the
Fund's total operating expenses do no exceed 1.75% per annum of the Fund's
average daily net assets during the current fiscal year. This expense limitation
arrangement does not cover extraordinary Fund expenses, such as
litigation-related expenses, or any expenses which were borne or accrued prior
to March 16, 1997. Under an agreement between the Fund and Navellier Management
relating to the payment of the Fund's operating expenses, Navellier Management
may be able to seek reimbursement for operating expenses of the Fund paid by
Navellier Management on behalf of the Fund during the period commencing January
1, 1997 through March 15, 1997.
In the event that the Fund incurs extraordinary expenses or that Navellier
Management seeks and is entitled to reimbursement from the Fund of operating
expenses of the Fund paid by Navellier Management on behalf of the Fund during
the period commencing January 1, 1997 and ending on March 15, 1997 (or
thereafter), the Fund's "Total Operating Expenses" may exceed 1.75%, as set
forth under the "Expense Summary" above.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------
The following audited financial highlights shows the per share income and
capital changes for an outstanding share of the Fund for the fiscal years ended
December 31, 1996, December 31, 1995 and for the period ended December 31, 1994.
The information in the table should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which are
incorporated by reference into the SAI in reliance upon the report of the Fund's
independent auditors given upon their authority, as experts in accounting and
auditing. The Fund's current independent auditors are Deloitte & Touche LLP.
<TABLE>
<CAPTION>
For the For the For The
Year Ended Year Ended Period Ended
December 31, December 31, December 31,
1996 1995 1994*
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value--Beginning of Period $ 15.41 $ 10.98 $ 10.00
-------- -------- -------
Net Investment Loss (0.23) (0.16) (0.08)
Net Realized and Unrealized Gains on Securities 2.61 4.97 1.06
-------- -------- -------
Net Increase in Net Asset Value Resulting from
Operations 2.38 4.81 0.98
Distributions to Shareholders:
From Net Investment Income
----- ----- -----
From Net Realized Capital Gains (0.38)
----- -----
--------
-------- -------
Net Increase in Net Asset Value 2.38 4.43 0.98
-------- -------- -------
Net Asset Value--End of Period $ 17.79 $ 15.41 $ 10.98
-------- -------- -------
-------- -------- -------
Total Investment Return(1) 15.44% 43.80% 9.80%
Ratios to Average Net Assets:
Expenses After Reimbursement(2) 1.75% 1.75% 1.68%
Expenses Before Reimbursement (Note 2)(2) 1.86% 2.10% 4.52%
Net Investment Loss (1.33%) (1.15%) (0.81%)
Supplementary Data:
Portfolio Turnover Rate 136.9% 169.6% 139.9%
Number of Shares Outstanding at End of Period
(000s omitted) 10,683 6,831 1,660
Net Assets at End of Year (000s omitted) $190,035 $105,299 $18,224
Average Commission Rate Paid(3) $ 0.0424
</TABLE>
4
<PAGE>
(1) Total returns do not include the maximum sales load. Total returns for
periods of less than one year are not annualized.
(2) Under an agreement between the Fund and the Prior Adviser related to
payment of operating expenses, the Prior Adviser has reserved the right to seek
reimbursement for the past, present and future operating expenses of the Fund
paid by the Prior Adviser, at any time upon notice to the Fund. At December 31,
1995, the prior adviser voluntarily agreed not to seek future reimbursement of
all unreimbursed past expenses of the Fund. During the year ended December 31,
1996, the Prior Adviser paid operating expenses of the Fund totaling $660,374.
Under the operating expense agreement, the Prior Adviser requested, and the Fund
reimbursed, $464,738 of such expenses. The Prior Adviser voluntarily agreed not
to seek future reimbursement of $195,636 of such 1996 expenses. Accordingly, at
December 31, 1996, there were no prior expenses which could be reimbursed in the
future under the agreement.
(3) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security trades
on which commissions are charged. This amount may vary from period to period and
fund to fund depending on the mix of trades executed in various markets where
trading practices and commission rate structures may differ.
* From Commencement of Operations January 3, 1994.
FUND HIGHLIGHTS
- -------------------------------------------------------
THE FUND
The Fund is a diversified series of the Trust, an open-end management
investment company organized as a business trust under the laws of the State of
Delaware on May 28, 1993. The Fund was closed to new investors after April 15,
1996. Existing shareholders and mutual fund wrap fee advisers, financial
advisers and planners have been able to continue to purchase additional shares
after April 15, 1996. The Fund may resume sales to new investors at some future
date.
INVESTMENT OBJECTIVE
The Fund invests in securities traded in the United States securities
markets of domestic issuers and of foreign issuers. The sole objective of the
Fund will be to seek to achieve long-term growth of capital primarily through
investments in stocks of small cap companies (companies with market
capitalization of less than one billion dollars) with appreciation potential.
There can be no assurance that the Fund will achieve its investment objective.
The Fund's investment objective may not be changed without shareholder approval.
The Fund should not be considered suitable for investors seeking current income.
INVESTMENT ADVISER
The Fund has retained MFS to provide it with a continuous investment
program, including investment research and management with respect to all
securities and investments. The Adviser will determine from time to time what
securities and other investments will be selected and purchased, retained, or
sold by the Fund. MFS receives an annual fee, equal to 1.25% of the value of
assets under management for the Fund, payable monthly, based upon a percentage
of the Fund's average daily net assets. The advisory fees paid by the Fund to
the Adviser are higher
5
<PAGE>
than those paid by most other investment companies. MFS also receives an annual
administrative fee of 0.25% of the value of assets under management.
DISTRIBUTION OF SHARES
MFD acts as the sole distributor of the Fund's shares and also serves as
distributor for each of the other funds in the MFS Family of Funds. It is a
wholly owned subsidiary of MFS, the Fund's Adviser. The Distributor may sell
shares of the Fund directly to investors or through a network of broker-dealers
selected by Distributor. The Distributor will compensate these selected dealers
by paying them directly or allowing them to receive directly from the investor
some or all of the sales charge paid by the Fund investors.
HOW TO INVEST
Shares of the Fund are continuously offered for sale by the Distributor and
are also available for purchase through selected broker-dealers. The daily
public offering price for shares is the net asset value per share next computed
after receipt of your order plus the sales charge. As described in the foregoing
table (see "Expense Summary"), the Fund has a sliding sales charge beginning at
3% on initial investments of between $2,000 and $24,999.99. The sales charge is
incrementally reduced to 1% on purchases of $100,000 or more. No sales charge is
charged on investments of $1 million or more, or to Trustees of the Fund, the
Adviser, the Distributor, the Transfer Agent, the Custodian, or their employees,
a retirement plan or deferred compensation plan and trust to fund such plan; or
to brokers directly involved in selling the Fund's shares and whose firm has
executed a selling agreement with the Distributor, or their employees; or on
purchases through accounts as to which an investment advisor, financial planner,
agent, banker or broker-dealer charges an account management or transaction fee
as part of a "wrap fee", provided the investment advisor, financial planner,
agent, bank or broker-dealer has an agreement with Distributor; or the spouse or
child of any of the above. (See also "Reduced Sales Charges".) The sales charge
is paid at the time of the investor's purchase. Initial purchases must be at
least $2,000 ($500 in the case of IRA and other retirement plans or qualifying
group plans) and subsequent investments must be $100 or more. Investments in the
Fund can be made directly through selected securities dealers (who have the
responsibility to transmit orders promptly and may charge a fee for the purchase
or redemption of Fund shares), or through the transfer agent Rushmore Trust and
Savings, FSB. (See "Purchase and Pricing of Shares"). Investors can also invest
in the Fund by completing an application authorizing the transfer agent to
transfer funds automatically every month from the investor's checking account to
the Fund for purchase of Fund shares for the investor's account.
REDEMPTION OF SHARES
On any day the Fund and the stock exchanges are open for business the shares
will be redeemed at the next determined net asset value per share after receipt
of the redemption order. Redemption orders cannot be accepted after 4:00 p.m.
E.S.T.
If the investor requests payment of redemptions to a third party or to a
location other than his/her address of record listed on the account application,
the request must be in writing and the investor's signature must be guaranteed
by a commercial bank or stock exchange member firm.
6
<PAGE>
The Fund will redeem its shares in cash at a redemption price equal to their
net asset value as next computed following the receipt of a request for
redemption. Payment for the redemption price will be made within seven days
after the Fund's receipt of the request for redemption. For investments that
have been made by check, payment on withdrawal requests may be delayed only
until such time as it is reasonably necessary to assure that good payment has
been collected for the purchase of such shares which may be up to fifteen (15)
days from purchase date. This delay is necessary to assure the Fund that
investments made by check are good funds. The proceeds of the redemption will be
forwarded promptly upon confirmation of receipt of good funds.
The right of redemption may also be suspended, or the date of payment
postponed, (a) for any period during which the New York Stock Exchange is closed
(other than customary weekend or holiday closings); or (b) when trading on the
Exchange is restricted, or an emergency exists, as determined by the Securities
and Exchange Commission, so that disposal of the Fund's investments or
determination of net asset value is not reasonably practical; or (c) for such
other periods as the Commission, by order, may permit for protection of the
Fund's investors.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issuers. These considerations include, among others,
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under laws applicable
to foreign securities markets, the impact of political, social, or diplomatic
developments, difficulties in invoking legal process abroad, and the difficulty
of assessing economic trends in foreign countries.
While to some extent the risks to the Fund of investing in foreign
securities may be limited, since the Fund may not invest more than 25% of its
total net asset value in such securities and the Fund may only invest in foreign
securities which are traded in the United States securities markets, the risks
nonetheless exist.
INVESTMENT OBJECTIVE AND POLICIES
- -------------------------------------------------------
The investment objective of the Fund is to achieve long-term growth of
capital primarily through investments in stocks of companies with appreciation
potential.
The Fund will invest primarily in the common stock of small cap companies
(companies with market capitalization of less than one billion dollars) believed
by the Adviser to have appreciation potential. This Fund should not be
considered suitable for investors seeking current income. Since no one class or
type of security necessarily affords the greatest promise for capital
appreciation at all times, the Fund may invest up to 35% of its assets in
non-small cap securities of any issuer believed by the Adviser to offer
potential for capital appreciation over both the intermediate and long term.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in small cap equities. However, that projected minimum percentage could
be lowered during adverse market conditions. Equity securities include, but are
not limited to, common and preferred stock, and preferred stocks that are
convertible into common stock.
7
<PAGE>
The Fund may also invest in debt securities and money market instruments if,
in the opinion of the Adviser, such investment will further the investment
objective of the Fund. In addition, for temporary defensive purposes, the Fund
may retain cash or invest all or any portion of its assets in cash equivalents.
The Fund's holdings in such non-equity non-small cap securities will not exceed
35% of the total assets of the Fund. If the Fund's assets or a portion thereof
are retained in cash, such cash will, in all probability, be deposited in
interest-bearing or money market accounts with Rushmore Trust and Savings, FSB,
which is also the Fund's Transfer Agent and Custodian. Such cash will only be
deposited with the Transfer Agent if its interest rates, terms, and security are
equal to or better than could be received by depositing such cash with another
savings institution.
It is anticipated that all of the Fund's investments in corporate debt
securities (other than commercial paper) and preferred stocks will be
represented by debt securities and preferred stocks which have, at the time of
purchase, a rating within the four highest grades as determined by Moody's
Investors Service, Inc. (Aaa, Aa, A, Baa) or the three highest grades determined
by Standard & Poor's Corporation (AAA, AA, A). When investing in debt
securities, said debt securities will have a rating within at least one of the
four highest grades determined by Moody's Investors Service or the three highest
grades determined by Standard & Poor's Corporation. Although investment-quality
securities are subject to market fluctuations, the risk of loss of income and
principal is generally expected to be less than with lower quality securities.
In the event the rating of a debt security or preferred stock in which the Fund
has invested drops below investment grade, the Fund will promptly dispose of
such investment.
The Fund invests primarily in undervalued common stocks believed to have
long-term growth potential. Stocks are selected on the basis of an evaluation of
factors such as earnings growth, expanding profit margins, market dominance
and/or factors that create the potential for market dominance, sales growth, and
other factors that indicate a company's potential for growth.
There are no limitations on the type, operating history, or dividend paying
record of small capitalization companies or industries in which the Fund may
invest, the principal criteria for investment being that the securities provide
opportunities for capital growth. The Fund will invest up to 100% of its capital
in equity securities selected for their capital growth potential.
The Adviser will typically (but not always) purchase common stocks of
issuers which have records of profitability and strong earnings momentum. Such
companies are likely to be lesser known companies moving from a lower to a
higher market share position within their industry groups rather than the
largest and best known companies in such groups. The Adviser may, however,
purchase common stocks of well known, highly researched, large companies if it
believes such common stocks offer opportunity for long-term capital growth.
Investments in such large company stocks will not exceed 35% of the Fund's total
assets.
Diversification is a consideration in selecting investments for the Fund.
However, greater emphasis will be placed upon selection of securities believed
to have good potential for appreciation rather than upon wide diversification.
8
<PAGE>
SPECIAL INVESTMENT METHODS AND RISKS
- -------------------------------------------------------
"SHORT SALES AGAINST THE BOX"
The Fund is permitted to make short sales if at the time of the short sale
the Fund owns or has the right to acquire a security equal in kind and amount to
the security being sold short, at no additional cost. This investment technique
is known as a "short sale against the box."
In a short sale, the seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
To make delivery to the purchaser, the executing broker borrows the securities
being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If the Fund engages in a short sale, the collateral account will be
maintained by the Fund's custodian. While the short sale is open, the Fund will
maintain, in a segregated custodial account, an amount of securities equal in
kind and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities at no additional cost. These
securities would constitute the Fund's long position.
The Fund may make a short sale against the box, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible into or exchangeable for such
security), or when the Fund desires to sell the security it owns at a current
attractive price, but also wishes to defer recognition of gain or loss for
federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such a case, any future losses in the Fund's long position should be reduced by
a gain in the short position. The extent to which such gains or losses are
reduced would depend upon the amount of the security sold short relative to the
amount the Fund owns. There will be certain additional transaction costs
associated with short sales against the box, but the Fund will endeavor to
offset theses costs with income from the investment of the cash proceeds of
short sales.
Short sales of securities, other than "short sales against the box," will
not be permitted by the Fund.
INVESTMENT RESTRICTIONS
- -------------------------------------------------------
The Fund may not invest 25% or more of its total assets in any one industry.
The Fund may not make investments in real estate or commodities or commodity
contracts, including futures contracts, but may purchase securities of issuers
which deal in real estate or commodities. The Fund is also prohibited from
investing in or selling puts, calls, straddles (or any combination thereof). The
Fund may borrow money only from banks for the Fund only for temporary or
emergency (not leveraging) purposes (provided that, after each borrowing, there
is an asset coverage of at least 300%). In order to secure any such borrowing,
the Fund may pledge, mortgage, or hypothecate up to 10% of the market value of
the assets of the Fund. The investment by the Fund in securities, including
American Depository Receipts, of issuers incorporated or organized, or any
governmental entity or political subdivision thereof, located outside of the
United States is limited to 25% of the net asset value of the Fund, provided
that no
9
<PAGE>
such foreign securities may be purchased unless they are traded in United States
securities markets.
The Fund may not purchase "restricted securities" (as defined in Rule
144(a)(3) of the Securities Act of 1933) if, as a result of such purchase, more
than 10% of the net assets (taken at market value) of the Fund would be invested
in such securities, nor will the Fund invest in illiquid or unseasoned
securities if as a result of such purchase more than 5% of the net assets of the
Fund would be invested in either illiquid or unseasoned securities.
In addition to the investment restrictions described above, the investment
program of the Fund is subject to further restrictions which are described in
the Statement of Additional Information. The restrictions for the Fund are
fundamental and may not be changed without shareholder approval.
RISK FACTORS
- -------------------------------------------------------
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issuers. These considerations include, among others,
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under laws applicable
to foreign securities markets, the impact of political, social, or diplomatic
developments, difficulties in invoking legal process abroad, and the difficulty
of assessing economic trends in foreign countries. The Adviser will use the same
basic selection criteria for investing in foreign securities as it uses in
selecting domestic securities as described in the Investment Objective and
Policies section.
While to some extent the risks to the Fund of investing in foreign
securities may be limited, since the Fund may not invest more than 25% of its
net asset value in such securities and the Fund may only invest in foreign
securities which are traded in the United States securities markets, the risks
nonetheless exist.
NET ASSET VALUE
The net asset value of the Fund is determined by adding the values of all
securities and other assets, subtracting liabilities, and dividing by the number
of outstanding shares. (See "Purchase and Pricing of Shares--Valuation of
Shares" and the Statement of Additional Information).
PORTFOLIO TURNOVER
The annual rate of portfolio turnover for the Fund was 136.9% for its fiscal
year ended December 31, 1996. The Adviser does not generally intend to have a
portfolio turnover rate in excess of 300% per annum, however, this is NOT a
restriction on the Adviser and if in the Adviser's judgment a higher annual
portfolio turnover rate is required in order to attempt to achieve a higher
overall performance then the Adviser is permitted to do so. However, high
portfolio turnover (100% or more) will result in increased brokerage
commissions, dealer mark-ups, and other transaction costs on the sale of
securities and on reinvestment in other securities and could therefore adversely
affect Fund performance. To the extent that increased portfolio turnover
10
<PAGE>
results in sales at a profit of securities held less than three months, the
Fund's ability to qualify as a "regulated investment company" under the Internal
Revenue Code may be affected. (See the Statement of Additional Information,
"Taxes").
SPECIAL RISK CONSIDERATIONS RELATING TO SECURITIES OF THE PORTFOLIO
For a description of certain other factors, including certain risk factors,
which investors should consider relating to the securities in which the Fund
will invest, see "Investment Objectives and Policies".
PERFORMANCE & YIELD
- -------------------------------------------------------
From time to time the Fund may include its performance history in
advertisements, sales literature, or reports to current or prospective
shareholders. Performance information about the Fund is based on its past
performance only and is not an indication of future performance. Performance
history may be expressed as yield or as total return of the Fund.
The Fund's quotations of yield will be based on all investment income per
share earned during a given 30-day period (including dividends and interest),
less expenses accrued during the period ("net investment income") and are
computed by dividing net investment income by the maximum offering price per
share on the last day of the period and multiplying the result by the average
daily number of shares outstanding during the period.
The "total return" of the Fund refers to the average annual compounded rate
of return over some representative period that would equate an initial payment
of $1,000 (after deduction of the maximum sales load) at the beginning of a
stated period to the ending redeemable value of the investment, after giving
effect to the reinvestment of all dividends and distributions and deductions of
expenses during the period. For more information about calculation of the
investment performance of the Fund, see the Statement of Additional Information.
For further information about the Fund's performance for the fiscal year ended
December 31, 1996, please see the Fund's Annual Report. A copy of the Annual
Report may be obtained without charge by contacting the Transfer Agent (see back
cover for address and phone number).
MANAGEMENT OF THE FUND
- -------------------------------------------------------
THE BOARD OF TRUSTEES
The Trust's Board of Trustees directs the business and affairs of the Fund
as well as supervises the Adviser, Distributor, accountant, Transfer Agent and
Custodian, as described below.
THE ADVISER
The Adviser is responsible for selecting the securities which will
constitute the pool of securities which will be selected for investment.
Pursuant to a separate Administrative Services Agreement, the Adviser provides
the Fund with certain administrative services, including accounting and
bookkeeping services and supervising the Fund's compliance with its reporting
obligations. The Adviser may contract for the performance of such services to
the Custodian,
11
<PAGE>
Transfer Agent, or others, and may share some or all of its fee with such other
person(s). The Adviser also provides the Fund with a continuous investment
program for the Fund's portfolio, including investment research and management
with respect to all securities and investments. The Adviser will determine from
time to time what securities and other investments will be selected to be
purchased, retained, or sold by the Fund.
Since the inception of the Fund through March 15, 1997, Navellier Management
acted as the investment adviser and administrator of the Fund. On March 15,
1997, the investment advisory agreement and administrative services agreement
between the Trust and Navellier Management with respect to the Fund terminated
due to the decision of the Trust's Board of Trustees not to renew these
agreements.
Effective March 16, 1997, the Trust entered into a new investment advisory
agreement and a new administrative services agreement with MFS. As noted under
"Special Considerations" above, the Fund's investment advisory agreement with
MFS will be submitted for approval by Fund shareholders at a special
shareholders' meeting called for that purpose on or prior to July 14, 1997.
John W. Ballen, a Senior Vice President of MFS and MFS' Chief Equity Officer
is the Fund's portfolio manager. Mr. Ballen has been employed as a portfolio
manager by the Adviser since 1984.
MFS is America's oldest mutual fund organization and, together with its
predecessor organizations, has a history of money management dating from 1924
and the founding of the first mutual fund in the United States, Massachusetts
Investors Trust. MFS serves as the investment adviser to the MFS Family of Funds
and a number of closed-end funds, funds underlying insurance products and
offshore funds. As of February 28, 1997, net assets under management of the MFS
organization were approximately $ billion on behalf of million investor
accounts, and the MFS organization managed approximately $ billion of assets
invested in equity securities.
The new investment advisory and administrative services agreements with MFS
contain substantially the same terms and conditions as the terminated agreements
with Navellier Management. As required by these terminated agreements with
Navellier Management, the Trust and the Fund have changed their names to
eliminate the use of the term "Navellier" and, reflecting the new relationship
with MFS, have adopted the names "The MFS Series Trust" and "MFS Aggressive
Small Cap Equity Fund," respectively.
The Adviser receives an annual 1.25% investment advisory fee from the Fund,
payable monthly, based upon the Fund's average daily net assets. The advisory
fee paid by the Fund is higher than that paid by most other investment
companies. The Adviser also receives a 0.25% annual fee from the Fund for the
provision of administration services.
THE DISTRIBUTOR
Since the inception of the Fund through March 15, 1997, Navellier Securities
acted as the Fund's Distributor. On March 15, 1997, the distribution agreement
for the Fund between the Trust and Navellier Securities terminated due to the
decision of the Trust's Board of Trustees not to renew this agreement.
12
<PAGE>
Effective March 16, 1997, the Trust entered into a new distribution
agreement with MFD. The new agreement with MFD contains substantially the same
terms and conditions as the terminated agreement with Navellier Securities.
THE CUSTODIAN AND THE TRANSFER AGENT
Rushmore Trust and Savings, FSB, 4922 Fairmont Avenue, Bethesda, Maryland,
20814, telephone: (301) 657-1517 or (800) 621-7874, is Custodian for the Fund's
securities and cash and Transfer Agent for the Fund shares. The Distributor
shall be responsible for the review of applications in order to guarantee that
all requisite and statistical information has been provided with respect to the
establishment of accounts.
EXPENSES OF THE FUND
- -------------------------------------------------------
GENERAL
The Fund is responsible for the payment of its own expenses. These expenses
are deducted from investment income before dividends are paid. These expenses
include, but are not limited to: fees paid to the Adviser, the Custodian, the
Transfer Agent, and the Accountant; Trustees' fees; taxes; interest; brokerage
commissions; organization expenses; securities registration ("blue sky") fees;
legal and auditing fees; insurance; and printing and other expenses which are
not directly assumed by the Adviser under its investment advisory and
administrative services agreements with the Fund.
Under an agreement between the Fund and the Prior Adviser related to payment
of operating expenses, the Prior Adviser has reserved the right to seek
reimbursement for the past, present and future operating expenses of the Fund
paid by the Prior Adviser, at any time upon notice to the Fund. At December 31,
1995, the prior adviser voluntarily agreed not to seek future reimbursement of
all unreimbursed past expenses of the Fund. During the year ended December 31,
1996, the Prior Adviser paid operating expenses of the Fund totaling $660,374.
Under the operating expense agreement, the Prior Adviser requested, and the Fund
reimbursed, $464,738 of such expenses. The Prior Adviser voluntarily agreed not
to seek future reimbursement of $195,636 of such 1996 expenses. Accordingly, at
December 31, 1996, there were no prior expenses which could be reimbursed in the
future under the agreement.
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the Fund's normal operating expenses which accrue on and after
March 16, 1997 such that the Fund's "Total Operating Expenses" do not exceed
1.75% per annum of its average daily net assets (the "Maximum Percentage"). MFS
has not agreed to bear the Fund's extraordinary expenses. The obligation of MFS
to bear these expenses terminates on the last day of the Fund's fiscal year in
which the Fund's "Total Operating Expenses" are less than or equal to the
Maximum Percentage. The payments made by MFS on behalf of the Fund under this
arrangement are subject to reimbursement by the Fund to MFS, which will be
accomplished by the payment of an expense reimbursement fee by the Fund to MFS
computed and paid monthly at a percentage of its average daily net assets for
its then current fiscal year, with a limitation that immediately after such
payment the Fund's "Total Operating Expenses" will not exceed the Maximum
Percentage. This expense reimbursement by the Fund to MFS terminates on the
earlier of the date on which payments made by the Fund equal the prior payment
of such reimbursable expenses by MFS or March 16, 2002.
13
<PAGE>
BROKERAGE COMMISSIONS
The Adviser may use selected broker-dealers to execute portfolio
transactions for the Fund, provided that the commissions, fees, or other
remuneration received by such party in exchange for executing such transactions
are reasonable and fair compared to those paid to other brokers in connection
with comparable transactions. The Adviser may consider sales of shares of the
Fund and of the other investment company clients of MFD as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions. From
time to time, the Adviser may direct certain portfolio transactions to
broker-dealer firms which, in the turn, have agreed to pay a portion of the
Fund's operating expenses (e.g., fees charged by the custodian of the Fund's
assets). (See the SAI).
REPORTS AND INFORMATION
- -------------------------------------------------------
The Fund will distribute to its shareholders semi-annual reports containing
unaudited financial statements and information pertaining to matters of the
Fund. An annual report containing financial statements together with the report
of the independent auditors of the Fund is distributed to shareholders each
year. Shareholder inquiries should be addressed to the Transfer Agent, Rushmore
Trust and Savings FSB, 4922 Fairmont Avenue, Bethesda, Maryland, 20814, Tel:
(301) 657-1517 or (800) 621-7874.
DESCRIPTION OF SHARES
- -------------------------------------------------------
The Trust is a Delaware business trust organized on May 28, 1993. The
Declaration of Trust permits the Trustees to issue an unlimited number of shares
of beneficial interest. The Board of Trustees has the power to designate one or
more classes of shares of beneficial interest and to classify or reclassify any
unissued shares with respect to such classes. Presently the Trust is only
offering shares of the Fund.
The shares of the Fund, when issued, are fully paid and non-assessable, are
redeemable at the option of the holder, are fully transferable, and have no
conversion or preemptive rights. Shares are also redeemable at the option of the
Fund under certain circumstances (see "Redemption of Shares"). Each share of the
Fund is equal as to earnings, expenses, and assets of the Fund and, in the event
of liquidation of the Fund, is entitled to an equal portion of all of the Fund's
net assets. Shareholders of the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Voting rights are
not cumulative, so that the holders of more than 50% of the shares voting in any
election of Trustees can, if they so choose, elect all of the Trustees. While
the Fund is not required, and does not intend, to hold annual meetings of
shareholders, such meetings may be called by the Trustees at their discretion,
or upon demand by the holders of 10% or more of the outstanding shares of the
Fund for the purpose of electing or removing Trustees.
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<PAGE>
All shares (including reinvested dividends and capital gain distributions)
are issued or redeemed in full or fractional shares rounded to the third decimal
place. No share certificates will be issued. Instead, an account will be
established for each shareholder and all shares purchased will be held in
book-entry form by the Fund.
DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------
All dividends and distributions with respect to the shares of the Fund will
be payable in shares at net asset value or, at the option of the shareholder, in
cash. Any shareholder who purchases shares of the Fund prior to the close of
business on the record date for a dividend or distribution will be entitled to
receive such dividend or distribution. Dividends and distributions (whether
received in shares or in cash) are treated either as ordinary income or
long-term capital gain for federal income tax purposes. Between the record date
and the cash payment date, the Fund retains the use and benefits of such monies
as would be paid as cash dividends.
The Fund will distribute all of its net investment income and net realized
capital gains, if any, annually in December. If a cash payment is requested with
respect to the Fund, a check will be mailed to the shareholder. Unless otherwise
instructed, the Transfer Agent will mail checks or confirmations to the
shareholder's address of record.
The federal income tax laws impose a four percent (4%) nondeductible excise
tax on each regulated investment company with respect to the amount, if any, by
which such company does not meet distribution requirements specified in the
federal income tax laws. The Fund intends to comply with the distribution
requirements and thus does not expect to incur the four percent (4%)
nondeductible excise tax, although the imposition of such excise tax may
possibly occur.
Shareholders will have their dividends and/or capital gain distributions
reinvested in additional shares of the Fund unless they elect in writing to
receive such distributions in cash. Shareholders whose shares are held in the
name of a broker or nominee should contact such broker or nominee to determine
whether they want dividends reinvested or distributed.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions. (See "Taxes" following).
In the case of foreign participants whose dividends are subject to U.S.
income tax withholding and in the case of any participants subject to 31%
federal backup withholding, the Transfer Agent will reinvest dividends after
deduction of the amount required to be withheld.
Experience may indicate that changes in the automatic reinvestment of
dividends are desirable. Accordingly, the Fund reserves the right to amend or
terminate this provision as applied to any dividend or distribution paid
subsequent to written notice of the change sent to shareholders at least 90 days
before the record date for such dividend or distribution.
15
<PAGE>
TAXES
- -------------------------------------------------------
FEDERAL TAXES
The Fund is a separate taxpayer and intends to meet the requirements of
Subchapter M of the Internal Revenue Code of 1986 (relating to regulated
investment companies) with respect to diversification of assets, sources of
income, and distributions of taxable income and will elect to be taxed as a
regulated investment company for federal income tax purposes.
However, the Code contains a number of complex tests relating to
qualification which a fund might not meet in any particular year. For example,
if a fund derives 30% or more of its gross income from the sale of securities
held for less than three months, it may fail to qualify. If a fund did not
qualify as a regulated investment company, it would be treated for tax purposes
as an ordinary corporation and receive no tax deduction for payments made to
shareholders and all fund distributions would be taxable to shareholders as
ordinary dividend income.
Because the Fund intends to distribute all of its net investment income and
net realized capital gains at least annually, it is not expected that the Fund
will be required to pay federal income tax for any year throughout which it was
a regulated investment company nor, for this reason, is it expected that the
Fund will be required to pay the 4% federal excise tax imposed on regulated
investment companies that fail to satisfy certain minimum distribution
requirements. However, the possibility of federal or state income tax and/or
imposition of the federal excise tax does exist.
Dividends (other than capital gains dividends) will be taxable to
shareholders as ordinary income, whether received in shares or cash and will, in
the case of corporate shareholders, generally qualify for the dividends-received
deduction to the extent paid out of qualifying dividends received by the Fund.
Capital gains dividends will ordinarily be taxable to shareholders as
long-term capital gain, regardless of how long they have held their shares. A
dividend is a capital gains dividend if it is so designated by the Fund and is
paid out of the Fund's net capital gain (that is, the excess of the Fund's net
long-term capital gain over its net short-term capital loss).
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of dividends. Furthermore, such dividends, although in effect a
return of capital, are subject to federal income taxes. Therefore, prior to
purchasing shares of the Fund, the investor should carefully consider the impact
of dividends, including capital gains distributions, which are expected to be or
have been announced.
Upon a disposition or redemption of shares of the Fund, the shareholder will
generally recognize taxable gain or loss measured by the difference between the
redemption price and the basis of the shares. This gain or loss will generally
be treated as capital gain (long-term or short-term, depending upon the holding
period for the redeemed shares).
Shortly after the end of each calendar year, each Fund shareholder will
receive a statement setting forth the federal income tax status of all dividends
and distributions for that year,
16
<PAGE>
including the portion taxable as ordinary income, the portion taxable as long
term capital gain, the portion, if any, representing a return of capital (which
is free of current taxes but results in a basis reduction) and the amount, if
any, of federal income tax withheld. Shareholders may be subject to backup
withholding with respect to dividends at the rate of 31% unless (a) they are
corporations or come within other exempt categories or (b) they provide correct
taxpayer identification numbers, certify as to no loss of exemption from backup
withholding, and otherwise comply with applicable requirements of the law
relating to backup withholding. Any amounts paid as backup withholding will be
creditable against the federal income tax liabilities of the affected
shareholders. The Fund intends to withhold U.S. federal income tax at the rate
of 30% on dividends and certain other payments that are subject to such
withholding and are made to persons who are neither citizens nor residents of
the U.S., regardless of whether a lower rate may be permitted under an
applicable treaty.
The Fund may pay taxes to foreign countries with respect to dividends or
interest it receives from foreign issuers or from domestic issuers that derive a
substantial amount of their revenues in foreign countries, or such taxes may be
withheld at the source by such issuers. The Fund will generally be entitled to
deduct such taxes in computing its taxable income.
STATE AND LOCAL TAXES
The Fund may be subject to state or local taxation in jurisdictions in which
it may be deemed to be doing business. Taxable income of the Fund and its
shareholders for state and local purposes may be different from taxable income
calculated for federal income tax purposes.
Each prospective investor is advised to consult his or her tax adviser for
advice as to the federal, state, and local taxation which may be applicable to
such investor in connection with an investment in the Fund.
PURCHASE AND PRICING OF SHARES
- -------------------------------------------------------
PURCHASE OF SHARES
The Fund's shares are sold to the general public on a continuous basis
through the Distributor and its network of broker-dealers and Transfer Agent.
The Fund closed to new investors on April 15, 1996. Shareholders of the Fund
as of such closing date may continue to add to an account through the
reinvestment of dividends and cash distributions on any Fund shares owned, and
through the purchase of additional Fund shares. Shareholders of the Fund as of
the April 15, 1996 closing date may also open and add to additional accounts
that use the same social security number as the account existing as of April 15,
1996, such as accounts where the shareholder is the owner, a joint owner or a
custodian for a minor child. Shares of the Fund may continue to be purchased
through mutual fund wrap fee advisers and financial planners. Additionally,
Trustees of the Fund and employees and directors of the Fund's Adviser may
continue to open new Fund accounts. The Fund may resume sales to new investors
at some future date.
17
<PAGE>
PURCHASE BY MAIL
Investments in the Fund can be made through selected securities dealers, who
have the responsibility to transmit orders promptly and may charge a processing
fee, or through the transfer agent Rushmore Trust and Savings, FSB.
TO INVEST BY MAIL: Fill out an application and make a check payable to ["MFS
Aggressive Small Cap Equity Fund."] Mail the check along with the application
to:
[MFS Aggressive Small Cap Equity Fund]
c/o Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
Purchases by check will normally be credited to an account within one
business day after receipt of payment. Foreign checks will not be accepted. Be
certain to specify the Fund's name.
Net asset value per share is calculated once daily as of 4:00 p.m. E.S.T. on
each business day. In the event that the New York Stock Exchange or the national
securities exchanges on which stocks are traded adopt different trading hours on
either a permanent or temporary basis, the Trustees of the Trust will reconsider
the time at which net asset value is to be computed. (See "Purchase and Pricing
of Shares--Valuation of Shares").
PURCHASES THROUGH DEALERS
Shares purchased through Dealers will be effected at the net asset value
next determined after the Dealer receives the purchase order, provided that the
Dealer transmits the order to the Transfer Agent and the Transfer Agent accepts
the order by 4:00 p.m. E.S.T. The investor must settle his or her entitlement to
that day's net asset value with the Dealer.
Certain selected Dealers may effect transactions in shares of the Portfolios
on a "five day settlement" basis through the National Securities Clearing
Corporation's Fund/SERV system.
Purchases of shares through Dealers not utilizing the National Securities
Clearing Corporation's Fund/SERV system will be effected when received in proper
form by the Transfer Agent, as described above, in the same manner and subject
to the same terms and conditions as are applicable to shares purchased directly
through the Transfer Agent. The sales charge applicable to the investor's
purchase (See "Pricing of Shares" below) is the same when purchased through a
Dealer as when purchased directly through the Transfer Agent.
Shareholders who wish to transfer fund shares from one broker-dealer to
another should contact the Fund at (800) 621-7874.
TO INVEST BY BANK WIRE: Request a wire transfer to:
Rushmore Federal Savings Bank
Bethesda, MD
Routing Number 0550 71084
For Account of [MFS Aggressive Small Cap Equity Fund]
Account Number [0293 85770]
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<PAGE>
[AFTER INSTRUCTING YOUR BANK TO TRANSFER MONEY BY WIRE, YOU MUST TELEPHONE
THE FUND AT (800) 622-1386 OR (301) 657-1510 BETWEEN 8:30 A.M. AND 4:00 P.M.
E.S.T. AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK SENDING
THE TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. IF THE PURCHASE IS
CANCELLED BECAUSE YOUR WIRE TRANSFER IS NOT RECEIVED, YOU MAY BE LIABLE FOR ANY
LOSS THE FUND MAY INCUR.]
Such wire should identify the name of the Fund, the account number, the
order number (if available), and your name.
TO INVEST BY AUTOMATIC MONTHLY INVESTMENT PLAN:
Shareholders may make automatic monthly purchases of the Fund's shares by
executing an automatic monthly withdrawl appplication authorizing his/her/its
bank to transfer money from his/her/its checking account to the Transfer Agent
for the automatic monthly purchase of shares of the Fund for the shareholder.
There is no charge by the Fund for this automatic monthly investment plan and
the shareholder can discontinue the service at any time.
PRICING OF SHARES
The shares of the Fund are sold at their net asset value per share next
determined after an order in proper form (completely filled out application form
and additional information or documentation) is received by the Transfer Agent,
plus a maximum sales charge of 3% on a single purchase of between $2,000 and
$24,999.99. The sales load is reduced to 2-1/2% for purchases of between $25,000
and $49,999.99, 2% for purchases of between of between $50,000 and $74,999.99,
1-1/2% for purchases of between $75,000 and $99,999.99, and 1% for purchases of
$100,000 or more. There is no sales charge for purchases of $1 Million or more.
The sales charge is payable at the time shares are purchased and is deducted
from the amount credited to the investor's account. If an order for shares of
the Fund is received by the Transfer Agent by 4:00 p.m. on any business day,
such shares will be purchased at the net asset value determined as of 4:00 p.m.
on that day (plus the applicable sales charge). Otherwise, such shares will be
purchased at the net asset value determined as of 4:00 p.m on the next day (plus
the applicable sales charge). However, orders received by the Transfer Agent
from dealers or brokers after the net asset value is determined that day will
receive such offering price if the orders were received by the Distributor or
broker or dealer from its customer prior to such determination and were
transmitted to and received by the Transfer Agent prior to its close of business
on that day (normally 4:00 p.m. E.S.T.). Shares are entitled to receive any
declared dividends on the day following the date of purchase.
ABATEMENT OF SALES CHARGES FOR TRANSFERRED ACCOUNTS
Any investor who transfers all or any portion of his investment from any
other registered investment company which charges a sales load (other than those
which charge a deferred sales load) to the Fund will not be required to pay a
sales charge on the amount invested. The Fund Trustees, the Distributor, the
Custodian, the Transfer Agent, retirement or deferred compensation plans and
trusts used to fund such plans, and their employees; or brokers directly
involved in selling the Fund's shares and whose firm has executed a selling
agreement with the Distributor or the Adviser or their employees or the spouse
or child of any of the above will not be required to pay any sales charge, nor
will any investor who purchases more than $1 million of the Fund's
19
<PAGE>
shares nor will any investor who purchases through an account as to which an
investment advisor, financial planner, agent, bank or broker-dealer charges an
account management or transaction fee ("wrap fee"), provided the investment
advisor, financial planner, agent, bank or broker-dealer has an Agreement with
Distributor.
Purchases may also be made at net asset value (no load) by investment
advisors or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; and clients of such investment advisors or financial
planners who place trades for their own accounts if the accounts are linked to
the master account of such investment advisor or financial planner on the books
and records of the broker or agent; and by retirement and deferred compensation
plans and trusts used to fund those plans, including, but not limited to, those
defined in section 401(a), 403(b), or 457 of the Internal Revenue Code and
"rabbi trusts".
GENERAL PURCHASING INFORMATION
The Fund has established a minimum initial investment of $2,000 ($500 in the
case of IRA and other retirement plans or qualifying group plans) and $100 for
subsequent investments. Orders for shares may be made by mail by completing the
Account Application included with this Prospectus and mailing the completed
application and the payment for shares to the Transfer Agent. Documentation in
addition to the information required by the Account Application may be required
when deemed appropriate by the Fund and/or the Transfer Agent and the Account
Application will not be deemed complete until such additional information has
been received.
REDUCED SALES CHARGES
A reduction in the sales charge rate applicable to sales of Fund shares may
be obtained by volume discounts as described in the Prospectus. In addition,
members of qualified groups or persons purchasing shares for retirement plans or
individual retirement accounts (IRAs) may purchase shares of the Fund at the
same discounts charged on volume discount purchases. Also, persons who transfer
their investments from another investment company, to which they paid a sales
charge, will not be charged a sales charge.
Purchases of Fund shares are made at the public offering price next
determined after the Transfer Agent receives payment, including the applicable
sales charge. To receive the group rate on their individual purchase, group
members must purchase shares through a single investment dealer designated by
the group. After the initial purchase, a member may send funds for the purchase
of shares directly to the Transfer Agent. Sales to members of qualified groups
are made at a reduced sales charge because such sales normally involve less
sales effort and sales-related expense than would usually be associated with
sales to individual investors. Also, it is believed that such reduced sales
charges will provide an incentive for increased investment in the Fund by
members of qualified groups which could benefit the Fund and its shareholders by
enabling the Fund to achieve certain economies of scale and benefits of size
more rapidly than would otherwise be the case.
As determined by the Distributor, qualified groups include the employees of
a corporation or a sole proprietorship, members, and employees of a partnership
or association (including, without limitation, members of tax-exempt
organizations enumerated under Sections 501(c)(3) and 501(c)(13) of the Internal
Revenue Code of 1986, or other organized groups of persons (the members of which
may include other qualified groups), provided that: (i) the group
20
<PAGE>
has at least 25 members, of which at least 10 members participate in the initial
purchase; (ii) the group has been in existence for at least six months; (iii)
the group has some purpose in addition to the purchase of investment company
shares at a reduced sales charge; and (iv) the group's sole organizational nexus
or connection is not that the members are credit card holders of a company,
policy holders of an insurance company, customers of a bank or a broker-dealer,
clients of an investment adviser, or security holders of a company.
Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is carried
on the records of the group or on the records of any constituent member of the
group as being a good standing employee, partner member, or person of like
status of the group or constituent member; or (iii) any fiduciary purchasing
shares for the account of a member of a qualified group or a member's
beneficiary, or participants in a qualified retirement plan, or contributors to
an individual retirement account (IRA). For example, a qualified group could
consist of a trade association which would have as its members individuals, sole
proprietors, partnerships, and corporations. The members of the group would then
consist of the individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, as well as trustees of
employment benefit trusts acquiring Fund shares for the benefit of any of the
foregoing. The Fund reserves the right to revise the terms of, or to suspend or
discontinue, group sales charge discounts at any time.
LETTER OF INTENT
An investor may pay reduced sales charges by signing and fulfilling a Letter
of Intent which is on the Application Form. The Letter of Intent confirms the
investor's intention as to the total investment in shares of the Fund within the
following 13 consecutive months, and thereby the investor will become eligible
for the reduced sales charges applicable to the total amount to be purchased.
Purchases made within 90 days prior to the signing of the Letter of Intent may
be included in the total amount and will be valued on the effective date of the
Letter of Intent. The Letter of Intent will not be a binding obligation on
either the purchaser or the Fund. Purchases made under the Letter of Intent are
made at the sales charge applicable to the aggregate amount to be invested in
shares of the Fund under the Letter of Intent as if all the shares were
purchased in a single transaction. During the period of the Letter of Intent,
the Transfer Agent will hold shares representing 5% of the intended purchase in
escrow to provide payment of additional sales commissions that may have to be
paid if the Letter of Intent is reduced. If the total shares stated in the
Letter of Intent are not purchased, a price adjustment is made, depending upon
the actual amount invested within the period covered by the Letter of Intent, by
the redemption of sufficient shares held in escrow for the account of the
investor. Otherwise, shares held in escrow will be released upon completion of
the intended investment. A Letter of Intent can be amended: (a) during the
13-month period if the purchaser files an amended Letter of Intent with the same
expiration date as the original and (b) automatically after the end of the
period, if the total purchases credited to the Letter of Intent qualify for an
additional reduction in sales charge. For more information concerning the Letter
of Intent, see the Application Form or contact the Transfer Agent.
VALUATION OF SHARES
The net asset value of the shares of the Fund is determined once daily as of
4:00 p.m E.S.T., on days when the New York Stock Exchange is open for trading.
In the event that the New York
21
<PAGE>
Stock Exchange or the national securities exchanges on which stocks are traded
adopt different trading hours on either a permanent or temporary basis, the
Trustees of the Fund will reconsider the time at which net asset value is to be
computed. The net asset value is determined by adding the values of all
securities and other assets of the Fund, subtracting liabilities, and dividing
by the number of outstanding shares of the Fund. The price at which a purchase
is effected is based on the next calculation of net asset value after the order
is received.
In determining the value of the assets of the Fund, the securities for which
market quotations are readily available are valued at market value. Debt
securities (other than short-term obligations) are normally valued on the basis
of valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. Use of a pricing service has been
approved by the Trustees of the Fund. All other securities and assets are valued
at their fair value as determined in good faith by the Trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the Trustees.
REDEMPTION OF SHARES
- -------------------------------------------------------
GENERAL
A shareholder may redeem shares of the Fund at the net asset value next
determined after receipt of a notice of redemption in accordance with the
procedures set forth below and compliance with the further redemption
information and/or additional documentation requirements described in this
Section. As used in this Prospectus, the term "business day" refers to those
days on which stock exchanges trading small cap stocks are open for business.
The Fund may change the following procedures at its discretion.
The shareholder will not be credited with dividends on those shares being
redeemed for the day on which the shares are redeemed by the Fund. A check for
the proceeds of redemption will normally be mailed within seven days of receipt
of any redemption request received by the Transfer Agent. Payments in redemption
of shares will be reduced by any income tax required to be withheld. See
"Taxes," above. If shares to be redeemed were purchased by check, the Fund may
delay transmittal of redemption proceeds only until such times as it is
reasonably assured that good payment has been collected for the purchase of such
shares, which may be up to 15 days from purchase date. Such delays can be
avoided by wiring Federal Funds in effecting share purchases.
If a shareholder wishes to redeem his or her entire shareholdings in the
Fund, he or she will receive, in addition to the net asset value of shares, all
declared but unpaid dividends thereon. The net asset value of the shares may be
more or less than a shareholder's cost depending on the market value of the
portfolio securities at the time of the redemption.
22
<PAGE>
REDEMPTION BY MAIL
A shareholder may redeem shares by mail on each day that the New York Stock
Exchange is open by submitting a written redemption request to:
[MFS Aggressive Small Cap Equity Fund]
c/o Rushmore Trust and Savings FSB
4922 Fairmont Avenue
Bethesda, MD 20814
The request for redemption should include the name of the Fund, the account
name and number, and should be signed by all registered owners of the shares in
the exact names in which they are registered. Each request should specify the
number or dollar amount of shares to be redeemed or that all shares in the
account are to be redeemed.
OPTION TO MAKE SYSTEMATIC WITHDRAWALS
The owner of $25,000 or more worth of the shares of the Fund may provide for
the payment from his account of any requested dollar amount (but not less than
$1,000) to him or his designated payee monthly, quarterly, or annually. Shares
will be redeemed on the last business day of each month. Unless otherwise
instructed, the Transfer Agent will mail checks to the shareholder at its
address of record. A sufficient number of shares will be redeemed to make the
designated payment. This redemption option is not available with respect to
shares for which certificates are held by a shareholder. Since a sales charge is
imposed on investors, investors should not purchase shares in the Fund while
they are participating in the withdrawal plan.
FURTHER REDEMPTION INFORMATION
Additional documentation regarding a redemption by any means may be required
when deemed appropriate by the Transfer Agent, and the request for such
redemption will not be considered to have been received in proper form until
such additional documentation has been received. An investor should contact the
Transfer Agent to inquire what, if any, additional documentation may be
required.
The Fund reserves the right to modify any of the methods of redemption or to
charge a fee for providing these services upon 30 days' written notice to
shareholders.
Due to the high cost of maintaining accounts of less than $2,000 ($500 for
IRA or other qualifying plan accounts), the Fund reserves the right to redeem
shares involuntarily in any such account at their then current net asset value.
Shareholders will first be notified and allowed 30 days to make additional share
purchases to bring their accounts to more than $2,000 ($500 for IRA or other
qualifying plan accounts). An account will not be redeemed involuntarily if the
balance falls below $2,000 ($500 for IRA or other qualifying plan accounts) by
virtue of fluctuations in net asset value rather than through investor
redemptions.
Under certain circumstances, the right of redemption may be suspended or the
redemption may be satisfied by distribution of portfolio securities rather than
cash. Information as to those matters is set forth in the Statement of
Additional Information.
23
<PAGE>
CERTAIN SERVICES PROVIDED TO SHAREHOLDERS
- -------------------------------------------------------
STATEMENTS OF ACCOUNT
Statements of Account for the Fund will be sent to each shareholder at least
quarterly.
DIVIDEND ELECTION
A shareholder may elect to receive dividends in shares or in cash. If no
election is made, dividends will automatically be credited to a shareholder's
account in additional shares.
ADDITIONAL INFORMATION
- -------------------------------------------------------
The Statement of Additional Information, available upon request, without
charge from the Fund, provides a further discussion of certain sections of the
Prospectus and other information which may be of interest to certain investors.
This Prospectus and the Statement of Additional Information do not contain all
the information included in the Registration Statement filed with the Securities
and Exchange Commission with respect to the securities being sold, certain
portions of which have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the Statement of Additional Information and the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, each such statement being
qualified in all respects by such reference.
ASSENT TO TRUST INSTRUMENT
- -------------------------------------------------------
Every Shareholder, by virtue of having purchased a Share or Interest shall
become a Shareholder and shall be held to have expressly assented and agreed to
be bound by the terms hereof.
TERMS APPLICABLE TO LETTER OF INTENT
- -------------------------------------------------------
By indicating in the Letter of Intent Section of the Account Application
that the provisions of the Letter of Intent have been selected, the Investor
agrees as follows:
Each purchase of shares under the Letter of Intent will be made at the
public offering price which, at the time of such purchase, is applicable to a
single transaction of the dollar amount checked on the Account Application, as
described in the current Prospectus relating to such shares.
Out of the initial purchase (or subsequent purchases if necessary), 5% of
the total purchases required to complete the Letter of Intent will be held in
escrow in the form of shares (valued at
24
<PAGE>
the purchase price thereof) registered in the investor's name. The Letter of
Intent will terminate and the escrow will be released when the total purchases
made under the Letter of Intent, together with the value on the date of the
Letter of Intent of any shares of the Fund then owned by the investor, equal the
aggregate amount checked on the Account Application. All dividends and any
capital gain distributions on the escrowed shares will be paid to the investor
or to the investor's order, but the receipt of dividends and capital gain
distributions in shares computed at net asset value will not apply towards the
completion of the Letter of Intent.
No commitment is made to purchase additional shares. If, within 13 months
from the date of the Letter of Intent, the investor's total purchases under the
Letter of Intent, together with the value on the date of the Letter of Intent of
any shares of the Fund then owned by such investor, do not equal or exceed the
aggregate amount checked on the Account Application, the Investor will remit to
Rushmore Trust and Savings FSB, the difference in the sales charge actually paid
and the sales charge which the investor would have paid if total purchases made
under the Letter of Intent had been made at a single time. If, within 20 days
after written request by Rushmore Trust and Savings FSB, or the appropriate
dealer, the investor does not pay such difference in the sales charge, such
investor irrevocably constitutes and appoints Rushmore Trust and Savings FSB, as
his/her attorney to surrender for redemption any or all escrowed shares, with
full power of substitution in the premises, to be redeemed in order to realize
such difference.
For purposes of a Letter of Intent, a "single purchaser" means:
(i) an individual, or an individual, his spouse and their children under
the age of 21 purchasing for his or their own account (including an IRA
account) including his or their own trusts, commonly known as living trusts;
or
(ii) a trustee or other fiduciary purchasing for a single trust estate
or single fiduciary account, although more than one beneficiary is involved;
or
(iii) multiple trusts for the same employer, or
(iv) trust companies and bank trust departments placing orders with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial, or similar capacity,
provided all shares are held of record in the name, or nominee name, of the
trust company or bank.
Except as provided above, a "single purchaser" does not include a group of
individuals whose funds are combined, directly or indirectly, for the purchase
of redeemable securities of a registered investment company jointly or through a
trustee, agent, custodian, or other representative, nor shall it include a
trustee, agent, custodian, or other representative of such a group of
individuals.
25
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services
Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Funds Distributor, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000
TRANSFER AGENT AND CUSTODIAN
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814
(800) 621-7874
SHAREHOLDER INQUIRIES
Rushmore Trust and Savings FSB
4922 Fairmont Avenue
Bethesda, MD 20814
(800) 621-7874
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1900 M Street
Washington, D.C. 20036
(202) 955-4000
<PAGE>
MFS AGGRESSIVE SMALL CAP EQUITY FUND ("THE FUND")
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1997
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the Prospectus of the MFS Aggressive Small Cap
Equity Fund, a series of The MFS Series Trust (the "Trust"), dated May 1, 1997,
a copy of which Prospectus may be obtained, without charge, by contacting the
Fund, at its mailing address c/o [ ], 500 Boylston Street, Boston, MA 02116
[(617) 954-5000].
TABLE OF CONTENTS
- -------------------------------------------------------
<TABLE>
<S> <C>
General Information and History________________________________ 2
Investment Objective and Policies______________________________ 2
Trustees and Officers of the Fund______________________________ 5
Officers_______________________________________________________ 7
Control Persons and Principal Holders of Securities____________ 8
Adviser, Distributor, Custodian and Transfer Agent_____________ 8
Brokerage Allocation and Other Practices_______________________ 9
Capital Stock and Other Securities_____________________________ 11
Purchase, Redemption, and Pricing of Shares____________________ 12
Taxes__________________________________________________________ 15
Calculation of Performance Data________________________________ 18
Independent Auditors and Financial Statements__________________ 21
Appendix_______________________________________________________
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
- -------------------------------------------------------
The Trust is a business trust company (organized under the laws of the State
of Delaware on May 28, 1993). The Trust was known as The Navellier Series Fund
until March 16, 1997, when the Trust entered into an investment advisory
agreement with a new investment adviser and its name was changed to The MFS
Series Trust. The Trust's only series was known as the Aggressive Small Cap
Equity Portfolio, and as of March 16, 1997 became the Aggressive Small Cap
Equity Fund.
INVESTMENT OBJECTIVE AND POLICIES
- -------------------------------------------------------
INVESTMENT POLICIES. The investment objective and policies of the Fund are
described in the "Investment Objective and Policies" section of the Prospectus.
The following general policies supplement the information contained in that
section of the Prospectus. Prior to being considered as a permissible investment
for the Fund, each issuer of the following instruments will first have to be
determined by the Investment Adviser to qualify as a "Qualified Issuer" (as
defined by the Prospectus).
CERTIFICATES OF DEPOSIT. Certificates of deposit are generally short-term,
interest-bearing, negotiable certificates issued by banks or savings and loan
associates against funds deposited in the issuing institution.
TIME DEPOSITS. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received.
BANKER'S ACCEPTANCES. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer, or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
COMMERCIAL PAPER. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months.
CORPORATE DEBT SECURITIES. Corporate debt securities with a remaining
maturity of less than one year tend to become liquid and can sometimes be traded
as money market securities.
UNITED STATES GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to
principal and interest by the United States government include a variety of
Treasury securities, which differ only in their interest rates, maturities, and
times of issuance. Treasury bills have a maturity of one year or less. Treasury
notes have maturities of one to seven years, and Treasury bonds generally have a
maturity of greater than five years.
Agencies of the United States government which issue or guarantee
obligations include, among others, export-import banks of the United States,
Farmers' Home Administration, Federal Housing Administration, Government
National Mortgage Association, Maritime Administration, Small Business
Administration, the Defense Security Assistance Agency of the Department of
Defense, and the Tennessee Valley Authority. Obligations of instrumentalities of
the United States government include securities issued or guaranteed by, among
others, the Federal National Mortgage Associates, Federal Intermediate Credit
Banks, Banks for Cooperatives, and the United States Postal Service. Some of the
securities are supported by the full faith and credit of the United States
government; others are supported by the right of the issuer to
2
<PAGE>
borrow from the Treasury, while still others are supported only by the credit of
the instrumentality.
INVESTMENT RESTRICTIONS. The Fund's fundamental policies cannot be changed
without the approval of a vote of a majority of the outstanding securities of
the Fund. A proposed change in fundamental policy or investment objective will
be deemed to have been effectively acted upon with respect to the Fund if a
majority of the outstanding voting securities of the Fund votes for the matter.
Such a majority is defined as the lesser of (a) 67% or more of the voting shares
of the Fund present at a meeting of shareholders, if the holders of more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. For purposes of the following restrictions
and those contained in the Prospectus: (i) all percentage limitations apply
immediately after a purchase or initial investment; and (ii) any subsequent
change in any applicable percentage resulting from market fluctuations or other
changes in the amount of total assets does not require elimination of any
security from the Fund.
The following investment restrictions are fundamental policies of the Fund
with respect to all Portfolios (unless otherwise specified below) and may not be
changed except as described above. The Fund may not:
1. Purchase for the Fund securities of any issuer, other than obligations
issued or guaranteed as to principal and interest by the United States
government or its agencies or instrumentalities, if immediately thereafter (i)
more than 5% of the Fund's total assets (taken at market value) would be
invested in the securities of such issuer, or (ii) more than 10% of the voting
securities of any class of such issuer would be held by the Fund.
2. Concentrate the portfolio investments in any one industry. To comply with
this restriction, no security may be purchased for the Fund if such purchase
would cause the value of the aggregate investment of the Fund in any one
industry to be 25% or more of that Fund's total assets (taken at market value).
3. Purchase any securities or other property on margin, or engage in short
sales of securities (unless it owns, or by virtue of its ownership of other
securities has the right to obtain without payment of any additional
consideration securities equivalent in kind and amount to the securities sold);
PROVIDED, HOWEVER, that the Fund may obtain short-term credit as may be
necessary for the clearance of purchases and sales of securities.
4. Make cash loans, except that the Fund may purchase bonds, notes,
debentures, or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not.
5. Make securities loans, except that the Fund may make loans of the
portfolio securities, provided that the market value of the securities subject
to any such loans does not exceed 33 1/3% of the value of the total assets
(taken at market value) of the Fund.
6. Make investments in real estate or commodities or commodity contracts,
including futures contracts, although the Fund may purchase securities of
issuers which deal in real estate or commodities although this is not a primary
objective of the Fund but only if such securities are small cap equity
securities or constitute less than 35% of the Fund's total assets.
7. Invest in oil, gas, or other mineral exploration or development programs,
although the Fund may purchase securities of issuers which engage in whole or in
part of such activities, but only if such securities are small cap equity
securities or constitute less than 35% of the Fund's total assets, although the
Fund may purchase securities of issuers which engage in whole or in part of such
activities.
3
<PAGE>
8. Invest in or sell puts, calls, straddles, and any combination thereof.
9. Purchase securities of companies for the purpose of exercising management
or control.
10. Participate in a joint or joint and several trading account in
securities.
11. Purchase the securities of (i) other open-end investment companies, or
(ii) closed-end investment companies.
12. Issue senior securities or borrow money, except that the Fund may (i)
borrow money only from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests, that might otherwise
require the untimely disposition of securities, provided that any such borrowing
does not exceed 10% of the value of the total assets (taken at market value),
and (ii) borrow money only from banks for investment purposes, provided that (a)
after each such borrowing, when added to any borrowing described in clause (i)
of this paragraph, there is an asset coverage of at least 300% as defined in the
Investment Company Act of 1940, and (b) is subject to an agreement by the lender
that any recourse is limited to the assets with respect to which the borrowing
has been made. The Fund may not invest in portfolio securities while the amount
of borrowing of the Fund exceeds 5% of the total assets of such Fund.
13. Pledge, mortgage, or hypothecate the assets of the Fund to an extent
greater than 10% of the total assets to secure borrowings made pursuant to the
provisions of Item 12 above.
14. Purchase for the Fund "restricted securities" (as defined in Rule
144(a)(3) of the Securities Act of 1933), if, as a result of such purchase, more
than 10% of the net assets (taken at market value) of the Fund would then be
invested in such securities nor will the Fund invest in illiquid or unseasoned
securities if as a result of such purchase more than 5% of the net assets of
such portfolio would be invested in either illiquid or unseasoned securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of portfolio securities or amount of net assets shall not be
considered a violation of the restrictions, except as to the 5%, 10% and 300%
percentage restrictions on borrowing specified in Restriction Number 12 above.
PORTFOLIO TURNOVER. The portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities during the fiscal year
by the monthly average of the value of the Fund's securities (excluding from the
computation all securities, including options, with maturities at the time of
acquisition of one year or less). A high rate of portfolio turnover generally
involves correspondingly greater expenses to the Fund, including brokerage
commission expenses, dealer mark-ups, and other transaction costs on the sale of
securities, which must be borne directly by the Fund. Turnover rates may vary
greatly from year to year as well as within a particular year and may also be
affected by cash requirements for redemptions of each Fund's shares and by
requirements which enable the Fund to receive certain favorable tax treatment.
The portfolio turnover rate for the Fund during 1996 was 136.9%. The Fund will
attempt to generally limit the annual portfolio turnover rate to 300% or less,
however this rate may be exceeded if in the Adviser's discretion securities are
or should be sold or purchased in order to attempt to increase the Fund's
performance.
4
<PAGE>
TRUSTEES AND OFFICERS OF THE FUND
- -------------------------------------------------------
The following information, as of March 16, 1997, is provided with respect to
each director and officer of the Fund:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS REGISTRANT AND ITS AFFILIATES PAST FIVE YEARS
- ---------------------------- ----------------------------------- -------------------------------------
<S> <C> <C>
Donald A. Simon Independent Trustee, Chairman and Currently the Executive Vice
American Aeromedical President President and Director of American
Services Corporation Aeromedical Services Corporation, an
21893 Skywest Dr. aeromedical transportation company,
Hayward, CA 94541 Mr. Simon was formerly Chairman of
KangaROOS USA, Inc., a footwear
importer; Executive
Lawrence Bianchi Independent Trustee Currently Chairman of the Board of
Codman Company Directors of The Codman Company,
211 Congress Street Inc., and a member of The American
Boston, MA 02210 Society of Real Estate Consultants,
Mr. Bianchi has been in the Boston
real estate market for 28 years. He
has been a Commissioner for 16 years,
representing the Greater Boston Real
Estate Board on the Boston Landmarks
Commission, served 20 years on the
Industrial Development Financing
Authority of the City of Boston, and
for the past 11 years has been its
Chairman. He was President in 1989 of
the New England Chapter of The
Society of Industrial and Office
Realtors. He is an incorporator of
both Massachusetts General Hospital
and University Hospital and a
Director of Historic Boston, Inc.,
and the Bostonian Society. Prior to
its sale in 1992 to the John Hancock
Insurance Company, Mr. Bianchi served
for 3-1/2 years as one of four
outside directors of the 750 million
dollar Patriot Group of three
closed-end mutual funds listed on the
New York Stock Exchange.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS REGISTRANT AND ITS AFFILIATES PAST FIVE YEARS
- ---------------------------- ----------------------------------- -------------------------------------
<S> <C> <C>
Kenneth Sletten Independent Trustee President of Rudolph & Sletten, Inc.,
Rudolph & Sletten a prominent construction company in
989 E. Hillsdale California. He has been Chairman of
Foster City, CA 94404 the Board of Directors in the Santa
Clara District of the Associated
General Contractors (AGC), and is a
member of the Board of Directors of
their Building Division. He is a
lifetime member of the Northern
California Construction Institute
(NCCI), and a member of the American
Institute of Plant Engineers (AIPE).
He serves on the boards of the
Children's Health Council and Menlo
School and College.
Arnold D. Scott Trustee Senior Executive Vice President,
Secretary and Director of
Massachusetts Financial Services
Company
*W. Thomas London Treasurer Massachusetts Financial Services
Company, Senior Vice President
*James O. Yost Assistant Treasurer Massachusetts Financial Services
Company, Vice President
*Stephen E. Cavan Secretary and Clerk Massachusetts Financial Services
Company, Senior Vice President,
General Counsel and Assistant
Secretary
*James R. Bordewick, Jr. Assistant Secretary Massachusetts Financial Services
Company, Senior Vice President and
Associate General Counsel
</TABLE>
- ------------------------
* "Interested persons" (as defined in the Investment Company Act of 1940) of
the Adviser whose address is 500 Boylston Street, Boston, Massachusetts
02116.
6
<PAGE>
OFFICERS
- -------------------------------------------------------
The officers of the Fund are affiliated with the Adviser and receive no
salary or fee from the Fund. The Fund's disinterested Trustees are each
compensated by the Fund with an annual fee, payable quarterly (calculated at an
annualized rate), of $10,000, if the Fund's net assets are $200 million or less,
and $20,000 if the Fund's net assets are over $200 million. The Trustees' fees
may be adjusted according to increased responsibilities if the Fund's assets
exceed one billion dollars. In addition, each disinterested Trustee receives an
attendance fee from the Fund of $500 per board meeting and for attendance at any
meeting of a committee of the board, as well as reimbursement for actual
expenses of such attendance.
The Board of Trustees is permitted by the Fund's By-Laws to appoint an
advisory committee which shall be composed of persons who do not serve the Fund
in any other capacity and which shall have no power to dictate corporate
operations or to determine the investments of the Fund. The Fund currently has
no advisory committee.
7
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- -------------------------------------------------------
The Fund does not control and is not under common control of any person. As
of February 28, 1997, [National Financial Services] [address] was the record
owner of 7.96% of the outstanding shares of the Fund and [Schwab & Co Load]
[address] was the record owner of [ %] and [ %] of the outstanding shares of
the Fund.
ADVISER, DISTRIBUTOR, CUSTODIAN
AND TRANSFER AGENT
- -------------------------------------------------------
(A) ADVISER
The management fee payable to the Adviser under the terms of the Investment
Advisory Agreement (the "Advisory Agreement") between the Adviser and the Fund
is payable monthly and is based upon a percentage of the Fund's average daily
net assets, equal to 1.25%. The Investment Adviser has the right, but not the
obligation, to waive any portion or all of its management fee, from time to
time. For the fiscal years ended December 31, 1996 and 1995 and the period ended
December 31, 1994, the Prior Adviser received management fees from the Fund of
$[ ], $[ ] and $[ ].
Expenses not expressly assumed by the Adviser under the Advisory Agreement
and administrative services agreement are paid by the Fund. The Advisory
Agreement lists examples of expenses paid by the Fund, the major categories of
which relate to taxes, fees to Trustees, legal, accounting, and audit expenses,
custodian and transfer agent expenses, certain printing and registration costs,
and non-recurring expenses, including litigation.
The Advisory Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund or its
investors except for losses (i) resulting from the willful misfeasance, bad
faith, or gross negligence on its part, or (ii) resulting from reckless
disregard by it of its obligations and duties under the Advisory Agreement.
Pursuant to an Administrative Services Agreement, the Adviser receives an
annual fee of 0.25% of the value of the Fund's average daily net assets and
provides or is responsible for the provision of certain administrative services
to the Fund, including, among others, the preparation and maintenance of certain
books and records required to be maintained by the Fund under the Investment
Company Act of 1940. The Administrative Services Agreement permits the
Investment Adviser to contract out for all of its duties thereunder; however, in
the event of such contracting, the Adviser remains responsible for the
performance of its obligations under the Administrative Services Agreement. The
Adviser has entered into an agreement with Rushmore Trust and Savings, FSB, to
perform, in addition to custodian and transfer agent services, some or all
administrative services.
The Advisory Agreement permits the Adviser to act as investment adviser for
any other person, firm, or corporation, and designates the Adviser as the owner
of the name "MFS" or any use or derivation of the word MFS. If the Adviser shall
no longer act as investment adviser to the Fund, the right of the Fund to use
the name "MFS" as part of its title may, solely at the Adviser's option, be
withdrawn.
8
<PAGE>
[The Prior Adviser advanced the Fund's organizational expenses which have
been estimated to be $143,294. The Fund agreed to reimburse the Prior Adviser
for the organizational expenses it advances, without interest on a date or dates
to be chosen at the sole discretion of the Prior Adviser, at any time after the
Fund has $20 million in total net assets or is breaking even or making a profit,
which ever first occurs. In the event that the total net assets of the Fund does
not attain the foregoing levels before the end of five years, the unreimbursed
portion of such expenses shall become fully payable at the end of the fifth
year. [check status]]
(B) DISTRIBUTOR
The Fund's Distributor is MFS Funds Distributor, Inc. ("MFD"). MFD is
registered as a broker-dealer with the Securities Exchange Commission and
National Association of Securities Dealers and the various states in which the
Fund's securities are offered for sale. The Fund's shares will be continuously
distributed by MFD pursuant to a Distribution Agreement, dated March 16, 1997.
Prior to March 16, 1997, Navellier Securities Corp. was the Fund's distributor.
The Distribution Agreement obligates the Distributor to pay certain expenses in
connection with the offering of the shares of the Fund. The Distributor is
responsible for the cost of printing and mailing Prospectuses to potential
investors and of any advertising incurred by it in connection with the
distribution of shares of the Fund.
For the years ended December 31, 1996 and 1995, and for the period ended
December 31, 1994, the Prior Distributor received $[ ], [ ] and [ ]
from sales loads earned on sales of the Fund's shares.
(C) CUSTODIAN AND TRANSFER AGENT
Rushmore Trust and Savings, FSB, 4922 Fairmont Avenue, Bethesda, Maryland
20814, serves as the custodian of the Fund's portfolio securities and as the
Fund's transfer agent and, in those capacities, maintains certain accounting and
other records of the Fund and processes requests for the purchase or the
redemption of shares, maintains records of ownership for shareholders, and
performs certain other shareholder and administrative services on behalf of the
Fund.
BROKERAGE ALLOCATION AND OTHER PRACTICES
- -------------------------------------------------------
Specific decisions to purchase or sell securities for the Fund are made by
employees of the Adviser, who are appointed and supervised by its senior
officers. Changes in the Fund's investments are reviewed by the Board of
Trustees. The Fund's portfolio manager may serve other clients of the Adviser or
any subsidiary of MFS in a similar capacity.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities, such as government securities, which are
principally traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser
9
<PAGE>
normally seeks to deal directly with the primary market makers, unless in its
opinion, better prices are available elsewhere. In the case of securities
purchased from underwriters, the cost of such securities generally includes a
fixed underwriting commission or concession. Securities firms or futures
commission merchants may receive brokerage commissions on transactions involving
options, Futures Contracts and Options on Futures Contracts and the purchase and
sale of underlying securities upon exercise of options. The brokerage
commissions associated with buying and selling options may be proportionately
higher than those associated with general securities transactions. From time to
time, soliciting dealer fees are available to the Adviser on the tender of the
Fund's portfolio securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser. At
present no other recapture arrangements are in effect.
Under the Advisory Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Adviser may cause the Fund to pay a
broker-dealer which provides brokerage and research services to the Adviser an
amount of commission for effecting a securities transaction for the Fund in
excess of the amount other broker-dealers would have charged for the transaction
if the Adviser determines in good faith that the greater commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer viewed in terms of either a particular
transaction or the Adviser's overall responsibilities to the Fund or to its
other clients. Not all of such services are useful or of value in advising the
Fund.
The term "brokerage and research services" includes advice as to the value
of securities, the advisability of purchasing or selling securities, and the
availability of purchasers or sellers of securities; furnishing analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; and effecting securities
transactions and performing functions incidental thereto such as clearance and
settlement.
Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to the
availability of purchasers or sellers of securities and services in effecting
securities transactions and performing functions incidental thereto such as
clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other
factual information or services ("Research") to the Adviser for no consideration
other than brokerage or underwriting commissions. Securities may be bought or
sold from time to time through such broker-dealers on behalf of the Fund. The
Trust's Trustees (together with the Trustees of the other MFS Funds) have
directed the Adviser to allocate a total of $39,100 of commission business from
the MFS Funds to the Pershing Division of Donaldson Lufkin & Jenrette as
consideration for the annual renewal of the Lipper Analytical Securities
Corporation (which provides information useful to the Trustees in reviewing the
relationship between the Fund and the Adviser).
The Adviser's investment management personnel attempt to evaluate the
quality of Research provided by brokers. Results of this effort are sometimes
used by the Adviser as a consideration in the selection of brokers to execute
portfolio transactions. However, the Adviser is unable to quantify the amount of
commissions which will be paid as a result of such Research
10
<PAGE>
because a substantial number of transactions will be effected through brokers
which provide Research but which were selected principally because of their
execution capabilities.
The management fee that the Fund pays to the Adviser will not be reduced as
a consequence of the Adviser's receipt of brokerage and research services. To
the extent the Fund's portfolio transactions are used to obtain such services,
the brokerage commissions paid by the Fund will exceed those that might
otherwise be paid, by an amount which cannot be presently determined. Such
services would be useful and of value to the Adviser in serving both the Fund
and other clients and, conversely, such services obtained by the placement of
brokerage business of other clients would be useful to the Adviser in carrying
out its obligations to the Fund. While such services are not expected to reduce
the expenses of the Adviser, the Adviser would, through use of the services,
avoid the additional expenses which would be incurred if it should attempt to
develop comparable information through its own staff.
For the Fund's fiscal year ended December 31, 1996, total brokerage
commissions of $ were paid on transactions [(other than U.S. Government
securities, purchased options transactions and short-term obligations)] of
$ . For the Fund's fiscal year ended December 31, 1995, total brokerage
commissions of $ were paid on total transactions [(other than U.S.
Government securities, purchased options transactions and short-term
obligations)] of $ . For the Fund's fiscal period ended December 31,
1994, total brokerage commissions of $ were paid on total transactions
[(other than U.S. Government securities, purchased options transactions and
short-term obligations)] of $ .
In certain instances there may be securities which are suitable for the
Fund's portfolio as well as for that of one or more of the clients of the
Adviser or MFS or any subsidiary of MFS. Investment decisions for the Fund and
for such other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed by the Adviser
to be equitable to each. It is recognized that in some cases this system could
have a detrimental effect on the price or volume of the security as far as the
Fund is concerned. In other cases, however, it is believed that the Fund's
ability to participate in volume transactions will produce better executions for
the Fund.
CAPITAL STOCK AND OTHER SECURITIES
- -------------------------------------------------------
The rights and preferences attached to the shares of the Fund are described
in the Prospectus (see "Description of Shares"). The Investment Company Act of
1940 requires that where more than one class or series of shares exists, each
class or series must be preferred over all other classes or series in respect of
assets specifically allocated to such class or series. Rule 18f-2 under the Act
provides that any matter required to be submitted by the provisions of the
Investment Company Act or applicable state law, or otherwise, to the holders of
the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding
11
<PAGE>
shares of each class or series affected by such matter. Rule 18f-2 further
provides that a class or series shall be deemed to be affected by a matter
unless the interests of each class or series in the matter are substantially
identical or that the matter does not affect any interest of such class or
series. However, the Rule exempts the selection of independent public
accountants, the approval of principal distribution contracts, and the election
of Trustees from the separate voting requirements of the Rule.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
- -------------------------------------------------------
REDUCED SALES CHARGES. A reduction in the sales charge rate applicable to
sales of Fund shares may be obtained by volume discounts as described in the
Prospectus. In addition, members of qualified groups or persons purchasing
shares for retirement plans or individual retirement accounts (IRA's) may
purchase shares of the Fund at the same discounts charged on volume discount
purchases. Also, persons who transfer their investments from another investment
company, to which they paid a sales charge, will not be charged a sales charge.
Nor will the Fund Trustees, the Distributor, the Custodian, the Transfer Agent,
retirement or deferred compensation plans or trusts used to fund such plans or
the employees of any of the above, or investment advisors, financial planners,
agents, banks, or brokers directly involved in selling the Fund's shares and
whose firm has executed a selling agreement with the Distributor, or their
employees or the spouse or child of any of the above have to pay a sales charge.
Nor will investors who invest through an account as to which an investment
advisor, financial planner, agent, a bank or broker-dealer charges an account
management or transaction fee ("wrap fee"), provided the bank or broker-dealer
has a selling agreement with Distributor, have to pay a sales charge.
Purchases may also be made at net asset value (no load) by investment
advisors or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; and clients of such investment advisors or financial
planners who place trades for their own accounts if the accounts are linked to
the master account of such investment advisor or financial planner on the books
and records of the broker or agent; and by retirement and deferred compensation
plans and trusts used to fund those plans, including, but not limited to, those
defined in section 401(a), 403(b), or 457 of the Internal Revenue Code and
"rabbi trusts".
Purchases of Fund shares are made at the public offering price next
determined after the Transfer Agent receives payment, including the applicable
sales charge. To receive the group rate on their individual purchase, group
members must purchase shares through a single investment dealer designated by
the group. After the initial purchase, a member may send funds for the purchase
of shares directly to the Transfer Agent. Sales to members of qualified groups
are made at a reduced sales charge because such sales normally involve less
sales effort and sales-related expense than would usually be associated with
sales to individual investors. Also, it is believed that such reduced sales
charges will provide an incentive for increased investment in the Fund by
members of qualified groups which could benefit the Fund and its shareholders by
enabling the Fund to achieve certain economies of scale and benefits of size
more rapidly than would otherwise be the case.
12
<PAGE>
As determined by the Distributor, qualified groups include the employees of
a corporation or a sole proprietorship, members, and employees of a partnership
or association (including, without limitation, members of tax-exempt
organizations enumerated under Sections 501(c)(3) and 501(c)(13) of the Internal
Revenue Code of 1986, or other organized groups of persons (the members of which
may include other qualified groups), provided that: (i) the group has at least
25 members, of which at least 10 members participate in the initial purchase;
(ii) the group has been in existence for at least six months; (iii) the group
has some purpose in addition to the purchase of investment company shares at a
reduced sales charge; and (iv) the group's sole organizational nexus or
connection is not that the members are credit card holders of a company, policy
holders of an insurance company, customers of a bank or a broker-dealer, clients
of an investment adviser, or security holders of a company.
Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is carried
on the records of the group or on the records of any constituent member of the
group as being a good standing employee, partner member, or person of like
status of the group or constituent member; or (iii) any fiduciary purchasing
shares for the account of a member of a qualified group or a member's
beneficiary, or participants in a qualified retirement plan, or contributors to
an individual retirement account (IRA). For example, a qualified group could
consist of a trade association which would have as its members individuals, sole
proprietors, partnerships, and corporations. The members of the group would then
consist of the individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, as well as trustees of
employment benefit trusts acquiring Fund shares for the benefit of any of the
foregoing. The Fund reserves the right to revise the terms of, or to suspend or
discontinue, group sales charge discounts at any time.
An investor who purchases shares in amounts of $25,000 or more shall be
charged a reduced sales charge in accordance with the breakpoints set forth in
the Prospectus.
In addition, purchases of shares of the Fund by (i) Trustees, officers, and
full-time employees of the Fund, (ii) directors, officers, and full-time
employees of the Distributor or the Adviser, (iii) selected dealers, (iv)
Trustees, officers, partners, and full-time employees of selected dealers which
are not individuals, and (v) the spouse or child of those individuals included
in (i) and (iv) will not be subject to any sales charge nor will investors who
invest through an account as to which a bank or broker-dealer charges an account
management fee, provided the bank or broker-dealer has a selling agreement with
Distributor, have to pay a sales charge. Any of the persons listed in clauses
(i)-(iv) above and their spouses can also purchase shares for custodial or trust
accounts for their minor children.
LETTERS OF INTENT. Shares of the Fund may be purchased by a "single
purchaser," within a period of 13 months, pursuant to a Letter of Intent in the
form provided by the Transfer Agent. Such Letter of Intent shall state the
investor's intention to invest in such shares during such period in an amount
which, together with the value (at their maximum offering prices on the date of
the Letter of Intent) of the shares of the Fund then owned by such investor,
equals a specified dollar amount ($25,000 or more). Each purchase of shares made
pursuant to a Letter of Intent will be made at the public offering price, as
described in the then current Prospectus relating to such shares, which at the
time of purchase is applicable to a single transaction of the dollar amount
specified in the Letter of Intent. The term "single purchaser" includes an
individual, or an individual, his spouse and their children under the age of 21
purchasing for his
13
<PAGE>
or their own account (including an IRA account) including his or their own
trust, commonly known as living trusts; a trustee or other fiduciary purchasing
for a single trust, estate, or single fiduciary account, although more than one
beneficiary is involved; multiple trusts for the same employer; or trust
companies and bank trust departments placing orders with respect to funds over
which they exercise discretionary investment authority and which are held in a
fiduciary, agency, custodial, or similar capacity, provided all shares are held
of record in the name, or nominee name, of the trust company or bank.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Fund or the Distributor to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete the
investor's investment is held in escrow in the form of shares (valued at the
purchase price thereof) registered in the investor's name until he completes his
investment, at which time escrowed shares are deposited to his account. If the
investor does not complete his investment and does not within 20 days after
written request by the Transfer Agent or his dealer pay the difference between
the sales charge on the dollar amount specified in his Letter of Intent and the
sales charge on the dollar amount of actual purchases, the difference will be
realized through the redemption of an appropriate number of the escrowed shares
and any remaining escrowed shares will be deposited to the investor's account.
COMBINATION PURCHASE PRIVILEGE. Purchases, either singly or in any
combination, of shares of the Fund, if made at a single time by a single
purchaser, will be combined for the purpose of determining whether the total
dollar amount of such purchases entitles the purchaser to a reduced sales charge
on any of such purchases. Each purchase of shares will then be made at the
public offering price, as described in the then current Prospectus relating to
such shares, which at the time of such purchase is applicable to a single
transaction of the total dollar amount of all such purchases. The term "single
purchaser" includes an individual, or an individual, his spouse and their
children under the age of 21, purchasing for his or their own account (including
an IRA account), including his or their own trust, commonly known as living
trusts; a trustee or other fiduciary purchasing for a single trust, estate, or
single fiduciary account, although more than one beneficiary is involved;
multiple trusts for the same employer; or trust companies and bank trust
departments placing orders with respect to funds over which they exercise
discretionary investment authority and which are held in a fiduciary, agency,
custodial, or similar capacity, provided all shares are held of record in the
name, or nominee name, of the trust company or bank.
RIGHTS OF ACCUMULATION. Purchases, either singly or in any combination, of
shares of the Fund, if made at a single time by a "single purchaser" (as defined
above) who already owns shares of the Fund, will be combined for the purpose of
determining whether the dollar amount of such purchases plus the current value
(at their maximum offering price) of shares of the Fund then owned by such
purchaser equals a dollar amount of purchases entitling the purchaser to a
reduced sales charge on any of such purchases, provided that at the time of any
such purchases, the purchaser, either directly or through his broker or dealer,
furnishes the Transfer Agent with sufficient information as to account
registrations and account numbers to permit verification that one or more of his
purchases qualifies for a reduced sales charge.
REDEMPTION OF SHARES. The Prospectus, under "Redemption of Shares"
describes the requirements and methods available for effecting redemption. The
Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange or any other applicable
exchange, is closed (other than a customary weekend
14
<PAGE>
and holiday closing), (b) when trading on the New York Stock Exchange, or any
other applicable exchange, is restricted, or an emergency exists as determined
by the Securities and Exchange Commission ("SEC") or the Fund so that disposal
of the Fund's investments or a fair determination of the net asset value of the
Fund is not reasonably practicable, or (c) for such other periods as the SEC by
order may permit for protection of the Fund's shareholders.
The Fund normally redeems shares for cash. However, the Board of Trustees
can determine that conditions exist making cash payments undesirable. If they
should so determine, redemption payments could be made in securities valued at
the value used in determining net asset value. There may be brokerage and other
costs incurred by the redeeming shareholder in selling such securities.
DETERMINATION OF NET ASSET VALUE. As described in the Prospectus under
"Purchase and Pricing of Shares--Valuation of Shares," the net asset value of
shares of the Fund is determined once daily as of 4 p.m. New York time on each
day during which the New York Stock Exchange, or other applicable exchange, is
open for trading. The New York Stock Exchange is scheduled to be closed for
trading on the following days: New Year's Day, Washington's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Board of Trustees of the Exchange reserves the right to
change this schedule. In the event that the New York Stock Exchange or the
national securities exchanges on which small cap equities are traded adopt
different trading hours on either a permanent or temporary basis, the Board of
Trustees of the Fund will reconsider the time at which net asset value is to be
computed.
In determining the value of the assets of the Fund, the securities for which
market quotations are readily available are valued at market value, which is
currently determined using the last reported sale price, or, if no sales are
reported--as is the case with many securities traded over-the-counter--the last
reported bid price. Debt securities (other than short-term obligations, which
are valued on the basis of amortized cost) are normally valued on the basis of
valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices and take
into account appropriate factors such as institution-size trading in similar
groups of securities, yield, quality of issue, trading characteristics, and
other market data. Use of a pricing service has been approved by the Board of
Trustees. All other securities and assets are valued at their fair value as
determined in good faith by the Board of Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board of Trustees.
TAXES
- -------------------------------------------------------
The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986 as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute all of
its net investment income and net realized capital gains to shareholders in
accordance with the timing requirements imposed by the Code, it is not expected
that the Fund will be required to pay any federal income or excise taxes,
although the Fund's foreign-source income may be subject to foreign withholding
taxes. If the Fund should fail to qualify as a
15
<PAGE>
"regulated investment company" in any year, the Fund would incur a regular
corporate federal income tax upon its taxable income and Fund distributions
would generally be taxable as ordinary dividend income to shareholders.
Dividends paid out of net investment income and net short-term capital gains
of the Fund will be taxable to shareholders as ordinary income regardless of
whether such distributions are reinvested in additional shares or paid in cash.
If a portion of the Fund's net investment income is derived from dividends from
domestic corporations, a corresponding portion of the dividends paid out of such
income may be eligible for the dividends-received deduction. Shareholders will
be informed as to the portion, if any, of dividends received by them which will
qualify for the dividends-received deduction, provided that the recipient
otherwise qualifies for that deduction with respect to its holding of Fund
shares. Availability of the deduction for particular shareholders is subject to
certain limitations, and deducted amounts may be subject to the alternative
minimum tax or result in certain basis adjustments.
Dividends paid out of the net capital gain of the Fund that are designated
as capital gain dividends by the Fund will be taxable to shareholders as
long-term capital gains regardless of how long the shareholders have held their
shares. Such dividends will not be eligible for the dividends-received
deduction.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of the Fund, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.
The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders, and may, under certain
circumstances, make an economic return of capital taxable to shareholders. Any
investment in certain securities purchased at a market discount will cause the
Fund to recognize income prior to the receipt of cash payments with respect to
those securities. In order to distribute its recognized income and avoid a tax
on the Fund, the Fund may be required to liquidate portfolio securities that it
might otherwise have continued to hold, potentially resulting in additional
taxable gain or loss to the Fund. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses. Use of foreign currencies for non-hedging
purposes may be limited in order to avoid a tax on the Fund. Investment by the
Fund in certain "passive foreign investment companies" may also be limited in
order to avoid a tax on the Fund. Investment income received by the Fund from
foreign securities may be subject to foreign income taxes withheld at the
source; the Fund does not expect to be able to pass through to shareholders
foreign tax credits or deductions with respect to such foreign taxes. The United
States has entered into tax treaties with many foreign countries that may
entitle the Fund to a reduced rate of tax or an exemption from tax on such
income; the Fund intends to qualify for treaty reduced rates where available. It
is not possible,
16
<PAGE>
however, to determine the Fund's effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested within various countries is not
known.
The shareholder will generally recognize taxable gain or loss measured by
the difference between the redemption price and the basis of the shares. This
gain will generally be treated as capital gain (long-term or short-term,
depending upon the shareholder's holding period for the redeemed shares). Any
losses recognized upon the sale or exchange of shares of the Fund within six
months from the date of their purchase will be treated as long-term capital loss
to the extent of any amounts treated as dividends paid during such period out of
the net long-term capital gain of the Fund. Any loss realized upon a disposition
of shares may also be disallowed under rules relating to wash sales. Gain may be
increased (or loss reduced) upon a redemption of shares of the Fund within 90
days after their purchase followed by any purchase without payment of an
additional sales charge (including purchases by exchange or by reinvestment) of
shares of the Fund or Class A shares of another MFS Fund (or any other shares of
an MFS Fund generally sold subject to a sales charge).
Shortly after the end of each year, the Fund will issue to each person who
was a shareholder at any time in the prior year a statement of the federal
income tax status of all distributions made to such shareholder.
Shareholders who fail to provide correct taxpayer identification numbers or
fail to certify as to no loss of exemption from backup withholding or otherwise
fail to comply with applicable requirements of the law relating to backup
withholding will be subject to backup withholding with respect to dividends and
redemptions at the rate of 31% unless they are corporations or come within other
exempt categories. Any amounts paid as backup withholding will be creditable
against the federal income tax liabilities of the affected shareholders. All
shareholders should consult their own tax advisers with regard to the tax
consequences applicable to their respective investments in the Fund.
The foregoing discussion relates solely to United States federal income tax
laws as applicable to United States persons (that is, citizens and residents of
the United States and domestic corporations, partnerships, trusts, and estates).
Each shareholder who is not a United States person should consult his tax
adviser regarding the United States and non-United States tax consequences of
ownership of shares, including the possibility that distributions by the Fund
may be subject to a United States withholding tax at the rate of 30%.
The Fund will be subject to a nondeductible excise tax for any year equal to
4% of the "required distribution" for the year over the "distributed amount" for
the year. For this purpose, the term "required distribution" means, with respect
to any year, the sum of (a) 98% of the Fund's "ordinary income" (that is, its
taxable income determined by excluding its net capital gain, if any, by
disallowing the dividends-received and net operating loss deductions, and by not
taking into account any capital gain or loss), (b) 98% of its capital gain net
income (that is, the excess of capital gains over capital losses) for the
one-year period ending on December 31 of the year, and (c) the "prior year
shortfall" (that is, the excess, if any, of the "grossed-up required
distribution" for the prior year over the "distributed amount" for such year).
For this purpose, the term "grossed-up required distribution" means, with
respect to any year, the required distribution for the year (determined by
including 100% of the Fund's ordinary income and capital gain net income) and
the term "distributed amount" means, with respect to any year, the sum of (a)
the amount of dividends-paid or deemed paid during the year, (b) any amount on
17
<PAGE>
which the Fund is required to pay corporate tax for the year, and (c) the
excess, if any, of the distributed amount for the prior year over the required
distribution for such year.
The Fund will not be subject to tax in Delaware for any year in which it
qualifies as a regulated investment company. However, distributions may be
subject to state and local taxes.
CALCULATION OF PERFORMANCE DATA
- -------------------------------------------------------
Performance information for the Fund may appear in advertisements, sales
literature, or reports to shareholders or prospective shareholders. Performance
information in advertisements and sales literature may be expressed as yield or
total return on the Fund.
Quotations of yield for the Fund will be based on all investment income per
share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the value of the Fund on
the last day of the period, according to the following formula:
<TABLE>
<C> <C> <S>
YIELD = 2[[a-b+1]/6/-1]
---
cd
where a = dividends and interest earned, as calculated in accordance
with the SEC's instructions, during the period by the Fund
b = expenses accrued for the period (net of any reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period
</TABLE>
The average annual total return on the Fund represents an annualization of
the Fund's total return ("T" in the formula below) over a particular period and
is computed by finding the current percentage rate which will result in the
ending redeemable value ("ERV" in the formula below) of a $1,000 payment* ("P"
in the formula below) made at the beginning of a one-, five-, or ten-year
period, or for the period from the date of commencement of the Portfolio's
operation, if shorter ("n" in the formula below). The following formula will be
used to compute the average annual total return for the Fund:
P (1 + T)/n/ = ERV
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year, or other
types of total return figures.
The manner in which total return will be calculated for public use is
described above. The average annual total return for the Fund for the fiscal
year ended December 31, 1996, and for the period from commencement of operations
on January 3, 1994 to December 31, 1996 was [ ]% and [ ]%, respectively.
The average annual total return for the Fund would have been lower had an
expense limitation not been in effect.
Performance information for the Fund shall reflect only the performance of a
hypothetical investment in the Portfolios during the particular time period on
which the calculations are
18
<PAGE>
based. Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Fund, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.
As summarized in the Prospectus under the heading "Performance and Yield,"
the total return of the Fund may be quoted in advertisements and sales
literature.
* The Fund's Total Return Calculation assumes the maximum sales load is deducted
from the initial $1,000 payment.
From time to time the Fund may, as appropriate, quote Fund rankings or
reprint all or a portion of evaluations of fund performance and operations
appearing in various independent publications, including but not limited to the
following: Money, Fortune, U.S. News and World Report, Kiplinger's Personal
Finance, The Wall Street Journal, Barron's, Investors Business Daily, Newsweek,
Financial World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger. Shearson Lehman
and Saloman Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Advisor, Financial Planning on Wall Street, Standard and Poor's,
Individual Investor, THE 100 BEST MUTUAL FUNDS YOU CAN BUY by Gordon K.
Williamson, Consumer Price Index, and Sanford C. Bernstein & Co. Fund
performance may also be compared to the performance of other mutual funds
tracked by financial or business publications or periodicals. The Fund may also
quote evaluations mentioned in independent radio or television broadcasts and
may use charts and graphs to illustrate the past performance of various indices
such as those mentioned above and illustrations using hypothetical rates of
return to illustrate the effects of compounding and tax-deferral. The Fund may
advertise examples of the effects of periodic investment plans, including the
principle of dollar cost averaging. In such a program, an investor invests a
fixed dollar amount in a fund at periodic intervals, thereby purchasing fewer
shares when prices are high and more shares when prices are low. While such a
strategy does not assure a profit or guard against a loss in a declining market,
the investor's average cost per share can be lower than if fixed numbers of
shares are purchased at the same intervals.
From time to time, the Fund may discuss or quote its current portfolio
manager as well as other investment personnel, including such persons' views on:
the economy; securities markets; portfolio securities and their issuers;
investment philosophies, strategies, techniques and criteria used in the
selection of securities to be purchased or sold for the Fund; the Fund's
portfolio holdings; the investment research and analysis process; the
formulation and evaluation of investment recommendations; and the assessment and
evaluation of credit, interest rate, market and economic risks.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established as the first
open-end mutual fund in America.
-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make
full public disclosure of its operations in shareholder reports.
19
<PAGE>
-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund to
register under the Securities Act of 1933 ("Truth in Securities Act" or
"Full Disclosure Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund to allow
shareholders to take capital gain distributions either in additional
shares or cash.
-- 1976 -- MFS-Registered Trademark- Municipal Bond Fund is among the first
municipal bond funds established.
-- 1979 -- Spectrum becomes the first combination fixed/variable annuity
with no initial sales charge.
-- 1981 -- MFS-Registered Trademark- World Governments Fund is established
as America's first globally fixed/ income mutual fund.
-- 1984 -- MFS-Registered Trademark- Municipal High Income Fund is the first
open-end mutual fund to seek high tax-free income from lower-rated
municipal securities.
-- 1986 -- MFS-Registered Trademark- Managed Sectors Fund becomes the first
mutual fund to target and shift investments among industry sectors for
shareholders.
-- 1986 -- MFS-Registered Trademark- Municipal Income Trust is the first
closed-end, high-yield municipal bond fund traded on the New York Stock
Exchange.
-- 1987 -- MFS-Registered Trademark- Multimarket Income Trust is the first
closed-end, multimarket high income fund listed on the New York Stock
Exchange.
-- 1989 -- MFS-Registered Trademark- Regatta becomes America's first
non-qualified market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS-Registered Trademark- World Total Return Fund is the global
balanced fund.
-- 1993 -- MFS-Registered Trademark- World Growth Fund is the first global
emerging markets fund to offer the expertise of two sub-advisers.
-- 1993 -- MFS becomes money manager of MFS-Registered Trademark- Union
Standard Trust, the first Trust to invest in companies deemed to be
union-friendly by an Advisory Board of senior labor officials, senior
managers of companies with significant labor contracts, academics and
other national labor leaders or experts.
20
<PAGE>
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
- -------------------------------------------------------
Deloitte & Touche LLP are the Fund's independent auditors, providing audit
services and assistance and consulation with respect to the preparation of
filings with the SEC.
The Portfolio of Investments at December 31, 1996, the Statement of Assets
and Liabilities at December 31, 1996, the Statement of Operations for the year
ended December 31, 1996, the Statement of Changes in Net Assets for each of the
two years in the period ended December 31, 1996, the Notes to Financial
Statements and the Independent Auditors' Report, each of which is included in
the Annual Report to shareholders of the Fund, are incorporated by reference
into this SAI and have been so incorporated in reliance upon the report of
Deloitte & Touche LLP, independent auditors, given upon their authority as
experts in accounting and auditing. A copy of the Annual Report accompanies this
SAI.
21
<PAGE>
APPENDIX
- -------------------------------------------------------
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Fund will invest only in commercial paper which, at the date of
investment, is rated A-1 by Standard & Poor's Corporation ("S&P") or P-1 by
Moody's Investors Services, Inc. ("Moody's"), or, if not rated, is issued or
guaranteed by companies which at the date of investment have an outstanding debt
issue rated AA or higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationship which exists with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
<PAGE>
APPENDIX
--------
A-1 AND P-1 COMMERCIAL PAPER RATINGS
- --------------------------------------
The Fund will invest only in commercial paper which, at the
date of investment, is rated A-1 by Standard & Poor's Corporation ("S&P") or P-1
by Moody's Investors Services, Inc. ("Moody's"), or, if not rated, is issued or
guaranteed by companies which at the date of investment have an outstanding debt
issue rated AA or higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationship which exists with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS INCLUDED IN PART A AND B:
INCLUDED IN PART A OF THIS REGISTRATION STATEMENT:
For the two years ended December 31, 1996, and the period
ended December 31, 1994:
Financial Highlights
INCLUDED IN PART B OF THIS REGISTRATION STATEMENT:
At December 31, 1996:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the two years ended December 31, 1996:
Statement of Changes in Net Assets*
For the year ended December 31, 1996:
Statement of Operations*
- ------------------------------
* Incorporated herein by reference to the Fund's Annual Report to
Shareholders, dated December 31, 1996, filed with the SEC via EDGAR on
February 28, 1997.
(b) EXHIBITS
1.1 Certificate of Trust of Registrant. (1)
1.2 Declaration of Trust of Registrant. (1)
1.3 Certificate of Amendment to Certificate of Trust, dated
March 13, 1997; filed herewith.
2 By-Laws of Registrant. (1)
3 Not Applicable.
4 None.
5 Investment Advisory Agreement, dated March 16, 1997;
filed herewith.
<PAGE>
6.1 Distribution Agreement, dated March 16, 1997; filed
herewith.
6.2 Dealer Agreement between MFS Fund Distributors, Inc.
("MFD"), and a dealer, dated December 28, 1994 and the
Mutual Fund Agreement between MFD and a bank or NASD
affiliate, dated December 28, 1994. (2)
7 None.
8 Administrative Services, Custodian and Transfer Agent
Agreement with Rushmore Trust and Savings, FSB, dated
March 10, 1994. (1)
9.1 Trustee Indemnification Agreements. (1)
9.2 Administrative Services Agreement with MFS Financial
Services, Inc., dated March 16, 1997; filed herewith.
10 Consent and Opinion of Counsel filed with Registrant's
Rule 24f-2 Notice for fiscal year ended December 31,
1996 on February 28, 1997.
11 Consent of Independent Auditors; filed herewith.
12 Not Applicable.
13 Subscription Agreement between the Trust and Louis
Navellier, dated May 15, 1993. (1)
14 Not Applicable.
15 Not Applicable.
16 Schedule for Computation of Performance Quotations -
Average Annual Total Return. (3)
18 Not Applicable.
27 Financial Data Schedules; filed herewith.
- -----------------------------
(1) Incorporated by reference to the Registrant's Post-Effective Amendment
No. 6 filed with the SEC via EDGAR on April 29, 1996.
<PAGE>
(2) Incorporated by reference to MFS Municipal Series Trust (File Nos.
2-92915 and 811-4096) Post-Effective Amendment No. 26 filed with the
SEC via EDGAR on February 22, 1995.
(3) Incorporated by reference to Massachusetts Investors Growth Stock Fund
(File Nos. 2-14677 and 811-7768) Post-Effective Amendment No. 59 filed
with the SEC via EDGAR on March 30, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 8,450
(without par value) (as of February 28, 1997)
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Article X of Registrant's Declaration
of Trust, incorporated by reference to Post-Effective Amendment No. 6, filed
with the SEC on April 29, 1996.
The Fund shall indemnify each of its Trustees, officers, employees,
and agents (including persons who serve at its request as directors, officers,
or trustees of another organization in which it has any interest, as a
shareholder, creditor, or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him in connection
with the defense or disposition of any action, suit, or other proceeding,
whether civil or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having been
such a Trustee, officer, employee, or agent, except with respect to any matter
as to which he shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence, or reckless disregard of his duties; provided,
however, that as to any matter disposed of by a compromise payment by such
Person, pursuant to a consent decree or otherwise, no indemnification either for
said payment or for any other expenses shall be provided unless there has been a
determination that such person did not engage in bad faith, willful misfeasance,
gross negligence, or reckless disregard of his duties involved in the conduct of
his office by the court or other body approving the settlement or other
disposition or by a reasonable determination, based upon review of readily
available facts (as opposed to a full trial-type inquiry), that he did not
engage in such conduct by written opinion from independent legal counsel
approved by a majority of a quorum of trustees who are neither interested
persons nor parties to the proceedings. The rights accruing to any person under
these provisions shall not exclude any other right to which he may be lawfully
entitled; provided that no person may satisfy any right of indemnity or
reimbursement
<PAGE>
granted herein or to which he may otherwise be entitled except out of the Fund
Property. A majority of a quorum of disinterested non-party Trustees may make
advance payments in connection with indemnification under this section, provided
that the indemnified person shall have given a written undertaking adequately
secured to reimburse the Fund in the event it is subsequently determined that he
is not entitled to such indemnification, or a majority of a quorum of
disinterested non-party Trustees or independent counsel determine, after a
review of readily available facts, that the person seeking indemnification will
probably be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to the Trustees, officers, and controlling persons
of the Fund pursuant to the provisions described under this Item 27, or
otherwise, the Fund has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Fund of expenses incurred or
paid by a Trustee, officer, or controlling person of the Fund in the successful
defense of any action, suit, or proceeding) is asserted by such Trustee,
officer, or controlling person in connection with the securities being
registered, the Fund will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Fund may purchase and maintain insurance on behalf of an officer,
Trustee, employee, or agent protecting such person, to the full extent permitted
by applicable law, from liability incurred by such person as officer, Trustee,
employee, or agent of the Fund or arising from his activities in such capacity.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser and principal underwriter are insured under an
errors and omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule 17g-1 under
the Investment Company Act of 1940, as amended.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
MFS serves as investment adviser to the following open-end Funds
comprising the MFS Family of Funds: Massachusetts Investors Trust,
Massachusetts Investors Growth Stock Fund, MFS Growth Opportunities Fund, MFS
Government Securities Fund, MFS Government Limited Maturity Fund, MFS Series
Trust I (which has thirteen series: MFS Managed Sectors Fund, MFS Cash Reserve
Fund, MFS World Asset Allocation Fund, MFS Aggressive Growth Fund, MFS Research
Growth and Income Fund, MFS Core Growth Fund, MFS Equity Income Fund, MFS
Special Opportunities Fund, MFS Convertible Securities Fund, MFS Blue Chip Fund,
MFS New Discovery Fund, MFS Science and Technology Fund and MFS Research
International
<PAGE>
Fund), MFS Series Trust II (which has four series: MFS Emerging Growth Fund, MFS
Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold & Natural
Resources Fund), MFS Series Trust III (which has two series: MFS High Income
Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has four
series: MFS Money Market Fund, MFS Government Money Market Fund, MFS Municipal
Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series: MFS Total
Return Fund and MFS Research Fund), MFS Series Trust VI (which has three series:
MFS World Total Return Fund, MFS Utilities Fund and MFS World Equity Fund), MFS
Series Trust VII (which has two series: MFS World Governments Fund and MFS Value
Fund), MFS Series Trust VIII (which has two series: MFS Strategic Income Fund
and MFS World Growth Fund), MFS Series Trust IX (which has three series: MFS
Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited Maturity Fund),
MFS Series Trust X (which has four series: MFS Government Mortgage Fund,
MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS/Foreign & Colonial
International Growth Fund and MFS/Foreign & Colonial International Growth and
Income Fund), and MFS Municipal Series Trust (which has 16 series: MFS Alabama
Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California Municipal
Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS
Maryland Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS
Mississippi Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North
Carolina Municipal Bond Fund, MFS Pennsylvania Municipal Bond Fund, MFS South
Carolina Municipal Bond Fund, MFS Tennessee Municipal Bond Fund, MFS Virginia
Municipal Bond Fund, MFS West Virginia Municipal Bond Fund and MFS Municipal
Income Fund) (the "MFS Funds"). The principal business address of each of the
MFS Funds is 500 Boylston Street, Boston, Massachusetts 02116.
MFS also serves as investment adviser of the following no-load,
open-end Funds: MFS Institutional Trust ("MFSIT") (which has seven series), MFS
Variable Insurance Trust ("MVI") (which has twelve series) and MFS Union
Standard Trust ("UST"). The principal business address of each of the
aforementioned funds is 500 Boylston Street, Boston, Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the MFS Closed-End Funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL"), Money Market Variable Account, High Yield Variable Account, Capital
Appreciation Variable Account, Government Securities Variable Account, World
Governments Variable Account, Total Return Variable Account and Managed Sectors
Variable Account. The principal business address of each of the aforementioned
funds is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02181.
<PAGE>
MFS International Ltd. ("MIL"), a limited liability company organized
under the laws of Bermuda and a subsidiary of MFS, whose principal business
address is Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda, serves as
investment adviser to and distributor for MFS American Fund (which has six
portfolios: MFS American Funds-U.S. Equity Fund, MFS American Funds-U.S.
Emerging Growth Fund, MFS American Funds-U.S. High Yield Bond Fund, MFS American
Funds - U.S. Dollar Reserve Fund, MFS American Funds-Charter Income Fund and MFS
American Funds-U.S. Research Fund) (the "MIL Funds"). The MIL Funds are
organized in Luxembourg and qualify as an undertaking for collective investments
in transferable securities (UCITS). The principal business address of the MIL
Funds is 47, Boulevard Royal, L-2449 Luxembourg.
MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund, MFS Meridian U.S. Equity Fund, MFS Meridian Research Fund and MFS
Emerging Markets Debt Fund (collectively the "MFS Meridian Funds"). Each of the
MFS Meridian Funds is organized as an exempt company under the laws of the
Cayman Islands. The principal business address of each of the MFS Meridian
Funds is P.O. Box 309, Grand Cayman, Cayman Islands, British West Indies.
MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned subsidiary
of MFS, serves as distributor for certain life insurance and annuity contracts
issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFSIT, MVI and UST.
MFS Institutional Advisors, Inc. ("MFSI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.
<PAGE>
MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames, Arnold
D. Scott, Donald A. Stewart and John D. McNeil. Mr. Brodkin is the Chairman,
Mr. Shames is the President, Mr. Scott is a Senior Executive Vice President and
Secretary, Bruce C. Avery, William S. Harris, William W. Scott, Jr., and
Patricia A. Zlotin are Executive Vice Presidents, Stephen E. Cavan is a Senior
Vice President, General Counsel and an Assistant Secretary, Robert T. Burns is a
Senior Vice President, Associate General Counsel and an Assistant Secretary of
MFS, and Thomas B. Hastings is a Vice President and Treasurer of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS SERIES TRUST VI
MFS SERIES TRUST X
MFS GOVERNMENT LIMITED MATURITY FUND
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice President
of MFS, is the Assistant Treasurer, James R. Bordewick, Jr., Senior Vice
President and Associate General Counsel of MFS, is the Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg,
Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
<PAGE>
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T. Swanson,
Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan, Assistant Vice President of MFS, and Daniel E. McManus, Vice
President of MFS, are Assistant Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer, and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A. Dennis and
Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant
Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice Presidents, Stephen
E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is
the Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames,
Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D. Laupheimer,
Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L. Schechter and
David R. King, Vice Presidents of MFS, are Vice Presidents, Daniel E. McManus,
Vice President of MFS, is an Assistant Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
<PAGE>
MFS VARIABLE INSURANCE TRUST
MFS UNION STANDARD TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M. Brown and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Leslie J. Nanberg and
James T. Swanson are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, Vice President of MFS, is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L. Shames and
Robert J. Manning are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost, is the Assistant Treasurer and
James R. Bordewick, Jr., is the Assistant Secretary.
MFS/SUN LIFE SERIES TRUST
John D. McNeil, Chairman and Director of Sun Life Assurance Company of
Canada, is the Chairman, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, is the Assistant Treasurer and James R. Bordewick,
Jr., is the Assistant Secretary.
<PAGE>
MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT
John D. McNeil is the Chairman, Stephen E. Cavan is the Secretary, and
James R. Bordewick, Jr., is the Assistant Secretary.
MIL
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott and
Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of MFS, is
the President, Thomas J. Cashman, Jr., a Senior Vice President of MFS, is a
Senior Vice President, Stephen E. Cavan is a Director, Senior Vice President and
the Clerk, James R. Bordewick, Jr. is a Director, Vice President and an
Assistant Clerk, Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo,
Senior Vice President and Chief Financial Officer of MFS, is the Treasurer and
Thomas B. Hastings is the Assistant Treasurer.
MIL-UK
A. Keith Brodkin is a Director and the Chairman, Arnold D. Scott,
Jeffrey L. Shames, and James R. Bordewick, Jr., are Directors, Stephen E. Cavan
is a Director and the Secretary, Ziad Malek is the President, James E. Russell
is the Treasurer, and Robert T. Burns is the Assistant Secretary.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker and William F. Waters are
Directors, Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost is the Assistant Treasurer and James R. Bordewick, Jr., is the
Assistant Secretary, and Ziad Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director, Richard B.
Bailey, John A. Brindle, Richard W. S. Baker, Arnold D. Scott, Jeffrey L. Shames
and William F. Waters are Directors, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James R. Bordewick, Jr., is the Assistant
Secretary, James O. Yost is the Assistant Treasurer, and Ziad Malek is a Senior
Vice President.
<PAGE>
MFD
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, William W. Scott, Jr., an Executive Vice
President of MFS, is the President, Stephen E. Cavan is the Secretary, Robert T.
Burns is the Assistant Secretary, Joseph W. Dello Russo is the Treasurer, and
Thomas B. Hastings is the Assistant Treasurer.
CIAI
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery is
the Vice President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings
is the Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T.
Burns is the Assistant Secretary.
MFSC
A. Keith Brodkin is the Chairman and a Director, Arnold D. Scott and
Jeffrey L. Shames are Directors, Joseph A. Recomendes, a Senior Vice President
of MFS, is Vice Chairman and a Director, Janet A. Clifford is the Executive Vice
President, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, Stephen E. Cavan is the Secretary, and Robert T. Burns is
the Assistant Secretary.
MFSI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L. Shames,
and Arnold D. Scott are Directors, Thomas J. Cashman, Jr., is the President and
a Director, Leslie J. Nanberg is a Senior Vice President, a Managing Director
and a Director, George F. Bennett, Carol A. Corley, John A. Gee, Brianne Grady
and Kevin R. Parke are Senior Vice Presidents and Managing Directors, Joseph W.
Dello Russo is the Treasurer, Thomas B. Hastings is the Assistant Treasurer and
Robert T. Burns is the Secretary.
RSI
William W. Scott, Jr. and Bruce C. Avery are Directors, Arnold D.
Scott is the Chairman and a Director, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is the
Secretary, Robert T. Burns is the Assistant Secretary and Sharon A. Brovelli and
Martin E. Beaulieu are Senior Vice Presidents.
In addition, the following persons, Directors or officers of MFS, have
the affiliations indicated:
<PAGE>
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive Park,
Wellesley Hills, Massachusetts
Director, Sun Life Insurance and Annuity
Company of New York, 67 Broad Street, New
York, New York
Donald A. Stewart President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Stewart is also an
officer and/or Director of various
subsidiaries and affiliates of Sun Life)
John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King Street
West, Toronto, Ontario, Canada (Mr. McNeil
is also an officer and/or Director of
various subsidiaries and affiliates of Sun
Life)
Joseph W. Dello Russo Director of Mutual Fund Operations, The
Boston Company, Exchange Place, Boston,
Massachusetts (until August, 1994)
ITEM 29. DISTRIBUTORS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above; the principal business
address of each of these persons is 500 Boylston Street, Boston, Massachusetts
02116.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
NAME ADDRESS
---- -------
Massachusetts Financial Services 500 Boylston Street
Company (investment adviser) Boston, MA 02116
<PAGE>
Navellier Management, Inc. 1 East Liberty, Third Floor
(prior investment adviser) Reno, Nevada 89501
MFS Fund Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116
Navellier Securities Corp. 1 East Liberty, Third Floor
(prior principal underwriter) Reno, NV 89501
Rushmore Trust & Savings, FSB 4922 Fairmont Avenue
(custodian and transfer agent) Bethesda, MD 20814
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its latest annual report to shareholders upon
request and without charge.
(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being Registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
(e) The Fund hereby undertakes that if it is requested by the holders
of at least 10% of its outstanding shares to call a meeting of shareholders for
the purpose of voting upon the question of removal of a Trustee, it will do so
and will assist in communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 8th day of April, 1997.
THE MFS SERIES TRUST
By: James R. Bordewick, Jr.
-------------------------------------
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on April 8, 1997.
SIGNATURE TITLE
DONALD A. SIMON* Chairman, Principal Executive
- ------------------------- Officer and Trustee
Donald A. Simon
W. THOMAS LONDON* Treasurer (Principal Financial Officer
- ------------------------- and Principal Accounting Officer)
W. Thomas London
LAWRENCE BIANCHI* Trustee
- -------------------------
Lawrence Bianchi
KENNETH SLETTEN* Trustee
- -------------------------
Kenneth Sletten
Trustee
- -------------------------
Louis Navellier
Trustee
- -------------------------
Alan Alpers
Name: James R. Bordewick, Jr.
-----------------------------------
James R. Bordewick, Jr.
as Attorney-in-fact
*Executed by James R. Bordewick, Jr., on
behalf of those indicated pursuant to a
Power of Attorney filed herewith.
<PAGE>
POWER OF ATTORNEY
THE MFS SERIES TRUST
The undersigned, Trustees and officers of The MFS Series Trust (the
"Registrant"), hereby severally constitute and appoint A. Keith Brodkin, W.
Thomas London, Stephen E. Cavan and James R. Bordewick, Jr., and each of them
singly, as true and lawful attorneys, with full power to them and each of them
to sign for each of the undersigned, in the names of, and in the capacities
indicated below, any Registration Statement and any and all amendments thereto
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission for the
purpose of registering the Registrant as a management investment company under
the Investment Company Act of 1940 and/or the shares issued by the Registrant
under the Securities Act of 1933 granting unto our said attorneys, and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary or desirable to be done in the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
In WITNESS WHEREOF, the undersigned have hereunto set their hand on this
13th day of March, 1997.
Signatures Title(s)
---------- --------
Donald A. Simon Chairman of the Board; Trustee and
- --------------------- Principal Executive Officer
Donald A. Simon
Lawrence Bianchi Trustee
- ---------------------
Lawrence Bianchi
Kenneth Sletten Trustee
- ---------------------
Kenneth Sletten
Trustee
- ---------------------
Louis Navellier
Trustee
- ---------------------
Alan Alpers
W. Thomas London Principal Financial and Accounting
- --------------------- Officer
W. Thomas London
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
1.3 Certificate of Amendment to Certificate
of Trust, dated March 13, 1997.
5 Investment Advisory Agreement, dated
March 16, 1997.
6.1 Distribution Agreement, dated March 16,
1997.
9.2 Administrative Services Agreement with
Massachusetts Financial Services
Company, dated March 16, 1997.
11 Consent of Independent Auditors.
27 Financial Data Schedules.
<PAGE>
EXHIBIT 1.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF TRUST
OF
THE NAVELLIER SERIES FUND
This Certificate of Amendment of Certificate of Trust is filed in accordance
with the provisions of the Delaware Business Trust Act and sets forth the
following:
1. The name of the Business Trust is THE NAVELLIER SERIES FUND. The
original Certificate of Trust was filed with the office of the Secretary of
State on or about May 15, 1993.
2. The Certificate of Trust is being amended hereby to change the name of
the Business Trust. Accordingly, paragraph 1 of the Certificate of Trust is
hereby amended to read in its entirety as follows:
1. The name of the Delaware Business Trust is THE MFS SERIES TRUST.
3. This Certificate of Amendment of Certificate of Trust shall become
effective immediately upon its filing with the office of the Secretary of State
of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being a majority of the trustees of
The Navellier Series Fund currently in office or authorized, has duly executed
this Certificate of Amendment of Certificate of Trust as of March 13, 1997.
Lawrence Bianchi
---------------------------------
Lawrence Bianchi, Trustee
Donald A. Simon
---------------------------------
Donald A. Simon, Trustee
Kenneth Sletten
---------------------------------
Kenneth Sletten, Trustee
<PAGE>
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this 16th day of March, 1997, by and
between THE MFS SERIES TRUST, a business trust organized under the laws of the
State of Delaware (the "Trust"), on behalf of the MFS AGGRESSIVE SMALL CAP
EQUITY FUND (the "Fund"), a series of the Trust, and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide business services to the Fund on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. The Adviser shall provide the Fund with
such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds. The Adviser shall
act as Adviser to the Fund and as such shall furnish continuously an investment
program and shall determine from time to time what securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held uninvested, subject always to the restrictions of the Declaration of Trust
of the Trust and By-Laws, each as amended from time to time (respectively, the
"Declaration" and the "By-Laws"), to the provisions of the Investment Company
Act of 1940 and the Rules, Regulations and orders thereunder and to the Fund's
then-current Prospectus and Statement of Additional Information. The Adviser
shall also make recommendations as to the manner in which voting rights, rights
to consent to corporate action and any other rights pertaining to the Fund's
portfolio securities shall be exercised. Should the Trustees at any time
however, make any definite determination as to the investment policy and notify
the Adviser thereof in writing, the Adviser shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination shall be revoked. The Adviser shall take, on behalf of
the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders for
the purchase or sale of portfolio securities for the Fund's account with brokers
or dealers selected by it, and to that end, the Adviser is authorized as the
agent of the Fund to give instructions to the Custodian of the Fund as to the
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund execution at
-1-
<PAGE>
the most reasonable price by responsible brokerage firms at reasonably
competitive commission rates. In fulfilling this requirement the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty, created by
this Agreement or otherwise, solely by reason of its having caused the Fund to
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Adviser determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other clients of the Adviser as
to which the Adviser exercises investment discretion.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall furnish
at its own expense investment advisory and administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Fund and maintaining its organization, and investment advisory facilities
and executive and supervisory personnel for managing the investments and
effecting the portfolio transactions of the Fund. The Adviser shall arrange, if
desired by the Trust, for Directors, officers and employees of the Adviser to
serve as Trustees, officers or agents of the Trust if duly elected or appointed
to such positions and subject to their individual consent and to any limitations
imposed by law. It is understood that the Fund will pay all of its own expenses
including, without limitation, compensation of Trustees "not affiliated" with
the Adviser; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports, notices, proxy statements and
reports to governmental officers and commissions; brokerage and other expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of shares of the Fund; expenses of shareholders' meetings; and expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes
(except to the extent that any Distribution Agreement to which the Trust is a
party on behalf of the Fund provides that another party is to pay some or all of
such expenses).
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered
and the facilities to be provided, the Fund shall pay to the Adviser an
investment advisory fee computed and paid monthly at an annual rate of 1.25% of
the Fund's average daily net assets for its then-current fiscal year. If the
Adviser shall serve for less than the whole of any period specified in this
Section 3, the compensation (including the expense reimbursement) payable to the
Adviser with respect to the Fund will be prorated.
ARTICLE 4. SPECIAL SERVICES. Should the Trust have occasion to request
the Adviser to perform services not herein contemplated or to request the
Adviser to arrange for the services of others, the Adviser will act for the
Trust on behalf of the Fund upon request to the best of its
-2-
<PAGE>
ability, with compensation for the Adviser's services to be agreed upon with
respect to each such occasion as it arises.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's principal
underwriter, if any, as principals in making purchases or sales of securities or
other property for the account of the Fund, except as permitted by the
Investment Company Act of 1940 and the Rules, Regulations or orders thereunder,
will not take a long or short position in the shares of the Fund except as
permitted by the Declaration, and will comply with all other provisions of the
Declaration and the By-Laws and the then-current Prospectus and Statement of
Additional Information of the Fund relative to the Adviser and its Directors and
officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. As used in this
Article 6, the term "Adviser" shall include Directors, officers and employees of
the Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. The services of the Adviser to the
Fund are not deemed to be exclusive, the Adviser being free to render investment
advisory and/or other services to others. The Adviser may permit other fund
clients to use the initials "MFS" in their names. The Fund agrees that if the
Adviser shall for any reason no longer serve as the Adviser for the Fund, the
Fund will change its name so as to delete the initials "MFS". It is understood
that the Trustees, officers and shareholders of the Trust are or may be or
become interested in the Adviser, as Directors, officers, employees, or
otherwise and that Directors, officers and employees of the Adviser are or may
become similarly interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
ARTICLE 8. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. This
Agreement shall become effective on the date first above written and shall
govern the relations between the parties hereto thereafter, and shall remain in
force after July 16, 1997, only if approved prior to that date by "vote of a
majority of outstanding voting securities" of the Fund, in which event it shall
remain in force until March 16, 1999, on which date it will terminate unless its
continuance after March 16, 1999 is "specifically approved at least annually"
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Trust, or by "vote of a majority of the outstanding voting
securities" of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by "vote of a majority of the outstanding voting
securities" of the Fund, or by the Adviser, in each case on not more than sixty
days' nor less than thirty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its "assignment."
-3-
<PAGE>
This Agreement may be amended only if such agreement is approved by "vote
of a majority of the outstanding voting securities" of the Fund.
The terms "specifically approved at least annually", "vote of a majority of
the outstanding voting securities", "assignment", "affiliated person", and
"interested person", when used in this Agreement, shall have the respective
meanings specified, and shall be construed in a manner consistent with, the
Investment Company Act of 1940 and the Rules and Regulations promulgated
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, and their respective seals to be hereto affixed, all as of the
day and year first written above. The undersigned Trustee of the Trust has
executed this Agreement not individually, but as Trustee under the Declaration
and the obligations of this Agreement are not binding upon any of the Trustees
or shareholders of the Trust, individually, but bind only the trust estate
applicable to the Fund.
THE MFS SERIES TRUST, on
behalf of the MFS
AGGRESSIVE SMALL CAP
EQUITY FUND
By: Stephen E. Cavan
---------------------------------
Stephen E. Cavan, as
Secretary and not individually
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By: A. Keith Brodkin
---------------------------------
A. Keith Brodkin
Chairman
-4-
<PAGE>
EXHIBIT 6.1
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this 16th day of March, 1997, by and between
THE MFS SERIES TRUST, a business trust organized under the laws of the State of
Delaware (the "Trust"), on behalf of each series from time to time of the Trust
(referred to individually as a "Fund" and collectively as the "Funds") and MFS
FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor");
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the parties hereto agree as follows:
1. The Trust grants to the Distributor the right, as agent of the Trust,
to sell Shares of Beneficial Interest, without par value, of the Funds (the
"Shares") upon the terms herein below set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use its
best efforts to find purchasers for Shares.
The Distributor shall have the right, as agent of the Trust, to order
from the Trust the Shares needed, but not more than the Shares needed (except
for clerical errors and errors of transmission) to fill unconditional orders for
Shares placed with the Distributor by dealers, banks or other financial
institutions or investors as set forth in the current Prospectus and Statement
of Additional Information (collectively, the "Prospectus") relating to the
Shares. The price which shall be paid to the Trust for the Shares so purchased
shall be the net asset value used in determining the public offering price on
which such orders were based. The Distributor shall notify the Custodian of the
Trust, at the end of each business day, or as soon thereafter as the
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orders placed with it have been compiled, of the number of Shares and the prices
thereof which have been ordered through the Distributor since the end of the
previous day.
The right granted to the Distributor to place orders for Shares with
the Trust shall be exclusive, except that said exclusive right shall not apply
to Shares issued in the event that an investment company (whether a regulated or
private investment company or a personal holding company) is merged or
consolidated with the Trust (or a Fund) or in the event that the Trust (or a
Fund) acquires by purchase or otherwise, all (or substantially all) the assets
or the outstanding shares of any such company; nor shall it apply to Shares
issued by the Trust (or a Fund) as a stock dividend or a stock split. The
exclusive right to place orders for Shares granted to the Distributor may be
waived by the Distributor by notice to the Trust in writing, either
unconditionally or subject to such conditions and limitations as may be set
forth in the notice to the Trust. The Trust hereby acknowledges that the
Distributor may render distribution and other services to other parties,
including other investment companies. In connection with its duties hereunder,
the Distributor shall also arrange for computation of performance statistics
with respect to the Trust and arrange for publication of current price
information in newspapers and other publications.
2. The Shares may be sold through the Distributor to dealers, banks and
other financial institutions having sales agreements with the Distributor, upon
the following terms and conditions:
The public offering price, I.E., the price per Share at which the
Distributor or dealers, banks or other financial institutions purchasing Shares
through the Distributor may sell Shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to the Shares,
including a sales charge (where applicable) not to exceed the amount permitted
by Article III, Section 26 of the National Association of Securities Dealers,
Inc.'s Rule of Fair Practice, as amended from time to time. The Distributor
shall retain the sales charge (where applicable) less any applicable dealer or
comparable discount. If the resulting public offering price does not come
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out to an even cent, the public offering price shall be adjusted to the nearer
cent. In addition, the Trust agrees that the Distributor may impose certain
contingent deferred sales charges (where applicable) in connection with the
redemption of Shares, not to exceed 6% of the net asset value of Shares, and the
Distributor shall retain (or receive from the Trust, as the case may be) all
such contingent deferred sales charges.
The Distributor may place orders for Shares at the net asset value for
such Shares (as established pursuant to paragraph l above) on behalf of such
purchasers and under such circumstances as the Prospectus describes, provided
that such sales comply with Rule 22d-1 under the Investment Company Act of 1940
or any exemptive order granted by the Securities and Exchange Commission. The
Distributor may also place orders for Shares at net asset value on behalf of
persons reinvesting the proceeds of the redemption or resale of Shares or shares
of other investment companies for which the Distributor acts as Distributor or
as otherwise provided in the current Prospectus.
The net asset value of Shares shall be determined by the Trust or by
an agent of the Trust, as of the close of regular trading of the New York Stock
Exchange on each business day on which said Exchange is open, in accordance with
the method set forth in the governing instruments (as hereinafter defined) of
the Trust. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
hour or hours as may from time to time be agreed upon in writing by the Trust
and Distributor. The Trust shall have the right to suspend the sale of Shares
if, because of some extraordinary condition, the New York Stock Exchange shall
be closed, or if conditions obtaining during the hours when the Exchange is open
render such action advisable, or for any other reasons deemed adequate by the
Trust.
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3. The Trust agrees that it will, from time to time, take all necessary
action to register the offering and sale of Shares under the Securities Act of
l933, as amended (the "Act"), and applicable state securities laws.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or shall
be an employee of the Trust. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in the Distributor, as
Directors, officers and employees, or otherwise and that Directors, officers and
employees of the Distributor are or may become similarly interested in the Trust
and that the Distributor may be or become interested in the Trust as a
shareholder or otherwise. The Distributor is responsible for its own conduct
and the employment, control and conduct of its agents and employees and for
injury to such agents or employees or to others through its agents or employees.
The Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it will
use its best efforts in all respects duly to conform with the requirements of
all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
Shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person's acquiring any Shares,
which may be based upon the Act or any other statute or common law, on account
of any wrongful act of the Distributor or any of its employees (including any
failure to conform with any requirement of any state or federal law or the Rules
of Fair Practice of the NASD relating to the sale of Shares) or on the ground
that the registration statement or Prospectus as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
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a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless any such act, statement or omission
was made in reliance upon information furnished to the Distributor by or on
behalf of the Trust, provided, however, that in no case (i) is the indemnity of
the Distributor in favor of any person indemnified to be deemed to protect the
Trust or any such person against any liability to which the Trust or any such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its or his duties or by reason of its or
his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Trust or upon such person (or after the Trust or such
person shall have received notice of such service on any designated agent), but
failure to notify the Distributor of any such claim shall not relieve it from
any liability which it may have to the Trust or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if the Distributor elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any such suit and retain such
counsel, the Trust or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Distributor does
not elect to assume the defense of any such suit, it shall reimburse the Trust
and such officers and Trustees or controlling person or persons, defendant or
defendants in such suit, for the reasonable fees and expenses of any counsel
retained by them.
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The Distributor agrees promptly to notify the Trust of the commencement of any
litigation or proceedings against it in connection with the issue and sale of
any Shares.
Neither the Distributor nor any other person is authorized to give any
information or to make any representation on behalf of the Trust, other than
those contained in the registration statement or Prospectus filed with the
Securities and Exchange Commission under the Act (as said registration statement
or Prospectus may be amended or supplemented from time to time), covering the
Shares or other than those contained in periodic reports to shareholders of the
Trust.
5. The Trust will pay, or cause to be paid -
(i) all costs and expenses of the Trust, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required registration statement or Prospectus under the Act covering Shares
and all amendments and supplements thereto and any notices regarding the
registration of shares, and preparing and mailing to shareholders Prospectuses,
statements and confirmations and periodic reports (including the expense of
setting up in type any such registration statement, Prospectus or periodic
report);
(ii) the expenses (including auditing expenses) of qualification
of the Shares for sale, and, if necessary or advisable in connection therewith,
of qualifying the Trust as a dealer or broker, in such states as shall be
selected by the Distributor and the fees payable to each such state with respect
to shares sold and for continuing the qualification therein until the
Distributor notifies the Trust that it does not wish such qualification
continued;
(iii) the cost of preparing temporary or permanent certificates
for Shares;
(iv) all fees and disbursements of the transfer agent of the
Trust;
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(v) the cost and expenses of delivering to the Distributor at
its office in Boston, Massachusetts, all Shares sold through it as Distributor
hereunder; and
(vi) all the federal and state issue and/or transfer taxes
payable upon the issue by or (in the case of treasury Shares) transfer from the
Trust of any and all Shares purchased through the Distributor hereunder.
The Distributor agrees that, after the Prospectus and periodic reports
have been set up in type, it will bear the expense (other than the cost of
mailing to shareholders of the Trust of printing and distributing any copies
thereof which are to be used in connection with the offering of Shares to
dealers, banks or other financial institutions or investors. The Distributor
further agrees that it will bear the expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it
for use by dealers, banks or other financial institutions in connection with the
offering of the Shares for sale to the public and expenses of advertising in
connection with such offering. The Distributor will also bear the expense of
sending confirmations and statements to dealers, banks and other financial
institutions having sales agreements with the Distributor. Nothing in this
paragraph 5 shall be deemed to prohibit or conflict with any payment by the
Trust or any Fund to the Distributor pursuant to any Distribution Plan adopted
as in effect pursuant to Rule 12b-1 under the Investment Company Act of 1940.
6. The Trust hereby authorizes the Distributor to repurchase, upon the
terms and conditions set forth in written instructions given by the Trust to the
Distributor from time to time, as agent of the Trust and for its account, such
Shares as may be offered for sale to the Trust from time to time; provided the
Distributor shall have the right, as stated above in paragraph 2 of this
Agreement, to retain (or to receive from the Trust, as the case may be) a
deferred sales charge not to exceed 6% of the net asset value of the Shares so
repurchased.
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(a) The Distributor shall notify in writing the Custodian of the
Trust, at the end of each business day, or as soon thereafter as the repurchases
have been compiled, of the number of Shares repurchased for the account of the
Trust since the last previous report, together with the prices at which such
repurchases were made, and upon the request of any Officer or Trustee of the
Trust shall furnish similar information with respect to all repurchases made up
to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the
foregoing authorization at any time. Unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by an officer of the Distributor, by telegraph or by written notice from
the Trust. In the event that the authorization of the Distributor is, by the
terms of such notice, suspended for more than twenty-four hours or until further
notice, the authorization given by this paragraph 6 shall not be revived except
by action of a majority of the members of the Board of Trustees of the Trust.
(c) The Distributor shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty days' written
notice thereof.
(d) The Trust agrees to authorize and direct the Custodian to
pay, for the account of the Trust, the purchase price of any Shares so
repurchased against delivery of the certificates, if any, in proper form for
transfer to the Trust or for cancellation by the Trust.
(e) The Distributor shall receive no commission in respect of
any repurchase of Shares under the foregoing authorization and appointment as
agent, except in connection with contingent deferred sales charge as provided in
the current Prospectus relating to the Shares.
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(f) The Trust agrees to reimburse the Distributor, from time to
time upon demand, for any reasonable expenses incurred in connection with the
repurchase of Shares pursuant to this paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts, any state or federal
tax laws, it shall notify the Distributor of the form of amendment which it
deems necessary or advisable and the reasons therefore. If the Distributor
declines to assent to such amendment, the Trust may terminate this Agreement
forthwith by written notice to the Distributor without payment of any penalty.
If, at any time during the existence of this Agreement, upon request by the
Distributor, the Trust fails (after a reasonable time) to make any changes in
its governing instruments or in its methods of doing business which are
necessary in order to comply with any requirements of federal or state laws or
regulations, laws or regulations of the Securities and Exchange Commission or of
a national securities association of which the Distributor is or may be a
member, relating to the sale of Shares, the Distributor may terminate this
Agreement forthwith by written notice to the Trust without payment of any
penalty.
8. The Distributor agrees that it will not take any long or short
positions in the Shares except as permitted by paragraphs l and 6 hereof.
Whenever used in this Agreement, the term "governing instruments" shall mean the
Declaration of Trust and the By-Laws of the Trust, as from time to time amended.
9. This Agreement shall become effective on March 16, 1997 and shall
continue in force until March 16, 1999 on which date it will terminate unless
its continuance after March 16, 1999,
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is specifically approved at least annually (i) by the vote of a majority of the
Board of Trustees of the Trust who are not interested persons of the Trust or of
the Distributor at a meeting specifically called for the purpose of voting on
such approval, and (ii) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of that Fund. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the Investment
Company Act of l940 and the Rules and Regulations thereunder.
This Agreement may be terminated as to any Fund at any time by either party
without payment of any penalty on not more than sixty days' or less than thirty
days' written notice to the other party, and will terminate automatically in the
event that the Investment Advisory Agreement dated March 16, 1997 between the
Trust, on behalf of the Fund, and Massachusetts Financial Services Company, is
terminated.
l0. This Agreement shall automatically terminate in the event of its
assignment.
11. The terms "vote of a majority of the outstanding voting securities",
"interested person" and "assignment" shall have the respective meanings
specified in the Investment Company Act of l940 and the Rules and Regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
12. This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.
13. A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of Delaware. The Distributor acknowledges that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or
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shareholders individually, but are binding solely upon the assets and property
of the Trust. If this instrument is executed by the Trust on behalf of one or
more series of the Trust, the Distributor further acknowledges that the assets
and liabilities of each series of the Trust are separate and distinct and that
the obligations of or arising out of this instrument are binding solely upon the
assets or property of the series on whose behalf the Trust has executed this
instrument. If the Trust has executed this instrument on behalf of more than
one series of the Trust, the Distributor also agrees that the obligations of
each series hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Distributor agrees not to proceed
against any series for the obligations of another series.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above.
THE MFS SERIES TRUST
On behalf of the MFS Aggressive Small Cap
Equity Fund
By: Stephen E. Cavan
---------------------------
Stephen E. Cavan as officer
and not individually
MFS FUND DISTRIBUTORS, INC.
By: William W. Scott, Jr.
---------------------------
William W. Scott, Jr.
President
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EXHIBIT 9.2
THE MFS SERIES TRUST
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 16th day of March, 1997, by and between THE MFS
SERIES TRUST, a business trust organized under the laws of the State of Delaware
(the "Fund"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation (the "Adviser").
WHEREAS, the Fund intends to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, the Fund is currently comprised of one portfolio designated as the
"MFS Aggressive Small Cap Equity Fund" ("Portfolio"); and
WHEREAS, the Adviser is registering as an investment adviser under the
Investment Advisers Act of 1940, and will be engaged in the business of acting
as investment adviser and providing certain other services to the Fund; and
WHEREAS, the Fund desires to retain the Adviser to render certain
additional services to the Fund regarding certain bookkeeping, accounting, and
administrative services (the "Services") in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Adviser desires to be retained to perform such services on
said terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and the Adviser agree as follows:
1. DUTIES OF ADVISER: (a) The Fund hereby retains the Adviser to provide
to the Fund: (A) such accounting and bookkeeping services and functions as are
reasonably necessary for the operation of the Fund. Such services shall
include, but shall not be limited to, preparation and maintenance of the
following books, records, and other documents: (1) journals containing daily
itemized records of all purchases and sales, and receipts and deliveries of
securities, and all receipts and disbursements of cash, and all other debits and
credits, in the form required by Rule 31a-1(b)(1) under the Investment Company
Act; (2) general and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, in the form required by Rules
31a-1(b)(2)(i)-(iii) under the Investment Company Act; (3) a securities record
or ledger reflecting separately for each portfolio security as of trade date all
<PAGE>
"long" and "short" positions carried by the Fund for the account of each
Portfolio, if any, and showing the location of all securities long and the
off-setting position to all securities short, in the form required by Rule
31a-1(b)(3) under the Investment Company Act; (4) a record of all portfolio
purchases or sales, in the form required by Rule 31a-1(b)(6) under the
Investment Company Act; (5) a record of all puts, calls, spreads, straddles,
and all other options, if any, in which any Portfolio has any direct or
indirect interest or which any Portfolio has granted or guaranteed, in the
form required by Rule 31a-1(b)(7) under the Investment Company Act; (6) a
record of the proof of money balances in all ledger accounts maintained
pursuant to this Agreement, in the form required by Rule 31a-1(b)(8) under
the Investment Company Act; and (7) price make-up sheets and such records as
are necessary to reflect the determination of each Portfolio's net asset
value. The foregoing books and records shall be maintained by the Adviser in
accordance with and for the time periods specified by applicable rules and
regulations, including Rule 31a-2 under the Investment Company Act. All such
books and records shall be the property of the Fund and upon request
therefore, the Adviser shall surrender to the Fund such of the books and
records so requested; and (B) certain administrative services including, but
not limited to, administrative services to shareholders of the Fund and to
respond to inquiries related to shareholder accounts.
(b) The services to be provided hereunder shall also include supervisory
services relating to the preparation and filing with the appropriate offices of
any reports or other documents, on behalf of the Fund, as shall be required by
applicable law and requested by the Fund, from time to time, including but not
limited to tax returns, financial statements, and such Forms N-1A and other
filings required by the securities laws of the United States or any state as may
be requested form time to time by the Fund.
2. PROVISION OF PERSONNEL. The Adviser shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall, from time to time, determine to be necessary or
useful to the performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, such staff and personnel shall be
deemed to include officers of the Adviser and persons employed or otherwise
retained by the Adviser to provide or assist in providing of the Services to
the Fund.
3. PROVISION OF CERTAIN FACILITIES AND EQUIPMENT. The Adviser shall
provide such office space, facilities, and equipment (including, but not limited
to, computer equipment, communication lines and supplies) and such clerical help
and other services as shall be necessary to provide the services to the Fund.
In addition, the Adviser may arrange, on behalf of the Fund and its Portfolios,
to obtain: (1) data processing and/or all of the above services, subject to
approval by a majority of the Fund's Board of Trustees, as necessary to assist
<PAGE>
it in providing the Services to the Fund, and (2) pricing information regarding
the Fund's investment securities from such company or companies as are approved
by a majority of the Fund's Board of Trustees, and the Fund shall be financially
responsible to such company or companies as aforesaid, for the reasonable cost
of such services.
4. PROVISION OF INFORMATION TO THE ADVISER. The Fund will, from time to
time, furnish or otherwise make available to the Adviser such information
relating to the business and affairs of the Fund as the Adviser may reasonably
require in order to discharge its duties and obligations hereunder.
5. REIMBURSEMENT OF EXPENSES OF ADVISER. The Fund shall reimburse the
Adviser for such direct expenses, including, but not limited to, (i) those
listed in paragraph 1(b) and 3 above, incurred on behalf of the Fund that are
associated with the providing of the Services, and (ii) those paid to any
delegates of the Adviser pursuant to Section 13 hereof. In no event, however,
shall such reimbursement exceed levels that are fair and reasonable in light of
the usual and customary charges made by others for services of the same nature
and quality. Reimbursement under this Agreement shall be calculated and paid
monthly.
The Adviser shall not be required to pay any filing fees and expenses
incurred in connection with the filing of reports or documents pursuant to
section 1(b) herein, or required to be filed by applicable federal or state law,
which fees or expenses shall be borne directly by the Fund.
6. ACCESS TO RECORDS. The Adviser will permit representatives of the
Fund, including the Fund's independent auditors, to have reasonable access to
the personnel and records of the Adviser in order to enable such representatives
to monitor the quality of services being provided and the determination of
reimbursements due the Adviser pursuant to this Agreement. In addition, the
Adviser shall promptly deliver to the Board of Trustees of the Fund such
information as may reasonably be requested form time to time to permit the Board
of Trustees to make an informed determination regarding continuation of this
Agreement and the payments contemplated to be made hereunder.
7. LIMITATION OF LIABILITY OF ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or fact, or for any loss suffered by
the Fund or its investors in connection with the matters to which this Agreement
relates, except (i) a loss resulting from willful misfeasance, bad faith, or
gross negligence on the part of the Adviser in the performance of its duties or
from reckless disregard by the Adviser of its obligations and duties under this
Agreement, or (ii) a loss for which the Adviser would not be permitted to be
indemnified under the Federal Securities laws.
<PAGE>
8. DURATION OF AGREEMENT. This Agreement shall become effective as of the
date of execution hereof and shall remain in effect for two (2) years from the
date hereof and from year to year thereafter, provided such continuance is
approved at least annually by the vote of a majority of the Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as defined in the
Investment Company Act) of any such party, which vote must be cast in person at
a meeting called for the purpose of voting on such approval; and further
PROVIDED, HOWEVER, that (a) the Fund may, at any time and without the payment of
any penalty, terminate this Agreement upon written notice to the Adviser; (b)
this Agreement shall immediately terminate in the event of its "assignment"
(within the meaning of the Investment company Act) to the extent that it would
similarly be required to terminate under similar circumstances if it were an
advisory contract subject to the provisions of Section 15 of the Investment
Company Act and the rules thereunder; (c) the Adviser may terminate this
Agreement without payment of penalty on sixty days' written notice to the Fund;
and (d) will terminate automatically in the event that the Investment Advisory
Agreement dated March 16, 1997 between the Trust, on behalf of the Fund, and
Massachusetts Financial Services Company is terminated. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed
post-paid, to the other party at the principal office of such party.
9. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of The Commonwealth of Massachusetts.
10. SEPARATE CONTRACT. This Agreement is separate and distinct from, and
neither affects nor is affected by (i) the Distribution Agreement in effect
between the Fund and MFS Fund Distributors, Inc., a Delaware Corporation, or
(ii) the Investment Advisory Agreement in effect between the Adviser and the
Fund.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Fund and the Adviser and their respective successors.
12. AMENDMENT. No amendment or modification of this Agreement shall be
effective unless in writing signed by other parties and witnessed and until
approved by a majority of the outstanding shares of the Fund.
13. DELEGATION OF DUTIES. The Adviser may delegate each duty to be
performed by it hereunder; provided, however, that notwithstanding any such
delegation, the Adviser shall remain responsible for the performance of the
duties to be performed by it hereunder as though such delegation had not
occurred.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
<PAGE>
together shall constitute one and the same instrument.
15. COMPENSATION. The Fund shall, in addition to reimbursing Adviser for
expenses as described in Section 5, pay Adviser an annual fee payable monthly
equal to .25% of the Fund's average daily net asset value for performing such
administrative services.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affiliated, as of the date first written above.
On behalf of THE MFS SERIES TRUST
By: Stephen E. Cavan
----------------------------------
Stephen E. Cavan, as
Secretary and not individually
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: A.Keith Brodkin
----------------------------------
A. Keith Brodkin
Chairman
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
THE MFS SERIES TRUST - MFS AGGRESSIVE SMALL CAP EQUITY FUND (FORMERLY THE
NAVELLIER SERIES FUND - NAVELLIER AGGRESSIVE SMALL CAP EQUITY PORTFOLIO)
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 7 to Registration No. 33-64010 of our report dated January 31,
1997 appearing in the Annual Report of The MFS Series Trust - MFS Aggressive
Growth Small Cap Equity Fund (formerly, The Navellier Series Fund - Navellier
Aggressive Small Cap Equity Portfolio) for the year ended December 31, 1996, and
to the reference to us under the caption "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement.
Deloitte & Touche LLP
Washington, DC
April 7, 1997
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