MFS SERIES TRUST VII, 497, 1995-03-15

MFS SERIES TRUST VII
497, 1995-03-15

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<PAGE> 1

<TABLE>
<C> <C>
MASSACHUSETTS INVESTORS TRUST MFS[R] TOTAL RETURN FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS[R] GOVERNMENT MONEY MARKET FUND
MFS[R] GROWTH OPPORTUNITIES FUND MFS[R] CASH RESERVE FUND
MFS[R] EMERGING GROWTH FUND MFS[R] ALABAMA MUNICIPAL BOND FUND
MFS[R] CAPITAL GROWTH FUND MFS[R] ARKANSAS MUNICIPAL BOND FUND
MFS[R] INTERMEDIATE INCOME FUND MFS[R] CALIFORNIA MUNICIPAL BOND FUND
MFS[R] GOLD & NATURAL RESOURCES FUND MFS[R] FLORIDA MUNICIPAL BOND FUND
MFS[R] MANAGED SECTORS FUND MFS[R] GEORGIA MUNICIPAL BOND FUND
MFS[R] VALUE FUND MFS[R] LOUISIANA MUNICIPAL BOND FUND
MFS[R] WORLD EQUITY FUND MFS[R] MARYLAND MUNICIPAL BOND FUND
MFS[R] WORLD TOTAL RETURN FUND MFS[R] MASSACHUSETTS MUNICIPAL BOND FUND
MFS[R] BOND FUND MFS[R] MISSISSIPPI MUNICIPAL BOND FUND
MFS[R] LIMITED MATURITY FUND MFS[R] NEW YORK MUNICIPAL BOND FUND
MFS[R] GOVERNMENT MORTGAGE FUND MFS[R] NORTH CAROLINA MUNICIPAL BOND FUND
MFS[R] GOVERNMENT LIMITED MATURITY FUND MFS[R] SOUTH CAROLINA MUNICIPAL BOND FUND
MFS[R] GOVERNMENT SECURITIES FUND MFS[R] TENNESSEE MUNICIPAL BOND FUND
MFS[R] HIGH INCOME FUND MFS[R] TEXAS MUNICIPAL BOND FUND
MFS[R] INCOME & OPPORTUNITY FUND MFS[R] VIRGINIA MUNICIPAL BOND FUND
MFS[R] WORLD GOVERNMENTS FUND MFS[R] WASHINGTON MUNICIPAL BOND FUND
MFS[R] WORLD GROWTH FUND MFS[R] WEST VIRGINIA MUNICIPAL BOND FUND
MFS[R] MONEY MARKET FUND MFS[R] MUNICIPAL LIMITED MATURITY FUND
MFS[R] RESEARCH FUND MFS[R] MUNICIPAL BOND FUND
MFS[R] MUNICIPAL HIGH INCOME FUND MFS[R] MUNICIPAL INCOME FUND

</TABLE>
SUPPLEMENT TO THE CURRENT PROSPECTUS

Effective immediately, the Funds have expanded their policies with respect to
exchanges effected by market timers to be as follows:

FSI may enter into an agreement with shareholders who intend to make
exchanges among certain classes of certain MFS Funds (as determined by FSI)
which follow a timing pattern, and with individuals or entities acting on
such shareholder's behalf (collectively, "market timers"), setting forth the
terms, procedures and restrictions with respect to such exchanges. In the
absence of such an agreement, it is the policy of the Fund and FSI to reject
or restrict purchases by market timers if (i) more than two exchange
purchases are effected in a timed account in the same calendar quarter or
(ii) a purchase would result in shares being held in timed accounts by
market timers representing more than (x) one percent of the Fund's net
assets or (y) specified dollar amounts in the case of certain MFS Funds
which may include the Fund and which may change from time to time. The Fund
and FSI each reserve the right to request market timers to redeem their
shares at net asset value, less any applicable CDSC, if either of these
restrictions is violated.

THE DATE OF THIS SUPPLEMENT IS APRIL 1, 1994

<PAGE> 2
MFS[R] WORLD GOVERNMENTS FUND
SUPPLEMENT TO THE PROSPECTUS DATED APRIL 1, 1994

<TABLE>
The following information replaces the information found on pages 2 and 3 of
the Fund's Prospectus dated April 1, 1994:

2. EXPENSE SUMMARY
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price) . . . . . . . . 4.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds,
as applicable) . . . . . . . . . . . . . . . . . . . . . . See Below (1) 4.00% 0.00%
ANNUAL OPERATING EXPENSES OF THE FUND (AS A PERCENTAGE OF
AVERAGE NET ASSETS): (2)
Management Fees (3) . . . . . . . . . . . . . . . . . . . . 0.90% 0.90% 0.90%
Rule 12-b1 Fees (after applicable fee waiver). . . . . . . . 0.24% (4) 1.00% (5) 1.00% (5)
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . 0.40% 0.47% (6) 0.40% (6)
------- ------- -------
Total Operating Expenses (after applicable fee waiver) . . . 1.54% 2.37% 2.30%
- ---------------------------------------
<FN>
(1) Purchases of $1 million or more are not subject to an initial sales charge; however, a CDSC of 1%
will be imposed on such purchases in the event of certain redemption transactions within 12 months
following such purchases (see "Purchases" in the Prospectus).

(2) For Class A shares, percentages are based on expenses incurred during the fiscal period ended
November 30, 1993. Percentages for Class B shares, which were initially offered on September 7,
1993, are based on Class A expenses adjusted for Class B specific expenses incurred during such partial
fiscal year. Percentages for Class C shares are based on the expenses which would have been incurred
during such fiscal year had Class C shares been outstanding.

(3) Effective January 1, 1994, the Adviser voluntarily reduced the management fee to 0.70% of the Fund's
average daily net assets with respect to average daily net assets exceeding $500 million. As of January
1, 1994, the Fund's net assets were approximately $481 million.

(5) The Fund has adopted separate Distibution Plans for its Class B and its Class C shares in accordance with
Rule 12b-1 under the 1940 Act, which provides that it will pay distribution/service fees
aggregating up to (but not necessarily all of) 1.00% per annum of the average daily net assets
attributable to the Class B shares under the Class B Distribution Plan and the Class C shares under
the Class C Distribution Plan (see "Distribution Plans"). After a substantial period of time,
distribution expenses paid under these Plans, together with any CDSC payable upon redemption of
Class B shares, may total more than the maximum sales charge that would have been permissible if
imposed entirely as an initial sales charge.

(6) Based on Class A expenses incurred during its last fiscal year, except for the shareholder servicing
agent fees component of "Other Expenses" which has been estimated for Class B and Class C shares.

</TABLE>

<PAGE> 3

<TABLE>
EXAMPLE OF EXPENSES

An investor would pay the following dollar amount of expenses on a $1000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):

PERIOD CLASS A CLASS B CLASS C
------ ------- ------- -------
<S> <C> <C> <C> <C>
1 year . . . . . . . . . . . . . . . . . . . $ 62 $ 64 $ 24 $ 23
3 years . . . . . . . . . . . . . . . . . . . 94 104 74 72
5 years . . . . . . . . . . . . . . . . . . . 127 147 127 123
10 years . . . . . . . . . . . . . . . . . . . 222 250 (2) 250 (2) 264

- -----------------------------------
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after purchase; therefore, years
nine and ten reflect Class A expenses.

________________________________
</TABLE>
The following information should be added to the disclosure under the section
"Purchases" in the Prospectus:

PURCHASES - CLASS A SHARES
--------------------------

Class A shares of the Fund may also be purchased at net asset value
where the purchase is in an amount of $3 million or more and where the dealer
and FSI enter into an agreement in which the dealer agrees to return any
commission paid to it on the sale (or on a pro rata portion thereof) as
described above if the shareholder redeems his or her shares within a year of
purchase (shareholders who purchase shares at net asset value pursuant to these
conditions are called "$3 Million Shareholders").

________________________________

THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 21, 1994

<PAGE> 4

<TABLE>

<C> <C>
MFS[R] TOTAL RETURN FUND MFS[R] ALABAMA MUNICIPAL BOND FUND
MASSACHUSETTS INVESTORS GROWTH STOCK FUND MFS[R] ARKANSAS MUNICIPAL BOND FUND
MFS[R] GROWTH OPPORTUNITIES FUND MFS[R] CALIFORNIA MUNICIPAL BOND FUND
MFS[R] EMERGING GROWTH FUND MFS[R] FLORIDA MUNICIPAL BOND FUND
MFS[R] CAPITAL GROWTH FUND MFS[R] GEORGIA MUNICIPAL BOND FUND
MFS[R] INTERMEDIATE INCOME FUND MFS[R] LOUISIANA MUNICIPAL BOND FUND
MFS[R] GOLD & NATURAL RESOURCES FUND MFS[R] MARYLAND MUNICIPAL BOND FUND
MFS[R] MANAGED SECTORS FUND MFS[R] MASSACHUSETTS MUNICIPAL BOND FUND
MFS[R] VALUE FUND MFS[R] MISSISSIPPI MUNICIPAL BOND FUND
MFS[R] UTILITIES FUND MFS[R] NEW YORK MUNICIPAL BOND FUND
MFS[R] WORLD EQUITY FUND MFS[R] NORTH CAROLINA MUNICIPAL BOND FUND
MFS[R] WORLD TOTAL RETURN FUND MFS[R] PENNSYLVANIA MUNICIPAL BOND FUND
MFS[R] BOND FUND MFS[R] SOUTH CAROLINA MUNICIPAL BOND FUND
MFS[R] LIMITED MATURITY FUND MFS[R] TENNESSEE MUNICIPAL BOND FUND
MFS[R] GOVERNMENT MORTGAGE FUND MFS[R] TEXAS MUNICIPAL BOND FUND
MFS[R] GOVERNMENT LIMITED MATURITY FUND MFS[R] VIRGINIA MUNICIPAL BOND FUND
MFS[R] GOVERNMENT SECURITIES FUND MFS[R] WASHINGTON MUNICIPAL BOND FUND
MFS[R] HIGH INCOME FUND MFS[R] WEST VIRGINIA MUNICIPAL BOND FUND
MFS[R] STRATEGIC INCOME FUND MFS[R] MUNICIPAL LIMITED MATURITY FUND
MFS[R] WORLD GOVERNMENTS FUND MFS[R] MUNICIPAL BOND FUND
MFS[R] WORLD GROWTH FUND MFS[R] MUNICIPAL INCOME FUND
MFS[R] OTC FUND MFS[R] RESEARCH FUND
MFS[R] MUNICIPAL HIGH INCOME FUND MFS[R] WORLD ASSET ALLOCATION FUND
MASSACHUSETTS INVESTORS TRUST

</TABLE>

SUPPLEMENT TO THE CURRENT PROSPECTUS

During the period from January 3, 1995 through April 28, 1995 (the "Sales
Period") (unless extended by MFS Fund Distributors, Inc. ("MFD"), the funds'
principal underwriter), MFD will pay A. G. Edwards and Sons, Inc., ("A. G.
Edwards") 100% of the applicable sales charge on sales of Class A shares of each
of the funds listed above (the "Funds") sold for investment in Individual
Retirement Accounts ("IRAs") (excluding SEP-IRAs). In addition, MFD will pay A.
G. Edwards an additional commission equal to 0.50% of the net asset value of all
of the Class B shares of the Funds sold by A. G. Edwards during the Sales
Period.

THE DATE OF THIS SUPPLEMENT IS JANUARY 3, 1995
<PAGE> 5

MFS[R] Managed Sectors Fund MFS[R] Municipal Limited Maturity Fund
MFS[R] Cash Reserve Fund MFS[R] Alabama Municipal Bond Fund
MFS[R] World Asset Allocation Fund MFS[R] Arkansas Municipal Bond Fund
MFS[R] Emerging Growth Fund MFS[R] California Municipal Bond Fund
MFS[R] Capital Growth Fund MFS[R] Florida Municipal Bond Fund
MFS[R] Gold & Natural Resources Fund MFS[R] Georgia Municipal Bond Fund
MFS[R] Intermediate Income Fund MFS[R] Louisiana Municipal Bond Fund
MFS[R] High Income Fund MFS[R] Maryland Municipal Bond Fund
MFS[R] Muncipal High Income Fund MFS[R] Massachusetts Municipal Bond Fund
MFS[R] Money Market Fund MFS[R] Missisippi Municipal Bond Fund
MFS[R] Government Money Market Fund MFS[R] New York Municipal Bond Fund
MFS[R] Municipal Bond Fund MFS[R] North Carolina Municipal Bond Fund
MFS[R] OTC Fund MFS[R] Pennsylvania Municipal Bond Fund
MFS[R] Total Return Fund MFS[R] South Carolina Municipal Bond Fund
MFS[R] Research Fund MFS[R] Tennessee Municipal Bond Fund
MFS[R] World Total Return Fund MFS[R] Texas Municipal Bond Fund
MFS[R] Utilities Fund MFS[R] Virginia Municipal Bond Fund
MFS[R] World Equity Fund MFS[R] Washington Municipal Bond Fund
MFS[R] World Governments Fund MFS[R] West Virginia Municipal Bond Fund
MRS[R] Value Fund MFS[R] Growth Opportunities Fund
MFS[R] Strategic Income Fund MFS[R] Government Mortgage Fund
MFS[R] World Growth Fund MFS[R] Government Securities Fund
MFS[R] Bond Fund Massachusetts Investors Growth Stock Fund
MFS[R] Limited Maturity Fund MFS[R] Government Limited Maturity Fund
Massachusetts Investors Trust
</TABLE>

SUPPLEMENT TO THE CURRENT PROSPECTUS

Effective as of January 1, 1995 MFS Fund Distributors, Inc. ("MFD")
has replaced MFS Financial Services, Inc. ("FSI") as the Fund's
distributor. Both MFD and FSI are wholly-owned subsidiaries of
Massachusetts Financial Services Company ("MFS"), the Fund's investment
adviser.

--------------------------------------------------

Class A shares of the Fund may be purchased at net asset value
by certain retirement plans subject to the Employee Retirement Income
Security Act of 1974, as amended, subject to the following:

(i) The sponsoring organization must demonstrate to the
satisfaction of MFD that either (a) the employer has at
least 25 employees or (b) the aggregate purchases by the
retirement plan of Class A shares of the Funds will be in
an amount of at least $250,000 within a reasonable period
of time, as determined by MFD in its sole discretion; and

(ii) A contingent deferred sales charge of 1% will be imposed
on such purchases in the event of certain redemption
transactions within 12 months following such purchases.

-------------------------------------------------

Class A shares may be sold at net asset value, subject to
appropriate documentation, through a dealer where the amount invested
represents redemption proceeds from a registered open-end management
investment company not distributed or managed by MFD or its affiliates
if: (i) the redeemed shares were subject to an initial sales charge or
a deferred sales charge (whether or not actually imposed); (ii) such
redemption has occurred no more than 90 days prior to the purchase
of Class A shares of the Fund; and (iii) the Fund, MFD or its affiliates
have not agreed with such company or its affiliates, formally or informally,
to sell Class A shares at net asset value or provide any other incentive
with respect to such redemption and sale.

------------------------------------------------

Class A shares of the Fund may be purchased at net asset value
by retirement plans whose third party administrators have entered into
an administrative services agreement with MFD or one or more of its
affiliates to perform certain administrative services, subject to certain
operational requirements specified from time to time by MFD or one
or more of its affiliates.

------------------------------------------------

<PAGE> 6
Class A shares of the Fund (except of the MFS municipal bond
funds identified above) may be purchased at net asset value by retirement
plans qualified under Section 401(k) of the Code through certain broker-
dealers and other financial institutions which have entered into an agreement
with MFD which includes certain minimum size qualifications for such retirement
plans and provides that the broker-dealer or other financial institution will
perform certain administrative services with respect to the plan's account.

----------------------------

The CDSC on Class A and Class B shares will be waived upon redemption
by a retirement plan where the redemption proceeds are used to pay expenses
of the retirement plan or certain expenses of participants under the
retirement plan (e.g. participant account fees), provided that the retirement
plan's sponsor subscribes to the MFS Fundamental 401(k) Plan[SM] or another
similar recordkeeping system made available by MFS Service Center, Inc.
(the "Shareholder Servicing Agent").

-----------------------------

The CDSC on Class A and B shares will be waived upon the transfer of
registration from shares held by a retirement plan through a single account
maintained by the Shareholder Servicing Agent to multiple Class A and B share
accounts, respectively, maintained by the Shareholder Servicing Agent on behalf
of individual participants in the retirement plan, provided that the retirement
plan's sponsor subscribes to the MFS Fundamental 401(k) Plan[SM] or another
similar recordkeeping system made available by the Sharehold Servicing Agent.

-----------------------------

The applicability of a CDSC will be unaffected by exchanges or
transfers of registration, except that, with respect to transfers of
registration to an IRA rollover account, the CDSC will be waived if the shares
being reregistered would have been eligible for a CDSC waiver had they been
redeemed.

-----------------------------

The current Prospectus discloses that "Class A shares of the Fund may
also be purchased at net asset value where the purchase is in an amount of $3
million or more and where the dealer and FSI enter into an agreement in which
the dealer agrees to return any commission paid to it on the sale (or a pro
rata protion thereof) as described above if the shareholder redeems his or
her shares within one year of purchase. (Shareholders who purchase shares at
NAV pursuant to these conditions are called ("3 Million Shareholders")." This
policy is terminated effective as of the date of this Supplement and the
above-referenced language, and all references to "$3 Million Shareholders,"
are deleted from the Prospectus.

-----------------------------

From time to time, MFD may pay dealers 100% of the applicable sales
charge on sales of Class A shares of certain specified Funds sold by such
dealer during a specified sales period. In addition, MFD or its affiliates
may, from time to time, pay dealers an additional commission equal to 0.50% of
the net asset value of all of the Class B shares of certain specified Funds
sold by such dealer during a specified sales period.

------------------------------

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable
to deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to reinvest all dividends
and other distributions reinvested in additional shares.

------------------------------

From time to time, MFS may direct certain portfolio transactions to
broker-dealer firms which, in turn, have agreed to pay a portion of the Fund's
operating expenses (e.g. fees charged by the custodian of the Fund's assets).

------------------------------

THE DATE OF THIS SUPPLEMENT IS JANUARY 13, 1995

<PAGE> 7

<TABLE>
<CAPTION>
<S> <C>
Massachusetts Investors Trust MFS[R] World Total Return Fund
Massachusetts Investors Growth Stock Fund MFS[R] Municipal Bond Fund
MFS[R] Capital Growth Fund MFS[R] Municipal High Income Fund
MFS[R] Emerging Growth fund MFS[R] Municipal Income Fund
MFS[R] Gold & Natural Resources Fund MFS[R] Alabama Municipal Bond Fund
MFS[R] Growth Opportunities Fund MFS[R] Arkansas Municipal Bond Fund
MFS[R] Managed Sectors Fund MFS[R] California Municipal Bond Fund
MFS[R] OTC Fund MFS[R] Florida Municipal Bond Fund
MFS[R] Research Fund MFS[R] Georgia Municipal Bond Fund
MFS[R] Value Fund MFS[R] Louisiana Municipal Bond Fund
MFS[R] Total Return Fund MFS[R] Maryland Municipal Bond Fund
MFS[R] Utilities Fund MFS[R] Massachusetts Municipal Bond Fund
MFS[R] Bond Fund MFS[R] Mississippi Municipal Bond Fund
MFS[R] Government Mortgage Fund MFS[R] New York Municipal Bond Fund
MFS[R] Government Securities Fund MFS[R] North Carolina Municipal Bond Fund
MFS[R] High Income Fund MFS[R] Pennsylvania Municipal Bond Fund
MFS[R] Intermediate Income Fund MFS[R] South Carolina Municipal Bond Fund
MFS[R] Strategic Income Fund MFS[R] Tennessee Municipal Bond Fund
MFS[R] Government Limited Maturity Fund MFS[R] Texas Municipal Bond Fund
MFS[R] Limited Maturity Fund MFS[R] Virginia Municipal Bond Fund
MFS[R] Municipal Limited Maturity Fund MFS[R] Washington Municipal Bond Fund
MFS[R] World Equity Fund MFS[R] West Virginia Municipal Bond Fund
MFS[R] World Governments Fund MFS[R] World Asset Allocation Fund
MFS[R] World Growth Fund

</TABLE>

SUPPLEMENT TO THE CURRENT PROSPECTUS

During the period from February 1, 1995 through April 14, 1995 (the "Sales
Period") (unless extended by MFS Fund Distributors, Inc. ("MFD"), the Funds'
distributor), MFD will pay Corelink Financial Inc. ("Corelink") an additional
commission equal to 0.10% of the gross commissionable sales for Class A shares
and Class B shares and the net asset value for Class C shares (if applicable)
of the Funds sold by Corelink during the Sales Period.

THE DATE OF THIS SUPPLEMENT ID FEBRUARY 1, 1995.

<PAGE> 8

PROSPECTUS
April 1, 1994
MFS(R) WORLD Class A Shares of Beneficial Interest
GOVERNMENTS FUND Class B Shares of Beneficial Interest
(A member of the MFS Family of Funds(R)) Class C Shares of Beneficial Interest
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. The Fund........................................................................ 2
2. Expense Summary................................................................. 2
3. Condensed Financial Information................................................. 3
4. Investment Objective and Policies............................................... 5
5. Management of the Fund.......................................................... 12
6. Information Concerning Shares of the Fund....................................... 13
Purchases................................................................. 13
Exchanges................................................................. 19
Redemptions and Repurchases............................................... 19
Distribution Plans........................................................ 21
Distributions............................................................. 23
Tax Status................................................................ 23
Net Asset Value........................................................... 24
Description of Shares, Voting Rights and Liabilities...................... 24
Performance Information................................................... 24
7. Shareholder Services............................................................ 25
Appendix........................................................................ A-1
</TABLE>

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.

MFS WORLD GOVERNMENTS FUND
500 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116 (617) 954-5000

The investment objective of the MFS World Governments Fund (the "Fund") is to
seek not only preservation, but also growth of capital, together with moderate
current income. The Fund is a non-diversified series of MFS Series Trust VII
(the "Trust"), an open-end investment company. THE FUND IS DESIGNED FOR
INVESTORS WHO WISH TO SPREAD THEIR INVESTMENTS BEYOND THE UNITED STATES AND WHO
ARE PREPARED TO ACCEPT THE RISKS ENTAILED IN SUCH INVESTMENTS WHICH MAY BE
HIGHER THAN THOSE ASSOCIATED WITH CERTAIN U.S. INVESTMENTS. See "Investment
Objective and Policies." The minimum initial investment is generally $1,000 per
account (see "Purchases"). The Fund's investment adviser and distributor are
Massachusetts Financial Services Company and MFS Financial Services, Inc.,
respectively, both of which are located at 500 Boylston Street, Boston,
Massachusetts 02116.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

This Prospectus sets forth concisely the information concerning the Fund and the
Trust that a prospective investor ought to know before investing. The Trust, on
behalf of the Fund, has filed with the Securities and Exchange Commission (the
"SEC") a Statement of Additional Information, dated April 1, 1994, which
contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. See page 26 for a further
description of the information set forth in the Statement of Additional
Information. A copy of the Statement of Additional Information may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover for
address and phone number).

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE> 9

1. THE FUND
MFS World Governments Fund (the "Fund") is a non-diversified series of MFS
Series Trust VII (the "Trust") an open-end management investment company which
was organized as a business trust under the laws of The Commonwealth of
Massachusetts in 1981. The Trust presently consists of two series, each of which
represents a portfolio with separate investment policies. Shares of the Fund are
continuously sold to the public and the Fund then uses the proceeds to buy
securities (primarily debt securities) for its portfolio. Three classes of
shares of the Fund currently are offered to the general public. Class A shares
are offered at net asset value plus an initial sales charge (or a contingent
deferred sales charge (a "CDSC") in the case of certain purchases of $1 million
or more) and subject to a Distribution Plan, providing for an annual
distribution fee and service fee. Class B shares are offered at net asset value
without a sales charge but subject to a CDSC and a Distribution Plan providing
for an annual distribution fee and service fee which are greater than the Class
A annual distribution fee and service fee; Class B shares will convert to Class
A shares approximately eight years after purchase. Class C shares are offered at
net asset value without a sales charge or a CDSC but are subject to a
Distribution Plan providing for an annual distribution fee and service fee which
are equal to the Class B annual distribution fee and service fee. Class C shares
do not convert to any other class of shares of the Fund.

The Trust's Board of Trustees provides broad supervision over the affairs of the
Fund. Massachusetts Financial Services Company, a Delaware corporation ("MFS" or
the "Adviser"), is the Fund's investment adviser. The Adviser is responsible for
the management of the Fund's assets and the officers of the Trust are
responsible for the Fund's operations. The Adviser manages the portfolio from
day to day in accordance with the Fund's investment objective and policies. A
majority of the Trustees of the Trust are not affiliated with the Adviser. The
selection of investments and the way they are managed depend on the conditions
and trends in the economies of the principal countries of the world, their
financial markets and the relationship of their currencies to the U.S. dollar.
The Trust also offers to buy back (redeem) shares of the Fund from shareholders
at any time at net asset value, less any applicable CDSC.

2. EXPENSE SUMMARY
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
--------- -------- --------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases of
Fund Shares (as a percentage of offering price)......... 4.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption
proceeds, as applicable)................................ See Below(1) 4.00% 0.00%

ANNUAL OPERATING EXPENSES OF THE FUND (AS A PERCENTAGE OF
AVERAGE NET ASSETS):(2)
Management Fees(3) (after applicable fee waivers)......... 0.70% 0.90% 0.90%
Rule 12b-1 Fees (after applicable fee waiver)............. 0.24%(4) 1.00%(5) 1.00%(5)
Other Expenses............................................ 0.40%(6) 0.47%(7) 0.40%(7)
Total Operating Expenses (after applicable fee waivers)... 1.34% 2.37% 2.30%
<FN>
- ---------------
(1) Purchases of $1 million or more are not subject to an initial sales charge; however, a CDSC of 1% will be imposed on such
purchases in the event of certain redemption transactions within 12 months following such purchases (see "Purchases" in the
Prospectus).
(2) For Class A shares, percentages are based on expenses incurred during the fiscal period ended November 30, 1993. Percentages
for Class B shares, which were initially offered on September 7, 1993, are based on Class A fees and expenses adjusted for
Class B specific expenses incurred during such partial fiscal year. Percentages for Class C shares are based on the expenses
which would have been incurred during such fiscal year had Class C shares been outstanding.
(3) Effective January 1, 1994, the Adviser voluntarily reduced the management fee to .70% of the Fund's average daily net assets.
Absent any fee reduction, Management Fees would have been .90% of the Fund's average daily net assets.
</TABLE>

2
<PAGE> 10

(4) The Fund has adopted a Distribution Plan for its Class A shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of)
0.35% per annum of the average daily net assets attributable to the Class A
shares (see "Distribution Plans in the Prospectus"). Currently, 0.10% of the
distribution/service fee is being waived. After a substantial period of time
distribution expenses paid under this Plan, together with the initial sales
charge, may total more than the maximum sales charge that would have been
permissible if imposed entirely as an initial sales charge.
(5) The Fund has adopted separate Distribution Plans for its Class B and its
Class C shares in accordance with Rule 12b-1 under the 1940 act, which
provide that it will pay distribution/service fees aggregating up to (but
not necessarily all of) 1.00% per annum of the average daily net assets
attributable to the Class B shares under the Class B Distribution Plan and
the Class C shares under the Class C Distribution Plan (see "Distribution
Plans"). After a substantial period of time, distribution expenses paid
under these Plans, together with any CDSC payable upon redemption of Class B
shares, may total more than the maximum sales charge that would have been
premissible if imposed entirely as an initial sales charge.
(6) Based on current shareholder servicing agent fees.
(7) Based on Class A expenses incurred during its last fiscal year, except for
the shareholder servicing agent fees component of "Other Expenses" which
have been estimated for Class B and Class C shares.

EXAMPLE OF EXPENSES
-------------------

An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 5% annual return and (b) redemption at the
end of each of the time periods indicated (unless otherwise noted):

<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B CLASS C
-------- ------- --------------- --------
<S> <C> <C> <C> <C>
1 year......................................... $ 62 $ 64 $ 24(1) $ 23
3 years........................................ 94 104 74 72
5 years........................................ 127 147 127 123
10 years........................................ 222 250(2) 250(2) 264

- ---------------
<FN>
(1) Assumes no redemption.
(2) Class B shares convert to Class A shares approximately eight years after purchase; therefore, years nine and ten reflect
Class A expenses.
</TABLE>

The purpose of the expense table above is to assist investors in understanding
the various costs and expenses that a shareholder of the Fund will bear directly
or indirectly. More complete descriptions of the following expenses are set
forth in the following sections: (i) varying sales charges on share
purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii) management
fees -- "Investment Adviser"; and (iv) Rule 12b-1 (i.e., distribution plan)
fees -- "Distribution Plans."

THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.

3. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which is
incorporated by reference into the Statement of Additional Information in
reliance upon the report of Coopers & Lybrand, independent certified public
accountants, as experts in accounting and auditing. The Financial Highlights
table has been included in reliance upon the report of Coopers & Lybrand,
independent accountants, as experts in accounting and auditing for the 10 years
ended December 31, 1992 and for the fiscal period ended November 30, 1993. For
the fiscal years ended on and after November 30, 1993, Ernst & Young will audit
the Fund's financial statements and will issue reports on those future fiscal
years. For the Fund's fiscal period ended November 30, 1993, the annualized
ratio of the Fund's expenses to its average daily net assets was 1.54% and 2.48%
for Class A and Class B shares, respectively. Investors should understand that
the

3
<PAGE> 11
expense ratio of the Fund can be expected to be higher than that of an
investment company investing in domestic securities since the expenses of the
Fund, such as custodial costs and advisory fees, are higher.

<TABLE>
FINANCIAL HIGHLIGHTS
CLASS A AND CLASS B SHARES
(No Class C shares were outstanding during these periods.)

<CAPTION>
Period Ended Year Ended December 31,
November 30, ------------------------------------------------------------------------------------
1993++ 1992 1991 1990 1989 1988
------------ ------------ ------------ ------------ ------------ ------------
Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT
EACH PERIOD):
Net assets value --
beginning of period..... $11.50 $ 12.63 $ 12.00 $ 11.45 $ 11.11 $ 11.87
------ --------- --------- --------- --------- ---------
Income from investment
operations --
Net investment income... $ 0.58sec. $ 0.87 $ 0.94 $ 0.98 $ 1.07 $ 0.94
Net realized and
unrealized gain (loss)
on investments........ 1.29 (0.70) 0.67 1.07 (0.26) (0.42)
------ --------- --------- --------- --------- ---------
Total from
investment
operations........ $ 1.87 $ 0.17 $ 1.61 $ 2.05 $ 0.81 $ 0.52
------ --------- --------- --------- --------- ---------
Less distributions declared
to shareholders --
From net investment
income.................. $ -- $ (1.30) $ (0.75) $ (0.95) $ (0.47) $ (0.90)
From net realized gain on
investments............. -- -- -- (0.50) -- (0.32)
From paid-in capital...... -- -- (0.23) (0.05) -- (0.06)
------ --------- --------- --------- --------- ---------
Total distributions
declared to
shareholders...... $ -- $ (1.30) $ (0.98) $ (1.50) $ (0.47) $ (1.28)
------ --------- --------- --------- --------- ---------
Net asset value -- end of
period.................... $13.37 $ 11.50 $ 12.63 $ 12.00 $ 11.45 $ 11.11
====== ========= ========= ========= ========= =========
Total return*............... 17.77+ 1.35% 13.42% 17.90% 7.27% 3.68%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA:
Expenses.................. 1.54%+sec. 1.53% 1.61% 1.44% 1.42% 1.12%
Net investment income..... 5.66%+sec. 6.78% 7.75% 8.06% 8.42% 7.91%
PORTFOLIO TURNOVER++........ 179% 163% 208% 220% 282% 232%
NET ASSETS AT END OF PERIOD
(000 OMITTED)............. $443,304 $340,347 $286,089 $145,202 $124,935 $190,590

<FN>
(see footnotes on following page)
</TABLE>

4
<PAGE> 12

<TABLE>
<CAPTION>
Year Ended December 31, Period Ended
------------------------------------------------------ November 30,
1987 1986 1985 1984 1983 1993**
------ ------ ------ ------ ------ ------------
Class Class B
A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net assets value -- beginning of period........ $11.45 $10.70 $ 9.40 $ 9.92 $10.57 $13.23
------ ------ ------ ------ ------ ------
Income from investment operations --
Net investment income........................ $ 0.91 $ 0.82 $ 0.75 $ 0.78 $ 0.77 $ 0.07
Net realized and unrealized gain (loss) on
investments................................ 1.86 2.35 1.94 (0.51) (0.63) 0.05
------ ------ ------ ------ ------ ------
Total from investment operations......... $ 2.77 $ 3.17 $ 2.69 $ 0.27 $ 0.14 $ 0.12
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income..................... $(0.90) $(0.82) $(0.74) $(0.79) $(0.79) $ --
From net realized gain on investments.......... (1.40) (1.52) (0.65) -- -- --
From paid-in capital........................... (0.05) (0.08) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders........................... $(2.35) $(2.42) $(1.39) $(0.79) $(0.79) $ --
------ ------ ------ ------ ------ ------
Net asset value -- end of period................. $11.87 $11.45 $10.70 $ 9.40 $ 9.92 $13.35
====== ====== ====== ====== ====== ======
Total return*.................................... 1.13% 1.17% 1.43% 1.40% 1.35% 4.32+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses....................................... 1.13% 1.17% 1.43% 1.40% 1.35% 2.48%+
Net investment income.......................... 7.54% 6.57% 7.45% 7.98% 7.41% 4.72%+
PORTFOLIO TURNOVER++............................. 378% 371% 307% 135% 192% 179%
NET ASSETS AT END OF PERIOD (000 OMITTED)........ $182,738 $142,183 $69,581 $35,486 $39,830 $24,590

- ---------------
<FN>
+ Annualized.
++ The portfolio turnover for 1985 and subsequent years includes portfolio activity applicable to U.S. government securities,
while the preceding years do not.
* The results do not include the sales charge (except for reinvested dividends prior to October 1, 1989). If the charge had
been included, the results would have been lower.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to November 30, 1993.
++ For the eleven months ended November 30, 1993.
sec. The distribution agent waived the Class A distribution fee in fiscal period 1993. If this fee had been incurred by the Fund,
the net investment income per share and the ratios would have been:
Net investment income....................... $0.58
RATIOS (TO AVERAGE NET ASSETS):
Expenses.................................. 1.57%
Net investment income..................... 5.63%
</TABLE>

Further information about the performance of the Fund is contained in the Fund's
Annual Report to shareholders, which can be attained from the Shareholder
Servicing Agent (see back cover for address and phone number) without charge.

4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The Fund's investment objective is to seek not only
preservation, but also growth of capital, together with moderate current income.
Any investment involves risk and there can be no assurance that the Fund will
achieve its investment objective.

INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective
through a professionally managed, internationally diversified portfolio
consisting primarily of debt securities and to a lesser extent equity
securities. The Fund attempts to provide investors with an opportunity to
enhance the value and increase the protection of their investment against
inflation and otherwise by taking advantage of investment opportunities in the
United States as well as in other countries where opportunities may be

5
<PAGE> 13
more rewarding. It is believed that diversification of assets on an
international basis decreases the degree to which events in any one country,
including the United States, can affect the entire portfolio. Although the
percentage of the Fund's assets invested in securities issued abroad and
denominated in foreign currencies ("non-dollar securities") will vary depending
on the state of the economies of the principal countries of the world, their
financial markets and the relationship of their currencies to the U.S. dollar,
under normal conditions the Fund's portfolio is internationally diversified.
However, for defensive reasons or during times of international political or
economic uncertainty or turmoil, most or all of the Fund's investments may be in
the United States.

Under normal economic and market conditions at least 80% of the Fund's portfolio
is invested in debt securities, such as bonds, debentures, mortgage securities,
notes, commercial paper, obligations issued or guaranteed by a government or any
of its political subdivisions, agencies or instrumentalities, certificates of
deposit, as well as debt obligations which may have a call on common stock by
means of a conversion privilege or attached warrants. Debt securities in which
the Fund may invest may also include zero coupon bonds. Zero coupon bonds do not
require the periodic payment of interest and are issued at a significant
discount from face value. The discount approximates the total amount of interest
the bonds will accrue and compound over the period until maturity at a rate of
interest reflecting the market rate of the security at the time of issuance.
Such investments benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments may experience greater
volatility in market value than debt obligations which make regular payments of
interest. The Fund will accrue income on such investments for tax and accounting
purposes, which is distributable to shareholders.

Up to 20% of the Fund's assets may be invested in equity securities. When
unfavorable economic or market conditions exist, the Fund may, until favorable
conditions return, invest all or a portion of its assets in cash (or foreign
currency) or cash equivalents (such as certificates of deposit, bankers'
acceptances and time deposits), commercial paper, short-term obligations,
repurchase agreements and obligations issued or guaranteed by the U.S. or any
foreign government or any of their agencies or instrumentalities. U.S.
Government securities also include interests in trusts or other entities
representing interests in obligations that are backed by the full faith and
credit of the U.S. Government, its agencies, authorities or instrumentalities.

The Fund may invest up to 100% (and expects generally to invest between 10% to
80%) of its total assets in foreign securities (not including American
Depositary Receipts). The Adviser will determine the amount of the Fund's assets
to be invested in the United States and the amount to be invested abroad. The
U.S. assets will be invested in high quality debt securities and the remainder
of the assets will be diversified among countries where opportunities for total
return are expected to be most attractive. It is currently expected that
investments within foreign countries will be primarily in government securities
to minimize credit risks. The Fund has registered as a "non-diversified"
investment company. As a result, the proportion of its assets that may be
invested in the securities of any one issuer is limited only by the Fund's own
investment restrictions and the diversification requirements of the Internal
Revenue Code of 1986, as amended. U.S. Government securities are not subject to
any investment limitation. The Fund will not invest 25% or more of the value of
its assets in the securities of any one foreign government. The portfolio will
be managed actively and the asset allocations modified as the Adviser deems
necessary.

The Fund will purchase non-dollar securities denominated in the currency of
countries where the interest rate environment as well as the general economic
climate provide an opportunity for declining interest rates and currency
appreciation. If interest rates decline, such non-dollar securities will
appreciate in value. If the currency also appreciates against the dollar, the
total investment in such non-dollar securities would be enhanced further.
Conversely, a rise in interest rates or decline in currency exchange rates would
adversely affect the Fund's return. Investments in non-dollar securities are
evaluated primarily on the strength of a particular currency against the dollar
and on the interest rate climate of that country. Currency is judged on the
basis of fundamental economic criteria (e.g., relative inflation levels and
trends, growth rate forecasts, balance of payments status, and economic
policies) as well as technical and political data. In addition to the foregoing,
interest rates are evaluated on the basis of differentials or anomalies that may
exist between different countries. The Fund may hold foreign currency received
in connection with investments in foreign securities when, in the judgment of
the Adviser, it would be beneficial to convert such currency into

6
<PAGE> 14
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate. The Fund may also hold foreign currency in anticipation of
purchasing foreign securities.

The phrase "preservation of capital" when applied to a domestic investment
company is generally understood to imply that the portfolio is invested in very
low risk securities and that the major risk is loss of purchasing power through
the effects of inflation or major changes in interest rates. However, while the
Fund invests in securities which are believed to have minimal credit risk, an
error of judgment in selecting a currency or an interest rate environment could
result in a loss of capital.

It is contemplated that the Fund's long-term debt investments will consist
primarily of securities which are believed by the Adviser to be of relatively
high quality. If after the Fund purchases such a security, the quality of the
security deteriorates significantly, the security will be sold only if the
Adviser believes it is advantageous to do so.

AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in American Depositary
Receipts ("ADRs") which are certificates issued by a U.S. depository (usually a
bank) and represent a specified quantity of shares of an underlying non-U.S.
stock on deposit with a custodian bank as collateral. Although ADRs are issued
by a U.S. depository, they are subject to many of the risks of foreign
securities such as changes in exchange rates and more limited information about
foreign issuers (see the Statement of Additional Information).

MORTGAGE PASS-THROUGH SECURITIES: The Fund may invest in mortgage pass-through
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgage loans. Monthly payments of interest and
principal by the individual borrowers on mortgages are passed through to the
holders of the securities (net of fees paid to the issuer or guarantor of the
securities) as the mortgages in the underlying mortgage pools are paid off. The
average lives of mortgage pass-throughs are variable when issued because their
average lives depend on prepayment rates. The average life of these securities
is likely to be substantially shorter than their stated final maturity as a
result of unscheduled principal prepayment. Prepayments on underlying mortgages
result in a loss of anticipated interest, and all or a part of a premium if any
has been paid, and the actual yield (or total return) to the Fund may be
different than the quoted yield on the securities. Mortgage prepayments
generally increase with falling interest rates and decrease with rising interest
rates. Like other fixed income securities, when interest rates rise the value of
a mortgage pass-through security generally will decline; however, when interest
rates are declining, the value of mortgage pass-through securities with
prepayment features may not increase as much as that of other fixed-income
securities.

Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
the Government National Mortgage Association ("GNMA"); or guaranteed by agencies
or instrumentalities of the U.S. Government (such as the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation
("FHLMC"), and are not guaranteed by the U.S. Government). Mortgage pass-through
securities may also be issued by nongovernmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers). Some of these mortgage
pass-through securities may be supported by various forms of insurance or
guarantees.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs," which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Typically, CMOs are collateralized by
certificates issued by GNMA, FNMA or FHLMC, but also may be collateralized by
whole loans or private mortgage pass-through securities (such collateral
collectively referred to as "Mortgage Assets"). The Fund may also invest a
portion of its assets in multiclass pass-through securities which are interests
in a trust composed of Mortgage Assets. CMOs (which include multiclass
pass-through securities) may be issued by agencies, authorities or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Payments of principal of and interest on the Mortgage Assets, and
any reinvestment income thereon, provide the funds to pay debt service on the
CMOs or make scheduled distributions on the multiclass pass-through securities.
In a CMO, a series of bonds or certificates are usually issued in multiple
classes with different maturities.

7
<PAGE> 15
Each class of CMOs, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Certain classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
the Fund invests, the investment may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities.

The Fund may also invest in parallel pay CMOs and Planned Amortization Class
CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of
principal on each payment date to more than one class. PAC Bonds generally
require payments of a specified amount of principal on each payment date. PAC
Bonds are always parallel pay CMOs with the required principal payment on such
securities having the highest priority after interest has been paid to all
classes. For a further description of CMOs, parallel pay CMOs and PAC Bonds and
the risks related to transactions therein, see the Statement of Additional
Information.

STRIPPED MORTGAGE-BACKED SECURITIES: The Fund may invest a portion of its assets
in stripped mortgage-backed securities ("SMBS"), which are derivative multiclass
mortgage securities usually structured with two classes that receive different
proportions of the interest and principal distributions from an underlying pool
of mortgage assets. The Fund may only invest in SMBS issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. In addition,
the Fund will only invest in SMBS whose mortgage assets are U.S. Government
securities. For a further description of SMBS and the risks related to
transactions therein, see the Statement of Additional Information.

REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn additional income on available cash or as a temporary defensive measure.
Under a repurchase agreement, the Fund acquires securities subject to the
seller's agreement to repurchase at a specified time and price. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Fund's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Fund has adopted
certain procedures intended to minimize any risk.

RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933 (the "1933 Act") ("restricted
securities"), including those that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). The Trust's Board of Trustees determines, based upon a continuing
review of the trading markets for a specific Rule 144A security, whether such
security is illiquid and thus subject to the Fund's limitations on investing not
more than 15% of its net assets is illiquid investments, or liquid and thus not
subject to such limitation. The Board of Trustees has adopted guidelines and
delegated to MFS the daily function of determining and monitoring the liquidity
of Rule 144A securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Board will carefully
monitor the Fund's investments in Rule 144A securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing Rule 144A securities held in the
Fund's portfolio. Subject to the Fund's 15% limitation on investments in
illiquid investments, the Fund may also invest in restricted securities that may
not be sold under Rule 144A, which presents certain risks. As a result, the Fund
might not be able to sell these securities when the Adviser wishes to do so, or
might have to sell them at less than fair value. In addition, market quotations
are less readily available. Therefore, judgment may at times play a greater role
in valuing these securities than in the case of unrestricted securities.

LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans will usually be made to member firms (and subsidiaries thereof) of
the New York Stock Exchange and to member banks of the Federal Reserve System,
and would be required to be secured continuously by collateral in cash, cash
equivalents or U.S. Treasury securities maintained on a current basis at an
amount at least equal to the market value of

8
<PAGE> 16

the securities loaned. If the Adviser determines to make securities loans, it is
intended that the value of the securities loaned would not exceed 30% of the
value of the total assets of the Fund.

MORTGAGE "DOLLAR ROLL" TRANSACTIONS: The Fund may enter into mortgage "dollar
roll" transactions with selected banks and broker-dealers pursuant to which the
Fund sells mortgage-backed securities for delivery in the future (generally
within 30 days) and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date. The Fund
will only enter into covered rolls. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction.

OPTIONS ON SECURITIES: The Fund may write (sell) covered put and call options on
securities ("Options") and purchase put and call Options. The Fund will write
such Options for the purpose of increasing its return and/or to protect the
value of its portfolio. In particular, where the Fund writes an Option which
expires unexercised or is closed out by the Fund at a profit, it will retain the
premium paid for the Option, which will increase its gross income and will
offset in part the reduced value of a portfolio security in connection with
which the Option may have been written or the increased cost of portfolio
securities to be acquired. In contrast, however, if the price of the security
underlying the Option moves adversely to the Fund's position, the Option may be
exercised and the Fund will be required to purchase or sell the security at a
disadvantageous price, resulting in losses which may only be partially offset by
the amount of the premium. The Fund may also write combinations of put and call
Options on the same security, known as "straddles." Such transactions can
generate additional premium income but also present increased risk.

The Fund may purchase put or call Options in anticipation of declines in the
value of portfolio securities or increases in the value of securities to be
acquired. In the event that the expected changes occur, the Fund may be able to
offset the resulting adverse effect on its portfolio, in whole or in part,
through the Options purchased. The risk assumed by the Fund in connection with
such transactions is limited to the amount of the premium and related
transaction costs associated with the Option, although the Fund may be required
to forfeit such amounts in the event that the prices of securities underlying
the Options do not move in the direction or to the extent anticipated.

The Fund may also enter into options on the yield "spread," or yield
differential between two securities, a transaction referred to as a "yield
curve" option, for hedging and non-hedging purposes. In contrast to other types
of options a yield curve option is based on the difference between the yields of
designated securities rather than the actual prices of the individual
securities. Yield curve options written by the Fund will be "covered" but could
involve additional risks, as discussed in the Statement of Additional
Information.

The staff of the SEC has taken the position that purchased over-the-counter
options and assets used to cover written over-the-counter options are illiquid
and, therefore, together with other illiquid securities, cannot exceed a certain
percentage of the Fund's assets (the "SEC illiquidity ceiling"). Although the
Adviser disagrees with this position, the Adviser intends to limit the Fund's
writing of over-the-counter options in accordance with the following procedure.
Except as provided below, the Fund intends to write over-the-counter options
only with primary U.S. Government securities dealers recognized by the Federal
Reserve Bank of New York. Also, the contracts the Fund has in place with such
primary dealers will provide that the Fund has the absolute right to repurchase
an option it writes at any time at a price which represents the fair market
value, as determined in good faith through negotiation between the parties, but
which in no event will exceed a price determined pursuant to a formula in the
contract. Although the specific formula may vary between contracts with
different primary dealers, the formula will generally be based on a multiple of
the premium received by the Fund for writing the option, plus the amount, if any
of the option's intrinsic value (i.e., the amount that the option is
in-the-money). The formula may also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written out-of-the-money. The Fund will treat all or a portion
of the formula as illiquid for purposes of the SEC illiquidity ceiling. The Fund
may also write over-the-counter options with non-primary dealers, including
foreign dealers, and will treat the assets used to cover these options as
illiquid for purposes of the SEC illiquidity ceiling.

9
<PAGE> 17

FUTURES CONTRACTS: The Fund may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies or
contracts based on indexes of securities as such instruments become available
for trading ("Futures Contracts"). Such transactions will be entered into for
hedging purposes, in order to protect the Fund's current or intended investments
from the effects of changes in interest or exchange rates, as well as for
non-hedging purposes, to the extent permitted by applicable law. For example, in
the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general increase in interest rates or a decline in the
dollar value of foreign currencies in which portfolio securities are
denominated, the adverse effects of such changes may be offset, in whole or
part, by gains on Futures Contracts sold by the Fund. Conversely, the adverse
effects of an increase in the cost of portfolio securities to be acquired,
occurring as a result of a decline in interest rates or a rise in the dollar
value of securities denominated in foreign currencies, may be offset, in whole
or in part, by gains on Futures Contracts purchased by the Fund. The Fund will
incur brokerage fees when it purchases and sells Futures Contracts, and will be
required to maintain margin deposits. In addition, Futures Contracts entail
risks. Although the Fund believes that use of such contracts will benefit the
Fund, if its investment judgment about the general direction of interest or
exchange rates is incorrect, the Fund's overall performance may be poorer than
if it had not entered into any such contract and the Fund may realize a loss.
The Fund will not enter into any Futures Contract if immediately thereafter the
value of all such Futures Contracts would exceed 50% of the value of its total
assets.

OPTIONS ON FUTURES CONTRACTS: The Fund may also purchase and write options on
Futures Contracts ("Options on Futures Contracts") for the purpose of protecting
against declines in the value of portfolio securities or against increases in
the cost of securities to be acquired. Purchases of Options on Futures Contracts
may present less risk in hedging the portfolio of the Fund than the purchase or
sale of the underlying Futures Contracts, since the potential loss is limited to
the amount of the premium paid for the option, plus related transaction costs.
The writing of such options, however, does not present less risk than the
trading of Futures Contracts, and will constitute only a partial hedge, up to
the amount of the premium received, less related transaction costs. In addition,
if an option is exercised, the Fund may suffer a loss on the transaction. The
Fund may also purchase and write Options on Futures Contracts for non-hedging
purposes, to the extent permitted by applicable law.

FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase and sale of a fixed quantity of a foreign currency at
a future date ("Forward Contracts"). The Fund may enter into Forward Contracts
for hedging purposes as well as for non-hedging purposes. By entering into
transactions in Forward Contracts, however, the Fund may be required to forego
the benefits of advantageous changes in exchange rates and, in the case of
Forward Contracts entered into for non-hedging purposes, the Fund may sustain
losses which will reduce its gross income. The Fund may also enter into a
Forward Contract on one currency in order to hedge against risk of loss arising
from fluctuations in the value of a second currency (referred to as a "cross
hedge") if, in the judgment of the Adviser, a reasonable degree of correlation
can be expected between movements in the values of the two currencies. Forward
Contracts are traded over-the-counter, and not on organized commodities or
securities exchanges. As a result, such contracts operate in a manner distinct
from exchange-traded instruments, and their use involves certain risks beyond
those associated with transactions in Futures Contracts or options traded on
exchanges. The Fund has established procedures consistent with Statements of the
SEC and its Staff regarding the use of Forward Contracts by registered
investment companies, which requires use of segregated assets or "cover" in
connection with the purchase and sale of such contracts.

OPTIONS ON FOREIGN CURRENCIES: The Fund may also purchase and write options on
foreign currencies ("Options on Foreign Currencies") for the purpose of
protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. As in the
case of other types of options, however, the writing of an Option on Foreign
Currency will constitute only a partial hedge, up to the amount of the premium
received, and the Fund may be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
Option on Foreign Currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, it may forfeit the entire amount of the premium paid for
the option plus related transaction costs.

10
<PAGE> 18

SWAPS AND RELATED TRANSACTIONS: As one way of managing its exposure to different
types of investments, the Fund may enter into interest rate swaps, currency
swaps and other types of available swap agreements, such as caps, collars and
floors. Swaps involve the exchange by the Fund with another party of cash
payments based upon different interest rate indexes, currencies, and other
prices or rates, such as the value of mortgage prepayment rates. For example, in
the typical interest rate swap, the Fund might exchange a sequence of cash
payments based on a floating rate index for cash payments based on a fixed rate.
Payments made by both parties to a swap transaction are based on a principal
amount determined by the parties.

The Fund may also purchase and sell caps, floors and collars. In a typical cap
or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. For
example, the purchase of an interest rate cap entitles the buyer, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the
counterparty selling such interest rate cap. The sale of an interest rate floor
obligates the seller to make payments to the extent that a specified interest
rate falls below an agreed-upon level. A collar arrangement combines elements of
buying a cap and selling a floor.

Swap agreements will tend to shift a Fund investment exposure from one type of
investment to another. For example, if a Fund agreed to exchange payments in
dollars for payments in foreign currency, in each case based on a fixed rate,
the swap agreement would tend to decrease a Fund's exposure to U.S. interest
rates and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on how
they are used, swap agreements may increase or decrease the overall volatility
of a Fund's investments and its share price and yield.

Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions.

Swaps, caps, floors and collars are highly specialized activities which involve
certain risks. See the Statement of Additional Information on the risks involved
in, these activities.

RISK FACTORS: Although the Fund will enter into transactions in Options, Futures
Contracts, Options on Futures Contracts, Forward Contracts and Options on
Foreign Currencies in part for hedging purposes, such transactions nevertheless
involve certain risks. For example, a lack of correlation between the instrument
underlying an option or Futures Contract and the assets being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and could result in losses. The Fund also may enter into
transactions in Options, Futures Contracts, Options on Futures Contracts and
Forward Contracts for other than hedging purposes, to the extent permitted by
applicable law which involves greater risk. In particular, such transactions may
result in losses for the Fund which are not offset by gains on other portfolio
positions, thereby reducing gross income. In addition, foreign currency markets
may be extremely volatile from time to time. In addition, there can be no
assurance that a liquid secondary market will exist for any contract purchased
or sold, and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses. The Fund may also be required or may
elect to receive delivery of the foreign currencies underlying Forward Contracts
or options on foreign currencies, which may involve certain risks. In such
instances, the Fund may hold the foreign currency when, in the judgment of the
Adviser, it would be beneficial to convert such currency into U.S. dollars at a
later date, based on anticipated changes in the relevant exchange rate. The
Appendix to this Prospectus contains a description of the nature and trading
mechanics of Options, Futures Contracts, Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies, and the Statement of Additional
Information includes a discussion of the risks related to transactions therein.

Transactions in Options may be entered into by the Fund on United States
exchanges regulated by the SEC, in the over-the-counter market and on foreign
exchanges, while Forward Contracts may be entered into only in the
over-the-counter market. Futures Contracts and Options on Futures Contracts may
be entered into on United States exchanges regulated by the Commodity

11
<PAGE> 19

Futures Trading Commission (the "CFTC") and on foreign exchanges. In addition,
the securities underlying options and Futures Contracts traded by the Fund will
include U.S. Government securities as well as foreign securities.

Investors should recognize that transactions involving foreign securities or
foreign currencies, and transactions entered into in foreign countries, involve
considerations and risks not typically associated with investing in U.S.
markets. Such investments may be favorably or unfavorably affected by changes in
interest rates, currency exchange rates and exchange control regulations, and
costs may be incurred in connection with conversions between various currencies.
In addition, investments in foreign countries could be affected by other factors
generally not thought to be present in the United States, including the
possibility of heavy taxation, less publicly available financial and other
information, different or lesser regulatory protection, political or social
instability, limitations on the removal of funds or other assets of the Fund,
expropriation of assets, diplomatic developments adverse to U.S. investments and
difficulties in enforcing contractual obligations. U.S. Government policies have
in the past, through taxation and other restrictions, discouraged certain
investments abroad by U.S. investors such as the Fund. While no such
restrictions are currently in effect, they could be reinstituted. In such event
it might become necessary for the Fund to invest all or substantially all of its
assets in U.S. securities, or the Fund might be liquidated. Over-the-counter
transactions also involve certain risks which may not be present in an exchange
environment.

Because of the Fund's international investment policies and the risks discussed
above, as well as other considerations, an investment in shares of the Fund may
not be appropriate for all investors, and an investment in shares of the Fund
should not be considered a complete investment program. Each prospective
purchaser should take into account his investment objectives as well as his
other investments when considering the purchase of shares of the Fund.

PORTFOLIO TRADING: Although the Fund does not intend to seek short-term profits,
securities in its portfolio will be sold whenever the Adviser believes it is
appropriate to do so without regard to the length of time the particular asset
may have been held. A high turnover rate involves greater expenses to the Fund.
The Fund engages in portfolio trading if it believes a transaction net of costs
(including custodian charges) will help in achieving its investment objective.

The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. Consistent with the foregoing primary
consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and such other policies as the Trustees
may determine, the Adviser may consider sales of shares of the Fund and of the
other investment company clients of MFS Financial Services, Inc. ("FSI"), the
Fund's distributor, as a factor in the selection of broker-dealers to execute
the Fund's portfolio transactions. For a further discussion of portfolio
trading, see the Statement of Additional Information.

The policies described above are not fundamental and may be changed without
shareholder approval, as may the Fund's investment objective.

The Statement of Additional Information includes a discussion of investment
policies and a listing of specific investment restrictions which govern the
Fund's investment policies. The specific investment restrictions listed in the
Statement of Additional Information may not be changed without shareholder
approval. See "Investment Restrictions" in the Statement of Additional
Information. The Fund's investment limitations, policies and rating standards
are adhered to at the time of purchase or utilization of assets; a subsequent
change in circumstances will not be considered to result in a violation of
policy.

5. MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated May 20, 1982 (the "Advisory Agreement"). The Adviser
provides the Fund with overall investment advisory and administrative services,
as well as general office facilities. Leslie J. Nanberg, a Senior Vice President
of the Adviser, has been the Fund's portfolio manager since 1984. Mr. Nanberg
has been employed by the Adviser since 1980. Subject to such policies as the
Trustees may determine, the Adviser makes investment decisions for the Fund. For
its services and facilities, the Adviser receives a management fee computed and
paid monthly at the annual rate of 0.90% of the first $500 million of the Fund's
average daily net assets and 0.80% of the Fund's average daily net assets in
excess of $500 million for the Fund's then-current fiscal year. Effective
January 1, 1994, the Adviser has agreed to a management fee waiver which will
reduce the management fee paid by the Fund to MFS to 0.70% of

12
<PAGE> 20

the Fund's average daily net assets with respect to average daily net assets
exceeding $500 million. This temporary fee reduction may be rescinded at any
time by the Adviser, upon written notice to the Fund, as to the fee accruing
after the date of such recission. For the Fund's fiscal period ended November
30, 1993, the management fee was computed and paid monthly at the annual rate of
0.90% of average daily net assets, and MFS received fees under the Advisory
Agreement of $3,167,619.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), to MFS(R)Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Institutional Trust, MFS Union
Standard Trust, MFS Special Value Trust, MFS/Sun Life Series Trust, Sun Growth
Variable Annuity Fund, Inc. and seven variable accounts, each of which is a
registered investment company established by Sun Life Assurance Company of
Canada (U.S.) ("Sun Life of Canada (U.S.)") in connection with the sale of
Compass-2 and Compass-3 combination fixed/variable annuity contracts. The MFS
Asset Management Group, a division of MFS, provides investment advice to
substantial private clients.

MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under the management of the MFS organization were
approximately $34.9 billion on behalf of approximately 1.4 million investor
accounts as of February 28, 1994. As of such date, the MFS organization managed
approximately $21.5 billion of assets invested in fixed income securities. MFS
is a subsidiary of Sun Life of Canada (U.S.), which in turn is a subsidiary of
Sun Life Assurance Company of Canada ("Sun Life"). The Directors of MFS are A.
Keith Brodkin, Jeffrey L. Shames, Arnold D. Scott, John D. McNeil and John R.
Gardner. Mr. Brodkin is the Chairman, Mr. Shames is the President and Mr. Scott
is the Secretary and a Senior Executive Vice President of MFS. Messrs. McNeil
and Gardner are the Chairman and President, respectively, of Sun Life. Sun Life,
a mutual life insurance company, is one of the largest international life
insurance companies and has been operating in the United States since 1895,
establishing a headquarters office here in 1973. The executive officers of MFS
report to the Chairman of Sun Life.

A. Keith Brodkin, the Chairman and a Director of MFS, is also the Chairman,
President and a Trustee of the Trust. Leslie J. Nanberg, Stephen C. Bryant, W.
Thomas London, Stephen E. Cavan, James R. Bordewick, Jr. and Linda J. Hoard, all
of whom are officers of MFS, are also officers of the Trust.

DISTRIBUTOR -- FSI, a wholly owned subsidiary of MFS, is the distributor of
shares of the Fund and also serves as distributor for each of the other MFS
Funds.

SHAREHOLDER SERVICING AGENT -- MFS Service Center, Inc. (the "Shareholder
Servicing Agent"), a wholly owned subsidiary of MFS, performs transfer agency
and other services for the Fund.

6. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Shares of the Fund may be purchased at the public offering price through any
securities dealer, certain banks and other financial institutions having selling
agreements with FSI. Non-securities dealer financial institutions will receive
transaction fees that are the same as commission fees to dealers. Securities
dealers and other financial institutions may also charge their customers fees
relating to investments in the Fund.

13
<PAGE> 21

The Fund offers three classes of shares which bear sales charges and
distribution fees in different forms and amounts:

<TABLE>
CLASS A SHARES. Class A shares are offered at net asset value per share plus an initial sales charge (or CDSC in
the case of certain purchases of $1 million or more) as follows:
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
SALES CHARGE* AS
PERCENTAGE OF:
-------------------------------- DEALER ALLOWANCE
NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OF OFFERING PRICE
<S> <C> <C> <C>
Less than $100,000................................ 4.75% 4.99% 4.00%
$100,000 but less than $250,000................... 4.00 4.17 3.20
$250,000 but less than $500,000................... 2.95 3.04 2.25
$500,000 but less than $1,000,000................. 2.20 2.25 1.70
$1,000,000 or more................................ None** None** See Below**
- ---------------
<FN>
* Because of rounding in the calculation of offering price, actual sales charges may be more or less than those calculated using
the percentages above.
** A CDSC may apply in certain instances. FSI (on behalf of the Fund) will also pay a commission on purchases of $1 million or more.
</TABLE>

No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC shall be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.

In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment occurred, will age one month on the last day of the month and
each subsequent month. Except as noted below, the CDSC on Class A shares will be
waived in the case of: (i) exchanges (except that if the shares acquired by
exchange were then redeemed within 12 months of the initial purchase (other than
in connection with subsequent exchanges to other MFS Funds), the charge would
not be waived); (ii) distributions to participants from a retirement plan
qualified under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") (a "Retirement Plan") due to: (a) a loan from the plan (repayments
of loans, however, will constitute new sales for purposes of assessing the
CDSC); or (b) "financial hardship" of the participant in the plan, as that term
is defined in Treasury Regulations Section 1.401(k)-1(d)(2), as amended from
time to time; or (c) the death of a participant in such plans; (iii)
distributions from a 403(b) plan or an Individual Retirement Account ("IRA") due
to death, disability, or attainment of age 59 1/2; (iv) tax-free returns of
excess contributions to an IRA; (v) distributions by other employee benefit
plans to pay benefits and (vi) certain involuntary redemptions and redemptions
in connection with certain automatic withdrawals from a qualified retirement
plan. The CDSC on Class A Shares will not be waived, however, if the Retirement
Plan withdraws from the Fund, except that if the Retirement Plan has invested
its assets in Class A shares of one or more of MFS Funds for more than 10 years
from the later to occur of (i) January 1, 1993 or (ii) the date such Retirement
Plan first invests its assets in Class A shares of one or more of the MFS Funds,
the CDSC on Class A shares will be waived in the case of a redemption of all of
the Retirement Plan's shares (including shares of any other class) in all MFS
Funds (i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), unless, immediately prior to the redemption, the aggregate amount
invested by the Retirement Plan in Class A shares of the MFS Funds (excluding
the reinvestment of distributions) during the prior four year period equals 50%
or more of the total value of the Retirement Plan's assets in the MFS Funds, in
which case the CDSC will not be waived. Any applicable CDSC will be deferred
upon an exchange of Class A shares of the Fund for units of participation of the
MFS Fixed Fund (a bank collective investment fund) (the "Units"), and the CDSC
will be deducted from the redemption proceeds when such Units are subsequently
redeemed (assuming the CDSC is then payable). No CDSC will be assessed upon an
exchange of Units for Class A shares of the Fund. For purposes of calculating
the CDSC payable upon redemption of Class A shares of the Fund or Units acquired
pursuant to one or more exchanges, the period during which the Units are held
will be aggregated with the period

14
<PAGE> 22

during which the Class A shares are held. The applicability of the CDSC will be
unaffected by transfers of registration. FSI shall receive all CDSCs which it
intends to apply for the benefit of the Fund.

FSI allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price, as shown in the above table. In the case of
the maximum sales charge, the dealer retains 4% and FSI retains approximately
3/4 of 1% of the public offering price. The sales charge may vary depending on
the number of shares of the Fund as well as certain MFS Funds and other funds
owned or being purchased, the existence of an agreement to purchase additional
shares during a 13-month period (or a 36-month period for purchases of $1
million or more) or other special purchase programs. A description of the Right
of Accumulation, Letter of Intent and Group Purchases privileges by which the
sales charge may be reduced is set forth in the Statement of Additional
Information. In addition, FSI, on behalf of the Fund and pursuant to the Fund's
Class A Distribution Plan described below, will pay a commission to dealers who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales up to $5 million, plus 0.25% on the amount in excess of $5
million. Purchases of $1 million or more for each shareholder account will be
aggregated over a 12-month period (commencing from the date of the first such
purchase) for purposes of determining the level of commissions to be paid during
that period with respect to such account.

Class A shares of the Fund may be sold at their net asset value to the officers
of the Trust, to any of the subsidiary companies of Sun Life, to eligible
Directors, officers, employees (including retired employees) and agents of MFS,
Sun Life or any of their subsidiary companies, to any trust, pension,
profit-sharing or any other benefit plan for such persons, to any trustees and
retired trustees of any investment company for which FSI serves as distributor
or principal underwriter, and to certain family members of such individuals and
their spouses, provided such shares will not be resold except to the Fund. Class
A shares of the Fund may be sold at net asset value to any employee, partner,
officer or trustee of any sub-adviser to any MFS Fund and to certain family
members of such individuals and their spouses, or to any trust, pensions,
profit-sharing or other retirement plan for the sole benefit of such employee or
representative, provided such shares will not be resold except to the Fund.
Class A shares of the Fund may also be sold at their net asset value to any
employee or registered representative of any dealer or other financial
institution which has a sales agreement with FSI or its affiliates, to certain
family members of such employees or representatives and their spouses, or to any
trust, pension, profit-sharing or other retirement plan for the sole benefit of
such employee or representative, as well as to clients of the MFS Asset
Management Group. Class A shares of the Fund also may be sold at net asset
value, subject to appropriate documentation, through a dealer where the amount
invested represents redemption proceeds from a registered open-end management
investment company not distributed or managed by FSI or its affiliates, if such
redemption has occurred no more than 60 days prior to the purchase of Class A
shares of the Fund and the shareholder either (i) paid an initial sales charge
or (ii) was at some time subject to, but did not actually pay, a deferred sales
charge with respect to the redemption proceeds. Class A shares of the Fund may
also be sold at net asset value where the amount invested represents redemption
proceeds from MFS Fixed Fund. In addition, Class A shares of the Fund may be
sold at net asset value in connection with the acquisition or liquidation of the
assets of other investment companies or personal holding companies. Insurance
company separate accounts may purchase Class A shares of the Fund at their net
asset value. Class A shares of the Fund may also be purchased at their net asset
value by retirement plans where third party administrators of such plans have
entered into certain arrangements with FSI or its affiliates provided that no
commission is paid to dealers. Class A shares of the Fund may also be sold at
net asset value through the automatic reinvestment of Class A and Class B
periodic distributions which constitute required withdrawals from qualified
retirement plans. Class A shares of the Fund may be purchased at net asset value
through certain broker-dealers and other financial institutions which have
entered into an agreement with FSI, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap account" or a
similar program under which such clients pay a fee to such broker-dealer or
other financial institution.

Class A shares of the Fund may be purchased at net asset value by retirement
plans qualified under section 401(a) or 403(b) of the Code which are subject to
the Employee Retirement Income Security Act of 1974, as amended, as follows:

(i) the retirement plan and/or the sponsoring organization must subscribe to
the MFS FUNDamental 401(k) Plan or another similar Section 401(a) or 403(b)
recordkeeping program made available by MFS Service Center, Inc.;

15
<PAGE> 23

(ii) either (a) the sponsoring organization must have at least 25 employees
or (b) the aggregate purchases by the retirement plan of Class A shares of
the MFS Funds must be in an amount of at least $250,000 within a reasonable
period of time, as determined by FSI in its sole discretion; and

(iii) a CDSC of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.

Dealers who initiate and are responsible for purchases of Class A shares of the
Fund in this manner will be paid a commission by FSI, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, that FSI may pay a commission, on sales in excess of $5 million to
certain retirement plans, of 1.00% to certain dealers which, at FSI's
invitation, enter into an agreement with FSI in which the dealer agrees to
return any commission paid to it on the sale (or on a pro rata portion thereof)
if the shareholder redeems his or her shares within a period of time after
purchase as specified by FSI. Purchases of $1 million or more for each
shareholder account will be aggregated over a 12-month period (commencing from
the date of the first such purchase) for purposes of determining the level of
commissions to be paid during that period with respect to such account.
Furthermore, Class A shares of the Fund may be sold at net asset value through
the automatic reinvestment of distributions of dividends and capital gains of
Class A shares of other MFS Funds pursuant to the Distribution Investment
Program (see "Shareholder Services" in the Statement of Additional Information).

<TABLE>
CLASS B SHARES: Class B shares are offered at net asset value without an initial sales charge but subject to a CDSC as follows:

<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
<S> <C>
First................................................................... 4%*
Second.................................................................. 4%
Third................................................................... 3%
Fourth.................................................................. 3%
Fifth................................................................... 2%
Sixth................................................................... 1%
Seventh and following................................................... 0%

- ---------------
<FN>
* Class B shares purchased between January 1, 1993 and August 31, 1993, are subject to a CDSC of 5% in the event of a redemption
within the first year after purchase.
</TABLE>

<TABLE>
For Class B shares purchased prior to January 1, 1993, the Fund imposes a CDSC as a percentage of redemption proceeds as follows:
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
<S> <C>
First................................................................... 6%
Second.................................................................. 5%
Third................................................................... 4%
Fourth.................................................................. 3%
Fifth................................................................... 2%
Sixth................................................................... 1%
Seventh and following................................................... 0%
</TABLE>

No CDSC is paid upon an exchange of shares. For purposes of calculating the CDSC
upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original

16
<PAGE> 24

purchase of the exchanged shares. See "Redemptions and Repurchases -- Contingent
Deferred Sales Charge" for further discussion of the CDSC.

The CDSC on Class B shares will be waived upon the death or disability (as
defined in section 72(m)(7) of the Code) of any investor, provided the account
is registered (i) in the case of a deceased individual, solely in the deceased
individual's name, (ii) in the case of a disabled individual, solely or jointly
in the disabled individual's name or (iii) in the name of a living trust for the
benefit of the deceased or disabled individual. The CDSC on Class B shares will
also be waived in the case of redemptions of shares of the Fund pursuant to a
systematic withdrawal plan. In addition, the CDSC on Class B shares will be
waived in the case of distributions from an IRA, SAR-SEP or any other retirement
plan qualified under section 401(a) or 403(b) of the Code, due to death or
disability, or in the case of required minimum distributions from any such
retirement plan due to attainment of age 70 1/2. The CDSC on Class B shares will
be waived in the case of distributions from a retirement plan qualified under
Section 401(a) of the Code due to (i) returns of excess contribution to the
plan, (ii) retirement of a participant in the plan, (iii) a loan from the plan
(repayments of loans, however, will constitute new sales for purposes of
assessing the CDSC), (iv) "financial hardship" of the participant in the plan,
as that term is defined in Treasury Regulation 1.401(k)-1(d)(2), as amended from
time to time; and (v) termination of employment of the participant in the plan
(excluding, however, a partial or other termination of the plan). The CDSC on
Class B shares of the Fund will also be waived upon redemption by (i) officers
of the Fund, (ii) any of the subsidiary companies of Sun Life, (iii) eligible
Directors, officers, employees (including retired employees) and agents of MFS,
Sun Life or any of their subsidiary companies, (iv) any trust, pension,
profit-sharing or any other benefit plan for such persons, (v) any trustees and
retired trustees of any investment company for which FSI serves as distributor
or principal underwriter, and (vi) certain family members of such individuals
and their spouses, provided in each case that the shares will not be resold
except to the Fund. The CDSC on Class B shares will also be waived in the case
of redemptions by any employee or registered representative of any dealer or
other financial institution which has a sales agreement with FSI, by certain
family members of such employee or representative and their spouse, by any
trust, pension, profit-sharing or other retirement plan for the sole benefit of
such employee or representative and by clients of the MFS Asset Management
Group. A retirement plan qualified under section 401(a) of the Code, (a
"Retirement Plan") that has invested its assets in Class B shares of one or more
of the MFS Funds for more than 10 years from the later to occur of (i) January
1, 1993 or (ii) the date the Retirement Plan first invests its assets in Class B
shares of one or more of the funds in the MFS Funds will have the CDSC on Class
B shares waived in the case of a redemption of all the Retirement Plan's shares
(including any Class A shares) in all MFS Funds (i.e., all the assets of the
Retirement Plan invested in the MFS Funds are withdrawn), except that if,
immediately prior to the redemption, the aggregate amount invested by the
Retirement Plan in Class B shares of the MFS Funds (excluding the reinvestment
of distributions) during the prior four year period equals 50% or more of the
total value of the Retirement Plan's assets in the MFS Funds, then the CDSC will
not be waived. The CDSC on Class B shares may also be waived in connection with
the acquisition or liquidation of the assets of other investment companies or
personal holding companies.

CONVERSION OF CLASS B SHARES. Class B shares of the Fund will convert to Class A
shares of the Fund approximately eight years after the purchase date. Shares
purchased through the reinvestment of distributions paid in respect of Class B
shares will be treated as Class B shares for purposes of the payment of the
distribution and service fees under the Distribution Plan applicable to Class B
shares. However, for purposes of conversion to Class A shares, all shares in a
shareholder's account that were purchased through the reinvestment of dividends
and distributions paid in respect of Class B shares (and which have not
converted to Class A shares as provided in the following sentence) will be held
in a separate sub-account. Each time any Class B shares in the shareholder's
account (other than those in the sub-account) convert to Class A shares, a
portion of the Class B shares then in the sub-account will also convert to Class
A shares. The portion will be determined by the ratio that the shareholder's
Class B shares not acquired through reinvestment of dividends and distributions
that are converting to Class A shares bear to the shareholder's total Class B
shares not acquired through reinvestment. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that such conversion will not
constitute a taxable event for federal tax purposes. There can be no assurance
that such ruling or opinion

17
<PAGE> 25

will be available, and the conversion of Class B shares to Class A shares will
not occur if such ruling or opinion is not available. In such event, Class B
shares would continue to be subject to higher expenses than Class A shares for
an indefinite period.

CLASS C SHARES: Class C shares are offered at net asset value without an initial
sales charge or a CDSC. Class C shares do not convert to any other class of
shares of the Fund. The maximum investment in Class C shares that may be made is
$5,000,000 per transaction.

Class C shares are not currently available for purchase by any retirement plan
qualified under Internal Revenue Code section 401(a) or 403(b) if the retirement
plan and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k)
Plan or another similar 401(a) or 403(b) recordkeeping program made available by
MFS Service Center, Inc.

GENERAL: Except as described below, the minimum initial investment is $1,000 per
account and the minimum additional investment is $50 per account. Accounts being
established for monthly automatic investments and under payroll savings programs
and tax-deferred retirement programs (other than IRAs) involving the submission
of investments by means of group remittal statements are subject to a $50
minimum on initial and additional investments per account. The minimum initial
investment for IRAs is $250 per account and the minimum additional investment is
$50 per account. Accounts being established for participation in the Automatic
Exchange Plan are subject to a $50 minimum on initial and additional investments
per account. There are also other limited exceptions to these minimums for
certain tax-deferred retirement programs. Any minimums may be changed at any
time at the discretion of FSI. The Fund reserves the right to cease offering its
shares at any time.

For shareholders who elect to participate in certain investment programs (e.g.,
the automatic investment plan) or avail themselves of certain other shareholder
services, FSI or its affiliates may either (i) give a gift of nominal value,
such as a hand-held calculator, or (ii) make a nominal charitable contribution
on their behalf.

A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from the
Fund (such as Right of Accumulation, Letter of Intent and certain recordkeeping
services) that the Fund ordinarily provides.

The Fund and FSI each reserve the right to reject any specific purchase order or
to restrict purchases by a particular purchaser (or group of related
purchasers). The Fund or FSI may reject or restrict any purchases of the Fund's
shares by a particular purchaser or group, for example, when a pattern of
frequent purchases and sales of shares of the Fund is evident, or if the
purchase and sale orders are, or a subsequent abrupt redemption might be, of a
size that would disrupt management of the Fund. The Fund and FSI intend
specifically to exercise this right in order to reject or restrict purchases by
market timers (including asset allocators) and the shareholder(s) whose accounts
are exchanged periodically based on an arrangement with or advice from such
persons or whose transactions seem to follow a timing pattern. In particular,
action may be taken if: (i) more than two exchange purchases are effected in a
timed account in the same calendar quarter; or (ii) a purchase would result in
shares being held in timed accounts by an individual or firm representing more
than (x) one percent of the Fund's net assets or (y) specified dollar amounts in
the case of certain funds in the MFS Funds, which may include the Fund and which
may change from time to time. The Fund and FSI each reserve the right to request
holders of timed accounts to redeem their shares at net asset value, less any
CDSC otherwise applicable, if either of these restrictions is violated.

Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A, Class B and Class C shares.

The Glass-Steagall Act prohibits national banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of the
prohibition has not been clearly defined, FSI believes that such Act should not
preclude banks from entering into agency agreements with FSI (as described
above). If, however, a bank were prohibited from so acting, the Trustees would
consider what actions, if any, would be necessary to continue to provide
efficient and effective shareholder services. It is not expected that
shareholders would suffer any adverse financial consequence as a result of these
occurrences. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as broker-dealers pursuant to state
law.

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<PAGE> 26

EXCHANGES
Subject to the requirements set forth below, some or all of the shares in an
account with the Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of the same class of any of the
other MFS Funds (if available for sale) at net asset value. In addition, Class C
shares may be exchanged for shares of MFS Money Market Fund at net asset value.
Shares of one class may not be exchanged for shares of any other class.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received for an established account by the Shareholder
Servicing Agent in proper form (i.e., if in writing -- signed by the record
owner(s) exactly as the shares are registered; if by telephone -- proper account
identification is given by the dealer or shareholder of record) and each
exchange must involve either shares having an aggregate value of at least $1,000
($50 in the case of retirement plan participants whose sponsoring organizations
subscribe to the MFS FUNDamental 401(k) Plan or another similar 401(k)
recordkeeping system made available by MFS Service Center, Inc.) or all the
shares in the account. If the Exchange Request is received by the Shareholder
Servicing Agent on any business day prior to the close of regular trading on the
New York Stock Exchange (the "Exchange"), the exchange usually will occur on
that day if all the requirements set forth above have been complied with at that
time. No more than five exchanges may be made in any one Exchange Request by
telephone. Additional information concerning this exchange privilege and
prospectuses for any of the other MFS Funds may be obtained from investment
dealers or the Shareholder Servicing Agent. A shareholder should read the
prospectus of the other MFS Fund and consider the differences in objectives and
policies before making any exchange. For federal and (generally) state income
tax purposes, an exchange is treated as a sale of the shares exchanged and,
therefore, an exchange could result in a gain or loss to the shareholder making
the exchange. Exchanges by telephone are automatically available to most
non-retirement plan accounts and certain retirement plan accounts. For further
information regarding exchanges by telephone see "Redemptions By Telephone." The
exchange privilege (or any aspect of it) may be changed or discontinued and is
subject to certain limitations, including certain restrictions on purchases by
market timer accounts (see "Purchases").

REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which the Fund is open for business by redeeming shares at their net
asset value or by selling such shares to the Fund through a dealer (a
repurchase). Since the net asset value of shares of the account fluctuate,
redemptions or repurchases, which are taxable transactions, are likely to result
in gains or losses to the shareholder. When a shareholder withdraws an amount
from his account, the shareholder is deemed to have tendered for redemption a
sufficient number of full and fractional shares in his account to cover the
amount withdrawn. The proceeds of a redemption or repurchase will normally be
available within seven days, except for shares purchased, or received in
exchange for shares purchased, by check (including certified checks or cashier's
checks); payment of redemption proceeds may be delayed for 15 days from the
purchase date in an effort to assure that such check has cleared. Payment of
redemption proceeds may be delayed for up to seven days if the Fund determines
that such a delay would be in the best interest of all its shareholders.

A. REDEMPTION BY MAIL -- Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption or letter of instruction, together with his share
certificates (if any were issued), all in "good order" for transfer. "Good
order" generally means that the stock power, written request for redemption,
letter of instruction or share certificate must be endorsed by the record
owner(s) exactly as the shares are registered and the signature(s) must be
guaranteed in the manner set forth below under the caption "Signature
Guarantee". In addition, in some cases, "good order" may require the furnishing
of additional documents. The Shareholder Servicing Agent may make certain de
minimis exceptions to the above requirements for redemption. Within seven days
after receipt of a redemption request by the Shareholder Servicing Agent in
"good order," the Fund will make payment in cash of the net asset value of the
shares next determined after such redemption request was received, reduced by
the amount of any applicable CDSC described above and the amount of any income
tax required to be withheld, except during any period in which the right of
redemption is suspended or date of payment is postponed because the Exchange is
closed or trading on the Exchange is restricted or to the extent otherwise
permitted by the 1940 Act if an emergency exists (see "Tax Status").

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<PAGE> 27

B. REDEMPTION BY TELEPHONE -- Each shareholder may redeem an amount from his
account by telephoning toll-free at (800) 225-2606. Shareholders wishing to
avail themselves of this telephone redemption privilege must so elect on their
Account Application, designate thereon a commercial bank and account number to
receive the proceeds of such redemption, and sign the Account Application Form
with the signature(s) guaranteed in the manner set forth below under the caption
"Signature Guarantee". The proceeds of such a redemption, reduced by the amount
of any applicable CDSC described above and the amount of any income tax required
to be withheld, are mailed by check to the designated account, without charge.
As a special service, investors may arrange to have proceeds in excess of $1,000
wired in federal funds to the designated account. If a telephone redemption
request is received by the Shareholder Servicing Agent by the close of regular
trading on the Exchange on any business day, shares will be redeemed at the
closing net asset value of the Fund on that day. Subject to the conditions
described in this section, proceeds of a redemption are normally mailed or wired
on the next business day following the date of receipt of the order for
redemption. The Shareholder Servicing Agent will not be responsible for any
losses resulting from unauthorized telephone transactions if it follows
reasonable procedures designed to verify the identity of the caller. The
Shareholder Servicing Agent will request personal or other information from the
caller, and will normally also record calls. Shareholders should verify the
accuracy of confirmation statements immediately after their receipt.

C. REPURCHASE THROUGH A DEALER -- If a shareholder desires to sell his shares at
their net asset value through his securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. Net asset value is calculated on the day the dealer places
the order with FSI, as the Fund's agent. IF THE DEALER RECEIVES THE
SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE EXCHANGE AND
COMMUNICATES IT TO FSI ON THE SAME DAY BEFORE FSI CLOSES FOR BUSINESS, THE
SHAREHOLDER WILL RECEIVE THE NET ASSET VALUE CALCULATED ON THAT DAY REDUCED BY
THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO
BE WITHHELD.

SIGNATURE GUARANTEE: In order to protect shareholders against fraud to the
greatest extent possible, the Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent.

Shareholders of the Fund who have redeemed their shares have a one-time right to
reinvest the redemption proceeds in the same class of shares of any of the MFS
Funds (if shares of such Fund are available for sale) at net asset value (with a
credit for any CDSC paid) within 90 days of the redemption pursuant to the
Reinstatement Privilege. If the shares credited for any CDSC paid are then
redeemed within six years of the initial purchase in the case of Class B shares,
or within 12 months of the initial purchase for certain Class A share purchases,
a CDSC will be imposed upon redemption. Such purchases under the Reinstatement
Privilege are subject to all limitations in the Statement of Additional
Information regarding this privilege.

Subject to the Fund's compliance with applicable regulations, the Fund has
reserved the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of securities
(instead of cash) from the Fund's portfolio. The securities distributed in such
a distribution would be valued at the same amount as that assigned to them in
calculating the net asset value for the shares being sold. If a shareholder
receives a distribution in kind, the shareholder could incur brokerage or
transaction charges in converting the securities to cash.

Due to the relatively high cost of maintaining small accounts, the Fund reserves
the right to redeem shares in any account for their then-current value (which
will be promptly paid to the shareholder) if at any time the total investment in
such account drops below $500 because of redemptions, except in the case of
accounts established for monthly automatic investments and certain payroll
savings programs, Automatic Exchange Plan accounts and tax-deferred retirement
plans, for which there is a lower minimum investment requirement. (See
"Purchases"). Shareholders will be notified that the value of their account is
less than the minimum investment requirement and allowed 60 days to make an
additional investment before the redemption is processed. No CDSC will be
imposed with respect to such involuntary redemptions.

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<PAGE> 28

CONTINGENT DEFERRED SALES CHARGE. Investments ("Direct Purchases") will be
subject to a CDSC for a period of 12 months (in the case of purchases of $1
million or more of Class A shares) or six years (in the case of purchases of
Class B shares). Class C shares are not subject to a CDSC. Purchases of Class A
shares made during a calendar month, regardless of when during the month the
investment occurred, will age one month on the last day of the month and each
subsequent month. Class B shares purchased on or after January 1, 1993 will be
aggregated on a calendar month basis -- all transactions made during a calendar
month, regardless of when during the month they have occurred, will age one year
at the close of business on the last day of such month in the following calendar
year and each subsequent year. For Class B shares of the Fund purchased prior to
January 1, 1993, transactions will be aggregated on a calendar year basis -- all
transactions made during a calendar year, regardless of when during the year
they have occurred, will age one year at the close of business on December 31 of
that year and each subsequent year. At the time of a redemption, the amount by
which the value of a shareholder's account for a particular class represented by
Direct Purchases exceeds the sum of the six calendar year aggregations (12
months in the case of purchases of $1 million or more of Class A shares) of
Direct Purchases may be redeemed without charge ("Free Amount"). Moreover, no
CDSC is ever assessed on additional shares acquired through the automatic
reinvestment of dividends or capital gain distributions ("Reinvested Shares").

Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC, and (ii) the amount of the redemption
equal to the then-current value of Reinvested Shares is not subject to the CDSC,
but (iii) any amount of redemption in excess of the aggregate of the
then-current value of Reinvested Shares and the Free Amount is subject to a
CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible rate.
The CDSC to be imposed upon redemptions will be calculated as set forth in
"Purchases" above.

The applicability of a CDSC will be unaffected by exchanges or transfers of
registration.

DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (the "Rule"), after having concluded that there is a reasonable
likelihood that the plans would benefit the Fund and its shareholders.

CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the Fund
will pay FSI a distribution/service fee aggregating up to (but not necessarily
all of) 0.35% of the average daily net assets attributable to Class A shares
annually in order that FSI may pay expenses on behalf of the Fund related to the
distribution and servicing of Class A shares. The expenses to be paid by FSI on
behalf of the Fund include a service fee to securities dealers which enter into
a sales agreement with FSI of up to 0.25% of the Fund's average daily net assets
attributable to Class A shares that are owned by investors for whom such
securities dealer is the holder or dealer of record. This fee is intended to be
partial consideration for all personal services and/or account maintenance
services rendered by the dealer with respect to Class A shares. FSI may from
time to time reduce the amount of the service fee paid for shares sold prior to
a certain date. Currently the service fee paid to dealers is reduced to 0.15%
for shares purchased prior to October 1, 1989. FSI may also retain a
distribution fee of 0.10% of the Fund's average daily net assets attributable to
Class A shares as partial consideration for services performed and expenses
incurred in the performance of FSI's obligations under its distribution
agreement with the Fund. FSI, however, currently is waiving this 0.10%
distribution fee and will not in the future accept payment of this fee unless it
first obtains the approval of the Trust's Board of Trustees. In addition, to the
extent that the aggregate of the foregoing fees does not exceed 0.35% per annum
of the average daily net assets of the Fund attributable to Class A shares, the
Fund is permitted to pay other distribution-related expenses, including
commissions to dealers and payments to wholesalers employed by FSI for sales at
or above a certain dollar level. Fees payable under the Class A Distribution
Plan are charged to, and therefore reduce, income allocated to Class A shares.
Service fees may be reduced for a securities dealer that is the holder or dealer
of record for an investor who owns shares of the Fund having a net asset value
at or above a certain dollar level. Dealers may from time to time be required to
meet certain criteria in order to receive service fees. FSI or its affiliates
are entitled to retain all service fees payable under the Class A Distribution
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial consideration for personal services and/or account

21
<PAGE> 29

maintenance services performed by FSI or its affiliates for shareholder
accounts. Certain banks and other financial institutions that have agency
agreements with FSI will receive service fees that are the same as service fees
to dealers.

CLASS B DISTRIBUTION PLAN. The Class B Distribution Plan provides that the Fund
will pay FSI a daily distribution fee equal on an annual basis to 0.75% of the
Fund's average daily net assets attributable to Class B shares and will pay FSI
a service fee of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class B shares (which FSI will in turn pay to securities dealers
which enter into a sales agreement with FSI at a rate of up to 0.25% per annum
of the Fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
This service fee is intended to be additional consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to the Class B shares. Fees payable under the Class B Distribution Plan are
charged to, and therefore reduce, income allocated to Class B shares. The Class
B Distribution Plan also provides that FSI will receive all CDSCs attributable
to Class B shares (see "Redemptions and Repurchases" above) which do not reduce
the distribution fee. FSI will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. FSI will also
advance to dealers the first year service fee at a rate equal to 0.25% of the
purchase price of such shares and, as compensation therefor, FSI may retain the
service fee paid by the Fund with respect to such shares for the first year
after purchase. Therefore, the total amount paid to a dealer upon the sale of
shares is 4.00% of the purchase price of the shares (commission rate of 3.75%
plus service fee equal to 0.25% of the purchase price). Dealers will become
eligible for additional service fees with respect to such shares commencing in
the thirteenth month following the purchase. Dealers may from time to time be
required to meet certain criteria in order to receive service fees. FSI or its
affiliates are entitled to retain all service fees payable under the Class B
Distribution Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by FSI or its affiliates
for shareholder accounts. The purpose of the distribution payments to FSI under
the Class B Distribution Plan is to compensate FSI for its distribution services
to the Fund. Since FSI's compensation is not directly tied to its expenses, the
amount of compensation received by FSI during any year may be more or less than
its actual expenses. For this reason, this type of distribution fee arrangement
is characterized by the staff of the SEC as being of the "compensation" variety.
However, the Fund is not liable for any expenses incurred by FSI in excess of
the amount of compensation it receives. The expenses incurred by FSI, including
commissions to dealers, are likely to be greater than the distribution fees for
the next several years, but thereafter such expenses may be less than the amount
of the distribution fees. Certain banks and other financial institutions that
have agency agreements with FSI will receive agency transaction and service fees
that are the same as commissions and service fees to dealers.

CLASS C DISTRIBUTION PLAN. The Class C Distribution Plan provides that the Fund
will pay FSI a distribution fee of up to 0.75% per annum of the Fund's average
daily net assets attributable to Class C shares and will pay FSI a service fee
of up to 0.25% per annum of the Fund's average daily net assets attributable to
Class C shares (which FSI in turn pays to securities dealers which enter into a
sales agreement with FSI at a rate of up to 0.25% per annum of the Fund's daily
net assets attributable to Class C shares owned by investors for whom that
securities dealer is the holder or dealer of record). The distribution/service
fees attributable to Class C shares are designed to permit an investor to
purchase such shares through a broker-dealer without the assessment of an
initial sales charge or a CDSC while allowing FSI to compensate broker-dealers
in connection with the sale of such shares. The service fee is intended to be
additional consideration for all personal services and/or account maintenance
services rendered with respect to Class C shares. FSI or its affiliates are
entitled to retain all service fees payable under the Class C Distribution Plan
with respect to accounts for which there is no dealer of record as partial
consideration for personal services and/or account maintenance services
performed by FSI or its affiliates for shareholder accounts. The purpose of the
distribution payments to FSI under the Class C Distribution Plan is to
compensate FSI for its distribution services to the Fund. Distribution fee
payments under the Plan will be used by FSI to pay securities dealers a
distribution fee in an amount equal on an annual basis to 0.75% of the Fund's
average daily net assets attributable to Class C shares owned by investors for
whom that securities dealer is the holder or dealer of record. (Therefore, the
total amount of distribution/service fees paid to a dealer on an annual basis is
1.00% of the Fund's average daily net assets attributable to Class C shares
owned by investors for whom the securities dealer is the holder or dealer of
record.) FSI also pays expenses of printing prospectuses and reports used for
sales purposes, expenses

22
<PAGE> 30

with respect to the preparation and printing of sales literature and other
distribution related expenses, including, without limitation, the compensation
of personnel and all costs of travel, office expense and equipment. Since FSI's
compensation is not directly tied to its expenses, the amount of compensation
received by FSI during any year may be more or less than its actual expenses.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the SEC as being of the "compensation" variety. However, the Fund
is not liable for any expenses incurred by FSI in excess of the amount of
compensation it receives. Certain banks and other financial institutions that
have agency agreements with FSI will receive agency transaction and service fees
that are the same as distribution and service fees to dealers. Fees payable
under the Class C Distribution Plan are charged to, and therefore reduce, income
allocated to Class C shares.

DISTRIBUTIONS

The Fund intends to pay substantially all of its net investment income for any
calendar year to its shareholders as dividends on an annual basis. The Fund may
make one or more distributions during the calendar year to its shareholders from
any long-term capital gains and also may make one or more distributions during
the calendar year to its shareholders from short-term capital gains.
Shareholders may elect to receive dividends and capital gain distributions in
either cash or additional shares of the same class with respect to which a
distribution is made. All distributions not paid in cash will be reinvested in
shares of the class on which the distribution is paid. See "Tax Status" and
"Shareholder Services -- Distribution Options" below. Distributions paid by the
Fund with respect to Class A shares will generally be greater than those paid
with respect to Class B and Class C shares because expenses attributable to
Class B and Class C shares will generally be higher.

TAX STATUS

The Fund is treated as an entity separate from the other series of the Trust for
federal income tax purposes. In order to minimize the taxes the Fund would
otherwise be required to pay, the Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Code, and to make
distributions to its shareholders in accordance with the timing requirements
imposed by the Code. It is expected that the Fund will not be required to pay
entity level federal income or excise taxes, although foreign-source income
received by the Fund may be subject to foreign withholding taxes. Shareholders
of the Fund normally will have to pay federal income taxes, and any state or
local taxes, on the dividends and capital gain distributions they receive from
the Fund, whether paid in cash or additional shares. The Fund expects that none
of its distributions will be eligible for the dividends-received deduction for
corporations. Shareholders may not have to pay state or local taxes on dividends
derived from interest on U.S. Government obligations. Investors should consult
with their tax advisors in this regard.

At the end of each calendar year, each shareholder receives information for tax
purposes on the dividends and distributions for that year, including the portion
taxable as ordinary income, the portion taxable as long-term capital gains, any
portion representing a return of capital (which is generally free of current
taxes but results in a basis reduction), and the amount, if any, of federal
income tax withheld.

The Fund intends to withhold U.S. federal income tax at the rate of 30% on
dividends and other payments that are subject to such withholding and that 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 is
also required in certain circumstances to apply backup withholding of 31% of
taxable dividends and redemption proceeds paid to any shareholder (including a
shareholder who is neither a citizen nor a resident of the U.S.) who does not
furnish to the Fund certain information and certifications or who is otherwise
subject to backup withholding. However, backup withholding will not be applied
to payments which have been subject to 30% withholding. Prospective investors
should read the Fund's Account Application for additional information regarding
backup withholding of federal income tax and should consult their own tax
advisor as to the tax consequences to them of an investment in the Fund.

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<PAGE> 31

NET ASSET VALUE

The net asset value per share of each class of shares of the Fund is determined
each day during which the Exchange is open for trading. This determination is
made once each day as of the close of regular trading on the Exchange by
deducting the amount of the liabilities attributable to the class from the value
of the assets attributable to the class and dividing the difference by the
number of shares of the class outstanding. Assets in the Fund's portfolio are
valued on the basis of their market values or otherwise at their fair values, as
described in the Statement of Additional Information. All investments and assets
are expressed in U.S. dollars based upon current currency exchange rates. The
net asset value per share of each class of shares is effective for orders
received by the dealer prior to its calculation and received by FSI prior to the
close of that business day.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund, one of two series of the Trust, has three classes of shares, entitled
Class A, Class B and Class C Shares of Beneficial Interest (without par value).
The Trust presently has two series of shares and has reserved the right to
create and issue additional classes and series of shares, in which case each
class of shares of a series would participate equally in the earnings, dividends
and assets attributable to that class of that particular series. Shareholders
are entitled to one vote for each share held and shares of each series would be
entitled to vote separately to approve investment advisory agreements or changes
in investment restrictions, but shares of all series would vote together in the
election of Trustees or selection of accountants. Additionally, each class of
shares of a series will vote separately on any material increases in the fees
under its Distribution Plan or on any other matter that affects solely that
class of shares, but will otherwise vote together with all other classes of
shares of the series on all other matters.

Shares have no pre-emptive or conversion rights (except as set forth above in
"Purchases -- Conversion of Class B Shares"). Shares are fully paid and
nonassessable. Should the Fund be liquidated, shareholders of each class are
entitled to share pro rata in the net assets attributable to that class
available for distribution to shareholders. Shares will remain on deposit with
the Shareholder Servicing Agent and certificates will not be issued except in
connection with pledges and assignments and in certain other limited
circumstances. The Trust does not intend to hold annual shareholder meetings.

The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed (e.g., fidelity bonding and errors and omissions insurance)
and the Trust itself was unable to meet its obligations.

PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, current distribution rate and
total rate of return quotations for each class of shares and may also quote fund
rankings in the relevant fund category from various sources, such as Lipper
Analytical Services, Inc., Morningstar, Inc. and Wiesenberger Investment
Companies Service. Yield quotations are based on the annualized net investment
income per class share over a 30-day period stated as a percent of the maximum
public offering price on the last day of that period. Yield calculations for
Class B shares assume no CDSC is paid. The current distribution rate for each
class is generally based upon the total amount of dividends per share paid by
the Fund to shareholders of that class during the past twelve months and is
computed by dividing the amount of such dividends by the maximum public offering
price of that class at the end of such period. Current distribution rate
calculations for Class B shares assume no CDSC is paid. The current distribution
rate differs from the yield calculation because it may include distributions to
shareholders from sources other than dividends and interest, such as premium
income from option writing, short-term capital gains, and return of invested
capital, and is calculated over a different period of time. Total rate of return
quotations will reflect the average annual percentage change over stated periods
in the value of an investment in each class of shares of the Fund made at the
maximum public offering price of shares of that class and with all distributions
reinvested and which, if quoted for periods of six years or less, will give
effect to the imposition of the CDSC assessed upon redemptions of the Fund's
Class B shares. Such total rate of return quotations may be accompanied by
quotations

24
<PAGE> 32

which do not reflect the reduction in value of the initial investment due to the
sales charge or the deduction of a CDSC, and which will thus be higher. All
performance quotations are based on historical performance and are not intended
to indicate future performance. Yield reflects only net portfolio income as of a
stated period of time and current distribution rate reflects only the rate of
distributions paid by the Fund over a stated (period of) time, while total rate
of return reflects all components of investment return over a stated period of
time. The Fund's quotations may from time to time be used in advertisements,
shareholder reports or other communications to shareholders. For a discussion of
the manner in which the Fund will calculate its yield, current distribution rate
and total rate of return, see the Statement of Additional Information. In
addition to information provided in shareholder reports, the Fund may, in its
discretion, from time to time, make a list of all or a portion of its holdings
available to investors upon request.

7. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Fund, should contact the Shareholder
Servicing Agent (see back cover for address and phone number).

ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account. At the
end of each calendar year, each shareholder will receive income tax information
regarding reportable dividends and distributions for that year, including
whether any portion represents a return of capital (see "Tax Status").

DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:

-- Dividends and capital gain distributions reinvested in additional shares.
This option will be assigned if no other option is specified;

-- Dividends (including short-term capital gains) in cash; long-term capital
gain distributions reinvested in additional shares;

-- Dividends and capital gain distributions in cash.

Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gain
distributions in amounts less than $10 will automatically be reinvested in
additional shares of the Fund. Any request to change a distribution option must
be received by the Shareholder Servicing Agent by the record date for a dividend
or distribution in order to be effective for that dividend or distribution. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.

INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Fund makes available the following programs designed to enable shareholders to
add to their investment in an account with the Fund or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Fund:

LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the Statement of Additional Information) anticipates purchasing
$100,000 or more of Class A shares of the Fund alone or in combination with
shares of Class B or Class C of the Fund or any of the classes of other MFS
Funds or the MFS Fixed Fund (a bank collective investment fund) within a
13-month period (or a 36-month period for purchases of $1 million or more), the
shareholder may obtain such shares at the same reduced sales charge as though
the total quantity were invested in one lump sum, subject to escrow agreements
and the appointment of an attorney for redemptions from the escrow amount if the
intended purchases are not completed, by completing the Letter of Intent section
of the Account Application.

RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of all classes of shares of
that shareholder in the MFS Funds or MFS Fixed Fund (a bank collective
investment fund) reaches discount level.

25
<PAGE> 33

DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of the Fund
may be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by the Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.

SYSTEMATIC WITHDRAWAL PLAN: A shareholder (except a $3 Million Shareholder)
may direct the Shareholder Servicing Agent to send him (or anyone he designates)
regular periodic payments, as designated on the Account Application and based
upon the value of his account. Each payment under a Systematic Withdrawal Plan
(a "SWP") must be at least $100, except in certain limited circumstances. The
aggregate withdrawals of Class B shares in any year pursuant to a SWP will not
be subject to a CDSC and are generally limited to 10% of the value of the
account at the time of the establishment of the SWP. The CDSC will not be waived
in the case of SWP redemptions of Class A shares which are subject to a CDSC.

DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.

AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
other MFS Funds (and in the case of Class C shares, for shares of MFS Money
Market Fund) under the Automatic Exchange Plan, a dollar cost averaging program.
The Automatic Exchange Plan provides for automatic monthly or quarterly
transfers of funds from the shareholder's account in an MFS Fund for investment
in the same class of shares of other MFS Funds selected by the shareholder.
Under the Automatic Exchange Plan, transfers of at least $50 each may be made to
up to four different funds. A shareholder should consider the objectives and
policies of a fund and review its prospectus before electing to transfer money
into such fund through the Automatic Exchange Plan. No transaction fee is
imposed in connection with transfer transactions under the Automatic Exchange
Plan. However, transfers of shares of MFS Money Market Fund, MFS Government
Money Market Fund or Class A shares of MFS Cash Reserve Fund will be subject to
any applicable sales charge. For federal and (generally) state income tax
purposes, a transfer is treated as a sale of the shares transferred and,
therefore, could result in a capital gain or loss to the shareholder making the
transfer. See the Statement of Additional Information for further information
concerning the Automatic Exchange Plan. Investors should consult their tax
advisers for information regarding the potential capital gain and loss
consequences of transactions under the Automatic Exchange Plan.

Because a dollar cost averaging program involves periodic purchases of shares
regardless of fluctuating share offering prices, a shareholder should consider
his financial ability to continue his purchases through periods of low price
levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares, and because of the
assessment of the CDSC for certain share redemptions in the case of Class A
shares.

TAX-DEFERRED RETIREMENT PLANS -- Except as noted under "Purchases -- Class C
shares," shares of the Fund may be purchased by all types of tax-deferred
retirement plans, including IRAs, SEP-IRA plans, 401(k) plans, 403(b) plans and
other corporate pension and profit-sharing plans. Investors should consult with
their tax adviser before establishing any of the tax-deferred retirement plans
described above.
------------------------

The Fund's Statement of Additional Information, dated April 1, 1994 contains
more detailed information about the Trust and the Fund, including information
related to: (i) the Fund's investment policies and restrictions, including the
purchase and sale of Options, Futures Contracts, Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies; (ii) the Trustees, officers
and investment adviser; (iii) portfolio trading; (iv) the Fund's shares,
including rights and liabilities of shareholders; (v) tax status of dividends
and distributions; (vi) the Distribution Plans; and (vii) various services and
privileges provided by the Fund for the benefit of its shareholders, including
additional information with respect to the exchange privilege.

26
<PAGE> 34

APPENDIX

DESCRIPTION OF OPTIONS, FUTURES CONTRACTS, OPTIONS ON
FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES

OPTIONS ON SECURITIES
An Option provides the purchaser, or "holder," with the right, but not the
obligation, to purchase, in the case of a "call" Option, or sell, in the case of
a "put" Option, the security or securities in connection with which the Option
was written, for a fixed exercise price up to a stated expiration date or, in
the case of certain options, on such date. The holder pays a nonrefundable
purchase price for the Option, known as the "premium." The maximum amount of
risk the purchaser of the Option assumes is equal to the premium plus related
transaction costs, although this entire amount may be lost. The risk of the
seller, or "writer," however, is potentially unlimited, unless the Option is
"covered." A call option written by the Fund is "covered" if the Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash, short-term money market instruments or high quality government
securities in a segregated account with its custodian. A put option written by a
Fund is "covered" if the Fund maintains cash, short-term money market
instruments or high quality debt securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written where the
exercise price of the put held is (a) equal to or greater than the exercise
price of the put written or (b) is less than the exercise price of the put
written if the difference is maintained by the Fund in cash, short-term money
market instruments or high quality debt securities in a segregated account with
its custodian. Put and call options written by a Fund may also be covered in
such other manner as may be in accordance with the requirements of the exchange
on which, or the counter party with which the option is traded, and applicable
laws and regulations. If the writer's obligation is not so covered, it is
subject to the risk of the full change in value of the underlying security from
the time the option is written until exercise.

Upon exercise of the Option, the holder is required to pay the purchase price of
the underlying security, in the case of a call Option, or to deliver the
security in return for the purchase price in the case of a put Option.
Conversely, the writer is required to deliver the security, in the case of a
call Option, or to purchase the security, in the case of a put Option. Options
which have been purchased or written may be closed out prior to exercise or
expiration by entering into an offsetting transaction on the exchange on which
the initial position was established, subject to the availability of a liquid
secondary market.

Effecting a closing transaction in the case of a written call Option permits the
Fund to write another call Option on the underlying security with either a
different exercise price or expiration date or both, or in the case of a written
put Option permits the Fund to write another put Option to the extent that the
exercise price thereof is secured by deposited cash or short-term securities.
Such transactions permit the Fund to generate additional premium income, which
may partially offset declines in the value of portfolio securities or increases
in the cost of securities to be acquired. Also, effecting a closing transaction
permits the cash or proceeds from the concurrent sale of any securities subject
to the Option to be used for other investments of the Fund, provided that
another Option on such security is not written. If the Fund desires to sell a
particular security from its portfolio on which it has written a call Option, it
will effect a closing transaction in connection with the Option prior to or
concurrent with the sale of the security.

The Fund will realize a profit from a closing transaction if the premium paid in
connection with the closing of an Option written by the Fund is less than the
premium received from writing the Option or if the premium received in
connection with the closing of an Option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, the Fund will suffer a loss
if

A-1
<PAGE> 35

the premium paid or received in connection with a closing transaction is more or
less, respectively, than the premium received or paid in establishing the Option
position. Because increases in the market price of a call Option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the closing out of a call Option previously written by the Fund
is likely to be offset in whole or in part by appreciation of the security in
connection with which the Option was written.

Options on securities are traded on national securities exchanges, such as the
Chicago Board Options Exchange and the New York Stock Exchange, which are
regulated by the SEC. The Options Clearing Corporation guarantees the
performance of each clearing member which is a party to a U.S. exchange-traded
option, by in effect taking the opposite side of each such Option. A holder or
writer may engage in transactions in exchange-traded Options only through a
registered broker-dealer which is a member of the exchange on which the Option
is traded.

In addition, as noted in the Prospectus, the Fund may purchase and write Options
traded over-the-counter and on exchanges located outside the United States.

FUTURES CONTRACTS
A Futures Contract is a bilateral agreement providing for the purchase and sale
of a specified type and amount of fixed income securities or foreign currency,
at a stated time in the future for a fixed price. By its terms, a Futures
Contract provides for a specified settlement date on which the fixed income
securities or foreign currency underlying the contract are delivered by the
seller and paid for by the purchaser or, in the case of Futures Contracts on
indexes of securities, on which a cash settlement is made. Futures Contracts
differ from options in that they are bilateral agreements, with both the
purchaser and the seller equally obligated to complete the transaction.

The purchase or sale of a Futures Contract also differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or securities must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
instrument underlying the Futures Contract fluctuates, making positions in the
Futures Contract more or less valuable, a process known as "marking to the
market."

A Futures Contract may be purchased or sold on an exchange, known as a "contract
market," designated by the CFTC for the trading of such contract, and only
through a registered futures commission merchant which is a member of such
contract market. A commission must be paid on each completed purchase and sale
transaction. The contract market clearing house guarantees the performance of
each clearing member which is a party to a Futures Contract, by in effect taking
the opposite side of such Contract. At any time prior to the expiration of a
Futures Contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house, while any profit due to the trader must be
delivered to it. Futures Contracts, as noted, are also traded on foreign
exchanges.

Futures Contracts currently are traded on a variety of fixed income securities,
including long-term U.S. Treasury Bonds, Treasury Notes, modified pass-through
mortgage-backed securities, U.S. Treasury Bills, bank certificates of deposit,
commercial paper and Eurodollar Deposits. Futures Contracts on foreign
currencies currently are traded on the British pound, Canadian dollar, Japanese
yen, Swiss franc and German mark.

OPTIONS ON FUTURES CONTRACTS
An Option on a Futures Contract provides the holder with the right to enter into
a "long" position in the underlying Futures Contract, in the case of a call
option, or a "short" position in the underlying Futures Contract, in the case of
a put option, at a fixed exercise price up to a stated expiration date or, in
the case of certain options, on such date. Upon exercise of the option by the
holder, the contract market clearing house establishes a corresponding short
position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of Futures Contracts, such as payment of margin deposits. In
addition,

A-2
<PAGE> 36

the writer of an Option on a Futures Contract, unlike the holder, is subject to
initial and variation margin requirements on the option position.

A position in an Option on a Futures Contract may be terminated by the purchaser
or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.

An option, whether on a security, a Futures Contract or foreign currency,
becomes worthless to the holder if it expires unexercised. Upon exercise of an
option, the exchange or contract market clearing house, in the case of
exchange-traded options, assigns exercise notices on a random basis to those of
its members which have written options of the same series and with the same
expiration date. A brokerage firm receiving such notices then assigns them on a
random basis to those of its customers which have written options of the same
series and expiration date. A writer therefore has no control over whether an
option will be exercised against it, nor over the timing of such exercise.

A Fund may cover the writing of call Options on Futures Contracts (a) through
purchases of the underlying Futures Contract, (b) through ownership of the
instrument, or instruments included in the index, underlying the Futures
Contract, or (c) through the holding of a call on the same Futures Contract and
in the same principal amount as the call written where the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, short-term money market instruments or high
quality government securities in a segregated account with its custodian. A Fund
may cover the writing of put Options on Futures Contracts (a) through sales of
the underlying Futures Contract, (b) through segregation of cash, short-term
money market instruments or high quality government securities in an amount
equal to the value of the security or index underlying the Futures Contract, or
(c) through the holding of a put on the same Futures Contract and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written, or is less than
the exercise price of the put written if the difference is maintained by the
Fund in cash, short-term money market instruments or high quality government
securities in a segregated account with its custodian. Put and call Options on
Futures Contracts may also be covered in such other manner as may be in
accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Upon the exercise of a call Option on a Futures
Contract written by a Fund, the Fund will be required to sell the underlying
Futures Contract which, if the Fund has covered its obligation through the
purchase of such Contract, will serve to liquidate its futures position.
Similarly, where a put Option on a Futures Contract written by the Fund is
exercised, the Fund will be required to purchase the underlying Futures Contract
which, if the Fund has covered its obligation through the sale of such Contract,
will close out its futures position. An Option on a Futures Contract is traded
on the same contract market as the underlying Futures Contract, subject to
regulation by the CFTC and the performance guarantee of the exchange clearing
house. Options on Futures Contracts, as noted in the Prospectus, are also traded
on foreign exchanges.

FORWARD CONTRACTS
A Forward Contract is a contractual obligation to purchase or sell a specified
quantity of a given foreign currency for a fixed exchange rate at a future date.
Forward Contracts are individually negotiated and are traded through the
"interbank currency market," an informal network of banks and brokerage firms
which operates around the clock and throughout the world. Transactions in the
interbank market may be executed only through financial institutions acting as
market-makers in the interbank market, or through brokers executing purchases
and sales through such institutions. Market-makers in the interbank market
generally act as principals in taking the opposite side of their customers'
positions in Forward Contracts and ordinarily charge a mark-up or commission,
which may be included in the cost of the Contract. In addition, market-makers
may require their customers to deposit collateral upon entering into a Forward
Contract, as security for the customer's obligation to make or receive delivery
of currency, and to deposit additional collateral if exchange rates move
adversely to the customer's position. Such deposits may function in a manner
similar to the margining of Futures Contracts.

A-3
<PAGE> 37

Prior to the stated maturity date of a Forward Contract, it may be possible to
liquidate the transaction by entering into an offsetting Contract. In order to
do so, however, it may be necessary to maintain both Contracts as open positions
until maturity and to make or receive a settlement of the difference owed to or
from the market-maker or broker at that time.

OPTIONS ON FOREIGN CURRENCIES
An Option on Foreign Currency provides the holder with the right, but not the
obligation, to purchase (in the case of a call), or to sell (in the case of a
put) a specific quantity of a given currency at a fixed exercise price up to a
stated expiration date. The writer of the option is obligated to sell (in the
case of a call) or to purchase (in the case of a put) the underlying currency at
the exercise price, upon the holder's exercise of the option. As in the case of
Options or Options on Futures Contracts, the holder pays a nonrefundable premium
for the Option on Foreign Currency which, in addition to transaction costs,
represents the maximum risk to which the holder may be exposed. The writer,
however, may be subject to initial and variation margin requirements, and to the
full risk of a change in value of the underlying currency, unless its position
is covered through ownership of the underlying currency or in some other manner.
Nevertheless, there can be no assurance that such cover will adequately protect
the writer against loss. Options on Foreign Currency written by the Fund will
generally be covered in a manner similar to the covering of other types of
options.

Options on Foreign Currencies are traded over-the-counter, on United States
securities exchanges regulated by the SEC and on exchanges located in foreign
countries.

A-4
<PAGE> 38
- --------------------------------------------------------------------------------
THE MFS FAMILY OF FUNDS[R] -- America's Oldest Mutual Fund Group
- --------------------------------------------------------------------------------

<TABLE>
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privelege and all cahrges and
expenses, plese contact your financial adviser or call the MFS Service Center
at 1-800-225-2606 any business day from 8 a.m. to 8 p.m. Eastern time. This
material should be read carefully before investing or sending money.

<CAPTION>
- ----------------------------------------- -----------------------------------------
STOCK FUNDS BOND FUNDS
- ----------------------------------------- -----------------------------------------
<S> <C>
Massachusetts Investors Trust MFS[R] Bond Fund
- ----------------------------------------- -----------------------------------------
Massachusetts Investors Growth Stock Fund MFS[R] Government Limited Maturity Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Capital Growth Fund MFS[R] Government Mortgage Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Emerging Growth Fund* MFS[R] Government Securities Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Gold & Natural Resources Fund MFS[R] High Income Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Growth Opportunities Fund MFS[R] Income & Opportunity Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Managed Sectors Fund MFS[R] Intermediate Income Fund
- ----------------------------------------- -----------------------------------------
MFS[R] OTC Fund MFS[R] Limited Maturity Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Research Fund MFS[R] World Governments Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Value Fund
- ----------------------------------------- -----------------------------------------
MFS[R] World Equity Fund TAX-FREE BOND FUNDS
- ----------------------------------------- -----------------------------------------
MFS[R] World Growth Fund MFS[R] Municipal Bond Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Municipal High Income Fund**
- ----------------------------------------- -----------------------------------------
STOCK AND BOND FUNDS MFS[R] Municipal Income Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Total Return Fund MFS[R] Municipal Limited Maturity Fund
- ----------------------------------------- -----------------------------------------
MFS[R] Utilities Fund MFS[R] Municipal Series Trust (AL, AR, CA,
- ----------------------------------------- FL, GA, LA, MD, MA, MS, NY, NC, PA, SC,
MFS[R] World Total Return Fund TN, TX, VA, WA, WV)
- ----------------------------------------- -----------------------------------------

-----------------------------------------
MONEY MARKET FUNDS
-----------------------------------------
MFS[R] Cash Reserve Fund
-----------------------------------------
MFS[R] Government Money Market Fund
-----------------------------------------
MFS[R] Money Market Fund
-----------------------------------------

<FN>
* Closed to new investors, commencing January 14, 1994.
** Closed to new investors.
</TABLE>

<PAGE> 39

--------------------------------
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
MFS(R)
DISTRIBUTOR WORLD
MFS Financial Services, Inc. GOVERNMENTS
500 Boylston Street, Boston, MA 02116 FUND
(617) 954-5000

CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606

MAILING ADDRESS:
P.O. Box 2281, Boston, MA 02107-9906

INDEPENDENT ACCOUNTANTS
Ernst & Young
200 Clarendon Street
Boston, MA 02116
[LOGO]

PROSPECTUS

APRIL 1, 1994

[LOGO]

MFS(R) WORLD
GOVERNMENTS FUND

--------------------------------
500 Boylston Street, Boston, MA 02116

<PAGE> 40
MFS [LOGO -- The First Name in Mutual Funds -- Since 1924]

<TABLE>
<CAPTION>
MFS(R) WORLD STATEMENT OF
GOVERNMENTS FUND ADDITIONAL INFORMATION
(A member of the MFS Family of Funds[R]) April 1, 1994
- --------------------------------------------------------------------------------------------------
Page
----
<S> <C> <C>
1. Definitions........................................................................... 2
2. Investment Objective, Policies and Restrictions....................................... 2
3. Management of the Fund................................................................ 11
Trustees.......................................................................... 11
Officers.......................................................................... 12
Investment Adviser................................................................ 12
Custodian......................................................................... 13
Shareholder Servicing Agent....................................................... 14
Distributor....................................................................... 14
4. Portfolio Transactions and Brokerage Commissions...................................... 15
5. Shareholder Services.................................................................. 16
Investment and Withdrawal Programs................................................ 16
Exchange Privilege................................................................ 18
Tax-Deferred Retirement Plans..................................................... 19
6. Tax Status............................................................................ 19
7. Determination of Net Asset Value and Performance...................................... 21
8. Distribution Plans.................................................................... 23
9. Description of Shares, Voting Rights and Liabilities.................................. 25
10. Independent Accountants and Financial Statements...................................... 26
</TABLE>

MFS WORLD GOVERNMENTS FUND
A Series of MFS Series Trust VII
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000

This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Fund's
Prospectus, dated April 1, 1994. This Statement of Additional Information should
be read in conjunction with the Prospectus, a copy of which may be obtained
without charge by contacting the Shareholder Servicing Agent (see back cover for
address and phone number).

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE> 41
1. DEFINITIONS

"Fund" -- MFS World Governments Fund, America's first global
bond fund, is a series of MFS Series Trust VII (the
"Trust"), a Massachusetts business trust. The Fund
was known as "Massachusetts Financial International
Trust -- Bond Portfolio" until its name was changed
effective November 1, 1990, as MFS Worldwide
Governments Trust until its name was changed on
August 3, 1992, and as MFS Worldwide Governments Fund
until its name was changed on August 17, 1993.
"MFS" or the "Adviser" -- Massachusetts Financial Services Company, a Delaware
corporation.
"FSI" -- MFS Financial Services, Inc., a Delaware corporation.
"Prospectus" -- The Prospectus, dated April 1, 1994 of the Fund.

2. INVESTMENT OBJECTIVE, POLICIES AND
RESTRICTIONS

INVESTMENT OBJECTIVE. The Fund's investment objective is to seek not only
preservation, but also growth of capital, together with moderate current income.
There can be no assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES. The Fund seeks to achieve its investment objective through
a professionally managed, internationally diversified portfolio consisting
primarily of debt securities and to a lesser extent equity securities and gold.
The Prospectus contains a discussion of the various types of securities in which
the Fund may invest and certain risks involved in such investments.

Under normal economic or market conditions at least 80% of the Fund's portfolio
is invested in debt securities. Up to 20% of the Fund's assets may be invested
in equity securities. The Fund may invest up to 10% of its total assets in gold.
Although the Fund has the power to buy gold, the Fund has undertaken with
certain state securities commissions not to purchase gold. Therefore, the Fund
will not purchase gold until the state regulatory authorities amend their
position with respect to its purchase or until the Fund withdraws from these
states.

The Fund may invest up to 100% (and expects generally to invest between 10% and
80%) of its total assets in foreign securities (not including American
Depositary Receipts). The percentage of the Fund's assets invested in securities
issued abroad and denominated in foreign currencies ("non-dollar securities")
will vary depending on the state of the economies of the principal countries of
the world, their financial markets and the relationship of their currencies to
the U.S. dollar. The Prospectus contains a discussion of the various risks
associated with investments in non-dollar securities. The Adviser will determine
the amount of the Fund's assets to be invested in the United States and the
amount to be invested abroad. The U.S. assets will be invested in high quality
debt securities and the remainder of the assets will be diversified among
countries where opportunities for total return are expected to be most
attractive. It is currently expected that investments within foreign countries
will be primarily in government securities to minimize credit risks. The Fund
has registered as a "non-diversified" investment company so that, subject to
certain tax requirements, it will be able to invest more than 5% of its assets
in the obligations of each of one or more foreign government issuers. (A
"diversified" investment company would be required under the Investment Company
Act of 1940, as amended (the "1940 Act"), to maintain at least 75% of its assets
in cash (including foreign currency), cash items, U.S. Government securities and
other securities, limited per issuer to blocks of less than 5% of the investment
company's total assets.) The Fund does not believe that the credit risk inherent
in the obligations of stable foreign governments is significantly greater than
that of U.S. Government obligations. The portfolio will be managed actively and
the asset allocations modified as the Adviser deems necessary.

The Fund may invest in equity securities issued by foreign companies. As
discussed in the Prospectus, investing in foreign securities generally
represents a greater degree of risk than investing in domestic securities, due
to possible exchange rate fluctuations, less publicly available information,
more volatile markets, less securities regulation, less favorable tax
provisions, war or expropriation. As a result of its investments in foreign
securities, the Fund may receive interest or dividend payments, or the proceeds
of the sale or redemption of such securities, in the foreign currencies in which
such securities are denominated.

Investments in non-dollar securities are evaluated primarily on the strength of
a particular currency against the dollar and on the interest rate climate of
that country. Currency is judged on the basis of fundamental economic criteria
(e.g., relative inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and political data.
In addition to the foregoing, interest rates are evaluated on the basis of
differentials or anomalies that may exist between different countries.

Although the Fund does not intend to seek short-term profits, securities in its
portfolio will be sold whenever the Adviser

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believes it is appropriate to do so without regard to the length of time the
particular asset may have been held. A high turnover rate involves greater
expenses to the Fund. The Fund engages in portfolio trading if it believes a
transaction net of costs (including custodian charges) will help in achieving
its investment objective. See "Portfolio Transactions and Brokerage Commissions"
below.

AMERICAN DEPOSITARY RECEIPTS: American Depositary Receipts are certificates
issued by a U.S. depository (usually a bank) and represent a specified quantity
of shares of an underlying non-U.S. stock on deposit with a custodian bank as
collateral. ADRs may be sponsored or unsponsored. A sponsored ADR is issued by a
depository which has an exclusive relationship with the issuer of the underlying
security. An unsponsored ADR may be issued by any number of U.S. depositories.
The Fund may invest in either type of ADR. Although the U.S. investor holds a
substitute receipt of ownership rather than direct stock certificates, the use
of the depository receipts in the United States can reduce costs and delays as
well as potential currency exchange and other difficulties. The Fund may
purchase securities in local markets and direct delivery of these ordinary
shares to the local depository of an ADR agent bank in the foreign country.
Simultaneously, the ADR agents create a certificate which settles at the Fund's
custodian in five days. The Fund may also execute trades on the U.S. markets
using existing ADRs. A foreign issuer of the security underlying an ADR is
generally not subject to the same reporting requirements in the United States as
a domestic issuer. Accordingly the information available to a U.S. investor will
be limited to the information the foreign issuer is required to disclose in its
own country and the market value of an ADR may not reflect undisclosed material
information concerning the issuer of the underlying security. ADRs may also be
subject to exchange rate risks if the underlying foreign securities are
denominated in foreign currency.

MORTGAGE PASS-THROUGH SECURITIES: The Fund may invest in mortgage pass-through
securities as described in the Prospectus. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by prepayments of principal resulting from the sale,
refinancing or foreclosure of the underlying property, net of fees or costs
which may be incurred. Some mortgage pass-through securities (such as securities
issued by the Government National Mortgage Association ("GNMA")) are described
as "modified pass-through." These securities entitle the holder to receive all
interests and principal payments owed on the mortgages in the mortgage pool, net
of certain fees, at the scheduled payment dates regardless of whether the
mortgagor actually makes the payment.

The principal governmental guarantor of mortgage pass-through securities is the
GNMA. GNMA is a wholly owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of Federal Housing Authority-insured or Veterans Administration-guaranteed
mortgages. These guarantees, however, do not apply to the market value or yield
of mortgage pass-through securities. GNMA securities are often purchased at a
premium over the maturity value of the underlying mortgages. This premium is not
guaranteed and will be lost if prepayment occurs.

Government-related guarantors (i.e., whose guarantees are not backed by the full
faith and credit of the U.S. Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional residential mortgages (i.e.,
mortgages not insured or guaranteed by any governmental agency) from a list of
approved seller/services which include state and federally-chartered savings and
loan associations, mutual savings banks, commercial banks, credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment by FNMA of principal and interest.

FHLMC was created by Congress in 1970 as a corporate instrumentality of the U.S.
Government for the purpose of increasing the availability of mortgage credit for
residential housing. FHLMC issues Participation Certificates ("PCs") which
represent interest in conventional mortgages (i.e., not federally insured or
guaranteed) from FHLMC's national portfolio. FHLMC guarantees timely payment of
interest and ultimate collection of principal regardless of the status of the
underlying mortgage loans.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: The
Fund may invest a portion of its assets in collateralized mortgage obligations
or "CMOs," which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Typically, CMOs are collateralized by
certificates issued by the GNMA, FNMA or FHLMC, but also may be collateralized
by whole loans or private mortgage pass-through securities (such collateral
collectively hereinafter referred to as "Mortgage Assets"). The Fund may also
invest a portion of its assets in multiclass pass-through securities which are
equity interests in a trust composed of Mortgage Assets. Unless the context
indicates otherwise, all references herein to CMOs include multiclass
pass-through securities. Payments of principal of and interest on the Mortgage
Assets, and any reinvestment income thereon, provide the funds to pay debt
service on the CMOs or make scheduled distributions on the multiclass
pass-through securities. CMOs may be issued by agencies or instrumentalities of
the United States government or

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<PAGE> 43

by private originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. The issuer of a series of CMOS
may elect to be treated as a Real Estate Mortgage Investment Conduit (a
"REMIC").

In a CMO, a series of bonds or certificates are usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates, resulting in a loss of all
or a part of the premium if any has been paid. Interest is paid or accrues on
all classes of the CMOs on a monthly, quarterly or semiannual basis. The
principal of and interest on the Mortgage Assets may be allocated among the
several classes of a series of a CMO in innumerable ways. In a common structure,
payments of principal, including any principal prepayments, on the Mortgage
Assets are applied to the classes of the series of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment of
principal will be made on any class of CMOs until all other classes having an
earlier stated maturity or final distribution date have been paid in full.
Certain CMOs may be stripped (securities which provide only the principal or
interest factor of the underlying security). See "Stripped Mortgage-Backed
Securities" below for a discussion of the risks of investing in these stripped
securities and of investing in classes consisting primarily of interest payments
or principal payments.

The Fund may also invest in parallel pay CMOs and Planned Amortization Class
CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of
principal on each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated maturity date or final
distribution date of each class, which, as with other CMO structures, must be
retired by its stated maturity date or final distribution date, but may be
retired earlier. PAC Bonds generally require payments of a specified amount of
principal on each payment date. PAC Bonds are always parallel pay CMOs with the
required principal payment on such securities having the highest priority after
interest has been paid to all classes.

SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions from a pool of mortgage assets. The
Fund will only invest in SMBS whose mortgage assets are issued or guaranteed by
the U.S. Government, its agencies, authorities or instrumentalities. A common
type of SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive most of
the interest and the remainder of the principal. In the most extreme case, one
class will receive all of the interest (the interest only or "IO" class) while
the other class will receive all of the principal (the principal only or "PO"
class). The yield to maturity on an IO is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying Mortgage
Assets, and a rapid rate of principal payments may have a material adverse
effect on such security's yield to maturity. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the Fund may fail
to fully recoup its initial investment in these securities. The market value of
the class consisting primarily or entirely of principal payments generally is
unusually volatile in response to changes in interest rates.

REPURCHASE AGREEMENTS: As described in the Prospectus, the Fund may enter into
repurchase agreements with sellers who are member firms (or subsidiaries
thereof), of the New York Stock Exchange or members of the Federal Reserve
System, recognized primary U.S. Government securities dealers or institutions
which the Adviser has determined to be of comparable creditworthiness. The
securities that the Fund purchases and holds through its agent are U.S.
Government securities, the values of which are equal to or greater than the
repurchase price agreed to be paid by the seller. The repurchase price may be
higher than the purchase price, the difference being income to the Fund, or the
purchase and repurchase prices may be the same, with interest at a standard rate
due to the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the U.S.
Government securities.

The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, the Fund will have the right to liquidate the securities. If at the time
the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.

LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans would be required to be secured continuously by collateral in cash,
cash equivalents or U.S. Treasury securities maintained on a current basis at an
amount at least equal to the market value of the securities

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loaned. The Fund would have the right to call a loan and obtain the securities
loaned at any time on customary industry settlement notice (which will usually
not exceed five days). During the existence of a loan, the Fund would continue
to receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation based on investment of the
collateral. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter affecting
the investment. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which could be earned currently from securities loans
of this type justifies the attendant risk. If the Adviser determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the value of the Fund's total assets.

MORTGAGE "DOLLAR ROLL" TRANSACTIONS: As described in the Prospectus, the Fund
may enter into mortgage "dollar roll" transactions pursuant to which it sells
mortgage-backed securities for delivery in the future and simultaneously
contracts to repurchase substantially similar securities on a specified future
date. During the roll period, the Fund foregoes principal and interest paid on
the mortgage-backed securities. The Fund is compensated for the lost interest by
the difference between the current sales price and the lower price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. The Fund may also be
compensated by receipt of a commitment fee.

OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options on
securities ("Options") and purchase call and put Options. The Fund may write
Options for the purpose of increasing its return and for hedging purposes. In
particular, if the Fund writes an Option which expires unexercised or is closed
out by the Fund at a profit, the Fund retains the premium paid for the Option
less related transaction costs, which increases its gross income and offsets in
part the reduced value of the portfolio security in connection with which the
Option is written, or the increased cost of portfolio securities to be acquired.
In contrast, however, if the price of the security underlying the Option moves
adversely to the Fund's position, the Option may be exercised and the Fund will
then be required to purchase or sell the security at a disadvantageous price,
which might only partially be offset by the amount of the premium.

The Fund may write Options in connection with buy-and-write transactions; that
is, the Fund may purchase a security and then write a call Option against that
security. The exercise price of the call Option the Fund determines to write
depends upon the expected price movement of the underlying security. The
exercise price of a call Option may be below ("in-the-money"), equal to
("at-the-money") or above ("out-of-the-money") the current value of the
underlying security at the time the Option is written.

The writing of covered put Options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put Options may be used by the
Fund in the same market environments in which call Options are used in
equivalent buy-and-write transactions.

The Fund may also write combinations of put and call Options on the same
security, a practice known as a "straddle." By writing a straddle, the Fund
undertakes a simultaneous obligation to sell or purchase the same security in
the event that one of the Options is exercised. If the price of the security
subsequently rises sufficiently above the exercise price to cover the amount of
the premium and transaction costs, the call will likely be exercised and the
Fund will be required to sell the underlying security at a below market price.
This loss may be offset, however, in whole or in part, by the premiums received
on the writing of the two Options. Conversely, if the price of the security
declines by a sufficient amount, the put will likely be exercised. The writing
of straddles will likely be effective, therefore, only where the price of a
security remains stable and neither the call nor the put is exercised. In an
instance where one of the Options is exercised, the loss on the purchase or sale
of the underlying security may exceed the amount of the premiums received.

By writing a call Option on a portfolio security, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the Option. By writing a put Option, the
Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price above its then current market value, resulting in
a loss unless the security subsequently appreciates in value. The writing of
Options will not be undertaken by the Fund solely for hedging purposes, and may
involve certain risks which are not present in the case of hedging transactions.
Moreover, even where Options are written for hedging purposes, such transactions
will constitute only a partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be acquired, up to
the amount of the premium.

The Fund may also purchase put and call Options. Put Options are purchased to
hedge against a decline in the value of securities held in the Fund's portfolio.
If such a decline occurs, the put Options will permit the Fund to sell the
securities underlying such Options at the exercise price, or to close out the
Options at a profit. The Fund will purchase call Options to hedge against an
increase in the price of securities that the Fund anticipates purchasing in the
future. If such an increase occurs, the call Option will permit the Fund to
purchase the securities underlying such Option at the exercise price or to close
out the Option at a profit. The premium paid for a call or put Option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the Option, and, unless the price of the underlying security rises
or declines sufficiently, the Option may expire worthless to the Fund. In
addition, in the event that

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<PAGE> 45

the price of the security in connection with which an Option was purchased moves
in a direction favorable to the Fund, the benefits realized by the Fund as a
result of such favorable movement will be reduced by the amount of the premium
paid for the Option and related transaction costs.

YIELD CURVE OPTIONS: The Fund may also enter into options on the yield "spread,"
or yield differential between two securities, transactions referred to as a
"yield curve" options. In contrast to other types of options, a yield curve
option is based on the difference between the yields of designated securities,
rather than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease.

Yield curve options may be used for the same purposes as other options on
securities. Specifically, the Fund may purchase or write such options for
hedging purposes. For example, a Fund may purchase a call option on the yield
spread between two securities, if it owns one of the securities and anticipates
purchasing the other security and wants to hedge against an adverse change in
the yield spread between the two securities. The Fund may also purchase or write
yield curve options for other than hedging purposes (i.e., in an effort to
increase its current income) if, in the judgment of the Adviser, the Fund will
be able to profit from movements in the spread between the yields of the
underlying securities. The trading of yield curve options is subject to all of
the risks associated with the trading of other types of options. In addition,
however, such options present risk of loss even if the yield of one of the
underlying securities remains constant, if the spread moves in a direction or to
an extent which was not anticipated. Yield curve options written by the Fund
will be "covered." A call (or put) option is covered if the Fund holds another
call (or put) option on the spread between the same two securities and maintains
in a segregated account with its custodian cash or cash equivalents sufficient
to cover the Fund's net liability under the two options. Therefore, the Fund's
liability for such a covered option is generally limited to the difference
between the amount of the Fund's liability under the option written by the Fund
less the value of the option held by the Fund. Yield curve options may also be
covered in such other manner as may be in accordance with the requirements of
the counter party with which the option is traded and applicable laws and
regulations. Yield curve options are traded over-the-counter and because they
have been only recently introduced, established trading markets for these
securities have not yet developed.

While Futures Contracts provide for the delivery of securities or currencies,
such deliveries are very seldom made. Generally, a Futures Contract is
terminated by entering into an offsetting transaction. The Fund will incur
brokerage fees when it purchases and sells Futures Contracts. At the time such a
purchase or sale is made, the Fund must allocate cash or securities as a margin
deposit ("initial deposit"). It is expected that the initial deposit will vary
but may be as low as 5% or less of the value of the contract. The Futures
Contract is valued daily thereafter and the payment of "variation margin" may be
required to be paid or received, so that each day the Fund may provide or
receive cash that reflects the decline or increase in the value of the contract.

The purpose of the purchase or sale of a Futures Contract, in the case of a
portfolio holding long-term debt securities, is to attempt to protect the Fund
from fluctuations in interest rates without actually buying or selling longterm
debt securities. For example, if the Fund owned long-term bonds and interest
rates were expected to increase, the Fund might enter into Futures Contracts for
the sale of debt securities. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of the Fund's
Futures Contracts should increase at approximately the same rate, thereby
keeping the net asset value of the Fund from declining as much as it otherwise
would have. The Fund could accomplish similar results by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase or by buying bonds with long maturities and selling bonds
with short maturities when interest rates are expected to decline. However,
since the futures market is more liquid than the cash market, the use of Futures
Contracts as an investment technique allows the Fund to maintain a defensive
position without having to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to hedge against anticipated purchases of long-term
bonds at higher prices. Since the fluctuations in the value of Futures Contracts
should be similar to that of long-term bonds, the Fund could take advantage of
the anticipated rise in the value of long-term bonds without actually buying
them until the market had stabilized. At that time, the Futures Contracts could
be liquidated and the Fund could buy long-term bonds on the cash market.
Purchases of Futures Contracts would be particularly appropriate when the cash
flow from the sale of new shares of the Fund could have the effect of diluting
dividend earnings. To the extent the Fund enters into Futures Contracts for this
purpose, the assets in the segregated asset account maintained to cover the
Fund's obligations with respect to such Futures Contracts will consist of cash,
cash equivalents or short-term money market instruments from the portfolio of
the Fund in an amount equal to the difference

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<PAGE> 46

between the fluctuating market value of such Futures Contracts and the aggregate
value of the initial and variation margin payments made by the Fund with respect
to such Futures Contracts, thereby assuring that the transactions are
unleveraged.

Futures Contracts on foreign currencies may be used in a similar manner, in
order to protect against declines in the dollar value of portfolio securities
denominated in foreign currencies, or increases in the dollar value of
securities to be acquired.

A Futures Contract on an index of securities provides for the making and
acceptance of a cash settlement based on changes in value of the underlying
index. The index underlying a Futures Contract is a broad based index of
fixed-income securities designed to reflect movements in the relevant market as
a whole. The Fund may also enter into Futures Contracts for non-hedging
purposes, to the extent permitted by applicable law.

OPTIONS ON FUTURES CONTRACTS: The Fund may write and purchase options to buy or
sell Futures Contracts ("Options on Futures Contracts"). The writing of a call
Option on a Futures Contract may constitute a partial hedge against declining
prices of the security or currency underlying the Futures Contract. If the
futures price at expiration of the option is below the exercise price, the Fund
will retain the full amount of the option premium, less related transaction
costs, which provides a partial hedge against any decline that may have occurred
in the Fund's portfolio holdings. The writing of a put Option on a Futures
Contract may constitute a partial hedge against increasing prices of the
security or currency underlying the Futures Contract. If the futures price at
expiration of the option is higher than the exercise price, the Fund will retain
the full amount of the option premium, less related transaction costs, which
provides a partial hedge against any increase in the price of securities which
the Fund intends to purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing Options on Futures Contracts may to
some extent be reduced or increased by changes in the value of portfolio
securities.

The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline, a rise in interest rates or a
decline in the dollar value of foreign currencies in which portfolio securities
are denominated, the Fund may, in lieu of selling Futures Contracts, purchase
put options thereon. In the event that such decrease in portfolio value occurs,
it may be offset, in whole or part, by a profit on the option. Conversely, where
it is projected that the value of securities to be acquired by the Fund will
increase prior to acquisition, due to a market advance, or a decline in interest
rates or a rise in the dollar value of foreign currencies in which securities to
be acquired are denominated, the Fund may purchase call Options on Futures
Contracts, rather than purchasing the underlying Futures Contracts. As in the
case of Options, the writing of Options on Futures Contracts may require the
Fund to forgo all or a portion of the benefits of favorable movements in the
price of portfolio securities, and the purchase of Options on Futures Contracts
may require the Fund to forego all or a portion of such benefits up to the
amount of the premium paid and related transaction costs. The Fund may also
enter into Options on Futures Contracts for non-hedging purposes, to the extent
permitted by applicable law.

FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts for the purchase or sale of a specific currency at a future date at a
price set at the time of the contract (a "Forward Contract"). The Fund may enter
into Forward Contracts for hedging purposes as well as for non-hedging purposes.
The Fund may also enter into Forward Contracts for "cross hedging" as noted in
the Prospectus. Transactions in Forward Contracts entered into for hedging
purposes will include forward purchases or sales of foreign currencies for the
purpose of protecting the dollar value of securities denominated in a foreign
currency or protecting the dollar equivalent of interest or dividends to be paid
on such securities. By entering into such transactions, however, the Fund may be
required to forgo the benefits of advantageous changes in exchange rates. The
Fund may also enter into transactions in Forward Contracts for other than
hedging purposes which presents greater profit potential but also involves
increased risk. For example, if the Adviser believes that the value of a
particular foreign currency will increase or decrease relative to the value of
the U.S. dollar, the Fund may purchase or sell such currency, respectively,
through a Forward Contract. If the expected changes in the value of the currency
occur, the Fund will realize profits which will increase its gross income. Where
exchange rates do not move in the direction or to the extent anticipated,
however, the Fund may sustain losses which will reduce its gross income. Such
transactions, therefore, could be considered speculative.

The Fund has established procedures consistent with statements by the SEC and
its staff regarding the use of Forward Contracts by registered investment
companies, which require the use of segregated assets or "cover" in connection
with the purchase and sale of such contracts. In those instances in which the
Fund satisfies this requirement through segregation of assets, it will maintain,
in a segregated account, cash, cash equivalents or high grade debt securities,
which will be marked to market on a daily basis, in an amount equal to the value
of its commitments under Forward Contracts.

OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write put and call
options on foreign currencies ("Options on Foreign Currencies") for the purpose
of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to be
acquired. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the

7
<PAGE> 47

Fund may purchase put options on the foreign currency. If the value of the
currency did decline, the Fund would have the right to sell such currency for a
fixed amount in dollars and would thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Fund deriving from purchases of foreign currency options would be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in foreign currency
options which would require it to forgo a portion or all of the benefits of
advantageous changes in such rates.

The Fund may write Options on Foreign Currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates
it may, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurred, the option would most likely not be
exercised, and the diminution in value of portfolio securities would be offset
by the amount of the premium received less related transaction costs. As in the
case of other types of options, therefore, the writing of Options on Foreign
Currencies will constitute only a partial hedge.

SWAPS AND RELATED TRANSACTIONS: The Fund may enter into interest rate swaps,
currency swaps and other types of available swap agreements, such as caps,
collars and floors.

Swap agreements may be individually negotiated and structured to include
exposure to a variety of different types of investments or market factors.
Depending on their structure, swap agreements may increase or decrease the
Fund's exposure to long or short-term interest rates (in the U.S. or abroad),
foreign currency values, mortgage securities, corporate borrowing rates, or
other factors such as securities prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. The Fund is not
limited to any particular form or variety of swap agreement if MFS determines it
is consistent with the Fund's investment objective and policies.

The Fund will maintain cash or appropriate liquid assets with its custodian to
cover its current obligations under swap transactions. If the Fund enters into a
swap agreement on a net basis (i.e., the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments), the Fund will maintain cash or liquid assets with its
Custodian with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis, it will maintain cash or liquid assets with
a value equal to the full amount of the Fund's accrued obligations under the
agreement.

The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, currency or other factor
that determines the amount of payments to be made under the arrangement. If MFS
is incorrect in its forecasts of such factors, the investment performance of the
Fund would be less than what it would have been if these investment techniques
had not been used. If a swap agreement calls for payments by the Fund, the Fund
must be prepared to make such payments when due. In addition, if the
counter-party's creditworthiness declined, the value of the swap agreement would
be likely to decline, potentially resulting in losses. If the counterparty
defaults, the Fund's risk of loss consists of the net amount of payments that
the Fund is contractually entitled to receive. The Fund anticipates that it will
be able to eliminate or reduce its exposure under these arrangements by
assignment or other disposition or by entering into an offsetting agreement with
the same or another counterparty.

RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts, and Forward
Contracts will depend on the degree to which price movements in the underlying
instruments correlate with price movements in the relevant portion of the Fund's
portfolio. If the values of portfolio securities being hedged do not move in the
same amount or direction as the instruments underlying options, Futures
Contracts or Forward Contracts traded, the Fund's hedging strategy may not be
successful and the Fund could sustain losses on its hedging strategy which would
not be offset by gains on its portfolio. It is also possible that there may be a
negative correlation between the instrument underlying an option, Future
Contract or Forward Contract traded and the portfolio securities being hedged,
which could result in losses both on the hedging transaction and the portfolio
securities. In such instances, the Fund's overall return could be less than if
the hedging transaction had not been undertaken. In the case of futures and
options based on an index of securities or individual fixed income securities,
the portfolio will not duplicate the components of the index, and in the case of
futures and options on fixed income securities, the portfolio securities which
are being hedged may not be the same type of obligation underlying such
contract. As a result, the correlation probably will not be exact. Consequently,
the Fund bears the risk that the price of the portfolio securities being hedged
will not move in the same amount or direction as the underlying index or
obligation.

The correlation between prices of securities and prices of options, Futures
Contracts or Forward Contracts may be distorted due to differences in the nature
of the markets, such as differences in margin requirements, the liquidity of
such markets and the participation of speculators in the option, Futures
Contract and Forward Contract markets. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction. The

8
<PAGE> 48

trading of Options on Futures Contracts also entails the risk that changes in
the value of the underlying Futures Contract will not be fully reflected in the
value of the option. The risk of imperfect correlation, however, generally tends
to diminish as the maturity or termination date of the option, Futures Contract
or Forward Contract approaches.

The trading of options, Futures Contracts and Forward Contracts also entails the
risk that, if the Adviser's judgment as to the general direction of interest or
exchange rates is incorrect, the Fund's overall performance may be poorer than
if it had not entered into any such contract. For example, if the Fund has
hedged against the possibility of an increase in interest rates, and rates
instead decline, the Fund will lose part or all of the benefit of the increased
value of the securities being hedged, and may be required to meet ongoing daily
variation margin payments.

It should be noted that the Fund may purchase and sell Options, Futures
Contracts, Options on Futures Contracts and Forward Contracts not only for
hedging purposes, but also for non-hedging purposes, to the extent permitted by
applicable law, including for the purpose of increasing its return. As a result,
the Fund will incur the risk that losses on such transactions will not be offset
by corresponding increases in the value of portfolio securities or decreases in
the cost of securities to be acquired.

POTENTIAL LACK OF A LIQUID SECONDARY MARKET -- Prior to exercise or expiration,
a position in an exchange-traded Option, Futures Contract, Option on a Futures
Contract or Option on a Foreign Currency can only be terminated by entering into
a closing purchase or sale transaction, which requires a secondary market for
such instruments on the exchange on which the initial transaction was entered
into. If no such market exists, it may not be possible to close out a position,
and the Fund could be required to purchase or sell the underlying instrument or
meet ongoing variation margin requirements. The inability to close out option or
futures positions also could have an adverse effect on the Fund's ability
effectively to hedge its portfolio.

The liquidity of a secondary market in an option or Futures Contract may be
adversely affected by "daily price fluctuation limits," established by the
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. Such limits could prevent the Fund from liquidating open
positions, which could render its hedging strategy unsuccessful and result in
trading losses. The exchanges on which options and Futures Contracts are traded
have also established a number of limitations governing the maximum number of
positions which may be traded by a trader, whether acting alone or in concert
with others. Further, the purchase and sale of exchange-traded options and
Futures Contracts is subject to the risk of trading halts, suspensions, exchange
or clearing corporation equipment failures, government intervention, insolvency
of a brokerage firm, intervening broker or clearing corporation or other
disruptions of normal trading activity, which could make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.

RISKS OF OPTIONS ON FUTURES CONTRACTS -- In order to profit from the purchase of
an Option on a Futures Contract, it may be necessary to exercise the option and
liquidate the underlying Futures Contract, subject to all of the risks of
futures trading. The writer of an Option on a Futures Contract is subject to the
risks of futures trading, including the requirement of initial and variation
margin deposits.

ADDITIONAL RISKS OF TRANSACTIONS RELATED TO FOREIGN CURRENCIES AND TRANSACTIONS
NOT CONDUCTED ON UNITED STATES EXCHANGES -- The available information on which
the Fund will make trading decisions concerning transactions related to foreign
currencies or foreign securities may not be as complete as the comparable data
on which the Fund makes investment and trading decisions in connection with
other transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, and the markets for foreign securities as well as
markets in foreign countries may be operating during non-business hours in the
United States, events could occur in such markets which would not be reflected
until the following day, thereby rendering it more difficult for the Fund to
respond in a timely manner.

In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Fund's position, unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund. This
could make it difficult or impossible to enter into a desired transaction or
liquidate open positions, and could therefore result in trading losses. Further,
over-the-counter transactions are not subject to the performance guarantee of an
exchange clearing house and the Fund will therefore be subject to the risk of
default by, or the bankruptcy of, a financial institution or other counterparty.

Transactions on exchanges located in foreign countries may not be conducted in
the same manner as those entered into on United States exchanges, and may be
subject to different margin, exercise, settlement or expiration procedures.

As a result, many of the risks of over-the-counter trading may be present in
connection with such transactions. Moreover, the SEC or CFTC has jurisdiction
over the trading in the United States of many types of over-the-counter and
foreign instruments, and such agencies could adopt regulations or
interpretations which would make it difficult or impossible for the Fund to
enter into the trading strategies identified herein or to liquidate existing
positions.

As a result of its investments in foreign securities, the Fund may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in foreign currencies. The Fund may also be required to receive
delivery of the foreign currencies underlying options on foreign currencies or
Forward Contracts it has entered into. This could occur, for example, if an
option written by the Fund is exercised or the Fund is unable to close out a
Forward Contract it has entered into. In addition, the Fund may elect to take
delivery of such currencies. Under such circumstances, the Fund may promptly
convert the foreign currencies into dollars at the then current exchange rate.
Alter-

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<PAGE> 49

natively, the Fund may hold such currencies for an indefinite period of time if
the Adviser believes that the exchange rate at the time of delivery is
unfavorable or if, for any other reason, the Adviser anticipates favorable
movements in such rates.

While the holding of currencies will permit the Fund to take advantage of
favorable movements in the applicable exchange rate, it also exposes the Fund to
risk of loss if such rates move in a direction adverse to the Fund's position.
Such losses could also adversely affect the Fund's hedging strategies. Certain
tax requirements may limit the extent to which the Fund will be able to hold
currencies.

In addition, where the Fund enters into Forward Contracts as a "cross hedge"
(i.e., the purchase or sale of a Forward Contract on one currency to hedge
against risk of loss arising from changes in value of a second currency), the
Fund incurs the risk of imperfect correlation between changes in the values of
the two currencies, which could result in losses.

RESTRICTIONS ON THE USE OF OPTIONS AND FUTURES: In order to assure that the Fund
will not be deemed to be a "commodity pool" for purposes of the Commodity
Exchange Act, regulations of the CFTC require that the Fund enter into
transactions in Futures Contracts and options on Futures Contracts only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and premiums on
such non-hedging positions does not exceed 5% of the liquidation value of the
Fund's assets. In addition, the Fund must comply with the requirements of
various state securities laws in connection with such transactions.

The Fund has adopted the additional policy that it will not enter into a Futures
Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Futures Contracts would exceed 50% of the value
of the Fund's total assets. Moreover, the Fund will not purchase put and call
options if, as a result, more than 5% of its total assets would be invested in
such options.

When the Fund purchases a Futures Contract, an amount of cash and cash
equivalents will be deposited in a segregated account with the Fund's custodian
so that the amount so segregated will at all times equal the value of the
Futures Contract, thereby insuring that the use of such Futures is unleveraged.

The policies stated above are not fundamental and may be changed without
shareholder approval, as may the Fund's objective.

INVESTMENT RESTRICTIONS: The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of its
shares (which, as used in this Statement of Additional Information, means the
lesser of (i) more than 50% of the outstanding shares of the Trust or a series
or class, as applicable, or (ii) 67% or more of the outstanding shares of the
Trust or a series or class, as applicable, present at a meeting at which holders
of more than 50% of the outstanding shares of the Trust or a series or class, as
applicable, are represented in person or by proxy):

The Fund may not:

(1) Borrow amounts in excess of 10% of its gross assets, and then only as a
temporary measure for extraordinary or emergency purposes, or pledge, mortgage
or hypothecate its assets (taken at market value) to an extent greater than
33 1/3% of its gross assets, in each case taken at the lower of cost or market
value and subject to a 300% asset coverage requirement (for the purpose of
this restriction, collateral arrangements with respect to Options, Futures
Contracts, Options on Futures Contracts, Forward Contracts and Options on
Foreign Currencies and payments of initial and variation margin in connection
therewith are not considered a pledge of assets);

(2) Underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;

(3) Invest more than 25% of the market value of its total assets in
securities of issuers in any one industry;

(4) Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities (except gold, and then
subject to a limit of 10% of its gross assets) or commodity contracts (except
gold futures/forward contracts, Forward Contracts, Futures Contracts, Options,
Options on Futures Contracts and Options on Foreign Currencies) in the
ordinary course of its business. The Fund reserves the freedom of action to
hold and to sell real estate acquired as a result of the ownership of
securities;

(5) Make loans to other persons except through the lending of its portfolio
securities in accordance with, and to the extent permitted by, its investment
objective and policies and except through repurchase agreements. Not more than
10% of the Fund's assets will be invested in repurchase agreements maturing in
more than seven days. For these purposes the purchase of commercial paper or a
portion of an issue of debt securities shall not be considered the making of a
loan;

(6) Purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of its total assets (taken at market value)
to be invested in the securities of such issuer, other than securities issued
or guaranteed by the U.S. Government, any foreign government or any of their
agencies or instrumentalities;

(7) Purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held by the Fund; or purchase securities of any issuer if
such purchase at the time thereof would cause more than 10% of any class of
securities of such issuer to be held by the Fund. For this purpose all
indebtedness of an issuer shall be

10
<PAGE> 50

deemed a single class and all preferred stock of an issuer shall be deemed a
single class;

(8) Invest for the purpose of exercising control or management;

(9) Purchase securities issued by any closed-end investment company except
by purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market,
is part of a plan of merger or consolidation; provided, however, that the Fund
shall not purchase such securities if such purchase at the time thereof would
cause more than 10% of its total assets (taken at market value) to be invested
in the securities of such issuers, or more than 3% of the total outstanding
voting securities of any closed-end investment company to be held by the Fund.
The Fund shall not purchase securities issued by any open-end investment
company;

(10) Invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years' continuous operation;

(11) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer
or Trustee of the Fund, or is a partner, officer, Director or Trustee of the
Adviser or the Sub-Adviser, if after the purchase of the securities of such
issuer by the Fund one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities, or both, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or both;

(12) Purchase any securities, gold or evidences of interest therein on
margin, except that the Fund may obtain such short-term credit as may be
necessary for the clearance of any transactions and except that the Fund may
make margin deposits in connection with Futures Contracts, Options on Futures
Contracts, Options and Options on Foreign Currencies;

(13) Sell any security which the Fund does not own unless by virtue of its
ownership of other securities the Fund has at the time of sale a right to
obtain securities without payment of further consideration equivalent in kind
and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions; or

(14) Purchase or sell any put or call option or any combination thereof,
provided, that this shall not prevent the purchase, ownership, holding or sale
of contracts for the future delivery of securities, currencies or warrants
where the grantor of the warrants is the issuer of the underlying securities
or the writing and purchasing of puts, calls or combinations thereof with
respect to securities, Futures Contracts and foreign currencies.

As a matter of non-fundamental policy (which may be changed without shareholder
approval), the Fund may not knowingly invest in securities (other than
repurchase agreements maturing in seven days or less) which are subject to legal
or contractual restrictions on resale or for which there is no readily available
market (unless the Board of Trustees has determined that such securities are
liquid based upon trading markets for the specific security) if more than 15% of
the Fund's assets (taken at market value) would be invested in such securities.

Except with respect to Investment Restriction (1), these investment restrictions
are adhered to at the time of purchase or utilization of assets; a subsequent
change in circumstances will not be considered to result in a violation of
policy.

3. MANAGEMENT OF THE FUND

The Board of Trustees provides broad supervision over the affairs of the
Fund.The Adviser is responsible for the investment management of the Fund's
assets,and the officers of the Trust are responsible for the Fund's operations.
The Trustees and officers are listed below, together with their principal
occupations during the past five years. (Their titles may have varied during
that period.)

TRUSTEES

A. KEITH BRODKIN* Chairman and President
Massachusetts Financial Services Company, Chairman and Director

RICHARD B. BAILEY*
Private Investor; Massachusetts Financial Services Company, former Chairman and
Director (until September 30, 1991)

PETER G. HARWOOD
Loomis, Sayles & Co. (investment counsel firm), Financial Vice President,
Treasurer and Director (retired October, 1988)
Address: 211 Lindsay Pond Road, Concord, Massachusetts

J. ATWOOD IVES
Eastern Enterprises (diversified holding company), Chairman and Chief Executive
Officer (since December, 1991); General Cinema Corporation, Vice Chairman and
Chief Financial Officer (until December, 1991); The Neiman Marcus Group, Inc.,
Vice Chairman and Chief Financial Officer (from August, 1987 to December,
1991); Property Capital Trust, Trustee
Address: 9 Riverside Road, Weston, Massachusetts

LAWRENCE T. PERERA
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts

WILLIAM J. POORVU
Harvard University Graduate School of Business Administration, Adjunct
Professor; Director; The Baupost Fund, Chairman and Trustee (since June, 1990)
Address: Harvard Business School, Soldiers Field Road, Cambridge, Massachusetts

CHARLES W. SCHMIDT
Private Investor, Raytheon Company (Diversified Electronics Manufacturer),
Senior Vice President (until December, 1990); OHM Corporation, Director; The
Boston Company, Director, Boston Safe Deposit and Trust Company, Director
Address: 30 Colpitts Road, Weston, Massachusetts

11
<PAGE> 51

ARNOLD D. SCOTT*
Massachusetts Financial Services Company, Senior Executive Vice President and
Secretary

JEFFREY L. SHAMES*
Massachusetts Financial Services Company, President

ELAINE R. SMITH
Independent Consultant; Brigham and Women's Hospital, Executive Vice President
and Chief Operating Officer (from August, 1990 to September, 1992); Ernst &
Young (Accountants), Consultant (from February to July, 1990); Women's College
Hospital, President and Chief Executive Officer (from July, 1988 to January,
1990)
Address: Newton, Massachusetts

DAVID B. STONE
North American Management Corp. (investment adviser) Chairman
Address: Ten Post Office Square, Suite 300, Boston, Massachusetts

OFFICERS

LESLIE J. NANBERG,* Vice President
Massachusetts Financial Services Company, Senior Vice President

STEPHEN C. BRYANT,* Vice President
Massachusetts Financial Services Company, Senior Vice President

W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President and Assistant
Treasurer

STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President and General
Counsel and Assistant Secretary (since December, 1989); The Boston Company
Advisors, Inc., President (prior to December, 1989)

JAMES R. BORDEWICK, JR.,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Associate General
Counsel (since September, 1990); Associate, Ropes & Gray (attorneys) (prior to
August, 1990)

LINDA J. HOARD,* Assistant Secretary
Massachusetts Financial Services Company, Vice President and Assistant General
Counsel

JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President (since June, 1989);
Deloitte & Touche, Manager (prior to June, 1989)
- ---------------

* "Interested persons" (as defined in the 1940 Act) of the Adviser, whose
address is 500 Boylston Street, Boston, Massachusetts 02116.

Each Trustee and officer holds comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor. Mr. Brodkin, the Chairman of FSI, Messrs.
Shames and Scott, Directors of FSI, and Mr. Cavan, the Secretary of FSI, hold
similar positions with certain other MFS affiliates. Mr. Bailey is a Director of
Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)"), the
corporate parent of MFS.

The Trust has adopted a retirement plan for non-interested Trustees. Under this
plan, a Trustee will retire upon reaching age 73 and if the Trustee has
completed at least five years of service, he would be entitled to annual
payments during his lifetime of up to 50% of such Trustee's average annual
compensation (based on the three years prior to his retirement) depending on his
length of service. A Trustee may also retire prior to age 73 and receive reduced
payments if he has completed at least five years of service. Under the plan, a
Trustee (or his beneficiaries) will also receive benefits for a period of time
in the event the Trustee is disabled or dies. These benefits will also be based
on the Trustee's average annual compensation and length of service. There is no
retirement plan provided by the Trust for the interested Trustees. The Fund will
accrue its allocable share of compensation expenses each year to cover current
year's service and amortize past service cost.

As of February 28, 1994, all Trustees and officers as a group owned less than 1%
of the Fund's shares outstanding on that date.

As of March 3, 1994, Merrill Lynch, Pierce, Fenner & Smith, P.O. Box 45286,
Jacksonville, FL 32232-5286, and Smith Barney Shearson Inc., Attn: Mutual Funds,
388 Greenwich Street, 22nd Floor, New York, NY 10013-2375 were the record owners
of approximately 12.37% and 5.79%, respectively, of the outstanding Class A
shares of the Fund. As of March 3, 1994, Merrill Lynch Pierce Fenner & Smith,
P.O. Box 45286, Jacksonville, FL 32232-5286 was the record owner of
approximately 8.37% of the outstanding Class B shares of the Fund. As of March
3, 1994, Applied Laser Systems, 2160 N.W. Vine St., Grants Pass, OR 97526-8439,
Milliken & Michaels Inc., 3850 N. Causeway, 2nd Floor, Metairie, LA 70002-1752,
Beumatic Wholesale & Vending Supply Inc., 6701 Lakeview Ave. South, Richfield,
MN 55423-2153 and Merrill Lynch Pierce Fenner & Smith, P.O. Box 45286,
Jacksonville, Fl 32232-5286 were the record owners of approximately 6.02%,
19.56%, 5.60% and 2.20%, respectively, of the outstanding Class C shares of the
Fund.

The Declaration of Trust provides that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust, unless as
to liability to the Trust or its shareholders, it is determined that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or with respect to any
matter, unless it is adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interests of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined pursuant to the Trust's Declaration of Trust that they have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.

INVESTMENT ADVISER

MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a subsidiary of Sun Life of Canada (U.S.), which is a
subsidiary of Sun Life Assurance Company of Canada ("Sun Life").

The Adviser manages the Fund pursuant to an Investment Advisory Agreement, dated
May 20, 1982 (the "Advisory Agreement"). The Adviser provides the Fund with
overall investment advisory and administrative services, as well as general
office

12
<PAGE> 52

facilities. Subject to such policies as the Trustees may determine, the Adviser
makes investment decisions for the Fund. For these services and facilities, the
Adviser receives a management fee computed and paid monthly at the annual rate
of 0.9% of the first $500 million of the Fund's average daily net assets and
0.8% of the Fund's average daily net assets in excess of $500 million for the
Fund's then-current fiscal year. Effective January 1, 1994, the Adviser has
agreed to a management fee waiver which will reduce the management fee paid by
the Fund to MFS to 0.70% of the Fund's average daily net assets with respect to
average daily net assets exceeding $500 million. This temporary fee reduction
may be rescinded at any time by the Adviser, upon written notice to the Fund, as
to the fee accruing after the date of such recession.

For the Fund's fiscal years ended December 31, 1991 and 1992 and for the fiscal
period ended November 30, 1993, the management fee was computed and paid monthly
at the annual rate of 0.90% of average daily net assets. For these years, MFS
received fees under the Advisory Agreement of $1,719,525, $2,899,509 and
$3,167,619, respectively.

In order to comply with the expense limitations of certain state securities
commissions, the Adviser will reduce its management fee or otherwise reimburse
the Fund for any expenses, exclusive of interest, taxes and brokerage
commissions, incurred by the Fund in any fiscal year to the extent such expenses
exceed the most restrictive of such state expense limitations. The Adviser will
make appropriate adjustments to such reimbursements in response to any amendment
or rescission of the various state requirements. Any such adjustment would not
become effective until the beginning of the Fund's next fiscal year following
the date of such amendments or the date on which such requirements become no
longer applicable. For the fiscal years ended December 31, 1991 and 1992 and for
the fiscal period ended November 30, 1993, no reimbursement was made by the
Advisor to the Fund for such expenses.

The Fund pays the compensation of the Trustees who are not officers of MFS (who
each receive from $1,750 to $2,740 annually, depending on attendance at
meetings, plus fees for meetings of special committees, such as the Audit
Committee) and all the Fund's expenses (other than those assumed by MFS or FSI),
including: governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Fund; fees and expenses of
independent auditors, of legal counsel, and of any transfer agent, registrar or
dividend disbursing agent of the Fund; expenses of repurchasing and redeeming
shares; expenses of preparing, printing and mailing share certificates,
shareholder reports, notices, proxy statements and reports to governmental
officers and commissions; brokerage and other expenses connected with the
execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of State Street Bank and Trust Company,
the Fund's 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; and expenses of
shareholder meetings. Expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes are borne by the Fund except that the Fund's
Distribution Agreement with FSI requires FSI to pay for prospectuses that are to
be used for sales purposes. Expenses of the Trust which are not attributable to
a specific series are allocated among the series in a manner believed by
management of the Trust to be fair and equitable. For a list of the Fund's
expenses, including the compensation paid to the Trustees who are not officers
of MFS, during the fiscal period ended November 30, 1993, see "Statement of
Operations" in the Annual Report to shareholders incorporated by reference into
this Statement of Additional Information.

MFS pays the compensation of the Trust's officers and of any Trustee who is an
officer of MFS. MFS also furnishes at its own expense all necessary
administrative services, including office space, equipment, clerical personnel,
investment advisory facilities, and all executive and supervisory personnel
necessary for managing the Fund's investments, effecting its portfolio
transactions, and, in general, administering its affairs.

The Advisory Agreement will remain in effect until August 1, 1994, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party. The Advisory Agreement terminates
automatically if it is assigned and may be terminated without penalty by vote of
a majority of the Fund's shares (as defined in "Investment Restrictions"), or by
either party on not more than 60 days' nor less than 30 days' written notice.
The Advisory Agreement also provides that neither the Adviser nor its personnel
shall 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 or their duties or by reason of reckless
disregard of its or their obligations and duties under the Advisory Agreement.

CUSTODIAN

State Street Bank and Trust Company (the "Custodian") is the custodian of the
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, determining income and collecting interest and dividends on the
Fund's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of each class of shares of the Fund. The Custodian does not
determine the investment policies of the Fund or decide which securities the
Fund will buy or sell. The Fund may, however, invest in securities of the
Custodian and may deal with the Custodian as principal in securities
transactions. The Trustees have reviewed and approved subcustodial arrangements
with the Chase Manhattan Bank, N.A. for securities of the Fund held outside the
United States. The Custodian also acts as the dividend disbursing agent

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of the Fund. The Custodian has contracted with the Adviser for the Adviser to
perform certain accounting functions related to options transactions for which
the Adviser receives remuneration on a cost basis.

SHAREHOLDER SERVICING AGENT

MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agreement, effective August 1, 1985 (the "Agency
Agreement") with the Fund. The Shareholder Servicing Agent's responsibilities
under the Agency Agreement include administering and performing transfer agent
functions and the keeping records in connection with the issuance, transfer and
redemption of each class of shares of the Fund. For these services, the
Shareholder Servicing Agent will receive a fee based on the net assets of each
class of shares of the Fund, computed and paid monthly. In addition, the
Shareholder Servicing Agent will be reimbursed by the Fund for certain expenses
incurred by the Shareholder Servicing Agent on behalf of the Fund. For the
fiscal period ended November 30, 1993, the Fund paid the Shareholder Servicing
Agent $531,447 for Class A shares and $6,206 for Class B shares under the Agency
Agreement. State Street Bank and Trust Company, the dividend and distribution
disbursing agent of the Fund, has contracted with the Shareholder Servicing
Agent to perform certain dividend and distribution disbursing functions for the
Fund.

DISTRIBUTOR

FSI, a wholly owned subsidiary of MFS, serves as distributor for the continuous
offering of shares of the Fund pursuant to a Distribution Agreement as amended
and restated as of April 21, 1993, (the "Distribution Agreement") with the Fund.

CLASS A SHARES: FSI acts as agent in selling Class A shares of the Fund to
dealers. The public offering price of Class A shares of the Fund is their net
asset value next computed after the sale plus a sales charge which varies based
upon the quantity purchased. The public offering price of a Class A share of the
Fund is calculated by dividing net asset value of a Class A share by the
difference (expressed as a decimal) between 100% and the sales charge percentage
of offering price applicable to the purchase (see "Purchases" in the
Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of the Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS Funds")
and other funds (as noted under Right of Accumulation), by any person, including
members of a family unit (e.g., husband, wife and minor children) and bona fide
trustees, and also applies to purchases made under the Right of Accumulation or
a Letter of Intent (see "Investment and Withdrawal Programs" in this Statement
of Additional Information). A group might qualify to obtain quantity sales
charge discounts (see "Investment and Withdrawal Programs" in this Statement of
Additional Information).

Class A shares of the Fund may be sold at their net asset value to certain
persons or in certain instances as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others with
whom MFS, FSI and/or the Fund have business relationships, and because the sales
effort, if any, involved in making such sales is negligible.

FSI allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The difference
between the total amount invested and the sum of (a) the net proceeds to the
Fund and (b) the dealer commission, is the commission paid to the distributor.
Because of rounding in the computation of offering price, the portion of the
sales charge paid to the distributor may vary and the total sales charge may be
more or less than the sales charge calculated using the sales charge expressed
as a percentage of the offering price or as a percentage of the net amount
invested as listed in the Prospectus. In the case of the maximum sales charge,
the dealer retains 4% and FSI retains approximately 3/4 of 1% of the public
offering price. In addition, FSI, on behalf of the Fund, pays commissions to
dealers who initiate and are responsible for purchases of $1 million or more as
described in the Prospectus.

CLASS B AND CLASS C SHARES: As the distributor of the Fund FSI acts as agent in
selling Class B and Class C shares of the Fund to dealers. The public offering
price of Class B and Class C shares is their net asset value next computed after
the sale (see "Purchases" in the Prospectus).

GENERAL: From time to time FSI, at its expense, may provide additional
commissions, compensation or promotional incentives ("concessions") to dealers
which sell shares of the Fund. The staff of the SEC has indicated that dealers
who receive more than 90% of the sales charge may be considered underwriters.
Such concessions provided by FSI may include financial assistance to dealers in
connection with preapproved conferences or seminars, sales or training programs
for invited registered representatives, payment for travel expenses, including
lodging, incurred by registered representatives and members of their families or
other invited guests to various locations for such seminars or training
programs, seminars for the public, advertising and sales campaigns regarding one
or more MFS Funds, and/or other dealer-sponsored events. In some instances,
these concessions may be offered to dealers or only to certain dealers who have
sold or may sell, during specified periods, certain minimum amounts of shares of
the Fund. From time to time, FSI may make expense reimbursements for special
training of a dealer's registered representatives in group meetings or to help
pay the expenses of sales contests. In addition, FSI may, from time to time, pay
additional compensation to MFS Investor Services, Inc., an affiliated
broker-dealer, in connection with assistance provided by such broker-dealer in
selling Fund shares. In some instances, promotional incentives to dealers may be
offered only to certain dealers who have sold or may sell significant amounts of
Fund shares. From time to time, FSI or

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<PAGE> 54

its affiliate may offer a small gift of nominal value to shareholders who elect
to participate in certain investment programs (e.g., the Automatic Investment
Plan) or other shareholder services. Other concessions may be offered to the
extent not prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. (the "NASD").
Neither FSI nor dealers are permitted to delay placing orders to benefit
themselves by a price change. On occasion, FSI may obtain brokers loans from
various banks, including the custodian banks for the MFS Funds, to facilitate
the settlement of sales of shares of the Fund to dealers. FSI may benefit from
its temporary holding of funds paid to it by investment dealers for the purchase
of Fund shares.

During the Fund's fiscal period ended November 30, 1993, gross sales charges on
sales of Class A shares of the Fund amounted to $2,472,178, of which $417,991
was retained by FSI and $2,054,187 by dealers and certain banks and other
financial institutions; the Fund received $90,387,035, representing the
aggregate net asset value of such shares. During the Fund's fiscal year ended
December 31, 1992, gross sales charges on sales of Class A shares of the Fund
amounted to $4,334,151, of which $723,839 was retained by FSI, as principal
underwriter, and $3,610,312 by dealers and certain banks and other financial
institutions; the Fund received $142,360,107, representing the aggregate net
asset value of such shares. During the Fund's fiscal year ended December 31,
1991, gross sales charges on sales of the Fund amounted to $6,009,954, of which
$489,410 was retained by FSI and $5,520,544 by dealers and certain banks and
other financial institutions; the Fund received $161,571,570, representing the
aggregate net asset value of such shares. There were no Class C shares
outstanding during these periods.

During the Fund's fiscal year ended November 30, 1993, FSI received sales
charges of $417,991 and dealers received sales charges of $2,054,187 (as their
concession on gross sales charges of $2,472,178) for selling Class A shares of
the Fund; the Fund received $90,387,035 representing the aggregate net asset
value of such shares. During the Fund's fiscal year ended November 30, 1992, FSI
received sales charges of $723,839 and dealers received sales charges of
$3,610,312 (as their concession on gross sales charges of $4,334,151) for
selling Class A shares of the Fund; the Fund received $142,360,107 representing
the aggregate net asset value of such shares. During the Fund's fiscal year
ended November 30, 1991, FSI received sales charges of $489,410 and dealers
received sales charges of $5,520,544 (as their concession on gross sales charges
of $6,009,954) for selling Class A shares of the Fund; the Fund received
$161,571,570 representing the aggregate net asset value of such shares.

During the period September 7, 1993 through November 30, 1993 the CDSC imposed
on redemption of Class B shares was $2,434.

The Distribution Agreement will remain in effect until August 1, 1994, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.

4. PORTFOLIO TRANSACTIONS AND
BROKERAGE COMMISSIONS

Specific decisions to purchase or sell securities for the Fund are made by
persons affiliated with the Adviser. Any such person may serve other clients of
the Adviser, or any subsidiary of the Adviser in a similar capacity. Changes in
the Fund's investments are reviewed by the Board of Trustees.

The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and broker-dealers through which it seeks this result. In the
United States and in some other countries debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers. In other countries both debt and equity
securities are traded on exchanges at fixed commission rates. The cost of
securities purchased from underwriters includes an underwriter's commission or
concession, and the prices at which securities are purchased and sold from and
to dealers include a dealer's mark-up or mark-down. The Adviser normally seeks
to deal directly with the primary market makers or on major exchanges unless, in
its opinion, better prices are available elsewhere. Subject to the requirement
of seeking execution at the best available price, securities transactions may,
as authorized by the Advisory Agreement, be bought from or sold to dealers who
have furnished statistical, research and other information or services to the
Adviser. At present no arrangements for the recapture of commission payments are
in effect.

Consistent with the foregoing primary consideration, the Rules of Fair Practice
of the NASD and such other policies as the Trustees may determine, the Adviser
may consider sales of shares of the Fund and of the other investment company
clients of FSI as a factor in the selection of broker-dealers to execute the
Fund's portfolio transactions.

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
their respective overall responsibilities to the Fund or to their other clients.
Not all of such services are useful or of value in advising the Fund.

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<PAGE> 55

The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or 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 securities or 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
through such broker-dealers, but at present, unless otherwise directed by the
Fund, a commission higher than one charged elsewhere will not be paid to such a
firm solely because it provided such Research. The Fund's Trustees (together
with the Trustees of the other MFS Funds) have directed the Adviser to allocate
a total of $20,000 of commission business from the MFS Funds to the Pershing
Division of Donaldson, Lufkin & Jenrette as consideration for the annual renewal
of the Lipper Directors' Analytical Data Service (which provides information
useful to the Trustees in reviewing the relationship between the Fund and the
Adviser).

For the fiscal years ended December 31, 1992, 1991 and for the fiscal period
ended November 30, 1993, the Fund paid no brokerage commissions.

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 other clients of the Adviser
or any subsidiary of the Adviser. 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 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, the Fund believes that its ability to participate in
volume transactions will produce better executions for the Fund.

During the fiscal period ended November 30, 1993, the Fund purchased and sold
securities issued by an affiliate of Kidder Peabody & Co. Incorporated.

5. SHAREHOLDER SERVICES

INVESTMENT AND WITHDRAWAL PROGRAMS -- The Fund makes available the following
programs designed to enable shareholders to add to their investment or withdraw
from it with a minimum of paper work. These are described below and in certain
cases, in the Fund's prospectus. The programs involve no extra charge to
shareholders (other than a sales charge in the case of certain Class A share
purchases) and may be changed or discontinued at any time by a shareholder or
the Fund.

LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $100,000 or more of Class A shares of the Fund
alone or in combination with shares of Class B or Class C of the Fund or any of
the classes of other MFS Funds or the MFS Fixed Fund (a bank collective
investment fund) within a 13-month period (or 36-month period in the case of
purchases of $1 million or more), the shareholder may obtain Class A shares of
the Fund at the same reduced sales charge as though the total quantity were
invested in one lump sum by completing the Letter of Intent section of the
Fund's Account Application or filing a separate Letter of Intent application
(available from the Shareholder Servicing Agent) within 90 days of the
commencement of purchases. Subject to acceptance by FSI and the conditions
mentioned below, each purchase will be made at a public offering price
applicable to a single transaction of the dollar amount specified in the Letter
of Intent application. The shareholder or his dealer must inform FSI that the
Letter of Intent is in effect each time shares are purchased. The shareholder
makes no commitment to purchase additional shares, but if his purchases within
13 months (or 36 months in the case of purchases of $1 million or more) plus the
value of shares credited toward completion of the Letter of Intent do not total
the sum specified, he will pay the increased amount of the sales charge as
described below. Instructions for issuance of shares in the name of a person
other than the person signing the Letter of Intent application must be
accompanied by a written statement from the dealer stating that the shares were
paid for by the person signing such Letter. Neither income dividends nor capital
gain distributions taken in additional shares will apply toward the completion
of the Letter of Intent. Dividends and distributions of other MFS Funds
automatically reinvested in shares of the Fund pursuant to the Distribution
Investment Program will also not apply toward completion of the Letter of
Intent.

Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in

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<PAGE> 56

the shareholder's name. All income dividends and capital gain distributions on
escrowed shares will be paid to the shareholder or to his order. When the
minimum investment so specified is completed (either prior to or by the end of
the 13-month or 36-month period, as applicable), the shareholder will be
notified and the escrowed shares will be released.

If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released by
the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in the
premises.

RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity discounts
on the purchase of Class A shares when his new investment, together with the
current offering price value of all holdings of all classes of shares of that
shareholder in the MFS Funds or the MFS Fixed Fund (a bank collective investment
fund) reaches a discount level. See "Purchases" in the Prospectus for the sales
charges on quantity discounts. For example, if a shareholder owns shares valued
at $75,000 and purchases an additional $25,000 of Class A shares of the Fund,
the sales charge for the $25,000 purchase would be at the rate of 4% (the rate
applicable to single transactions of $100,000). A shareholder must provide the
Shareholder Servicing Agent (or his investment dealer must provide FSI) with
information to verify that the quantity sales charge discount is applicable at
the time the investment is made.

DISTRIBUTION INVESTMENT PROGRAM: Distributions of dividends and capital gains
made by the Fund with respect to a particular class of shares may be
automatically invested in shares of the same class of one of the other MFS
Funds, if shares of the fund are available for sale. Such investments will be
subject to additional purchase minimums. Distributions will be invested at net
asset value (exclusive of any sales charge) and not subject to any CDSC.
Distributions will be invested at the close of business on the payable date for
the distribution. A shareholder considering the Distribution Investment Program
should obtain and read the prospectus of the other fund and consider the
differences in objectives and policies before making any investment.

SYSTEMATIC WITHDRAWAL PLAN: A shareholder (except a $3 Million Shareholder, as
defined in the Prospectus) may direct the Shareholder Servicing Agent to send
him (or anyone he designates) regular periodic payments, as designated on the
Account Application and based upon the value of his account. Each payment under
a Systematic Withdrawal Plan (a "SWP") must be at least $100, except in certain
limited circumstances. The aggregate withdrawals of Class B shares in any year
pursuant to a SWP generally are limited to 10% of the value of the account at
the time of establishment of the SWP. SWP payments are drawn from the proceeds
of share redemptions (which would be a return of principal and, if reflecting a
gain, would be taxable). Redemptions of Class B shares will be made in the
following order: (i) any "Reinvested Shares"; (ii) to the extent necessary, any
"Free Amount"; and (iii) to the extent necessary, the "Direct Purchase" subject
to the lowest CDSC (as such terms are defined in "Contingent Deferred Sales
Charge" in the Prospectus). The CDSC will be waived in the case of redemptions
of Class B shares pursuant to a SWP but will not be waived in the case of SWP
redemptions of Class A shares which are subject to a CDSC. To the extent that
redemptions for such periodic withdrawals exceed dividend income reinvested in
the account, such redemptions will reduce and may eventually exhaust the number
of shares in the shareholder's account. All dividend and capital gain
distributions for an account with a SWP will be reinvested in additional full
and fractional shares of the Fund at the net asset value in effect at the close
of business on the record date for such distributions. To initiate this service,
shares having an aggregate value of at least $10,000 either must be held on
deposit by, or certificates for such shares must be deposited with, the
Shareholder Servicing Agent. With respect to Class A shares, maintaining a
withdrawal plan concurrently with an investment program would be disadvantageous
because of the sales charges included in share purchases and because of the
assessment of the CDSC for certain share redemptions. The shareholder by written
instruction to the Shareholder Servicing Agent may deposit into the account
additional shares of the Fund, change the payee or change the dollar amount of
each payment. The Shareholder Servicing Agent may charge the account for
services rendered and expenses incurred beyond those normally assumed by the
Fund with respect to the liquidation of shares. No charge is currently assessed
against the account, but one could be instituted by the Shareholder Servicing
Agent on 60 days' notice in writing to the shareholder in the event that the
Fund ceases to assume the cost of these services. The Fund may terminate any SWP
for an account if the value of the account falls below $5,000 as a result of
share redemptions (other than as a result of a SWP) or an exchange of shares of
the Fund for shares of another MFS Fund. Any SWP may be terminated at any time
by either the shareholder or the Fund.

INVEST BY MAIL: Additional investments of $50 or more may be made at any time by
mailing a check payable to the Fund directly to the Shareholder Servicing Agent.
The shareholder's account number and the name of his investment dealer must be
included with each investment.

GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent), obtain quantity sales charge discounts on the purchase of Class A
shares if the group or association (1) gives its endorsement or authorization to
the investment program so it may be used by the investment dealer to facilitate
solicitation of the membership, thus effecting economies of sales effort; (2)
has been in existence for at least six months and has a legitimate purpose other
than to purchase mutual fund shares at a discount; (3) is not a group of
individuals whose sole organizational nexus is as credit cardholders of a
company, policyholders of an insurance company,

17
<PAGE> 57

customers of a bank or broker-dealer, clients of an investment adviser, or other
similar groups; and (4) agrees to provide certification of membership of those
members investing money in the MFS Funds upon the request of FSI.

AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least $5,000
in any MFS Fund may exchange their shares for the same class of shares of other
MFS Funds (if available for sale)(and, in the case of Class C shares, for shares
of MFS Money Market Fund) under the Automatic Exchange Plan, a dollar cost
averaging program. The Automatic Exchange Plan provides for automatic transfers
of funds from the shareholder's account in an MFS Fund for investment in the
same class of shares of other MFS Funds selected by the shareholder. Under the
Automatic Exchange Plan, transfers of at least $50 each may be made to up to
four different funds effective on the seventh day of each month or every third
month, depending whether monthly or quarterly transfers are elected by the
shareholder. If the seventh day of the month is not a business day, the
transaction will be processed on the next business day. Generally, the initial
transfer will occur after receipt and processing by the Shareholder Servicing
Agent of an application in good order. Transfers will continue to be made from a
shareholder's account in any MFS Fund, as long as the balance of the account is
sufficient to complete the transfers. Additional payments made to a
shareholder's account will extend the period that transfers will continue to be
made under the Automatic Exchange Plan. However, if additional payments are
added to an account subject to the Automatic Exchange Plan shortly before a
transfer is scheduled, such funds may not be available for transfers until the
following month; therefore, care should be used to avoid inadvertently
terminating the Automatic Exchange Plan through exhaustion of the account
balance.

No transaction fee for transfers will be charged in connection with the
Automatic Exchange Plan. However, transfers of shares of MFS Money Market Fund,
MFS Government Money Market Fund and Class A shares of MFS Cash Reserve Fund
will be subject to any applicable sales charge. Changes in amounts to be
transferred to each fund, the funds to which transfers are to be made and the
timing of transfers (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions in
writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by the
record owner(s) exactly as shares are registered; if by telephone -- proper
account identification is given by the dealer or shareholder of record). Each
Exchange Change Request (other than termination of participation in the program)
must involve at least $50. Generally, if an Exchange Change Request is received
by telephone or in writing before the close of business on the last business day
of a month, the Exchange Change Request will be effective for the following
month's transfer.

A shareholder's right to make additional investments in any of the MFS Funds, to
make exchanges of shares from one MFS Fund to another and to withdraw from an
MFS Fund, as well as a shareholder's other rights and privileges are not
affected by a shareholder's participation in the Automatic Exchange Plan. The
Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding the Automatic Exchange Plan, including treatment of any
CDSC, see "Exchange Privilege" below.

REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the other
MFS Funds (except MFS Money Market Fund, MFS Government Money Market Fund and
holders of Class A shares of MFS Cash Reserve Fund in the case where shares of
such funds are acquired through direct purchase or reinvested dividends) who
have redeemed their shares have a one-time right to reinvest the redemption
proceeds in the same class of shares of any of the MFS Funds (if shares of the
fund are available for sale) at net asset value (without a sales charge) and, if
applicable, with credit for any CDSC paid. In the case of proceeds reinvested in
shares of MFS Money Market Fund, MFS Government Money Market Fund and Class A
shares of MFS Cash Reserve Fund, the shareholder has the right to exchange the
acquired shares for shares of another MFS Fund at net asset value pursuant to
the exchange privilege described below. Such a reinvestment must be made within
90 days of the redemption and is limited to the amount of the redemption
proceeds. If the shares credited for any CDSC paid are then redeemed within six
years of the initial purchase in the case of Class B shares or within 12 months
of the initial purchase in the case of certain Class A shares, a CDSC will be
imposed upon redemption. Although redemptions and repurchases of shares are
taxable events, a reinvestment within a certain period of time in the same fund
may be considered a "wash sale" and may result in the inability to recognize
currently all or a portion of a loss realized on the original redemption for
federal income tax purposes. Please see your tax adviser for further
information.

EXCHANGE PRIVILEGE -- Subject to the requirements set forth below, some or all
of the shares of the same class in an account with the Fund for which payment
has been received by the Fund (i.e., an established account) may be exchanged
for shares of the same class of any of the other MFS Funds (if available for
sale) at net asset value. In addition, Class C shares may be exchanged for
shares of MFS Money Market Fund at net asset value. Exchanges will be made only
after instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Shareholder Servicing Agent.

Each Exchange Request must be in proper form (i.e., if in writing -- signed by
the record owner(s) exactly as the shares are registered; if by telephone --
proper account identification is given by the dealer or shareholder of record),
and each exchange must involve either shares having an aggregate value of at
least $1,000 ($50 in the case of retirement plan participants whose sponsoring
organizations subscribe to the MFS FUNDamental 401(K) Plan or another similar
401(k) recordkeeping system made available by MFS Service Center, Inc.) or all
the shares in the account. Each exchange involves the redemption of the shares
of the Fund to be exchanged and the purchase at net asset value (i.e., without a
sales charge) of shares of the same class of the other MFS Funds. Any gain or
loss on the

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<PAGE> 58

redemption of the shares exchanged is reportable on the shareholder's federal
income tax return, unless both the shares received and the shares surrendered in
the exchange are held in a tax-deferred retirement plan or other tax-exempt
accounts. No more than five exchanges may be made in any one Exchange Request by
telephone. If the Exchange Request is received by the Shareholder Servicing
Agent on any business day prior to the close of regular trading on the New York
Stock Exchange (the "Exchange"), the exchange usually will occur on that day if
all the requirements set forth above have been complied with at that time.
However, payment of the redemption proceeds by the Fund, and thus the purchase
of shares of the other MFS Funds, may be delayed for up to seven days if the
Fund determines that such a delay would be in the best interest of all its
shareholders. Investment dealers which have satisfied criteria established by
FSI may also communicate a shareholder's Exchange Request to the Shareholder
Servicing Agent by facsimile subject to the requirements set forth above.

No CDSC is imposed on exchanges among the MFS Funds, although liability for the
CDSC is carried forward to the exchanged shares. For purposes of calculating the
CDSC upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares.

Additional information with respect to any of the MFS Funds, including a copy of
its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should obtain
and read the prospectus of the other fund and consider the differences in
objectives and policies before making any exchange. Shareholders of the other
MFS Funds (except holders of MFS Money Market Fund, MFS Government Money Market
Fund and Class A shares of MFS Cash Reserve Fund acquired through direct
purchase and dividends reinvested prior to June 1, 1992) have the right to
exchange their shares for shares of the Fund, subject to the conditions, if any,
set forth in their respective prospectuses. In addition, unitholders of the MFS
Fixed Fund (a bank collective investment fund) have the right to exchange their
units (except units acquired through direct purchases) for shares of the Fund,
subject to the conditions, if any, imposed upon such unitholders by the MFS
Fixed Fund.

Any state income tax advantages for investment in shares of each state specific
series of MFS Municipal Series Trust may only benefit residents of such states.
Investors should consult with their own tax advisers to be sure this is an
appropriate investment, based on their residency and each state's income tax
laws.

The exchange privilege (or any aspect of it) may be changed or discontinued and
is subject to certain limitations, including certain restrictions on purchases
by market timer accounts (see "Purchases" in the Prospectus).

TAX-DEFERRED RETIREMENT PLANS -- Except as noted below, shares of the Fund may
be purchased by all types of tax-deferred retirement plans. FSI makes available
through investment dealers plans and/or custody agreements for the following:

Individual Retirement Accounts (IRAs) (for individuals and their nonemployed
spouses who desire to make limited contributions to a tax deferred retirement
program and, if eligible, to receive a federal income tax deduction for
amounts contributed);

Simplified Employee Pension (SEP-IRA) Plans;

Retirement Plans Qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended;

403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and

Certain qualified corporate pension and profit-sharing plans.

The plan documents provided by FSI designate a trustee or custodian (unless
another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested automatically.
For further details with respect to any plan, including fees charged by the
trustee, custodian or FSI, tax consequences and redemption information, see the
specific documents for that plan. Plan documents other than those provided by
FSI may be used to establish any of the plans described above. Third party
administrative services, available for some corporate plans, may limit or delay
the processing of transactions.

An investor should consult with his tax adviser before establishing any of the
tax-deferred retirement plans described above.

6. TAX STATUS

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 the 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 "regulated investment company" in any year, the
Fund would incur a regular corporate federal income tax upon its

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<PAGE> 59

taxable income and Fund distributions would generally be taxable as ordinary
dividend income to the shareholders.

Shareholders of the Fund will have to pay federal income taxes, and any state or
local taxes, on the dividends and capital gain distributions they receive from
the Fund. Fund dividends which are declared in October, November or December to
shareholders of record in such a month and paid the following January will be
taxable to shareholders as if received on December 31 of the year in which they
are declared.

Dividends from ordinary income and from net short-term capital gains (whether
paid in cash or invested in additional shares) are taxable to the Fund's
shareholders as ordinary income for federal income tax purposes. Because the
Fund expects to earn primarily interest income, it is expected that no Fund
dividends will qualify for the dividends-received deduction for corporations.
Distributions from net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), whether paid in cash or invested in
additional shares, are taxable to the Fund's shareholders as long-term capital
gains for federal income tax purposes without regard to the length of time the
shareholders have owned their shares.

Any dividend or distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the dividend or distribution.
Shareholders purchasing shares shortly before the record date of any taxable
dividend or other distribution may thus pay the full price for the shares and
then effectively receive a portion of the purchase price back as a taxable
distribution.

In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than 12 months and otherwise as a short-term capital gain or loss. However, any
loss realized upon a redemption of shares in the Fund held for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a redemption of shares may also be disallowed under rules relating
to wash sales. Gain may be increased (or loss reduced) upon a redemption of
Class A shares of the Fund within 90 days after their purchase followed by any
purchase (including purchases by exchange or by reinvestment) without payment of
an additional sales charge of Class A shares of the Fund or of another MFS Fund
(or any other shares of an MFS Fund generally sold subject to a sales charge).

The Fund's transactions in Options, Futures Contracts and Forward Contracts will
be subject to special tax rules that may affect the amount, timing and character
of distributions to shareholders. For example, certain positions held by the
Fund on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out) on such day, and any gain or loss associated
with such positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by the Fund that substantially diminish its
risk of loss with respect to other positions in its portfolio will constitute
"straddles," which are subject to special tax rules that may cause deferral of
Fund losses, adjustments in the holding periods of Fund securities and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles which could alter the effects of these rules. The Fund will
limit its activities in Options, Futures Contracts, Forward Contracts, and swaps
and related transactions to the extent necessary to meet the requirements of
Subchapter M of the Code.

Investment in residual interests of a CMO that has elected to be treated as a
real estate mortgage investment conduit, or "REMIC," can create complex tax
problems, especially if the Fund has state or local governments or other
tax-exempt organizations as shareholders.

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. The
Fund's investment in zero coupon securities and certain securities purchased at
a market discount will cause it to realize income prior to the receipt of cash
payments with respect to these securities. In order to distribute this 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.

Special tax considerations apply with respect to foreign investments of the
Fund. For example, foreign exchange gains and losses realized by the Fund will
generally be treated as ordinary income or losses. Use of foreign currencies for
nonhedging purposes and investment by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid imposition of 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 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. It is impossible to
determine the 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 Fund
intends to qualify for treaty reduced rates of tax where available.

If the Fund holds more than 50% of its assets in foreign securities at the
close of its taxable year, the Fund may elect to "pass through" to the Fund's
shareholders foreign income taxes paid. If the Fund so elects, shareholders
will be required to treat their pro rata portion of the foreign income taxes
paid by the Fund as part of the amounts distributed to them by the Fund and
thus includable in their gross income for federal income tax purposes.
Shareholders who itemize deductions would then be allowed to claim a deduction
or credit (but not both) on their federal income tax returns for such amounts,
subject to certain limitations. Shareholders who do not itemize deductions
would be able (subject to such limitations) to claim a credit but not a
deduction. If the Fund does not qualify or elect to "pass through" to the
Fund's shareholders foreign income taxes paid by it, shareholders will not

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<PAGE> 60

be able to claim any deduction or credit for any part of the foreign taxes paid
by the Fund.

Dividends and certain other payments to persons who are not citizens or
residents of the United States ("Non-U.S. Persons") are generally subject to
U.S. federal income tax withholding at the rate of 30%. The Fund intends to
withhold 30% on any payments made to Non-U.S. Persons that are subject to
withholding, regardless of whether a lower rate may be permitted under an
applicable treaty. Any amounts over-withheld may be recovered by such persons by
filing a claim for refund with the U.S. Internal Revenue Service within the time
period applicable to such claims. Distributions received from the Fund by
Non-U.S. Persons may also be subject to tax under the laws of their own
jurisdictions. The Fund is also required in certain circumstances to apply
backup withholding of 31% of taxable dividends and the proceeds of redemptions
and exchanges paid to any shareholder (including a Non-U.S. Person) who does not
furnish to the Fund certain information and certifications or who is otherwise
subject to backup withholding. However, backup withholding will not be applied
to payments which have been subject to 30% withholding.

Fund distributions that are derived from interest on obligations of the U.S.
Government and certain of its agencies and instrumentalities (but generally not
from capital gains realized upon the disposition of such obligations) may be
exempt from state and local taxes in certain states. In other states, arguments
can be made on the basis of a U.S. Supreme Court decision to the effect that
such distributions should be exempt from state and local taxes. Shareholders
should consult their tax advisors regarding the possible exclusion of that
portion of such distributions for state and local income tax purposes.

As long as the Fund qualifies as a regulated investment company under the Code,
it will not be subject to income or excise tax in the Commonwealth of
Massachusetts.

7. DETERMINATION OF NET ASSET VALUE AND
PERFORMANCE

NET ASSET VALUE: The net asset value per share of each class of the Fund is
determined each day during which the Exchange is open for trading. (As of the
date of this Statement of Additional Information, the Exchange is open for
trading every weekday except for the following holidays or the days on which
they are observed: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.) This
determination is made once each day as of the close of regular trading on the
Exchange by deducting the amount of the liabilities attributable to the class
from the value of the assets attributable to the class and dividing the
difference by the number of shares of the class outstanding. Bonds and other
fixed income securities (other than short-term obligations) of U.S. issuers in
the Fund's portfolio are valued on the basis of valuations furnished by a
pricing service which utilizes both dealer supplied valuations and electronic
data processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect the fair
value of such securities. Forward Contracts will be valued using a pricing
model taking into consideration market data from an external pricing source.
Use of the pricing services has been approved by the Fund's Board of Trustees.
All other securities, futures contracts and options in the Fund's portfolio
(other than short-term obligations) for which the principal market is one or
more securities or commodities exchanges (whether domestic or foreign) will be
valued at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available,
be valued at current bid prices, unless such securities are reported on the
NASDAQ system, in which case they are valued at the last sale price or, if no
sales occurred during the day, at the last quoted bid price. Short-term
obligations with a remaining maturity in excess of 60 days will be valued based
upon dealer supplied valuations. Other short-term obligations in the Fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Portfolio investments for which there are
no such quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees.

Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of regular trading on the New York Stock
Exchange. Occasionally, events affecting the values of such securities may occur
between the times at which they are determined and the close of regular trading
on the Exchange which will not be reflected in the computation of the Fund's net
asset value unless the Trustees deem that such event would materially affect the
net asset value in which case an adjustment would be made.

All investments and assets are expressed in U.S. dollars based upon current
currency exchange rates. A share's net asset value is effective for orders
received by the dealer prior to its calculation and received by FSI, the Fund's
principal underwriter, prior to the close of that business day.

The Trustees annually review the appropriateness of the time of day as of which
the net asset value is computed.

PERFORMANCE INFORMATION

TOTAL RATE OF RETURN: The Fund will calculate its total rate of return for each
class of shares for certain periods by determining the average annual compounded
rates of return over those periods that would cause an investment of $1,000
(made with all distributions reinvested and reflecting the CDSC or the maximum
public offering price) to reach the value of that investment at the end of the
periods. The Fund may also

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<PAGE> 61

calculate (i) a total rate of return, which is not reduced by the CDSC (4%
maximum for Class B shares purchased on and after September 1, 1993) and
therefore may result in a higher rate of return, (ii) a total rate of return
assuming an initial account value of $1,000, which will result in a higher rate
of return since the value of the initial account will not be reduced by the
maximum sales charge (currently 4.75%) and/or (iii) total rates of return which
represent aggregate performance over a period or year-by-year performance, and
which may or may not reflect the effect of the maximum or other sales charge or
CDSC. On October 1, 1989, the maximum sales charge was lowered to 4.75%, the
sales charge on reinvested dividends was eliminated and a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act was implemented which permits up to
0.25% (0.35% effective August 17, 1993) of the Fund's average daily net assets
to be used to pay expenses related to distribution of the Fund's shares as
described below. The Fund's average annual total rate of return for Class A
shares reflecting the current maximum sales charge on the initial investment
(4.75%) for the one-year, five-year and ten-year periods ended November 30, 1993
was, respectively, 11.06%, 9.80% and 13.77%. The Fund's average annual total
rate of return for Class A shares not giving effect to the sales charge on the
initial investment and reinvested dividends for the one-year, five-year and
ten-year periods ended November 30, 1993 was, respectively, 16.63%, 10.87% and
14.32%. The Fund's aggregate total rate of return for Class B shares, reflecting
the CDSC, for the period September 7, 1993 through the Fund's fiscal period
ended November 30, 1993 was -3.02%. The Fund's aggregate total rate of return
for Class B shares, not giving effect to the CDSC, for the period September 7,
1993 through the Fund's fiscal period ended November 30, 1993 was 0.98%. The
figures presented for Class B shares are not calculated on an annualized basis.
The aggregate total rate of return represents a limited time frame and, like the
total rates of return presented above for Class A shares, may not be indicative
of future performances. There were no Class C shares outstanding during the
periods. Certain total rate of return figures would have been lower if fee
waivers were not in place.

PERFORMANCE RESULTS: The performance results for Class A shares below, based on
an assumed initial investment of $10,000 in Class A shares, cover the period
from January 1, 1984 to December 31, 1993. It has been assumed that dividend and
capital gain distributions were reinvested in additional shares. These
performance results, as well as any yield or total rate of return quotation
provided by the Fund, should not be considered as representative of the
performance of the Fund in the future since the net asset value and public
offering price of shares of the Fund will vary based not only on the type,
quality and maturities of the securities held in the Fund's portfolio, but also
on changes in the current value of such securities and on changes in the
expenses of the Fund. These factors and possible differences in the methods used
to calculate yields and total rates of return should be considered when
comparing the yield and total rate of return of the Fund to yields and total
rates of return published for other investment companies or other investment
vehicles. Total rate of return reflects the performance of both principal and
income. The current net asset value of shares and account balance information
may be obtained by calling 1-800-MFS-TALK (637-8255).

<TABLE>
MFS WORLD GOVERNMENTS FUND -- CLASS A

<CAPTION>
VALUE OF
VALUE OF REINVESTED VALUE OF
YEAR ENDED INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
DECEMBER 31 INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
- ----------- ---------------- ------------- ---------- ------
<S> <C> <C> <C> <C>
1984 $ 9,029 $ 0 $ 782 $ 9,811
1985 10,278 706 1,707 12,691
1986 10,999 2,707 2,787 16,493
1987 11,402 3,077 6,094 20,573
1988 10,672 3,105 7,697 21,474
1989 10,999 3,200 8,837 23,036
1990 11,527 4,460 11,174 27,161
1991 12,132 5,214 13,459 30,805
1992 11,047 4,748 15,424 31,219
1993 11,844 5,172 19,944 36,960
</TABLE>

EXPLANATORY NOTES: The results in the table assume that the initial investment
on January 1, 1984 has been reduced by the current maximum sales charge of
4.75%. No adjustment has been made for any income taxes payable by shareholders.

YIELD: Any yield quotation for a class of shares of the Fund will be based on
the annualized net investment income per share of that class of the Fund over a
30-day period. The yield is calculated by dividing the net investment income per
share allocated to a particular class of the Fund earned during the period by
the maximum offering price per share of such class on the last day of that
period. The resulting figure is then annualized. Net investment income per share
of a class is determined by dividing (i) the dividends and interest earned by
the Fund allocated to the class during the period, minus accrued expenses of
such class for the period, by (ii) the average number of shares of such class
entitled to receive dividends during the period multiplied by the maximum
offering price per share of such class on the last day of the period. The Fund's
yield calculations assume a maximum sales charge of 4.75% in the case of Class A
shares and no payment of any CDSC in the case of Class B and Class C shares. The
Fund's yield for the 30-day period ended November 30, 1993 was 4.32% for Class A
shares, taking into account the distribution fee waiver; without the waiver, the
yield would have been 4.23% for Class A shares. The Fund's yield for the 30-day
period ended November 30, 1993 was 3.80% for Class B shares. There was no waiver
in effect for Class B shares for the 30-day period ended November 30, 1993.
There were no Class C shares outstanding during the periods.

CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the Securities and Exchange Commission, is not indicative of the
amounts which were or will be paid to the Fund's shareholders. Amounts paid to
shareholders of each class are reflected in the quoted "current distribution
rate" for that class. The current distribution rate for a class is computed by
dividing the total amount of dividends per share paid by the Fund to
shareholders of that class during the past

22
<PAGE> 62

twelve months by the maximum public offering price of that class at the end of
such period. Under certain circumstances, such as when there has been a change
in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends paid during
the past twelve months. The current distribution rate differs from the yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income for option writing,
short-term capital gains and return of invested capital, and is calculated over
a different period of time. The Fund's current distribution rate calculation for
Class A shares assumes a maximum sales charge of 4.75%. The Fund's current
distribution rate calculation for Class B shares assumes no CDSC is paid. The
current distribution rate for Class A shares of the Fund for the twelve-month
period ended on November 30, 1993 was 9.26%. The current distribution rate for
Class B shares of the Fund based on the annualization of the last dividend paid
during the last fiscal year was 9.34%. There were no Class C shares outstanding
during these periods.

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 Salomon Bros. Indi ces, 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
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.

MFS FIRSTS: MFS has a long history of innovations.

-- 1924 -- Massachusetts Investors Trust is established as the first mutual
fund in America.

-- 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.

-- 1936 -- Massachusetts Investors Trust is the first mutual fund to let
shareholders take capital gain distributions either in additional shares or
in cash.

-- 1976 -- MFS Municipal Bond Fund is among the first municipal bond funds
established.

-- 1981 -- MFS World Governments Fund is established as America's first
globally diversified fixed income mutual fund.

-- 1984 -- MFS Municipal High Income Fund is the first mutual fund to seek
high tax-free income from lower-rated municipal securities.

-- 1986 -- MFS Managed Sectors Fund becomes the first mutual fund to target
and shift investments among industry sectors for shareholders.

-- 1986 -- MFS Municipal Income Trust is the first closed-end, high-yield
municipal bond fund traded on the New York Stock Exchange.

-- 1986 -- MFS Lifetime Investment ProgramSM is established as the first
complete family of 12b-1 mutual funds with no initial sales charge.

-- 1987 -- MFS Multimarket Income Trust is the first closed-end, multimarket
high income fund listed on the New York Stock Exchange.

-- 1990 -- MFS World Total Return Fund is the first global balanced fund.

8. DISTRIBUTION PLANS

The Trustees have adopted a Distribution Plan for each of Class A, Class B and
Class C Shares (the "Distribution Plans") pursuant to Section 12(b) of the 1940
Act and Rule 12b-1 thereunder (the "Rule") after having concluded that there is
a reasonable likelihood that each Distribution Plan would benefit the Fund and
the respective class of shareholders. The Distribution Plans are designed to
promote sales, thereby increasing the net assets of the Fund. Such an increase
may reduce the expense ratio to the extent the Fund's fixed costs are spread
over a larger net asset base. Also, an increase in net assets may lessen the
adverse effects that could result were the Fund required to liquidate portfolio
securities to meet redemptions. There is, however, no assurance that the net
assets of the Fund will increase or that the other benefits referred to above
will be realized.

CLASS A DISTRIBUTION PLAN: The Distribution Plan relating to Class A shares
(the "Class A Distribution Plan") provides that the Fund will pay FSI up to (but
not necessarily all of) an

23
<PAGE> 63

aggregate of 0.35% of the average daily net assets attributable to the Class A
shares annually in order that FSI may pay expenses on behalf of the Fund related
to the distribution and servicing of its Class A shares. The expenses to be paid
by FSI on behalf of the Fund include a service fee to securities dealers which
enter into a sales agreement with FSI of up to 0.25% of the portion of the
Fund's average daily net assets attributable to the Class A shares owned by
investors for whom that securities dealer is the holder or dealer of record.
These payments are partial consideration for personal services and/or account
maintenance performed by such dealers with respect to Class A shares. FSI may
from time to time reduce the amount of the service fee paid for shares sold
prior to a certain date. Currently the service fee is reduced to 0.15% for
shares sold prior to October 1, 1989. FSI may also retain a distribution fee of
0.10% of the Fund's average daily net assets attributable to Class A shares as
partial consideration for services performed and expenses incurred in the
performance of FSI's obligations as to Class A shares under the Distribution
Agreement with the Fund. FSI, however, currently is waiving this 0.10%
distribution fee and will not accept payment of this fee in the future unless it
first obtains the approval of the Trust's Board of Trustees. Any remaining funds
may be used to pay for other distribution related expenses as described in the
Prospectus. Service fees may be reduced for a securities dealer that is the
holder or dealer of record for an investor who owns shares of the Fund having a
net asset value at or above a certain dollar level. No service fee will be paid
(i) to any securities dealer who is the holder or dealer of record for investors
who own Class A shares having an aggregate net asset value less than $750,000,
or such other amount as may be determined from time to time by FSI (FSI,
however, may waive this minimum amount requirement from time to time if the
dealer satisfies certain criteria), or (ii) to any insurance company which has
entered into an agreement with the Fund and FSI that permits such insurance
company to purchase shares from the Fund at their net asset value in connection
with annuity agreements issued in connection with the insurance company's
separate accounts. Dealers may from time to time be required to meet certain
other criteria in order to receive service fees. FSI or its affiliates are
entitled to retain all service fees payable under the Class A Distribution Plan
for which there is no dealer of record or for which qualification standards have
not been met as partial consideration for personal services and/or account
maintenance services performed by FSI or its affiliates for shareholder
accounts. Certain banks and other financial institutions that have agency
agreements with FSI will receive agency transaction and service fees that are
the same as commissions and service fees to dealers.

During the fiscal year ended November 30, 1993, the Fund incurred expenses of
$864,682 (equal to 0.24% of its average daily net assets) relating to the
distribution and servicing of its Class A shares, all of which was paid to
securities dealers of the Fund and certain banks and other financial
institutions.

CLASS B DISTRIBUTION PLAN: The Distribution Plan relating to Class B shares
(the "Class B Distribution Plan") provides that the Fund shall pay FSI, as the
Fund's distributor for its Class B shares, a daily distribution fee equal on an
annual basis to 0.75% of the Fund's average daily net assets attributable to
Class B shares and will pay FSI an annual service fee of up to
0.25% of the Fund's average daily net assets attributable to Class B shares
(which FSI will in turn pay to securities dealers which enter into a sales
agreement with FSI at a rate of up to 0.25% of the Fund's average daily net
assets attributable to Class B shares owned by investors for whom that
securities dealer is the holder or dealer of record). This service fee is
intended to be additional consideration for all personal services and/or account
maintenance services rendered by the dealer with respect to Class B shares. FSI
will advance to dealers the first-year service fee at a rate equal to 0.25% of
the amount invested. As compensation therefor, FSI may retain the service fee
paid by the Fund with respect to such shares for the first year after purchase.
Dealers will become eligible for additional service fees with respect to such
shares commencing in the thirteenth month following purchase. Except in the case
of the first year service fee, no service fee will be paid to any securities
dealer who is the holder or dealer of record for investors who own Class B
shares having an aggregate net asset value of less than $750,000 or such other
amount as may be determined from time to time FSI. FSI, however, may waive this
minimum amount requirement from time to time if the dealer satisfies certain
criteria. Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. FSI or its affiliates are entitled to
retain all service fees payable under the Class B Distribution Plan for which
there is no dealer of record or for which qualification standards have not been
met as partial consideration for personal services and/or account maintenance
services performed by FSI or its affiliates for shareholder accounts.

The purpose of distribution payments to FSI under the Class B Distribution Plan
is to compensate FSI for its distribution services to the Fund. FSI pays for
expenses of printing prospectuses and reports used for sales purposes, expenses
with respect to the preparation and printing of sales literature and other
distribution related expenses, including, without limitation, the cost necessary
to provide distribution-related services, or personnel, travel office expenses
and equipment. The Class B Distribution Plan also provides that FSI will receive
all CDSCs attributable to Class B shares (see "Distribution Plan" and
"Purchases" in the Prospectus).

During the fiscal year ended November 30, 1993, the Fund incurred expenses of
$28,211 (equal to 1.00% of its average daily net assets) relating to the
distribution and servicing of its Class B shares, of which FSI received $21,158
(0.75% of its average daily net assets attributable to Class B shares) and
securities dealers of the Fund and certain banks and other financial
institutions received $7,053 (0.25% of its average daily net assets attributable
to Class B shares).

CLASS C DISTRIBUTION PLAN: The Distribution Plan relating to Class C shares (the
"Class C Distribution Plan") provides that the Fund will pay FSI a distribution
fee of up to 0.75% per annum of the Fund's average daily net assets attributable
to Class C shares and will annually pay FSI a service fee of up to

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0.25% per annum of the Fund's average daily net assets attributable to Class C
shares (which FSI will in turn pay to securities dealers which enter into a
sales agreement with FSI at a rate of up to 0.25% per annum of the Fund's daily
net assets attributable to Class C shares owned by investors for whom that
securities dealer is the holder or dealer of record).

The distribution/service fees attributable to Class C shares are designed to
permit an investor to purchase such shares through a broker-dealer without the
assessment of an initial sales charge or a CDSC while allowing FSI to compensate
broker-dealers in connection with the sale of such shares.

The service fee is intended to be additional consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. FSI or its affiliates are entitled to retain all service fees
payable under the Class C Distribution Plan with respect to accounts for which
there is no dealer of record as partial consideration for personal services
and/or account maintenance services performed by FSI or its affiliates for
shareholder accounts.

The purpose of the distribution payments to FSI under the Class C Distribution
Plan is to compensate FSI for its distribution services to the Fund.
Distribution payments under the Plan will be used by FSI to pay securities
dealers a distribution fee in an amount equal on an annual basis to 0.75% of the
Fund's average daily net assets attributable to Class C shares owned by
investors for whom securities dealer is the holder or dealer of record.
(Therefore, the total amount of distribution/service fees paid to a dealer on an
annual basis is 1.00% of the Fund's average daily net assets attributable to
Class C shares owned by investors for whom the securities dealer is the holder
or dealer of record.) FSI also pays expenses of printing prospectuses and
reports used for sales purposes, expenses with respect to the preparation and
printing of sales literature and other distribution-related expenses, including,
without limitation, the compensation of personnel and all costs of travel,
office expense and equipment. Since FSI's compensation is not directly tied to
its expenses, the amount of compensation received by FSI during any year may be
more or less than its actual expenses. For this reason, this type of
distribution fee arrangement is characterized by the staff of the SEC as being
of the "compensation" variety. However, the Fund is not liable for any expenses
incurred by FSI in excess of the amount of compensation it receives. Certain
banks and other financial institutions that have agency agreements with FSI will
receive agency transaction and service fees that are the same as distribution
and service fees to dealers. Fees payable under the Class C Distribution Plan
are charged to, and therefore reduce, income allocated to Class C shares.

GENERAL: Each of the Distribution Plans will remain in effect until August 1,
1994, and will continue in effect thereafter only if such continuance is
specifically approved at least annually by vote of both the Trustees and a
majority of the Trustees who are not "interested persons" or financially
interested parties to such Plan ("Distribution Plan Qualified Trustees"). Each
of the Distribution Plans also requires that the Fund and FSI each shall provide
to the Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended (and purposes therefor) under such Plan. Each of
the Distribution Plans may be terminated at any time by a vote of a majority of
the Distribution Plan Qualified Trustees or by vote of the holders of a majority
of the respective class of the Fund's shares (as defined in "Investment
Restrictions"). All agreements relating to any of the Distribution Plans entered
into between the Fund or FSI and other organizations must be approved by the
Board of Trustees, including a majority of the Distribution Plan Qualified
Trustees. Agreements under any of the Distribution Plans must be in writing,
will be terminated automatically if assigned, and may be terminated at any time
without payment or any penalty, by vote of a majority of the Distribution Plan
Qualified Trustees or by vote of the holders of a majority of the respective
class of the Fund's shares. None of the Distribution Plans may be amended to
increase materially the amount of permitted distribution expenses without the
approval of a majority of the respective class of the Fund's shares (as defined
in "Investment Restrictions") or may be materially amended in any case without a
vote of the Trustees and a majority of the Distribution Plan Qualified Trustees.
The selection and nomination of Distribution Plan Qualified Trustees shall be
committed to the discretion of the non-interested Trustees then in office. No
Trustee who is not an "interested person" has any financial interest in any of
the Distribution Plans or in any related agreement.

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional Shares of Beneficial Interest (without par value) of one or
more separate series and to divide or combine the shares of any series into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests in that series. The Trustees have currently authorized
shares of the Fund and two other series. The Declaration of Trust further
authorizes the Trustees to classify or reclassify any series of shares into one
or more classes. Pursuant thereto, the Trustees have authorized the issuance of
three classes of each of the Trust's two series, (Class A, Class B and Class C
shares). Each share of a class of the Fund represents an equal proportionate
interest in the assets of the Fund allocable to that class. Upon liquidation of
the Fund, the shareholders of each class of the Fund are entitled to share pro
rata in the net assets of the Fund allocable to such class available for
distribution to shareholders. The Trust reserves the right to create and issue
additional series or classes of shares, in which case the shares of each series
or class would participate equally in the earnings, dividends and assets of the
particular series or class.

Shareholders are entitled to one vote for each share held and may vote in the
election of Trustees and on other matters submitted to meetings of shareholders.
Although Trustees are not elected annually by the shareholders, shareholders
have the right to remove one or more Trustees in accordance with the provisions
of Section 16(c) of the 1940 Act. No material amendment may be made to the
Declaration of Trust without the

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affirmative vote of a majority of the outstanding shares of the Trust. Shares
have no pre-emptive or conversion rights (except as set forth in "Purchases --
Conversion of Class B Shares" in the Prospectus). Shares are fully paid and
non-assessable. The Trust may enter into a merger or consolidation, or sell all
or substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by the vote of the holders of
two-thirds of the Trust's outstanding shares voting as a single class, or of the
affected series of the Trust, as the case may be, except that if the Trustees of
the Trust recommend such merger, consolidation or sale, the approval by vote of
the holders of a majority of the Trust's or the affected series' outstanding
shares (as defined in "Investment Restrictions") will be sufficient. The Trust
or any series of the Trust may also be terminated (i) upon liquidation and
distribution of its assets, if approved by the vote of the holders of two-thirds
of its outstanding shares, or (ii) by the Trustees by written notice to the
shareholders of the Trust or the affected series. If not so terminated the Trust
will continue indefinitely.

The Trust is an entity of the type commonly known as a "Massachusetts business
trust". Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts, obligations or affairs of the Trust and provides for
indemnification and reimbursement of expenses out of Trust property for any
shareholder held personally liable for the obligations of the Trust. The
Declaration of Trust also provides that the Trust shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust and its shareholders and the Trustees, officers,
employees and agents of the Trust covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.

The Declaration of Trust further provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of his willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.

10. INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS

Coopers & Lybrand were the Fund's independent accountants, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the SEC for the fiscal period ended November
30, 1993.

The Portfolio of Investments at November 30 1993, the Statement of Assets and
Liabilities at November 30, 1993, the Statement of Operations for the period
ended November 30 1993, the Statement of Changes in Net Assets for the year
ended December 31, 1992 and for the period ended November 30, 1993, the
Financial Highlights table for the period January 1, 1993 through November 30,
1993 and for each of the ten years in the period ended December 31, 1992 for
Class A shares and for the period September 7, 1993 to November 30, 1993 for
Class B shares the Notes to Financial Statements and the Report of Independent
Accountants, each of which is included in the Annual Report to shareholders of
the Fund, are incorporated by reference into this Statement of Additional
Information and have been so incorporated in reliance upon the report of Coopers
& Lybrand, independent accountants, as experts in accounting and auditing. For
the fiscal years after November 30, 1993, Ernst & Young will audit the Fund's
financial statements and will issue reports in those future fiscal years. A copy
of the Annual Report accompanies this Statement of Additional Information.

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INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
617-954-5000

DISTRIBUTOR
MFS Financial Services, Inc.
500 Boylston Street, Boston, MA 02116
(617)954-5000

CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800)-225-2606

Mailing Address:
P.O. Box 2281, Boston, MA 02107-9906

INDEPENDENT ACCOUNTANTS
Ernst & Young
200 Clarendon Street
Boston, MA 02116

MFS(R)
WORLD
GOVERNMENTS FUND

500 BOYLSTON STREET
BOSTON, MA 02116

(R)
MFS MWG-13-4/94/1M 20/220/320