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MFS(R) World Governments Fund
(a series of MFS Series Trust VII)
Supplement to Prospectus
dated April 1, 1997
The Fund's Prospectus is revised as follows:
1. The third and the fifth sentences in the fourth paragraph on
page 8 under the caption "Investment Objective and Policies
Investment Policies" are deleted in their entirety.
2. The last two paragraphs on page 8 under the caption
"Investment Objective and Policies - Investment Policies" are
deleted in their entirety.
3. A new paragraph is added following the fifth paragraph on page
8 under the caption "Investment Objective and Policies -
Investment Policies" which reads in its entirety:
Consistent with the Fund's investment objective and
policies, and in addition to the Fund's investments
in emerging market securities and Brady Bonds, the
Fund may invest up to 35% of its net assets in
non-convertible fixed income securities rated below
the four highest grades of Standard & Poor's Rating
Services ("S&P"), Fitch Investors Services, Inc.
("Fitch"), Duff & Phelps Credit Rating Co. ("Duff &
Phelps") (AAA, AA, A or BBB) or Moody's Investors
Services, Inc. ("Moody's") (Aaa, Aa, A or Baa) and
comparable unrated securities. For a discussion of
the risks of investing in these securities, see
"Additional Risk Factors - Lower Rated Fixed Income
Securities" below.
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4. A new paragraph is added on page 15 following the section
captioned "Emerging Market Securities" under the heading
"Additional Risk Factors" as follows:
Lower Rated Fixed Income Securities: As indicated
above, the Fund may also invest up to 35% of its net
assets in non-convertible fixed income securities
rated Ba or lower by Moody's or BB or lower by S&P,
Fitch or Duff & Phelps and comparable unrated
securities (commonly known as "junk bonds"). No
minimum rating standard is required by the Fund.
These securities are considered speculative and,
while generally providing greater income than
investments in higher rated securities, will involve
greater risk of principal and income (including the
possibility of default or bankruptcy of the issuers
of such securities) and may involve greater
volatility of price (especially during periods of
economic uncertainty or change) than securities in
the higher rating categories. However, since yields
vary over time, no specific level of income can ever
be assured. These lower rated high yielding fixed
income securities generally tend to reflect economic
changes and short-term corporate and industry
developments to a greater extent than higher rated
securities which react primarily to fluctuations in
the general level of interest rates. These lower
rated fixed income securities are also affected by
changes in interest rates, the market's perception of
their credit quality, and the outlook for economic
growth. In the past, economic downturns or an
increase in interest rates have, under certain
circumstances, caused a higher incidence of default
by the issuers of these securities and may do so in
the future, especially in the case of highly
leveraged issuers. During certain periods, the higher
yields on the Fund's lower rated high yielding fixed
income securities are paid primarily because of the
increased risk of loss of principal and income,
arising from such factors as the heightened
possibility of default or bankruptcy of the issuers
of such securities. Due to the fixed income payments
of these securities, the Fund may continue to earn
the same level of interest income while its net asset
value declines due to portfolio losses, which could
result in an increase in the Fund's yield despite the
actual loss of principal. The market for these lower
rated fixed income securities may be less liquid than
the market for investment grade fixed income
securities. Therefore, judgment may at times play a
greater role in valuing these securities than in the
case of investment grade fixed income securities.
The Fund may also invest in non-convertible fixed
income securities rated Baa by Moody's or BBB by S&P,
Fitch or Duff & Phelps and comparable unrated
securities. These securities, while normally
exhibiting adequate protection parameters, have
speculative characteristics and changes in economic
conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and
interest payments than in the case of higher grade
fixed income securities.
These lower rated and comparable unrated securities
may also include zero coupon bonds, described above.
The date of this Supplement is June 19, 1997
