MFS SERIES TRUST IX /MA/, 485BPOS, 1998-08-27

MFS SERIES TRUST IX /MA/
485BPOS, 1998-08-27

Previous: LINCOLN NATIONAL CORP, 8-K, 1998-08-27

Next: MEDTRONIC INC, S-3MEF, 1998-08-27

<PAGE>

As filed with the Securities and Exchange Commission on August 27, 1998
1933 Act File No. 2-50409
1940 Act File No. 811-2464
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------

FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

POST-EFFECTIVE AMENDMENT NO. 35
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 28

MFS SERIES TRUST IX
(formerly known as MFS Fixed Income Trust)
(Exact Name of Registrant as Specified in Charter)

500 Boylston, Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)

Registrant's Telephone Number, Including Area Code: 617-954-5000
Stephen E. Cavan, Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)

|_| immediately upon filing pursuant to paragraph (b)
|X| on August 28, 1998 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment

================================================================================
<PAGE>

MFS SERIES TRUST IX
-------------------

MFS BOND FUND
MFS LIMITED MATURITY FUND
MFS MUNICIPAL LIMITED MATURITY FUND

CROSS REFERENCE SHEET

(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)

<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -------------------

<S> <C> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Condensed Financial Information *
(b) * *
(c) Information Concerning Shares *
of the Fund - Performance
Information
(d) Condensed Financial Information *
4 (a) The Fund; Investment Objective *
and Policies
(b), (c) Investment Objective and Policies *
5 (a) The Fund; Management of the *
Fund - Investment Adviser
(b) Front Cover Page; Management *
of the Fund - Investment Adviser;
Back Cover Page
(c) Management of the Fund - *
Investment Adviser
(d) Management of the Fund - *
Investment Adviser;
Administrator - Back Cover Page
(e) Management of the Fund - *
Shareholder Servicing Agent;
Back Cover Page
(f) Expense Summary; Condensed *
Financial Information; Information
Concerning Shares of the Fund -
Expenses
(g) Investment Objective and Policies; *
Information Concerning Shares
of the Fund - Purchases
(h) * *
5A (a), (b), (c) ** **
6 (a) Information Concerning Shares *
of the Fund - Description of
Shares, Voting Rights and
Liabilities; Information
Concerning Shares of the Fund -
Redemptions and Repurchases;
Information Concerning Shares
of the Fund - Purchases; Information
Concerning Shares of the Fund -
Exchanges
(b), (c), (d) * *
(e) Shareholder Services *
(f) Information Concerning Shares *
of the Fund - Distributions;
Shareholder Services -
Distribution Options
(g) Information Concerning Shares *
of the Fund - Tax Status;
Information Concerning Shares
of the Fund - Distributions
(h) * *
7 (a) Front Cover Page; Management *
of the Fund - Distributor; Back
Cover Page
(b) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Net Asset Value
(c) Information Concerning Shares *
of the Fund - Purchases;
Information Concerning Shares
of the Fund - Exchanges;
Shareholder Services
(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases; Shareholder Services
(e) Information Concerning Shares *
of the Fund - Distribution Plan;
Information Concerning Shares
of the Fund - Purchases; Expense
Summary
(f) Information Concerning Shares *
of the Fund - Distribution Plan
(g) Expense Summary; Information *
Concerning Shares of the Fund -
Purchases, Exchanges, Redemptions
and Repurchases, Distribution Plan,
Distributions, Performance
Information; Shareholder Services
8 (a) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases; Information
Concerning Shares of the Fund -
Purchases; Shareholder Services
(b), (c), (d) Information Concerning Shares *
of the Fund - Redemptions and
Repurchases
9 * *

STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION CAPTION
----------------- ------------------ -------------------
<S> <C> <C>
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 The Fund Definitions
13 (a), (b), (c) * Investment Objective,
Policies and Restrictions
(d) * *
14 (a), (b) * Management of the Fund -
Trustees and Officers
(c) * Management of the Fund -
Trustees and Officers;
Trustee Compensation
Table
15 (a) * *
(b), (c) * Management of the Fund -
Trustees and Officers
16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser;
Management of the Fund -
Trustees and Officers
(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser
(c) * *
(d) * Management of the Fund -
Investment Adviser;
Administrator
(e) * Portfolio Transactions and
Brokerage Commissions
(f) Information Concerning Shares Distribution Plan
of the Fund - Distribution
Plan
(g) * *
(h) * Management of the Fund -
Custodian; Independent
Auditors and
Financial Statements; Back
Cover Page
(i) * Management of the Fund -
Shareholder Servicing Agent
17 (a), (b), (c), (d), (e) * Portfolio Transactions and
Brokerage Commissions
18 (a) Information Concerning Shares Description of Shares Voting
of the Fund - Description of Rights and Liabilities
Shares, Voting Rights and
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Services
of the Fund - Purchases;
Shareholder Services
(b) Information Concerning Shares Management of the Fund -
of the Fund - Net Asset Value; Distributor; Determination
Information Concerning Shares of Net Asset Value and
of the Fund - Purchases Performance - Net Asset
Value
(c) * *
20 * Tax Status
21 (a), (b) * Management of the Fund -
Distributor; Distribution
Plan
(c) * *
22 (a) * *
(b) * Determination of Net Asset
Value and Performance;
Performance Information
23 * Independent Auditors
and Financial
Statements
</TABLE>
- - -----------------
* Not Applicable
** Contained in Annual Report
<PAGE>

MFS BOND FUND

SUPPLEMENT TO THE SEPTEMBER 1, 1998 PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION

THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUND'S
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION ("SAI"), DATED SEPTEMBER 1,
1998, AND CONTAINS A DESCRIPTION OF CLASS I SHARES.

CLASS I SHARES ARE AVAILABLE FOR PURCHASE ONLY BY CERTAIN INVESTORS AS
DESCRIBED UNDER THE CAPTION "ELIGIBLE PURCHASERS" BELOW.

EXPENSE SUMMARY

SHAREHOLDER TRANSACTION EXPENSES: CLASS I
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price) ................ None
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds, as
applicable) ............................................... None

ANNUAL OPERATING EXPENSES OF THE FUND (AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Management Fees ............................................. 0.39%
Rule 12b-1 Fees ............................................. None
Other Expenses(1) ........................................... 0.28%
Total Operating Expenses .................................... 0.67%

- - -----------
(1) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."

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

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

PERIOD CLASS I
------ -------
1 year ...................................... $ 7
3 years ..................................... 21
5 years ..................................... 37
10 years .................................... 83

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. A more complete description of the Fund's
management fee is set forth under the caption "Management of the Fund" in the
Prospectus.

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.
<PAGE>

CONDENSED FINANCIAL INFORMATION

The following information has been audited and should be read in
conjunction with the financial statements included in the Fund's Annual Report
to Shareholders which are incorporated by reference into the SAI in reliance
upon the report of the Fund's independent auditors, given upon their authority
as experts in accounting and auditing. The Fund's independent auditors are
Deloitte & Touche LLP.

FINANCIAL HIGHLIGHTS - CLASS I SHARES
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30,1997*
-------------- --------------
Per share data (for a share outstanding
throughout the period):
Net asset value - beginning of period $13.05 $13.15
------ ------
Income from investment operations# -
Net investment income $ 0.94 $ 0.31
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.55 (0.09)
------ ------
Total from investment operations $ 1.49 $ 0.22
------ ------
Less distributions declared to shareholders
From net investment income $ (0.96)$ (0.32)
In excess of net investment income+(0.00) --
Total distributions declared to shareholders $(0.96) $ 0.32
------ ------
Net asset value - end of period $13.58 $13.05
------ ------
Total return 11.72% 1.70%++
Ratios (to average net assets)/ Supplemental data:
Expenses## 0.68% 0.69%+
Net investment income 6.95% 7.19%+
Portfolio turnover 333% 446%
Net assets, end of period
(000 omitted) $ 9,249 $ 9,593

- - -------------
* For the period from the inception of Class I shares, January 2, 1997 through
April 30, 1997. + Annualized ++ Not annualized + For the year ended April 30,
1998, the per share distribution in excess of net investment income was less
than $0.01.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.

ELIGIBLE PURCHASERS

Class I shares are available for purchase only by the following purchasers
("Eligible Purchasers"):

(i) certain retirement plans established for the benefit of employees of
Massachusetts Financial Services Company ("MFS"), the Fund's investment
adviser, and employees of MFS' affiliates;

(ii) any fund distributed by MFS Fund Distributors, Inc. ("MFD"), the Fund's
distributor, if the fund seeks to achieve its investment objective by
investing primarily in shares of the Fund and other funds distributed by
MFD;

(iii) any retirement plan, endowment or foundation which (a) purchases shares
directly through MFD (rather than through a third party broker or dealer
or other financial intermediary); (b) has, at the time of purchase of
Class I shares, aggregate assets of at least $100 million; and (c) invests
at least $10 million in Class I shares of the Fund either alone or in
combination with investments in Class I shares of other MFS funds
distributed by MFD (additional investments may be made in any amount);
provided that MFD may accept purchases from smaller plans, endowments or
foundations or in smaller amounts if it believes, in its sole discretion,
that such entity's aggregate assets will equal or exceed $100 million, or
that such entity will make additional investments which will cause its
total investment to equal or exceed $10 million, within a reasonable
period of time; and

(iv) bank trust departments or law firms acting as trustee or manager for trust
accounts which initially invest, on behalf of their trust clients, at
least $100,000 in Class I shares of the Fund (additional investments may
be made in any amount); provided that MFD may accept smaller initial
purchases if it believes, in its sole discretion, that the bank trust
department or law firm will make additional investments, on behalf of its
trust clients, which will cause its total investment to equal or exceed
$100,000 within a reasonable period of time.

In no event will the Fund, MFS, MFD or any of their affiliates pay any sales
commissions or compensation to any third party in connection with the sale of
Class I shares; the payment of any such sales commission or compensation would,
under the Fund's policies, disqualify the purchaser as an eligible investor of
Class I shares.

SHARE CLASSES OFFERED BY THE FUND

Four classes of shares of the Fund currently are offered for sale,
Class A shares, Class B shares, Class C shares and Class I shares. Class I
shares are available for purchase only by Eligible Purchasers, as defined above,
and are described in this Supplement. Class A shares, Class B shares and Class C
shares are described in the Fund's Prospectus and are available for purchase by
the general public.

Class A shares are offered at net asset value plus an initial sales
charge up to a maximum of 4.75% of the offering price (or a contingent deferred
sales charge (a "CDSC") upon redemption of 1.00% during the first year in the
case of purchases of $1 million or more and certain purchases by retirement
plans), and are subject to an annual distribution fee and service fee up to a
maximum of 0.35% per annum. Class B shares are offered at net asset value
without an initial sales charge but are subject to a CDSC upon redemption
(declining from 4.00% during the first year to 0% after six years) and an annual
distribution fee and service fee up to a maximum of 1.00% per annum; Class B
shares convert to Class A shares approximately eight years after purchase. Class
C shares are offered at net asset value without an initial sales charge but are
subject to a CDSC upon redemption of 1.00% during the first year and an annual
distribution fee and service fee up to a maximum of 1.00% per annum. Class I
shares are offered at net asset value without an initial sales charge or CDSC
and are not subject to a distribution or service fee. Class C and Class I shares
do not convert to any other class of shares of the Fund.

OTHER INFORMATION

Eligible Purchasers may purchase Class I shares only directly through
MFD. Eligible Purchasers may exchange Class I shares of the Fund for Class I
shares of any other MFS Fund available for purchase by such Eligible Purchasers
at their net asset value (if available for sale), and may exchange Class I
shares of the Fund for shares of the MFS Money Market Fund (if available for
sale), and may redeem Class I shares of the Fund at net asset value.
Distributions paid by the Fund with respect to Class I shares generally will be
greater than those paid with respect to Class A shares, Class B shares and Class
C shares because expenses attributable to Class A shares, Class B shares and
Class C shares generally will be higher.

THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1998

<PAGE>
MFS(R) BOND FUND
SEPTEMBER 1, 1998

PROSPECTUS

CLASS A SHARES OF BENEFICIAL INTEREST
CLASS B+ SHARES OF BENEFICIAL INTEREST
CLASS C SHARES OF BENEFICIAL INTEREST
- - --------------------------------------------------------------------------------

This Prospectus pertains to the MFS Bond Fund (the "Fund"), a diversified
series of MFS(R) Series Trust IX (the "Trust"), an open-end investment company
presently consisting of three series. The primary investment objective of the
Fund is to provide as high a level of current income as is believed to be
consistent with prudent investment risk. The secondary objective of the Fund
is to protect shareholders' capital. See "Investment Objectives and Policies"
below. The minimum initial investment is generally $1,000 per account. See
"Information Concerning Shares of the Fund -- Purchases" below.

The Fund's investment adviser and distributor are Massachusetts Financial
Services Company ("MFS" or the "Adviser") and MFS Fund Distributors, Inc.
("MFD"), respectively, both of which are located at 500 Boylston Street,
Boston, Massachusetts 02116.

INVESTMENT PRODUCTS ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT
AGENCY, AND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY
FINANCIAL INSTITUTION. SHARES OF MUTUAL FUNDS ARE SUBJECT TO INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED, AND WILL FLUCTUATE
IN VALUE. YOU MAY RECEIVE MORE OR LESS THAN YOU PAID WHEN YOU REDEEM YOUR
SHARES.

This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor ought to know before investing. The Trust
on behalf of the Fund has filed with the Securities and Exchange Commission
("SEC") a Statement of Additional Information, dated September 1, 1998, as
amended or supplemented from time to time (the "SAI") which contains more
detailed information about the Fund and the Trust and is incorporated into
this Prospectus by reference.

See page 45 for a further description of the information set forth in the SAI. A
copy of the SAI may be obtained without charge by contacting the Shareholder
Servicing Agent (see back cover for address and phone number). The SEC maintains
an Internet World Wide Web site at http://www.sec.gov that contains the SAI,
materials that are incorporated by reference into this Prospectus and the SAI,
and other information regarding the Fund. This Prospectus is available on the
Adviser's Internet World Wide Web site at http://www.mfs.com.

TABLE OF CONTENTS
Page

1. Expense Summary .................................................... 3
2. Condensed Financial Information .................................... 5
3. The Fund ........................................................... 9
4. Investment Objectives and Policies ................................. 9
5. Certain Securities and Investment Techniques ....................... 10
6. Additional Risk Factors ............................................ 19
7. Management of the Fund ............................................. 22
8. Information Concerning Shares of the Fund .......................... 24
Purchases ...................................................... 24
Exchanges ...................................................... 32
Redemptions and Repurchases .................................... 33
Distribution Plan .............................................. 37
Distributions .................................................. 39
Tax Status ..................................................... 40
Net Asset Value ................................................ 41
Description of Shares, Voting Rights and Liabilities ........... 41
Performance Information ........................................ 42
Provision of Annual and Semiannual Reports ..................... 43
9. Shareholder Services ............................................... 43
Appendix A -- Waivers of Sales Charges ............................. A-1
Appendix B -- Description of Bond Ratings .......................... B-1
Appendix C -- Portfolio Composition Chart .......................... C-1

<PAGE>

1. EXPENSE SUMMARY
CLASS A CLASS B CLASS C

SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge
Imposed on Purchases of Fund
Shares (as a percentage of
offering price) ................. 4.75% None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) ..................... See below(1) 4.00% 1.00%

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ................... 0.39% 0.39% 0.39%
Rule 12b-1 Fees ................... 0.30%(2) 1.00%(3) 1.00%(3)
Other Expenses(4) ................. 0.28% 0.28% 0.28%
----- ----- -----
Total Operating Expenses .......... 0.97% 1.67% 1.67%

(2) The Fund has adopted a distribution plan for its shares in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") (the "Distribution Plan"), 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 Class A
shares. The Fund is currently paying distribution fees in the amount of
0.05%. Payment of the remaining portion of the 0.10% per annum
distribution fee will commence on such date as the Trustees of the Trust
may determine. Assets attributable to Class A shares sold prior to March
1, 1991 are subject to a service fee of 0.15% per annum; after March 1,
1991 the fee was increased to 0.25% per annum. Distribution expenses paid
under this Plan, together with the initial sales charge, may cause long-
term shareholders to pay more than the maximum sales charge that would
have been permissible if imposed entirely as an initial sales charge. (See
"Information Concerning Shares of the Fund -- Distribution Plan" below).

(3) The Fund's Distribution Plan 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
and Class C shares, respectively. Distribution expenses paid under
Distribution Plan with respect to Class B or Class C shares, together with
any CDSC with respect to Class B and Class C shares, may cause long-term
shareholders to pay more than the maximum sales charge that would have
been permissible if imposed entirely as an initial sales charge. (See
"Information Concerning Shares of the Fund -- Distribution Plan" below).
(4) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have
the effect of reducing the Fund's expenses). Any such fee reductions are
not reflected under "Other Expenses."
<PAGE>

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):

PERIOD CLASS A CLASS B CLASS C
- - ------ ------- ------------- ----------------
(1) (1)
1 year .................. $ 57 $ 57 $ 17 $ 27 $ 17
3 years .................. 77 83 53 53 53
5 years .................. 99 111 91 91 91
10 years .................. 161 179(2) 179(2) 198 198
- - ------------
(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.

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 of the Prospectus: (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 Plan."

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

2. CONDENSED FINANCIAL INFORMATION

The following information has been audited for at least the latest five fiscal
years of the Fund and should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which are
incorporated by reference into the SAI in reliance upon the report of the Fund's
independent auditors, given upon their authority as experts in accounting and
auditing. The Fund's current independent auditors are Deloitte & Touche LLP.

FINANCIAL HIGHLIGHTS
<TABLE>

YEAR ENDED APRIL 30,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
CLASS A
----------------------------------------------------------------------

PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period . $13.04 $12.85 $12.71 $12.75 $14.39
------ ------ ------ ------ ------

Income from investment operations# --
Net investment income(S) ............. $ 0.89 $ 0.94 $ 0.95 $ 0.98 $ 1.02
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .............. 0.55 0.18 0.15 (0.05) (0.63)
------ ------ ------ ------ ------
Total from investment operations . $ 1.44 $ 1.12 $ 1.10 $ 0.93 $ 0.39
------ ------ ------ ------ ------

Less distributions declared to
shareholders --
From net investment income ........... $(0.91) $(0.93) $(0.94) $(0.89) $(1.06)
From net realized gain on investments
and foreign currency transactions .. -- -- -- -- (0.80)
In excess of net investment income++ . 0.00 -- -- -- (0.02)
In excess of net realized gain on
investments and foreign currency
transactions ....................... -- -- -- -- (0.01)
From paid-in capital ................. -- -- (0.02) (0.08) (0.14)
------ ------ ------ ------ ------
Total distributions declared to
shareholders ........................... $(0.91) $(0.93) $(0.96) $(0.97) $(2.03)
------ ------ ------ ------ ------
Net asset value -- end of period ....... $13.57 $13.04 $12.85 $12.71 $12.75
====== ====== ====== ====== ======
Total return+ .......................... 11.36% 8.99% 8.67% 7.78% 2.12%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses## ........................... 0.98% 1.02% 1.00% 1.00% 0.96%
Net investment income ................ 6.61% 7.12% 7.10% 7.91% 7.17%
PORTFOLIO TURNOVER ..................... 333% 446% 377% 306% 410%
NET ASSETS AT END OF PERIOD (000
OMITTED) ............................. $708,021 $541,710 $514,892 $477,056 $459,311
- - ------------
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.
+Total returns for Class A shares do not include the applicable sales charge. If the charge
had been included, the results would have been lower.
++For the year ended April 30, 1998, the per share distribution in excess of net investment
income was less than $0.01.
(S)The investment adviser and/or the distributor voluntarily waived a portion of their
management fee and/or distribution fee, respectively, for certain of the periods indicated.
If the fee had been incurred by the Fund, the net investment income per share and the ratios
would have been:

Net investment income .............. $ -- $ -- $ -- $ 0.97 $ 1.01
Ratios (to average net assets)
Expenses## ....................... -- -- -- 1.10% 1.02%
Net investment income ............ -- -- -- 7.81% 7.10%

</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>

YEAR ENDED APRIL 30,
----------------------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CLASS A
----------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period . $13.70 $13.25 $12.69 $12.80 $13.20
------ ------ ------ ------ ------

Income from investment operations --
Net investment income ................ $ 1.04 $ 1.13 $ 1.14 $ 1.20 $ 1.15
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .............. 0.74 0.45 0.59 (0.14) (0.38)
------ ------ ------ ------ ------
Total from investment operations . $ 1.78 $ 1.58 $ 1.73 $ 1.06 $ 0.77
------ ------ ------ ------ ------

Less distributions declared to
shareholders --
From net investment income ........... $(1.04) $(1.13) $(1.17) $(1.17) $(1.17)
From net realized gain on investments
and foreign currency transactions .. (0.05) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders ................... $(1.09) $(1.13) $(1.17) $(1.17) $(1.17)
------ ------ ------ ------ ------
Net asset value -- end of period ....... $14.39 $13.70 $13.25 $12.69 $12.80
====== ====== ====== ====== ======
Total return+........................... 13.42% 12.39% 13.65% 7.69% 5.49%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ............................. 0.88% 0.91% 0.79% 0.75% 0.83%
Net investment income ................ 7.82% 8.39% 8.82% 9.10% 8.93%
PORTFOLIO TURNOVER ..................... 330% 243% 189% 186% 160%
NET ASSETS AT END OF PERIOD (000
OMITTED) .............................. $490,417 $448,261 $315,722 $293,242 $299,485
- - ------------
+Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.

</TABLE>

<PAGE>
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>

YEAR ENDED APRIL 30,
----------------------------------------------------------------------
1998 1997 1996 1995 1994***
CLASS B
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $12.99 $12.79 $12.69 $12.73 $14.99
------ ------ ------ ------ ------

Income from investment operations# --
Net investment income ............... $ 0.79 $ 0.83 $ 0.85 $ 0.88 $ 0.56
Net realized and unrealized gain
(loss) on investments and foreign
currrency transactions ............ 0.54 0.19 0.13 (0.05) (1.30)
------ ------ ------ ------ ------
Total from investment operations $ 1.33 $ 1.02 $ 0.98 $ 0.83 $(0.74)
------ ------ ------ ------ ------

Less distributions declared to
shareholders --
From net investment income .......... $(0.80) $(0.82) $(0.85) $(0.80) $(0.59)
From net realized gain on investments
and foreign currency transactions . -- -- -- -- (0.80)
In excess of net investment income++ 0.00 -- (0.01) -- (0.02)
In excess of net realized gain on
investments and foreign currency
transactions ...................... -- -- -- -- (0.01)
From paid-in capital ................ -- -- (0.02) (0.07) (0.10)
------ ------ ------ ------ ------
Total distributions declared to
shareholders .................. $(0.80) $(0.82) $(0.88) $(0.87) $(1.52)
------ ------ ------ ------ ------
Net asset value -- end of period ...... $13.52 $12.99 $12.79 $12.69 $12.73
====== ====== ====== ====== ======
Total return .......................... 10.52% 8.16% 7.90% 6.90% (5.42)%**
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## .......................... 1.68% 1.76% 1.81% 1.84% 1.83%*
Net investment income ............... 5.90% 6.39% 6.29% 7.17% 6.39%*
PORTFOLIO TURNOVER .................... 333% 446% 377% 306% 410%
NET ASSETS AT END OF PERIOD (000
OMITTED) ............................. $187,905 $123,000 $102,914 $75,451 $33,413
- - ------------
*Annualized.
**Not annualized.
***For the period from the inception of Class B, September 7, 1993, through April 30, 1994.
++For the year ended April 30, 1998, the per share distribution in excess of net income was
less than $0.01.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.

</TABLE>
<PAGE>
<TABLE>

FINANCIAL HIGHLIGHTS -- CONTINUED

YEAR ENDED APRIL 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994***
------ ------ ------ ------ --------
CLASS C
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period .... $12.98 $12.79 $12.68 $12.72 $13.57
------ ------ ------ ------ ------
Income from investment operations# --
Net investment income ................... $ 0.78 $ 0.83 $ 0.85 $ 0.88 $ 0.29
Net realized and unrealized gain (loss)
on investments and foreign currrency
transactions .......................... 0.56 0.20 0.15 (0.05) (0.90)
------ ------ ------ ------ ------
Total from investment operations .... $ 1.34 $ 1.03 $ 1.00 $ 0.83 $(0.61)
------ ------ ------ ------ ------

Less distributions declared to shareholders --
From net investment income .............. $(0.80) $(0.84) $(0.85) $(0.80) $(0.22)
In excess of net investment income++ .... 0.00 -- (0.02) -- --
From paid-in capital .................... -- -- (0.02) (0.07) (0.02)
------ ------ ------ ------ ------
Total distributions declared to
shareholders ...................... $(0.80) $(0.84) $(0.89) $(0.87) $(0.24)
------ ------ ------ ------ ------
Net asset value -- end of period .......... $13.52 $12.98 $12.79 $12.68 $12.72
====== ====== ====== ====== ======
Total return .............................. 10.54% 8.27% 7.90% 7.00% 4.57%**
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## .............................. 1.68% 1.74% 1.74% 1.75% 1.80%*
Net investment income ................... 5.89% 6.44% 6.35% 7.17% 6.57%*
PORTFOLIO TURNOVER ........................ 333% 446% 377% 306% 410%
NET ASSETS AT END OF PERIOD (000 OMITTED) . $42,229 $20,003 $17,330 $8,171 $7,627
- - ------------
*Annualized.
**Not annualized.
***For the period from the inception of Class C, January 3, 1994, through April 30, 1994.
++For the year ended April 30, 1998, the per share distribution in excess of net investment
income was less than $0.01.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.

</TABLE>

<PAGE>

3. THE FUND
The Fund is a diversified series of the Trust, an open-end management investment
company which was organized as a trust under the laws of The Commonwealth of
Massachusetts in 1985. The Trust presently consists of three series, each of
which represents a portfolio with separate policies. Shares of the Fund are
continuously sold to the public and the Fund uses the proceeds to buy securities
for its portfolio. Three classes of shares of the Fund currently are offered for
sale to the general public. Class A shares are offered at net asset value plus
an initial sales charge up to a maximum of 4.75% of the offering price (or a
CDSC upon redemption of 1.00% during the first year in the case of purchases of
$1 million or more and certain purchases by retirement plans) and subject to an
annual distribution and service fee up to a maximum of 0.35% per annum. Class B
shares are offered at net asset value without an initial sales charge but
subject to a CDSC upon redemption (declining from 4.00% during the first year to
0% after six years) and an annual distribution fee and service fee up to a
maximum of 1.00% per annum. Class B shares will convert to Class A shares
approximately eight years after purchase. Class C shares are offered at net
asset value without an initial sales charge but are subject to a CDSC upon
redemption of 1.00% during the first year and an annual distribution and service
fee up to a maximum of 1.00% per annum. Class C shares do not convert to any
other class of shares of the Fund. In addition, the Fund offers an additional
class of shares, Class I shares, exclusively to certain institutional investors.
Class I shares are made available by means of a separate Prospectus Supplement
provided to institutional investors eligible to purchase Class I shares and are
offered at net asset value without an initial sales charge or CDSC upon
redemption and without an annual distribution and service fee.

The Trust's Board of Trustees provides broad supervision over the affairs of the
Fund. A majority of the Trustees are not affiliated with the 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 investment objectives and
policies of the Fund. The selection of investments and the way they are managed
depend on the conditions and trends in the economy and the financial
marketplaces. The Fund also offers to buy back (redeem) its shares from its
shareholders at any time at net asset value, less any applicable CDSC.

INVESTMENT POLICIES: The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 65% of its total assets in:

(1) convertible and non-convertible debt securities and preferred stocks;

(2) debt securities issued or guaranteed by the United States ("U.S.")
Government or its agencies, authorities or instrumentalities ("U.S.
Government Securities");

(3) commercial paper, repurchase agreements and cash or cash equivalents
(such as certificates of deposit and bankers' acceptances);

Not more than 20% of the Fund's net assets will be invested in convertible and
non-convertible securities rated below the four highest grades of Standard &
Poors Ratings Services ("S&P"), Fitch IBCA ("Fitch"), Duff & Phelps Credit
Rating Co. ("Duff & Phelps") (AAA, AA, A or BBB) or Moody's Investors Service,
Inc. (Aaa, Aa, A or Baa) and comparable unrated securities. For a description of
these ratings see Appendix B to this Prospectus and for a chart indicating the
composition of the Fund's portfolio for the fiscal year ended April 30, 1998,
with the debt securities rated by S&P separated into rating categories, see
Appendix C to this Prospectus. For a discussion of the risks of investing in
these securities see "Additional Risk Factors -- Lower Rated Fixed Income
Securities" below.

Although the Fund may purchase Canadian and other foreign securities, under
normal market conditions, it may not invest more than 10% of its assets in
non-dollar denominated non-Canadian foreign securities.

The Fund may not directly purchase common stocks. However, the Fund may retain
up to 10% of its total assets in common stocks which were acquired either by
conversion of fixed income securities or by the exercise of warrants attached
thereto.

U.S. Government Securities also include interest in trusts or other entities
representing interests in obligations that are issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities.

5. CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
Consistent with the Fund's investment objectives and policies, the Fund may
engage in the following securities transactions and investment techniques, many
of which are described more fully in the SAI. See "Investment Objectives,
Policies and Restrictions" in the SAI.

CORPORATE ASSET-BACKED SECURITIES: The Fund may invest in corporate asset-
backed securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and automobile
loan receivables, representing the obligations of a number of different parties.

Corporate asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (e.g., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.

Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection; and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. The Fund
will not pay any additional or separate fees for credit support. The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.

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 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"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations). Mortgage
pass-through securities may also be issued by non-governmental 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.

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 notional
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 could be used to shift the Fund's investment exposure from one
type of investment to another. For example, if the 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 the 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 the 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, or no
investment of cash. As a result, swaps can be highly volatile and may have a
considerable impact on the 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. The Fund may also suffer
losses if it is unable to terminate outstanding swap agreements or reduce its
exposure through offsetting transactions.

REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order to
earn 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 SAI, the Fund has adopted certain procedures intended to
minimize risk.

LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. 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, U.S. Government securities or an irrevocable letter of
credit maintained on a current basis at an amount at least equal to the market
value of the securities loaned. The Fund will continue to collect the equivalent
of interest on the securities loaned and will also receive either interest
(through investment of cash collateral) or a fee (if the collateral is U.S.
government securities or an irrevocable letter of credit). 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.

ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS: Fixed income
securities in which the Fund may invest also include zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK bonds").
Zero coupon and deferred interest bonds are debt obligations which are issued or
purchased 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 or the first interest payment date, at a rate of interest
reflecting the market rate of the security at the time of issuance. While zero
coupon bonds do not require the periodic payment of interest, deferred interest
bonds provide for a period of delay before the regular payment of interest
begins. PIK bonds are debt obligations which provide that the issuer thereof
may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. 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 due to changes in
interest rates 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 and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
to satisfy the Fund's distribution obligations.

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 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. 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 prepayments 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.

STRIPPED MORTGAGE-BACKED SECURITIES: The Fund may also 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 interest and principal distributions from an underlying
pool of mortgage assets. For a further description of SMBS and the risks related
to transactions therein, see the SAI.

EMERGING MARKET SECURITIES: Consistent with the Fund's objective and policies,
the Fund may invest in securities of issuers whose principal activities are
located in emerging market countries. Emerging market countries include any
country determined by the Adviser to have an emerging market economy, taking
into account a number of factors, including whether the country has a low- to
middle-income economy according to the International Bank for Reconstruction and
Development, the country's foreign currency debt rating, its political and
economic stability and the development of its financial and capital markets. The
Adviser determines whether an issuer's principal activities are located in an
emerging market country by considering such factors as its country of
organization, the principal trading market for its securities and the source of
its revenues and location of its assets. The issuer's principal activities
generally are deemed to be located in a particular country if: (a) the security
is issued or guaranteed by the government of that country or any of its
agencies, authorities or instrumentalities; (b) the issuer is organized under
the laws of, and maintains a principal office in, that country; (c) the issuer
has its principal securities trading market in that country; (d) the issuer
derives 50% or more of its total revenues from goods sold or services performed
in that country; or (e) the issuer has 50% or more of its assets in that
country.

BRADY BONDS: The Fund may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented to date in Argentina, Brazil, Bulgaria,
Costa Rica, Croatia, Dominican Republic, Ecuador, Jordan, Mexico, Morocco,
Nigeria, Panama, Peru, the Philippines, Poland, Slovenia, Uruguay and Venezuela.
Brady Bonds have been issued only recently, and for that reason do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (but primarily the U.S. dollar) and are actively
traded in over-the-counter secondary markets. U.S. dollar-denominated,
collateralized Brady Bonds, which may be fixed rate bonds or floating-rate
bonds, are generally collateralized in full as to principal by U.S. Treasury
zero coupon bonds having the same maturity as the bonds. Brady Bonds are often
viewed as having three or four valuation components: the collateralized
repayment of principal at final maturity; the collateralized interest payments;
the uncollateralized interest payments; and any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constituting the "residual
risk"). In light of the residual risk of Brady Bonds and the history of defaults
of countries issuing Brady Bonds with respect to commercial bank loans by public
and private entities, investments in Brady Bonds may be viewed as speculative.

"WHEN-ISSUED" SECURITIES: The Fund may purchase securities on a "when-issued" or
on a "forward delivery" basis, which means that the securities will be delivered
to the Fund at a future date usually beyond customary settlement time. The
commitment to purchase a security for which payment will be made on a future
date may be deemed a separate security. In general, the Fund does not pay for
such securities until received, and does not start earning interest on the
securities until the contractual settlement date. While awaiting delivery of
securities purchased on such bases, the Fund will segregate liquid assets
sufficient to cover its commitments.

INDEXED SECURITIES: The Fund may invest in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indices, or other
financial indicators. Most indexed securities are short to intermediate term
fixed-income securities whose values at maturity (i.e., principal value) or
interest rates rise or fall according to changes in the value of one or more
specified underlying instruments. Indexed securities may be positively or
negatively indexed (i.e., their principal value or interest rates may increase
or decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument or to
one or more options on the underlying instrument. Indexed securities may be more
volatile than the underlying instrument itself and could involve the loss of all
or a portion of the principal amount of or interest on the instrument.

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.

RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933, as amended ("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"). A determination is made, based upon a continuing review of the
trading markets for a specific Rule 144A security, whether such security is
liquid and thus not subject to the Fund's limitation on investing not more than
10% of its net assets in illiquid investments. 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, retains oversight of
the liquidity determinations, focusing on factors such as valuation, liquidity
and availability of information. Investing in Rule 144A securities could have
the effect of decreasing the level of liquidity in the Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these Rule 144A securities held in the Fund's portfolio. Subject to the Fund's
10% 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.

OPTIONS: The Fund intends to write (sell) "covered" put and call options and
purchase put and call options on domestic and foreign fixed income securities.
Call options written by the Fund give the holder the right to buy the underlying
security from the Fund at a fixed exercise price up to a stated expiration date
or, in the case of certain options, on such date. Put options give the holder
the right to sell the underlying security to the Fund during the term of the
option at a fixed exercise price up to a stated expiration date or, in the case
of certain options, on such date. Call options are "covered" by the Fund, when
it owns the underlying security, and put options are "covered" by the Fund, when
it has established a segregated account of liquid assets which can be liquidated
promptly to satisfy any obligation of the Fund to purchase the underlying
security. The Fund may also write straddles (combinations of puts and calls on
the same underlying security). The writing of straddles provides the Fund with
additional premium income, but could involve greater risk.

The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates. By writing a call option, 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 higher than its then current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.

The Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. It is possible, however, that
illiquidity in the options markets may make it difficult from time to time for
the Fund to close out its written option positions.

The Fund may also purchase put or call options in anticipation of changes in
interest rates which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. The
premium paid for a put or call 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 changes sufficiently, the option may expire
without value to the Fund.

The Fund intends to write and purchase options on securities not only for
hedging purposes, but also for the purpose of increasing its return. Options on
securities that are written or purchased by the Fund will be traded on U.S. and
foreign exchanges and over-the-counter. Over-the-counter transactions also
involve certain risks which may not be present in an exchange environment.

The Fund may also enter into options on the yield "spread" or yield differential
between two fixed income 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 fixed income 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.

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 which 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
part of the formula price 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 such SEC illiquidity ceiling.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and
sell futures contracts on foreign or domestic fixed income securities or indices
of such securities, including municipal bond indices and any other indices of
foreign or domestic fixed income securities which may become available for
trading ("Futures Contracts"). The Fund may also purchase and write options on
such Futures Contracts ("Options on Futures Contracts"). These instruments will
be used only to hedge against anticipated future changes in interest rates which
otherwise might either adversely affect the value of the Fund's portfolio
securities or adversely affect the prices of securities which the Fund intends
to purchase at a later date. Should interest rates move in an unexpected manner,
the Fund may not achieve the anticipated benefits of the hedging transactions
and may realize a loss. Such transactions may also be entered into for
non-hedging purposes, to the extent permitted under applicable law, which
involves greater risks and could result in losses which are not offset by gains
on other portfolio assets.

Futures Contracts and Options on Futures Contracts that are entered into by the
Fund will be traded on U.S. and foreign exchanges.

FORWARD CONTRACTS: The Fund may enter into forward foreign currency exchange
contracts ("Forward Contracts") for hedging purposes only. A Forward Contract is
an obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers. The Fund will enter into Forward Contracts to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currency. The Fund may enter
into a Forward Contract, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security. Additionally, for example, when
the Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a Forward Contract to sell an amount
of that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. 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. The Fund may choose to, or be required to, receive delivery of the
foreign currencies underlying Forward Contracts it has entered into. Under
certain circumstances, such as where the Adviser believes that the applicable
exchange rate is unfavorable at the time the currencies are received or the
Adviser anticipates, for any other reason, that the exchange rate will improve,
the Fund may hold such currencies for an indefinite period of time. The Fund has
established procedures which require use of segregated assets or "cover" in
connection with the purchase and sale of such contracts. See "Additional Risk
Factors -- Foreign Securities" below for information on the risks associated
with holding foreign currency.

OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write put and call
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. As in the case of other kinds
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 could 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 plus
related transaction costs. Options on foreign currencies written or purchased by
the Fund will be traded on U.S. and foreign exchanges and over-the-counter. The
Fund may also choose to, or be required to, receive delivery of the foreign
currencies underlying options on foreign currencies it has entered into. Under
certain circumstances, such as where the Adviser believes that the applicable
exchange rate is unfavorable at the time the currencies are received or the
Adviser anticipates, for any other reason, that the exchange rate will improve,
the Fund may hold such currencies for an indefinite period of time. See
"Additional Risk Factors -- Foreign Securities," below for information on the
risks associated with holding foreign currency.

6. ADDITIONAL RISK FACTORS
The following discussion of additional risk factors supplements the risk factors
described above. Additional information concerning risk factors can be found
under the caption "Investment Objectives, Policies and Restrictions" in the SAI.

OPTIONS, FUTURES CONTRACTS, FORWARD CONTRACTS: Although the Fund will enter into
certain transactions in options, Futures Contracts, Options on Futures
Contracts, Forward Contracts and options on foreign currencies for hedging
purposes, and will enter into certain other options transactions for hedging
purposes, such transactions nevertheless involve 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 such instruments for other than hedging purposes,
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. 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.

Transactions in options may be entered into by the Fund on U.S. 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 U.S.
exchanges regulated by the CFTC and on foreign exchanges. In addition, the
securities underlying options and Futures Contracts traded by the Fund will
include foreign as well as domestic securities.

FIXED INCOME SECURITIES: The net asset value of the shares of an open-end
investment company, such as the Fund, which invests primarily in fixed income
securities, changes with the general level of interest rates. When interest
rates decline, the market value of a portfolio invested at higher yields can be
expected to rise. Conversely, when interest rates rise, the market value of a
portfolio invested at lower yields can be expected to decline.

LOWER-RATED FIXED INCOME SECURITIES: As indicated above, the Fund may also
invest up to 20% of its net assets in convertible and non-convertible 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 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, deferred interest bonds and PIK bonds, described above.

FOREIGN SECURITIES: The Fund may invest in foreign securities to the extent
described above. Investing in securities of foreign issuers generally involves
risks not ordinarily associated with investing in securities of domestic
issuers. These risks include changes in currency rates, exchange control
regulations, governmental administration or economic or monetary policy (in the
U.S. or abroad) or circumstances in dealings between nations. Costs may be
incurred in connection with conversions between various currencies. Special
considerations may also include more limited information about foreign issuers,
higher brokerage costs, different accounting standards and thinner trading
markets. Foreign securities markets may also be less liquid, more volatile and
less subject to government supervision than in the U.S. Investments in foreign
countries could be affected by other factors including expropriation,
confiscatory taxation and potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods. 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 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.

EMERGING MARKET SECURITIES: The risks of investing in foreign securities may be
intensified in the case of investments in emerging markets. Securities of many
issuers in emerging markets may be less liquid and more volatile than securities
of comparable domestic issuers. Emerging markets also have different clearance
and settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets of the
Fund is uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Fund due to
subsequent declines in value of the portfolio security, a decrease in the level
of liquidity in the Fund's portfolio or, if the Fund has entered into a contract
to sell the security, in possible liability to the purchaser. Certain markets
may require payment for securities before delivery and in such markets, the Fund
bears the risk that the securities will not be delivered and that the Fund's
payments will not be returned. Securities prices in emerging markets can be
significantly more volatile than in the more developed nations of the world,
reflecting the greater uncertainties of investing in less established markets
and economies. In particular, countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions of repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.

Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.

Investment in certain foreign emerging market debt obligations may be restricted
or controlled to varying degrees. These restrictions or controls may at times
preclude investment in certain foreign emerging market debt obligations and
increase the expenses of the Fund.

PORTFOLIO TRADING: The Fund intends to engage in portfolio trading rather than
holding portfolio securities to maturity. In trading portfolio securities, the
Fund seeks to take advantage of market developments, yield disparities and
variations in the creditworthiness of issuers. For the fiscal year ended April
30, 1998, the Fund had a portfolio turnover rate of over 100%. Transaction costs
incurred by the Fund and the realized capital gains and losses of the Fund may
be greater than that of a fund with a lesser portfolio turnover rate. For a
description of the strategies which may be used by the Fund in trading portfolio
securities, see "Portfolio Trading" in the SAI.

The primary consideration in placing portfolio security transactions with
broker-dealers is to obtain, and maintain the availability of, execution at the
most favorable prices. Consistent with the foregoing primary consideration, the
Conduct Rules 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 MFD, the Fund's distributor, as a factor in the selection of broker-dealers
to execute the Fund's portfolio transactions. From time to time, the Adviser may
direct certain portfolio transactions to broker-dealer firms which, in 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 SAI includes a discussion of other investment policies and a listing of
specific investment restrictions which govern the Fund's investment policies.
The specific investment restrictions listed in the SAI may be changed without
shareholder approval unless otherwise indicated (see "Investment Restrictions"
in the SAI). Except with respect to the Fund's policy on borrowing and investing
in illiquid securities, the Fund's limitations, policies and rating 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.

7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER: The Adviser manages the assets of the Fund pursuant to an
Investment Advisory Agreement, dated December 2, 1985 (the "Advisory
Agreement"). Under the Advisory Agreement, the Adviser provides the Fund with
overall investment advisory services. Geoffrey L. Kurinsky, a Senior Vice
President of the Adviser, has been the Fund's portfolio manager since 1989 and
has been employed as a portfolio manager by the Adviser since 1987. 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 fixed by a formula based upon a
percentage of the Fund's average daily net assets for its then-current fiscal
year plus a percentage of the Fund's gross income (i.e., income other than gains
from the sale of securities, gains from options and futures transactions and
premium income from options written) for that fiscal year. The applicable
percentages are reduced as assets and income attain the following levels:

ANNUAL RATE OF MANAGEMENT FEE ANNUAL RATE OF MANAGEMENT FEE
BASED ON AVERAGE DAILY NET ASSETS BASED ON GROSS INCOME
- - --------------------------------- ------------------------------
.225% of the first $200 million 2.75% of the first $20 million
.191% of average daily net assets 2.34% of gross income in excess of
in excess of $200 million $20 million

For the Fund's fiscal year ended April 30, 1998, MFS received management fees
under the Advisory Agreement of $3,126,075 (equivalent to 0.39% of the Fund's
average daily net assets).

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS
Institutional Trust, MFS Variable Insurance Trust, MFS/Sun Life Series Trust and
seven variable accounts, each of which is a registered investment company
established by Sun Life Assurance Company of Canada (U.S.), a subsidiary of Sun
Life Assurance Company of Canada ("Sun Life"), in connection with the sale of
various fixed/variable annuity contracts. MFS and its wholly owned subsidiary,
MFS Institutional Advisors, Inc., provide 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 $87.8 billion on behalf of approximately 3.3 million investor
accounts as of July 31, 1998. As of such date, the MFS organization managed
approximately $20.5 billion of net assets in fixed income funds and fixed income
portfolios of MFS Institutional Advisors, Inc. Approximately $4.9 billion of the
assets managed by MFS are invested in securities of foreign issuers and non-U.S.
dollar denominated securities of U.S. issuers. MFS is a subsidiary of Sun Life
of Canada (U.S.) Financial Services Holdings, Inc., which in turn is an indirect
wholly owned subsidiary of Sun Life. The Directors of MFS are Jeffrey L. Shames,
John W. Ballen, Arnold D. Scott, Kevin R. Parke, Thomas J. Cashman, Joseph Dello
Russo, William W. Scott, Donald A. Stewart and John D. McNeil. Mr. Shames is the
Chairman and Chief Executive Officer of MFS, Mr. Ballen is the President and
Chief Investment Officer of MFS and Mr. Scott is the Secretary and a Senior
Executive Vice President of MFS. Messrs. McNeil and Stewart are the Chairman and
the 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 U.S. since 1895, establishing a headquarters office here
in 1973. The executive officers of MFS report directly to the Chairman of Sun
Life.

Mr. Shames, the Chairman of MFS, is a Trustee of the Trust. W. Thomas London,
Stephen E. Cavan, James R. Bordewick, Jr., James O. Yost, Ellen Moynihan, Mark
E. Bradley, and Geoffrey L. Kurinsky, all of whom are officers of MFS, are
officers of the Trust.

In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS. Some simultaneous
transactions are inevitable when several clients receive investment advice from
MFS, particularly when the same security is suitable for more than one client.
While in some cases this arrangement could have a detrimental effect on the
price or availability of the security as far as the Fund is concerned, in other
cases, however, it may produce increased investment opportunities for the Fund.

DISTRIBUTOR: MFD, 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.

ADMINISTRATOR: MFS provides the Fund with certain financial, legal, compliance,
shareholder communications and other administrative services pursuant to a
Master Administrative Services Agreement dated March 1, 1997, as amended. Under
this Agreement, the Fund pays MFS an administrative fee up to 0.015% per annum
of the Fund's average daily net assets. This fee reimburses MFS for a portion of
the costs it incurs to provide such services.

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

8. INFORMATION CONCERNING SHARES OF THE FUND

PURCHASES
Class A, B and C shares of the Fund may be purchased at the public offering
price through any dealer. As used in the Prospectus and any appendices thereto
the term "dealer" includes any broker, dealer, bank (including bank trust
departments), registered investment adviser, financial planner and any other
financial institutions having a selling agreement or other similar agreement
with MFD. Dealers may also charge their customers fees relating to investments
in the Fund.

This Prospectus offers Class A, B and C shares to the general public which bear
sales charges and distribution fees in different forms and amounts, as described
below:

CLASS A SHARES: Class A shares are generally offered at net asset value plus an
initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.

PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at net
asset value plus an initial sales charge as follows:

<TABLE>
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**
</TABLE>
- - ------------

*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 will apply to such purchases, as discussed below.

MFD 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 MFD 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 other MFS Funds owned or
being purchased, the existence of an agreement to purchase additional shares
during a 13-month period (or 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 Purchase privileges by which the
sales charge may be reduced is set forth in the SAI.

PURCHASES SUBJECT TO A CDSC (but not an initial sales charge). In the following
five circumstances, Class A shares are offered at net asset value without an
initial sales charge, but subject to a CDSC equal to 1% of the lesser of the
value of the shares redeemed (exclusive of reinvested dividend and capital gain
distributions) or the total cost of such shares, in the event of a share
redemption within 12 months following the purchase:

(i) on investments of $1 million or more in Class A shares;

(ii) on investments in Class A shares by certain retirement plans subject
to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if prior to July 1, 1996: (a) the plan had established an
account with the Shareholder Servicing Agent and (b) the sponsoring
organization had demonstrated to the satisfaction of MFD that either
(i) the employer has at least 25 employees or (ii) the aggregate
purchases by the retirement plan of Class A shares of Funds in the
MFS Funds would be in an aggregate amount of at least $250,000
within a reasonable period of time, as determined by MFD in its sole
discretion;

(iii) on investments in Class A shares by certain retirement plans subject
to ERISA, if: (a) the retirement plan and/or sponsoring organization
subscribes to the MFS FUNDamental 401(k) Program or any similar
recordkeeping system made available by the Shareholder Servicing
Agent (the "MFS Participant Recordkeeping System"); (b) the plan
establishes an account with the Shareholder Servicing Agent on or
after July 1, 1996; and (c) the aggregate purchases by the
retirement plan of Class A shares of the MFS Funds will be in an
aggregate amount of at least $500,000 within a reasonable period of
time, as determined by MFD in its sole discretion;

(iv) on investments in Class A shares by certain retirement plans subject
to ERISA, if: (a) the plan establishes an account with the
Shareholder Servicing Agent on or after July 1, 1996 and (b) the plan
has, at the time of purchase, a market value of $500,000 or more
invested in shares of any class or classes of the MFS Funds. THE
RETIREMENT PLAN WILL QUALIFY UNDER THIS CATEGORY ONLY IF THE PLAN OR
ITS SPONSORING ORGANIZATION INFORMS THE SHAREHOLDER SERVICING AGENT
PRIOR TO THE PURCHASE THAT THE PLAN HAS A MARKET VALUE OF $500,000 OR
MORE INVESTED IN SHARES OF ANY CLASS OR CLASSES OF THE MFS FUNDS. THE
SHAREHOLDER SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO
DETERMINE WHETHER SUCH A PLAN QUALIFIES UNDER THIS CATEGORY; AND

(v) on investments in Class A shares by certain retirement plans subject
to ERISA, if: (a) the plan establishes an account with the
Shareholder Servicing Agent on or after July 1, 1997; (b) such plan's
records are maintained on a pooled basis by the Shareholder Servicing
Agent; and (c) the sponsoring organization demonstrates to the
satisfaction of MFD that, at the time of purchase, the employer has
at least 200 eligible employees and the plan has aggregate assets of
at least $2,000,000.

In the case of all such purchases, MFD will pay commissions to dealers on new
investments in Class A shares made through such dealers as follows:

COMMISSION PAID BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT
-------------------------------- --------------------------
1.00% On the first $2,000,000, plus
0.80% Over $2,000,000 to $3,000,000, plus
0.50% Over $3,000,000 to $50,000,000, plus
0.25% Over $50,000,000

For purposes of determining the level of commissions to be paid to dealers with
respect to a shareholder's new investment in Class A shares purchases for each
shareholder account (and certain other accounts for which the shareholder is a
record or beneficial holder) will be aggregated over a 12-month period
(commencing from the date of the first such purchases).

See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" in the
Prospectus for further discussion of the CDSC.

WAIVERS OF INITIAL SALES CHARGE AND CDSC. In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemptions of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus. In addition to these circumstances,
the CDSC imposed upon the redemption of Class A shares is waived with respect to
shares held by certain retirement plans qualified under Section 401(a) or 403(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), and subject to
ERISA, where:

(i) the retirement plan and/or sponsoring organization does not subscribe
to the MFS Participant Recordkeeping System; and

(ii) the retirement plan and/or sponsoring organization demonstrates to
the satisfaction of, and certifies to the Shareholder Servicing Agent
that the retirement plan has, at the time of certification or will
have pursuant to a purchase order placed with the certification, a
market value of $500,000 or more invested in shares of any class or
classes of the MFS Funds and aggregate assets of at least $10
million;

provided, however, that the CDSC will not be waived (i.e., it will be imposed)
(a) with respect to plans which establish an account with the Shareholder
Servicing Agent on or after November 1, 1997, in the event that the Plan makes a
complete redemption of all of its shares in the MFS Funds, or (b) with respect
to plans which established an account with the Shareholder Servicing Agent prior
to November 1, 1997, in the event that there is a change in law or regulations
which results in a material adverse change to the tax advantaged nature of the
plan, or in the event that the plan and/or sponsoring organization: (i) becomes
insolvent or bankrupt; (ii) is terminated under ERISA or is liquidated or
dissolved; or (iii) is acquired by, merged into, or consolidated with, any other
entity.

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

CONTINGENT
YEAR OF REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE

First ..................................................... 4%
Second .................................................... 4%
Third ..................................................... 3%
Fourth .................................................... 3%
Fifth ..................................................... 2%
Sixth ..................................................... 1%
Seventh and following ..................................... 0%

The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividends or capital gain distributions.

Except as described below, MFD will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee payable under the Fund's
Distribution Plan (see "Distribution Plan" below) at a rate equal to 0.25% of
the purchase price of such shares. Therefore, the total amount paid to a dealer
upon the sale of Class B shares is 4% of the purchase price of the shares
(commission rate of 3.75% plus a service fee equal to 0.25% of the purchase
price).

Class B shares purchased by a retirement plan whose sponsoring organization
subscribes to the MFS Participant Recordkeeping System and which has established
its account with the Shareholder Servicing Agent on or after July 1, 1996, will
be subject to the CDSC described above, only under limited circumstances, as
explained below under "Waivers of CDSC." With respect to such purchases, MFD
pays an amount to dealers equal to 3.00% of the amount purchased through such
dealers (rather than the 4.00% payment described above), which is comprised of a
commission of 2.75% plus the advancement of the first year service fee equal to
0.25% of the purchase price payable under the Fund's Distribution Plan. As
discussed above, such retirement plans are eligible to purchase Class A shares
of the Fund at net asset value without an initial sales charge but subject to a
1% CDSC if the plan has, at the time of purchase, a market value of $500,000 or
more invested in shares of any class or classes of the MFS Funds. IN THIS EVENT,
THE PLAN OR ITS SPONSORING ORGANIZATION SHOULD INFORM THE SHAREHOLDER SERVICING
AGENT THAT THE PLAN IS ELIGIBLE TO PURCHASE CLASS A SHARES UNDER THIS CATEGORY;
THE SHAREHOLDER SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE
WHETHER SUCH A PLAN QUALIFIES UNDER THIS CATEGORY FOR THE PURCHASE OF CLASS A
SHARES.

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

WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon redemption
of Class B shares is waived. These circumstances are described in Appendix A to
this Prospectus. In addition to these circumstances, the CDSC imposed upon the
redemption of Class B shares is waived with respect to shares held by a
retirement plan whose sponsoring organization subscribes to the MFS Participant
Recordkeeping System and which has established an account with the Shareholder
Servicing Agent on or after July 1, 1996; provided, however, that the CDSC will
not be waived (i.e., it will be imposed) in the event that there is a change in
law or regulations which results in a material adverse change to the tax
advantaged nature of the plan, or in the event that the plan and/or sponsoring
organization: (i) becomes insolvent or bankrupt; (ii) is terminated under ERISA
or is liquidated or dissolved; or (iii) is acquired by, merged into, or
consolidated with, any other entity.

CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain
outstanding for approximately eight years will convert to Class A shares of the
same Fund. 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 Fund's Distribution Plan.
See "Information Concerning Shares of the Fund -- Distribution Plan" below.
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 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 but are subject to a CDSC upon redemption of 1.00% during the first
year. 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 up to $1,000,000
per transaction.

The CDSC imposed is assessed against the lesser of the value of the shares
redeemed (exclusive of reinvested dividend and capital gain distributions) or
the total cost of such shares. No CDSC is assessed against shares acquired
through the automatic reinvestment of dividend or capital gain distributions.
See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" below for
further discussion of the CDSC.

MFD will pay dealers 1.00% of the purchase price of Class C shares purchased
through dealers and, as compensation therefor, MFD will retain the 1.00% per
annum distribution and service fee paid under the Fund's Distribution Plan to
MFD for the first year after purchase (see "Distribution Plan" below).

Class C shares are not currently available for purchase by any retirement plan
qualified under Sections 401(a) or 403(b) of the Internal Revenue Code of 1986,
as amended (the "Code") if the retirement plan and/or the sponsoring
organization subscribe to the MFS FUNDamental 401(k) Plan or another similar
recordkeeping program made available by the Shareholder Servicing Agent.

WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon redemption
of Class C shares is waived. These circumstances are described in Appendix A to
this Prospectus.

GENERAL: The following information applies to purchases of all classes of
the Fund's shares.

MINIMUM INVESTMENT. 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 MFD. The Fund reserves
the right to cease offering its shares at any time.

SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase
additional shares of any MFS Fund by telephoning the Shareholder Servicing Agent
toll-free at (800) 225-2606. The minimum purchase amount is $50 and the maximum
purchase amount is $100,000. Shareholders wishing to avail themselves of this
telephone purchase privilege must so elect on their Account Application and
designate thereon a bank and account number from which purchases will be made.
If a telephone purchase request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), the purchase will occur at the closing net
asset value of the shares purchased on that day. The Shareholder Servicing Agent
may be liable for any losses resulting from unauthorized telephone transactions
if it does not follow 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.

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. THE FOLLOWING POLICY WILL
REMAIN IN EFFECT UNTIL SEPTEMBER 15, 1998. Purchases and exchanges should be
made for investment purposes only. The Fund and MFD each reserves the right to
reject or restrict any specific purchase or exchange request. Because an
exchange request involves both a request to redeem shares of one fund and to
purchase shares of another fund, the Fund considers the underlying redemption
request conditioned upon the acceptance of the underlying purchase request.
Therefore, in the event that the Fund or MFD rejects an exchange request,
neither the redemption nor the purchase side of the exchange will be processed.

The Fund is not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Fund defines a "market
timer" as an individual, or organization acting on behalf of one or more
individudals, if (i) the individual or organization makes three or more exchange
requests out of the Fund per calender year and (ii) any one of such exchange
requests represents shares equal in value to 1/2 of 1% or more of the Fund's net
assets at the time of the request. Accounts under common ownership or control,
including accounts administered by market timers, will be aggregated for
purposes of this definition.

EFFECTIVE SEPTEMBER 15, 1998, THE FUND WILL ADOPT THE FOLLOWING NEW MARKET
TIMING POLICY WHICH WILL REPLACE THE CURRENT POLICY AS DISCLOSED ABOVE:

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserve the
right to reject or restrict any specific purchase or exchange request. Because
an exchange request involves both a request to redeem shares of one fund and to
purchase shares of another fund, the Fund considers the underlying redemption
request conditioned upon the acceptance of the underlying purchase request.
Therefore, in the event that the Fund or MFD rejects an exchange request,
neither the redemption nor the purchase side of the exchange will be processed.

The MFS Family of Funds is not designed for professional market timing
organizations or other entities using programmed or frequent exchanges. The MFS
Family of Funds defines a "market timer" as an individual or organization acting
on behalf of one or more individuals, if (i) the individual or organization
makes six or more exchange requests among the MFS Family of Funds or three or
more exchange requests out of any of the MFS high yield bond funds or MFS
municipal bond funds per calendar year and (ii) any one of such exchange
requests represents shares equal in value to $1 million or more. Accounts under
common ownership or control, including accounts administered by market timers,
will be aggregated for purposes of this definition.

DEALER CONCESSIONS. Dealers may receive different compensation with respect
to sales of Class A, Class B and Class C shares. In addition, from time to time,
MFD may pay dealers 100% of the applicable sales charge on sales of Class A
shares of certain specified MFS 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 and/or Class C shares of certain specified MFS Funds sold by such
dealer during a specified sales period. In addition, from time to time, MFD, at
its expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell or arrange for the sale of
shares of the Fund. Such concessions provided by MFD may include financial
assistance to dealers in connection with preapproved conferences or seminars,
sales or training programs for invited registered representatives and other
employees, payment for travel expenses, including lodging, incurred by
registered representatives and other employees 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. From time to time, MFD
may make expense reimbursements for special training of a dealer's registered
representatives and other employees in group meetings or to help pay the
expenses of sales contests. Other concessions may be offered to the extent not
prohibited by state laws or any self-regulatory agency, such as the NASD.

SPECIAL INVESTMENT PROGRAMS. For shareholders who elect to participate in
certain investment programs (e.g., the Automatic Investment Plan) or other
shareholder services, MFD 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.

RESTRICTIONS ON ACTIVITIES OF NATIONAL BANKS. 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, MFD believes that such Act should not preclude banks from
entering into agency agreements with MFD. 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 in
respect of Shareholders who invested in the Fund through a national bank. 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.

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

A shareholder whose shares are held in the name of, or controlled by, a 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.

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 in the MFS Family of Funds (the "MFS Funds") at net asset value
(if available for sale). Shares of one class may not be exchanged for shares of
any other class.

EXCHANGES AMONG MFS FUNDS (EXCLUDING MFS MONEY MARKET FUNDS): No initial
sales charges or CDSC will be imposed in connection with an exchange from shares
of an MFS Fund to shares of any other MFS Fund, except with respect to exchanges
from an MFS money market fund to another MFS Fund which is not an MFS money
market fund (discussed below). With respect to an exchange involving shares
subject to a CDSC, the CDSC will be unaffected by the exchange and the holding
period for purposes of calculating the CDSC will carry over to the acquired
shares.

EXCHANGES FROM AN MFS MONEY MARKET FUND: Special rules apply with respect
to the imposition of an initial sales charge or a CDSC for exchanges from an MFS
money market fund to another MFS Fund which is not an MFS money market fund.
These rules are described under the caption "Exchanges" in the Prospectuses of
those MFS money market funds.

EXCHANGES INVOLVING THE MFS FIXED FUND: Class A shares of any MFS Fund held
by certain qualified retirement plans may be exchanged for units of
participation of the MFS Fixed Fund (a bank collective investment fund) (the
"Units"), and Units may be exchanged for Class A shares of any MFS Fund. With
respect to exchanges between Class A shares subject to a CDSC and Units, the
CDSC will carry over to the acquired shares or Units and will be deducted from
the redemption proceeds when such shares or Units are subsequently redeemed,
assuming the CDSC is then payable (the period during which the Class A shares
and the Units were held will be aggregated for purposes of calculating the
applicable CDSC). In the event that a shareholder initially purchases Units and
then exchanges into Class A shares subject to an initial sales charge of an MFS
Fund, the initial sales charge shall be due upon such exchange, but will not be
imposed with respect to any subsequent exchanges between such Class A shares and
Units with respect to shares on which the initial sales charge has already been
paid. In the event that a shareholder initially purchases Units and then
exchanges into Class A shares subject to a CDSC of an MFS Fund, the CDSC period
will commence upon such exchange, and the applicability of the CDSC with respect
to subsequent exchanges shall be governed by the rules set forth in this
paragraph above.

GENERAL: A shareholder should read the prospectus of the other MFS Fund
into which an exchange is made and consider the differences in objectives,
policies and restrictions before making any exchange. 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 the
Shareholder Servicing Agent) or all the shares in the account. If an 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 (generally, 4:00
p.m., Eastern time) (the "Exchange"), the exchange will occur on that day if all
the requirements set forth above have been complied with at that time, and
subject to the Fund's right to reject purchase orders. 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 dealers or the Shareholder Servicing Agent.
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 timers.

REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the value of his account on any
date on which the Fund is open for business by redeeming shares at their net
asset value (a redemption) or by selling such shares to the Fund through a
dealer (a repurchase). Certain redemptions and repurchases are, however, subject
to a CDSC. See "Contingent Deferred Sales Charge" below. Because the net asset
value of shares of the account fluctuates, 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 up to 15 days from the purchase date in an effort to
assure that such check has cleared. See "Tax Status" below.

REDEMPTION BY MAIL: Each shareholder may 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
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"
will 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 in "good
order" by the Shareholder Servicing Agent, 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 such Exchange is restricted or to
the extent otherwise permitted by the 1940 Act if an emergency exists.

REDEMPTION BY TELEPHONE: Each shareholder may redeem an amount from his
account by telephoning the Shareholder Servicing Agent 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 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 and the amount of any
income tax required to be withheld, are mailed by check to the designated
account, without charge, if the redemption proceeds do not exceed $1,000, and
are wired in federal funds to the designated account if the redemption proceeds
exceed $1,000. 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.

REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares
through his dealer (a repurchase), the shareholder can place a repurchase order
with his dealer, who may charge the shareholder a fee. IF THE DEALER RECEIVES
THE SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE EXCHANGE
AND COMMUNICATES IT TO MFD BEFORE THE CLOSE OF BUSINESS ON THE SAME DAY, 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.

REDEMPTION BY CHECK: Only Class A and Class C shares may be redeemed by
check. A shareholder owning Class A or Class C shares of the Fund may elect to
have a special account with State Street Bank and Trust Company (the "Bank") for
the purpose of redeeming Class A or Class C shares from his or her account by
check. The Bank will provide each Class A or Class C shareholder, upon request,
with forms of checks drawn on the Bank. Only shareholders having accounts in
which no share certificates have been issued will be permitted to redeem shares
by check. Checks may be made payable in any amount not less than $500.
Shareholders wishing to avail themselves of this redemption by check privilege
should so request on their Account Application, must execute signature cards
(for additional information, see the Account Application) with signature
guaranteed in the manner set forth under the caption "Signature Guarantee"
below, and must return any Class A or Class C share certificates issued to them.
Additional documentation will be required from corporations, partnerships,
fiduciaries or other such institutional investors. All checks must be signed by
the shareholder(s) of record exactly as the account is registered before the
Bank will honor them. The shareholders of joint accounts may authorize each
shareholder to redeem by check. The check may not draw on monthly dividends
which have been declared but not distributed. SHAREHOLDERS WHO PURCHASE CLASS A
AND CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS OR CASHIER'S CHECKS) MAY
WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY HAVE BEEN ON THE FUND'S BOOKS
FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO THE BANK FOR PAYMENT, A
SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL BE REDEEMED TO COVER THE
AMOUNT OF THE CHECK, ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX
REQUIRED TO BE WITHHELD. IF THE AMOUNT OF THE CHECK, PLUS ANY APPLICABLE CDSC
AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD IS GREATER THAN THE
VALUE OF CLASS A OR CLASS C SHARES HELD IN THE SHAREHOLDER'S ACCOUNT, THE CHECK
WILL BE RETURNED UNPAID, AND THE SHAREHOLDER MAY BE SUBJECT TO EXTRA CHARGES. TO
AVOID DISHONOR OF CHECKS DUE TO FLUCTUATIONS IN ACCOUNT VALUE, SHAREHOLDERS ARE
ADVISED AGAINST REDEEMING ALL OR MOST OF THEIR ACCOUNT BY CHECK. CHECKS SHOULD
NOT BE USED TO CLOSE A FUND ACCOUNT BECAUSE WHEN THE CHECK IS WRITTEN, THE
SHAREHOLDER WILL NOT KNOW THE EXACT TOTAL VALUE OF THE ACCOUNT ON THE DAY THE
CHECK CLEARS. There is presently no charge to the shareholder for the
maintenance of this special account or for the clearance of any checks, but the
Fund and the Bank reserve the right to impose such charges or to modify or
terminate the redemption by check privilege at any time.

CONTINGENT DEFERRED SALES CHARGE: Investments in Class A shares, Class B
shares or Class C shares ("Direct Purchases") will be subject to a CDSC for a
period of (i) with respect to Class A and Class C shares, 12 months (however,
the CDSC on Class A shares is only imposed with respect to purchases of $1
million or more of Class A shares or purchases by certain retirement plans of
Class A shares) or (ii) with respect to Class B shares, six years. 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 C shares and 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 of shares represented by Direct Purchases exceeds
the sum of the six calendar year aggregations (12 months in the case of
purchases of Class C shares and of purchases of $1 million or more of Class A
shares or purchases by certain retirement plans 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 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
the 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 of shares will be calculated as set forth in "Purchases" above.

The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except as described in Appendix A hereto.

GENERAL: The following information applies to redemptions and repurchases
of all classes of the Fund's shares.

SIGNATURE GUARANTEE. In order to protect shareholders against fraud, 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.

REINSTATEMENT PRIVILEGE. 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 Class
C shares and 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 SAI regarding this privilege.

IN-KIND DISTRIBUTIONS. The Trust agrees to redeem shares of the Fund solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund
during any 90-day period for any one shareholder. The Fund has reserved the
right to pay other redemptions, 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 received a distribution in-kind, the shareholder could
incur brokerage or transaction charges when converting the securities to cash.

INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. 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 if at any time the total investment in such
account drops below $500 because of redemptions or exchanges, except in the case
of accounts being 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 -- General -- Minimum Investment." 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.

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

In certain circumstances, the fees described may not be imposed or are being
waived. These circumstances, if any, are described below under the heading
"Current Level of Distribution and Service Fees."

FEATURES COMMON TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are common to each class of shares, as described below.

SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A, Class B
or Class C shares, as appropriate) (the "Designated Class") annually in order
that MFD may pay expenses on behalf of the Fund relating to the servicing of
shares of the Designated Class. The service fee is used by MFD to compensate
dealers which enter into a sales agreement with MFD in consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to shares of the Designated Class owned by investors for whom such
dealer is the dealer or holder of record. MFD may from time to time reduce the
amount of the service fees paid for shares sold prior to a certain date. Service
fees may be reduced for a dealer that is the holder or dealer of record for an
investor who owns shares of the Fund having an aggregate 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. MFD or its affiliates are
entitled to retain all service fees payable under the 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 MFD or its affiliates to shareholder accounts.

DISTRIBUTION FEES. The Distribution Plan provides that the Fund may pay MFD
a distribution fee based on the average daily net assets attributable to the
Designated Class as partial consideration for distribution services performed
and expenses incurred in the performance of MFD's obligations under its
distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plan, as does the use
by MFD of such distribution fees. Such amounts and uses are described below in
the discussion of the provisions of the Distribution Plan relating to each class
of shares.

OTHER COMMON FEATURES. Fees payable under the Distribution Plan are charged
to, and therefore reduce, income allocated to shares of the Designated Class.
The provisions of the Distribution Plan relating to operating policies as well
as initial approval, renewal, amendment and termination are substantially
identical as they relate to each class of shares covered by the Distribution
Plan.

FEATURES UNIQUE TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are unique to each class of shares, as described below.

CLASS A SHARES. Class A shares are generally offered pursuant to an initial
sales charge, a substantial portion of which is paid to or retained by the
dealer making the sale (the remainder of which is paid to MFD). See "Purchases
- - -- Class A Shares" above. In addition to the initial sales charge, the dealer
also generally receives the ongoing 0.25% per annum service fee, as discussed
above.

The distribution fee paid to MFD under the Distribution Plan is equal, on an
annual basis, to 0.10% of the Fund's average daily net assets attributable to
Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commission to dealers with respect to purchases
of $1 million or more and purchases by certain retirement plans of Class A
shares which are sold at net asset value but which are subject to a 1% CDSC for
one year after purchase). See "Purchases -- Class A Shares" above. In addition,
to the extent that the aggregate service and distribution fees paid under the
Distribution Plan do 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 such
distribution-related expenses or other distribution- related expenses.

CLASS B SHARES. Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class B Shares"
above. MFD will advance to dealers the first year service fee described above at
a rate equal to 0.25% of the purchase price of such shares and, as compensation
therefore, MFD may retain the service fee paid by the Fund with respect to such
shares for the first year after purchase. Dealers will become eligible to
receive the ongoing 0.25% per annum service fee with respect to such shares
commencing in the thirteenth month following purchase.

Under the Distribution Plan, the Fund pays MFD a distribution fee equal, on an
annual basis, to 0.75% of the Fund's average daily net assets attributable to
Class B shares. As noted above, this distribution fee may be used by MFD to
cover its distribution-related expenses under its distribution agreement with
the Fund (including the 3.75% commission it pays to dealers upon purchase of
Class B shares, as described under "Purchases -- Class B Shares" above).

CLASS C SHARES. Class C shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class C shares"
above. MFD will pay a commission to dealers of 1.00% of the purchase price of
Class C shares purchased through dealers at the time of purchase. In
compensation for this 1.00% commission paid by MFD to dealers, MFD will retain
the 1.00% per annum Class C distribution and service fees paid by the Fund with
respect to such shares for the first year after purchase, and dealers will
become eligible to receive from MFD the ongoing 1.00% per annum distribution and
service fees paid by the Fund to MFD with respect to such shares commencing in
the thirteenth month following purchase.

This ongoing 1.00% fee is comprised of the 0.25% per annum service fee paid to
MFD under the Distribution Plan (which MFD in turn pays to dealers), as
discussed above, and a distribution fee paid to MFD (which MFD also in turn pays
to dealers) under the Distribution Plan equal, on an annual basis, to 0.75% of
the Fund's average daily net assets attributable to Class C shares.

CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class B
and Class C distribution and service fees for its current fiscal year are 0.30%,
1.00% and 1.00% per annum, respectively. The Fund is currently paying
distribution fees of 0.05% under the Class A Distribution Plan. Payment of the
remaining portion of the 0.10% per annum distribution fee will commence on such
date as the Trustees of the Trust may determine. Assets attributable to Class A
shares sold prior to March 1, 1991 are subject to a service fee of 0.15% per
annum.

DISTRIBUTIONS
The Fund intends to pay substantially all of the Fund's net investment income to
its shareholders as dividends on a monthly basis. In determining the net
investment income available for distributions, the Fund may rely on projections
of its anticipated net investment income, including short-term capital gains
from the sales of securities or other assets and premiums from options written,
over a longer term, rather than its actual net investment income for the period.
The Fund may make one or more distributions during the calendar year to its
shareholders from any long-term capital gains, and may also 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. 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. Because the Fund
intends to distribute all of its net investment income and net realized capital
gains to its 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.

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 reinvested in 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 advisers in this regard.

Shortly after the end of each calendar year, each shareholder will be sent a
statement setting forth the federal income tax status of all dividends and
distributions for that year, including the portion taxable as ordinary income,
the portion, if any, taxable as long-term capital gain, (as well as the rate
category or categories under which such gain is taxable) the portion, if any,
representing a return of capital (which is generally free of current taxes but
which results in a basis reduction), the portion representing interest on U.S.
Government obligations, and the amount, if any, of federal income tax withheld.

Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before the Fund makes a 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.

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

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. This determination is made once
during each such 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 Fund's assets attributable to the class and dividing the difference by
the number of shares of the class outstanding. Values of assets in the Fund's
portfolio are determined on the basis of their market or other fair value, as
described in the SAI. The net asset value of each class of shares is effective
for orders received in "good order" by the dealer prior to its calculation and
received by MFD prior to the close of that business day.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund, one of three series of the Trust, has three classes of shares which it
offers to the general public, entitled Class A, Class B and Class C Shares of
Beneficial Interest (without par value). The fund also has a class of shares
which it offers exclusively to certain institutional investors, entitled Class I
Shares. The Trust has reserved the right to create and issue additional series
and classes of shares, in which case each class of a series would participate
equally in the earnings, dividends and assets attributable to that class of the
particular series. Shareholders are entitled to one vote for each share held and
shares of each series are entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shares of all
series vote together in the election of Trustees and ratification of selection
of accountants. Additionally, each class of shares of a series will vote
separately on any material increases in the fees under the 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. The Trust does not intend to hold annual shareholder meetings. The
Declaration of Trust provides that a Trustee may be removed from office in
certain instances (see "Description of Shares, Voting Rights and Liabilities" in
the SAI).

Each share of a class of the Fund represents an equal proportionate interest in
the Fund with each other class, subject to the liabilities of the particular
class. Shares have no pre-emptive or conversion rights (except as set forth
above in "Purchases -- Conversion of Class B Shares"). Shares of the Fund are
fully paid and nonassessable. Should the Fund be liquidated, shareholders of
each class would be 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, assignments and in certain other limited
circumstances.

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 (e.g., fidelity bonding and errors and omissions insurance) existed
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 the Lipper
Securities Corporation and Wiesenberger Investment Companies Service. Yield
quotations are based on the annualized net investment income per share allocated
to each class of the Fund over a 30-day period stated as a percent of the
maximum public offering price of that class on the last day of that period.
Yield calculations for Class B and Class C 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 12 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 and Class C 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 the shares of that class with all distributions reinvested and
which will give effect to the imposition of any applicable CDSC assessed upon
redemptions of the Fund's Class B and Class C shares. Such total rate of return
quotations may be accompanied by quotations which do not reflect the reduction
in value of the initial investment due to the sales charge or the deduction of
the CDSC, and which will thus be higher. The Fund offers multiple classes of
shares which were initially offered for sale to, and purchased by, the public on
different dates (the class "inception date". The calculation of total rate of
return for a class of shares which has a later class inception date than another
class of shares of the Fund is based both on (i) the performance of the Fund's
newer class from its inception date and (ii) the performance of the Fund's
oldest class from its inception date up to the class inception date of the newer
class. See the SAI for further information on the calculation of total rate of
return for share classes with different class inception dates. 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 SAI. For further information about the Fund's
performance for the fiscal year ended April 30, 1998, please see the Fund's
Annual Report. A copy of the Annual Report may be obtained without charge by
contacting the Shareholder Servicing Agent (see back cover for address and phone
number). 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.

PROVISION OF ANNUAL AND SEMIANNUAL REPORTS
To avoid sending duplicate copies of materials to households, effective
September 15, 1998, only one copy of each Fund annual and semiannual report may
be mailed to shareholders having the same residential address on the Fund's
records. However, any shareholder may call the Shareholder Servicing Agent at
1-800-225-2606 to request that copies of such reports be sent personally to that
shareholder.

9. 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. Cancelled checks, if
any, will be sent to shareholders monthly. At the end of each calendar year,
each shareholder will receive income tax information regarding reportable
dividends and capital gain distributions for that year (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:

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

o Dividends in cash; capital gain distributions (except as provided below)
reinvested in additional shares;

o Dividends and capital gain distributions in cash.

With respect to the second option, the Fund may from time to time make
distributions from short-term capital gains on a monthly basis, and to the
extent such gains are distributed monthly, they shall be paid in cash; any
remaining short-term capital gains not so distributed shall be reinvested in
additional shares.

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. 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, or
the shareholder does not respond to mailings from the Shareholder Servicing
Agent with regard to uncashed distribution checks, such shareholder's
distribution option will automatically be converted to having all dividends and
other distributions reinvested in additional shares. 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 SAI) anticipates purchasing $100,000 or more of Class A shares
of the Fund alone or in combination with shares of any class of other MFS Funds
or MFS Fixed Fund (a bank collective investment fund) within a 13- month period
(or 36-month period for purchases of $1 million or more), the shareholder may
obtain such shares of the Fund 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 the purchases of Class A shares when his new investment, together
with the current offering price value of all holdings of Class A, B and C shares
of that shareholder in the MFS Funds or MFS Fixed Fund (a bank collective fund)
reaches a discount level.

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 any other 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.

DOLLAR COST AVERAGING PROGRAMS
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account on any day of the month. If the
Shareholder does not specify a date, the investment will automatically occur on
the first day of the month. 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 the MFS Money
Market Fund) under the Automatic Exchange Plan. The Automatic Exchange Plan
provides for automatic monthly or quarterly exchanges 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 if such fund is available for
sale. Under the Automatic Exchange Plan, exchanges of at least $50 each may be
made to up to six different funds. A shareholder should consider the differences
in objectives and policies of a fund and review its prospectus before electing
to exchange money into such fund through the Automatic Exchange Plan. No
transaction fee is imposed in connection with exchange transactions under the
Automatic Exchange Plan. However, exchanges 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. For federal and (generally)
state income tax purposes, an exchange is treated as a sale of shares exchanged
and, therefore, could result in a capital gain or loss to the shareholder making
the exchange. See the SAI 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 these tax-deferred retirement
plans.

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

The Fund's SAI, dated September 1, 1998, as amended or supplemented from time to
time, contains more detailed information about the Fund, including, but not
limited to, information related to (i) the Fund's investment objectives,
policies and restrictions, (ii) the Trustees, officers and investment adviser,
(iii) portfolio transactions and brokerage commissions, (iv) the method used to
calculate performance quotations, (v) the Distribution Plan and (vi) various
services and privileges provided by the Fund, including additional information
with respect to the exchange privilege.

<PAGE>

APPENDIX A

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which all applicable sales
charges are waived (Section I), the initial sales charge and the contingent
deferred sales charge ("CDSC") for Class A shares are waived (Section II), and
the CDSC for Class B and Class C shares is waived (Section III). Some of the
following information will not apply to certain Funds in the MFS Family of
Funds, depending on which classes of shares are offered by such fund. As used in
this Appendix, the term "dealer" includes any broker, dealer, bank (including
bank trust departments), registered investment adviser, financial planner and
any other financial institutions having a selling agreement or other similar
agreement with MFS Fund Distributors, Inc. ("MFD").

I. WAIVERS OF ALL APPLICABLE SALES CHARGES
In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions of
Class A shares and on redemptions of Class B and Class C shares, as
applicable, are waived:

1. DIVIDEND REINVESTMENT

o Shares acquired through dividend or capital gain reinvestment; and

o Shares acquired by automatic reinvestment of distributions of
dividends and capital gains of any MFS Fund in the MFS Family of Funds
("MFS Funds") pursuant to the Distribution Investment Program.

2. CERTAIN ACQUISITIONS/LIQUIDATIONS

o Shares acquired on account of the acquisition or liquidation of assets
of other investment companies or personal holding companies.

3. AFFILIATES OF AN MFS FUND/CERTAIN DEALERS. Shares acquired by:

o Trustees and retired trustees of any investment company for which MFD
serves as distributor;

o Employees, directors, partners, officers and trustees of any
sub-adviser to any MFS Fund;

o Employees or registered representatives of dealers;

o Certain family members of any such individual and their spouses
identified above and certain trusts, pension, profit- sharing or other
retirement plans for the sole benefit of such persons, provided the
shares are not resold except to the MFS Fund which issued the shares;
and

o Clients of MFS or MFS Institutional Advisors, Inc. ("MFSI").

4. INVOLUNTARY REDEMPTIONS (CDSC WAIVER ONLY)

o Shares redeemed at an MFS Fund's direction due to the small size of a
shareholder's account. See "Redemptions and Repurchases -- General --
Involuntary Redemptions/ Small Accounts" in the Prospectus.

5. RETIREMENT PLANS (CDSC WAIVER ONLY). Shares redeemed on account of
distributions made under the following circumstances:

INDIVIDUAL RETIREMENT ACCOUNTS ("IRA'S")

o Death or disability of the IRA owner.

SECTION 401(a) PLANS ("401(a) PLANS") AND SECTION 403(b) EMPLOYER
SPONSORED PLANS ("ESP PLANS")

o Death, disability or retirement of 401(a) or ESP Plan participant;

o Loan from 401(a) or ESP Plan (repayment of loans, however, will
constitute new sales for purposes of assessing sales charges);

o Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time);

o Termination of employment of 401(a) or ESP Plan participant
(excluding, however, a partial or other termination of the Plan);

o Tax-free return of excess 401(a) or ESP Plan contributions;

o To the extent that redemption proceeds are used to pay expenses (or
certain participant expenses) of the 401(a) or ESP Plan (e.g.,
participant account fees), provided that the Plan sponsor subscribes
to the MFS FUNDamental 401(k) Plan or another similar recordkeeping
system made available by the Shareholder Servicing Agent; and

o Distributions from a 401(a) or ESP Plan that has invested its assets
in 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 such 401(a) or ESP
Plan first invests its assets in one or more of the MFS Funds. The
sales charges will be waived in the case of a redemption of all of the
401(a) or ESP Plan's shares in all MFS Funds (i.e., all the assets of
the 401(a) or ESP Plan invested in the MFS Funds are withdrawn),
unless immediately prior to the redemption, the aggregate amount
invested by the 401(a) or ESP Plan in shares of the MFS Funds
(excluding the reinvestment of distributions) during the prior four
years equals 50% or more of the total value of the 401(a) or ESP
Plan's assets in the MFS Funds, in which case the sales charges will
not be waived.

SECTION 403(b) SALARY REDUCTION ONLY PLANS ("SRO PLANS")

o Death or disability of SRO Plan participant.

6. CERTAIN TRANSFERS OF REGISTRATION (CDSC WAIVER ONLY). Shares
transferred:

o To an IRA rollover account where any sales charges with respect to the
shares being reregistered would have been waived had they been
redeemed; and

o From a single account maintained for a 401(a) Plan to multiple
accounts maintained by the Shareholder Servicing Agent on behalf of
individual participants of such Plan, provided that the Plan sponsor
subscribes to the MFS FUNDamental 401(k) Plan or another similar
recordkeeping system made available by the Shareholder Servicing
Agent.

7. LOAN REPAYMENTS

o Shares acquired pursuant to repayments by retirement plan participants
of loans from 401(a) or ESP Plans with respect to which such Plan or
its sponsoring organization subscribes to the MFS FUNDamental 401(k)
Program or the MFS Recordkeeper Plus Program (but not the MFS
Recordkeeper Program).

II. WAIVERS OF CLASS A SALES CHARGES

In addition to the waivers set forth in Section I above, in the following
circumstances the initial sales charge imposed on purchases of Class A
shares and the CDSC imposed on certain redemptions of Class A shares are
waived:

1. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS

o Shares acquired by investments through certain dealers (including
registered investment advisers and financial planners) which have
established certain operational arrangements with MFD which include a
requirement that such shares be sold for the sole benefit of clients
participating in a "wrap" account, mutual fund "supermarket" account
or a similar program under which such clients pay a fee to such
dealer.

2. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS

o Shares acquired by insurance company separate accounts.

3. RETIREMENT PLANS

ADMINISTRATIVE SERVICES ARRANGEMENTS

o Shares acquired by retirement plans or trust accounts whose third
party administrators or dealers have entered into an administrative
services agreement with MFD or one of its affiliates to perform
certain administrative services, subject to certain operational and
minimum size requirements specified from time to time by MFD or one or
more of its affiliates.

REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS

o Shares acquired through the automatic reinvestment in Class A shares
of Class A or Class B distributions which constitute required
withdrawals from qualified retirement plans.

SHARES REDEEMED ON ACCOUNT OF DISTRIBUTIONS MADE UNDER THE FOLLOWING
CIRCUMSTANCES:

IRA'S

o Distributions made on or after the IRA owner has attained the age of
59 1/2 years old; and

o Tax-free returns of excess IRA contributions.

401(a) PLANS

o Distributions made on or after the 401(a) Plan participant has
attained the age of 59 1/2 years old; and

o Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a 401(a) Plan.

ESP PLANS AND SRO PLANS

o Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59 1/2 years old.

4. PURCHASES OF AT LEAST $5 MILLION (CDSC WAIVER ONLY)

o Shares acquired of Eligible Funds (as defined below) if the
shareholder's investment equals or exceeds $5 million in one or more
Eligible Funds (the "Initial Purchase") (this waiver applies to the
shares acquired from the Initial Purchase and all shares of Eligible
Funds subsequently acquired by the shareholder); provided that the
dealer through which the Initial Purchase is made enters into an
agreement with MFD to accept delayed payment of commissions with
respect to the Initial Purchase and all subsequent investments by the
shareholder in the Eligible Funds subject to such requirements as may
be established from time to time by MFD (for a schedule of the amount
of commissions paid by MFD to the dealer on such investments, see
"Purchases -- Class A Shares -- Purchases Subject to a CDSC" in the
Prospectus). The Eligible Funds are all funds included in the MFS
Family of Funds, except for Massachusetts Investors Trust,
Massachusetts Investors Growth Stock Fund, MFS Municipal Bond Fund,
MFS Municipal Limited Maturity Fund, MFS Money Market Fund, MFS
Government Money Market Fund and MFS Cash Reserve Fund.

5. BANK TRUST DEPARTMENTS AND LAW FIRMS

o Shares acquired by certain bank trust departments or law firms acting
as trustee or manager for trust accounts which have entered into an
administrative services agreement with MFD and are acquiring such
shares for the benefits of their trust account clients.

6. INVESTMENT OF PROCEEDS FROM CERTAIN REDEMPTIONS OF CLASS I SHARES

o The initial sales charge imposed on purchases of Class A shares, and
the contingent deferred sales charge imposed on certain redemptions of
Class A shares, are waived with respect to Class A shares acquired of
any of the MFS Funds through the immediate reinvestment of proceeds of
a redemption of Class I shares of any of the MFS Funds.

III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES

In addition to the waivers set forth in Section I above, in the following
circumstances the CDSC imposed on redemptions of Class B and Class C shares
is waived:

1. SYSTEMATIC WITHDRAWAL PLAN

o Systematic Withdrawal Plan redemptions with respect to up to 10% per
year (or 15% per year, in the case of accounts registered as IRAs
where the redemption is made pursuant to Section 72(t) of the Internal
Revenue Code of 1986, as amended) of the account value at the time of
establishment.

2. DEATH OF OWNER

o Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a
living trust for the benefit of the deceased individual.

3. DISABILITY OF OWNER

o Shares redeemed on account of the disability of the account owner if
shares are held either solely or jointly in the disabled individual's
name or in a living trust for the benefit of the disabled individual
(in which case a disability certification form is required to be
submitted to the Shareholder Servicing Agent).

4. RETIREMENT PLANS. Shares redeemed on account of distributions made under
the following circumstances:

IRA'S, 401(a) PLANS, ESP PLANS AND SRO PLANS

o Distributions made on or after the IRA owner or the 401(a), ESP or SRO
Plan participant, as applicable, has attained the age of 70 1/2 years
old, but only with respect to the minimum distribution under
applicable Internal Revenue Code ("Code") rules.

SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS ("SAR-SEP PLANS")

o Distributions made on or after the SAR-SEP Plan participant has
attained the age of 70 1/2 years old, but only with respect to the
minimum distribution under applicable Code rules;

o Death or disability of a SAR-SEP Plan participant.
<PAGE>

APPENDIX B

DESCRIPTION OF BOND RATINGS

The ratings of Moody's, S&P, Fitch and Duff & Phelps represent their opinions as
to the quality of various debt instruments. It should be emphasized, however,
that ratings are not absolute standards of quality. Consequently, debt
instruments with the same maturity, coupon and rating may have different yields
while debt instruments of the same maturity and coupon with different ratings
may have the same yield.

MOODY'S

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

STANDARD & POOR'S RATINGS SERVICES

AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is EXTREMELY STRONG.

AA: An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is VERY STRONG.

A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still STRONG.

BBB: An obligation rated BBB exhibits ADEQUATE protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB: An obligation rated BB is LESS VULNERABLE to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

B: An obligation rated B is MORE VULNERABLE to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC: An obligation rated CCC is CURRENTLY VULNERABLE to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.

CC: An obligation rated CC is CURRENTLY HIGHLY VULNERABLE to nonpayment.

C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.

R: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

FITCH IBCA

AAA: Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA: Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

A: High credit quality. A ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB: Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

Speculative Grade

BB: Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.

B: Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC, CC, C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.

DDD, DD, D: Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50% -- 90% of such outstandings, and
D the lowest recovery potential, i.e. below 50%.

DUFF & PHELPS CREDIT RATING CO.

AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.

A+, A, A-: Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

BBB+, BBB, BBB-: Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.

BB+, BB, BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.

B+, B, B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.

CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic/
industry conditions, and/or with unfavorable company developments.

DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/
or interest payments.

DP: Preferred stock with dividend arrearages.

DUFF & PHELPS SHORT-TERM RATINGS

D-1+: Highest certainty of timely payment. Short-term liquidity, including
internal operation factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.

D-1: Very high certainty of timely payment. Liquidity factors are excellent and
supported by good fundamental protection factors. Risk factors are minor.

D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

D-2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.

D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>

APPENDIX C

PORTFOLIO COMPOSITION CHART

MFS BOND FUND
FOR THE FISCAL YEAR ENDED APRIL 30, 1998

The table below shows the percentages of the Fund's assets at April 30, 1998
invested in bonds assigned to the various rating categories by S&P, Moody's,
Fitch IBCA and Duff & Phelps Credit Rating Co. and in unrated bonds determined
by MFS to be of comparable quality. The highest of the four rating services is
used with respect to each rating.

UNRATED
BONDS OF
COMPILED COMPARABLE
RATING RATINGS QUALITY TOTAL

AAA/Aaa ............................... 25.46% -- 25.46%
AA/Aa ................................. 1.18% -- 1.18%
A/A ................................... 12.99% -- 12.99%
BBB/Baa ............................... 36.87% -- 36.87%
BB/Ba ................................. 11.59% -- 11.59%
B/B ................................... 7.71% -- 7.71%
CCC/Caa ............................... 0.24% -- 0.24%
CC/Ca ................................. -- -- --
C/C ................................... -- -- --
Default ............................... 0.05 -- 0.05
------ ------
Total ............................. 96.12% 96.12%

The chart does not necessarily indicate what the composition of the Fund's
portfolio will be in subsequent years. Rather, the Fund's investment
objective, policies and restrictions indicate the extent to which the Fund may
purchase securities in the various categories.
<PAGE>

Investment Adviser
Massachusetts Financial
Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000

Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000

Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

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 Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110

MFB-1-9/98/509M 11/211/311

<PAGE>

[LOGO] M F S(R)
INVESTMENT MANAGEMENT

MFS(R) BOND FUND STATEMENT OF
ADDITIONAL INFORMATION

(A Member of the MFS Family of Funds(R)) September 1, 1998
- - --------------------------------------------------------------------------------

Page
----
1. Definitions ............................................................ 2
2. Investment Objectives, Policies and Restrictions ....................... 2
3. Management of the Fund .................................................11
Trustees ............................................................11
Officers ............................................................11
Trustee Compensation Table ..........................................12
Investment Adviser ..................................................12
Administrator .......................................................13
Custodian ...........................................................13
Shareholder Servicing Agent .........................................13
Distributor .........................................................13
4. Portfolio Transactions and Brokerage Commissions .......................14
5. Shareholder Services ...................................................15
Investment and Withdrawal Programs ..................................15
Exchange Privilege ..................................................17
Tax-Deferred Retirement Plans .......................................17
6. Tax Status .............................................................18
7. Determination of Net Asset Value and Performance .......................19
8. Distribution Plan ......................................................21
9. Description of Shares, Voting Rights and Liabilities ...................22
10. Independent Auditors and Financial Statements ..........................22
Appendix A -- Performance Information ..................................24

MFS BOND FUND
A Series of MFS Series Trust IX
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000

This Statement of Additional Information as amended or supplemented from time
to time (the "SAI") sets forth information which may be of interest to
investors but which is not necessarily included in the Fund's Prospectus,
dated September 1, 1998. This SAI should be read in conjunction with the
Prospectus, a copy of which may be obtained without charge by contacting the
Shareholder Servicing Agent (see last page for address and phone number).

THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>

"Fund" -- MFS Bond Fund, a diversified series
of the Trust.

"MFS" or the "Adviser" -- Massachusetts Financial Services
Company, a Delaware corporation.

"MFD" -- MFS Fund Distributors, Inc., a
Delaware corporation.

"Prospectus" -- The Prospectus of the Fund, dated
September 1, 1998, as amended or
supplemented from time to time.

2. INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS
INVESTMENT OBJECTIVES. The primary investment objective of the Fund is to
provide as high a level of current income as is believed to be consistent with
prudent investment risk. The secondary objective of the Fund is to protect
shareholders' capital. Any investment involves risk and there can be no
assurance that the Fund will achieve its investment objectives.

INVESTMENT POLICIES. The investment policies of the Fund are described in the
Prospectus. In addition, certain of the Fund's investment policies are
described in greater detail below.

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
interest 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 FHA-insured or VA-guaranteed mortgages. These
guarantees, however, do not apply to the market value or yield of mortgage
pass-though 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., those 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/servicers 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 interests 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.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of mortgage loans. Such issuers may also be the originators
and/or servicers of the underlying mortgage-related securities. Pools created
by such non-governmental issuers generally offer a higher rate of interest
than government and government-related pools because there are no direct or
indirect government or agency guarantees of payments in the former pools.
However, timely payment of interest and principal of mortgage loans in these
pools may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit. The
insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. There can be no assurance that the private insurers
or guarantors can meet their obligations under the insurance policies or
guarantee arrangements. The Fund may also buy mortgage-related securities
without insurance or guarantees.

REPURCHASE AGREEMENTS: As described in the Prospectus, the Fund may enter into
repurchase agreements with sellers who are member firms (or a subsidiary
thereof) of the New York Stock Exchange (the "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 securities that are issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or
instrumentalities ("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 Government securities.

The repurchase agreement provides that in the event the seller fails to pay
the amount 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 collateral.

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

The Fund will maintain cash or appropriate liquid assets 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 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 counterparty'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.

FOREIGN SECURITIES: The Fund may invest in foreign securities 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. Under certain circumstances, such as where the
Adviser believes that the applicable exchange rate is unfavorable at the time
the currencies are received or the Adviser anticipates, for any other reason,
that the exchange rate will improve, the Fund may hold such currencies for an
indefinite period of time. While the holding of currencies will permit the
Fund to take advantage of favorable movements in the applicable exchange rate,
such strategy also exposes the Fund to risk of loss if exchange rates move in
a direction adverse to the Fund's position. Such losses could reduce any
profits or increase any losses sustained by the Fund from the sale or
redemption of securities and could reduce the dollar value of interest or
dividend payments received.

The Fund may not invest more than 10% of its assets in non-dollar denominated,
non-Canadian foreign securities.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES: As
described in the Prospectus, 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 (such
collateral referred to collectively as "Mortgage Assets"). Unless the context
indicates otherwise, all references herein to CMOs include multiclass pass-
through securities.

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 Morgage-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.

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. The Fund records these transactions as sale and purchase transactions,
rather than as borrowing transactions. 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.

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 issued by agencies of or instrumentalities of
the U.S. Government, or by private originators of, or investors in mortgage
loans, including savings and loan institutions, mortgage banks, commercial
banks and investment banks.

SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions from a pool of
mortgage assets. 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. Because SMBS were only
recently introduced, established trading markets for these securities have not
yet developed, although the securities are traded among institutional
investors and investment banking firms.

LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities. Such loans will usually be made only to member
firms of the New York Stock Exchange (and subsidiaries thereof) and member
banks of the Federal Reserve System, and would be required to be secured
continuously by collateral in cash, U.S. Treasury securities, or an
irrevocable letter of credit maintained on a current basis at an amount at
least equal to the market value of the securities 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 not usually exceed five
days). For the duration of a loan, the Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned. The Fund would also receive a fee from the borrower or compensation
from the investment of cash collateral, less a fee paid to the borrower, if
the collateral is in the form of cash. The Fund would not, however, have the
right to vote any securities having voting rights during the existence of the
loan, but the Fund 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 can be earned currently from securities loans of this type
justifies the attendant risk. 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 Fund's total assets.

"WHEN-ISSUED" SECURITIES: As described in the Prospectus, the Fund may
purchase debt securities on a "when-issued" or on a "forward delivery" basis.
Although the Fund is not limited as to the amount of these securities for
which it may have commitments to purchase on such bases, it is expected that
under normal circumstances the Fund will not commit more than 20% of its total
assets to such purchases. When the Fund commits to purchase these securities
on a "when-issued" or "forward delivery" basis, it will set up procedures
consistent with the General Statement of Policy of the Securities and Exchange
Commission (the "SEC") concerning such purchases. Since that policy currently
recommends that an amount of the Fund's assets equal to the amount of the
purchase be held aside or segregated to be used to pay for the commitment, the
Fund will always have liquid assets sufficient to cover any commitments or to
limit any potential risk. Although the Fund does not intend to make such
purchases for speculative purposes and intends to adhere to the provisions of
the SEC policy, purchases of securities on such bases may involve more risk
than other types of purchases. For example, the Fund may have to sell assets
which have been set aside in order to meet redemptions. Also, if the Fund
determines it is necessary to sell the "when-issued" or "forward delivery"
securities before delivery, the Fund may incur a loss because of market
fluctuations since the time the commitment to purchase such securities was
made.

The policies described above and the policies with respect to options, Futures
Contracts, Options on Futures Contracts, Forward Contracts, options on foreign
currencies, portfolio trading and the lending of portfolio securities
described below are not fundamental and may be changed without shareholder
approval, as may be the Fund's investment objectives.

INDEXED SECURITIES: The Fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed securities
typically, but not always, are debt securities or deposits whose value at
maturity (i.e., principal value) or coupon rate is determined by reference to
a specific instrument or statistic. Gold-indexed securities, for example,
typically provide for a maturity value that depends on the price of gold,
resulting in a security whose price tends to rise and fall together with gold
prices. Currency-indexed securities typically are short-term to intermediate-
term debt securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies, and may
offer higher yields than U.S. dollar-denominated securities of equivalent
issuers. Currency-indexed securities may be positive or negatively indexed;
that is, their maturity value may increase when the specified currency value
increases, resulting in a security that performs similarly to a foreign-
denominated instrument, or their maturity value may decline when foreign
currencies increase, resulting in a security whose price characteristics are
similar to a put on the underlying currency. Currency-indexed securities may
also have prices that depend on the values of a number of different foreign
currencies relative to each other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S. and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deterioriates. Recent issuers
of indexed securities have included banks, corporations, and certain U.S.
government agencies.

OPTIONS: The Fund intends to write covered put and call options and purchase
put and call options on domestic and foreign fixed income securities that are
traded on U.S. and foreign securities exchanges and over-the-counter. Call
options written by the Fund give the holder the right to buy the underlying
securities from the Fund at a fixed exercise price; put options written by the
Fund give the holder the right to sell the underlying security to the Fund at
a fixed exercise price. A call option written by the Fund is "covered" if the
Fund owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration segregated by the Fund) 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 liquid assets
representing the difference are segregated by the Fund. A put option written
by the Fund is "covered" if the Fund segregates liquid assets with a value
equal to the exercise price 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 (a) is 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 liquid assets
representing the difference are segregated by the Fund. Put and call options
written by the Fund may also be covered in such other manner as may be in
accordance with the requirements of the exchange, or the counter party with
which, the option is traded, and applicable laws and regulations. The writer
of an option may have no control over when the underlying securities must be
sold (in the case of a call option) or purchased (in the case of a put option)
since with regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.

Effecting a closing transaction in the case of a written call option will
permit 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, will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by deposited liquid
assets. Such transactions permit the Fund to generate additional premium
income, which will partially offset declines in the value of portfolio
securities or increases in the cost of securities to be acquired. Also,
effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
Fund investments. 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 prior to or concurrent with the sale of the security.

The Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid
to purchase the option. 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 is likely
to be offset in whole or in part by appreciation of the underlying security
owned by the Fund.

An option position may be closed out only where there exists a secondary
market for an option of the same series. If a secondary market does not exist,
it might not be possible to effect closing transactions in particular options
with the result that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by a national securities exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or the Options Clearing Corporation (the "OCC") may
not at all times be adequate to handle current trading volume; or (vi) one or
more exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class
or series of options), in which event the secondary market on that exchange
(or in that class or series of options) would cease to exist, although
outstanding options on that exchange that had been issued by the OCC as a
result of trades on that exchange would continue to be exercisable in
accordance with their terms.

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 the Fund determines to write will
depend 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. If the call options are exercised in such
transactions, the Fund's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the difference between the
Fund's purchase price of the security and the exercise price. If the options are
not exercised and the price of the underlying security declines, the amount of
such decline will be offset in part, or entirely, by the premium received.

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 that call options are used in equivalent
buy-and-write transactions.

The Fund may 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 and 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.

The Fund may also purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and by transaction costs.

The Fund may purchase call options to hedge against an increase in the price
of domestic or foreign securities that the Fund anticipates purchasing in the
future. The premium paid for the call 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 sufficiently, the
option may expire worthless to the Fund.

YIELD CURVE OPTIONS: The Fund may also enter into options on the yield
"spread" or yield differential between two fixed income securities, a
transaction referred to as a "yield curve" option. In contrast to other types
of options, a yield curve option is based on the difference between the yields
of designated fixed income securities, rather than the prices of the
individual securities, and is usually 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, the 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 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 fixed income 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 yield 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 written by the Fund is covered if the Fund
holds another call (or put) option on the yield spread between the same two
securities and segregates liquid assets sufficient to cover the Fund's net
liability under the two options. 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. Because these securities are traded over-the-counter,
the SEC has taken the position that yield curve options are illiquid and,
therefore, cannot exceed the SEC illiquidity ceiling. See "Investment
Techniques -- Options" in the Prospectus for a discussion of the policies the
Adviser intends to follow to limit the Fund's investment in these securities.

FUTURES CONTRACTS: The Fund may enter into contracts for hedging purposes, and
for non-hedging purposes to the extent permitted by applicable law, for the
future delivery of domestic or foreign fixed income securities or contracts
based on municipal bond or other financial indices including any index of
domestic or foreign fixed income securities, as such contracts become
available for trading ("Futures Contracts"). A "sale" of a Futures Contract
means a contractual obligation to deliver the securities called for by the
contract at a specified price in a fixed delivery month or, in the case of a
Futures Contract, on an index of securities, to make or receive a cash
settlement. A "purchase" of a Futures Contract means a contractual obligation
to acquire the securities called for by the contract at a specified price in a
fixed delivery month or, in the case of a Futures Contract on an index of
securities, to make or receive a cash settlement. U.S. Futures Contracts have
been designed by exchanges which have been designated as "contract markets" by
the Commodity Futures Trading Commission (the "CFTC"), and must be executed
through a futures commission merchant, or brokerage firm, which is a member of
the relevant contract market. Existing contract markets include the Chicago
Board of Trade and the International Monetary Market of the Chicago Mercantile
Exchange. Futures Contracts are traded on these markets, and, through their
clearing corporations, the exchanges guarantee performance of the contracts as
between the clearing members of the exchange. Futures Contracts purchased or
sold by the Fund are also traded on foreign exchanges which are not regulated
by the CFTC.

At the same time a Futures Contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment ("initial deposit"). The
initial deposit varies but may be as low as 5% or less of the value of the
contract. Daily thereafter, the Futures Contract is valued and the payment of
"variation margin" may be required since each day the Fund would provide or
receive cash that reflects any decline or increase in the contract's value.

At the time of delivery of securities pursuant to a Futures Contract based on
fixed income securities, adjustments are made to recognize differences in
value arising from the delivery of securities with a different interest rate
from that specified in the contract. In some (but not many) cases, securities
called for by a Futures Contract may not have been issued when the contract
was written.

A Futures Contract based on an index of securities, such as a municipal bond
index Futures Contract, provides for a cash payment, equal to the amount, if
any, by which the value of the index at maturity is above or below the value
of the index at the time the contract was entered into, times a fixed index
"multiplier". The index underlying such a Futures Contract is generally a
broad based index of securities designed to reflect movements in the relevant
market as a whole. The index assigns weighted values to the securities
included in the index, and its composition is changed periodically.

Although Futures Contracts call for the actual delivery or acquisition of
securities or, in the case of Futures Contracts based on an index, the making
or acceptance of a cash settlement at a specified future time, the contractual
obligation is usually fulfilled before such date by buying or selling, as the
case may be, on a commodities exchange, an identical Futures Contract calling
for settlement in the same month, subject to the availability of a liquid
secondary market. The Fund incurs brokerage fees when it purchases and sells
Futures Contracts.

The purpose of the acquisition or sale of a Futures Contract, in the case of a
portfolio such as that of the Fund, which holds or intends to acquire long-
term fixed income securities, is to attempt to protect the Fund from
fluctuations in interest rates without actually buying or selling long-term
fixed income securities. For example, if the Fund owns long-term bonds, and
interest rates were expected to increase, the Fund might enter into Futures
Contracts for the sale of debt securities. Such a sale would have much the
same effect as selling an equivalent value of the long-term bonds owned by the
Fund. If interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the Futures Contracts would 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.
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
hedging position without having to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to attempt 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 then buy long-term
bonds on the cash market. 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 liquid assets from its portfolio in an amount equal to the
difference 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.

The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out Futures Contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. 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.

In addition, Futures Contracts entail risks. Although the Fund believes that
use of such contracts will benefit the Fund, if the Adviser's investment
judgment about the general direction of interest rates is incorrect, the
Fund's overall performance would 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 which would adversely affect the price of bonds
held in its portfolio and interest rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of its bonds which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have
to sell bonds from its portfolio to meet daily variation margin requirements.
Such sales of bonds may be, but will not necessarily be, at increased prices
which reflect the rising market. The Fund may have to sell securities at a
time when it may be disadvantageous to do so. Transactions in Futures
Contracts for non-hedging purposes involve greater risks, and could result in
losses which are not offset by gains on other portfolio assets.

OPTIONS ON FUTURES CONTRACTS: The Fund intends to purchase and write options
on Futures Contracts ("Options on Futures Contracts") for hedging purposes. 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. Such Options on Futures
Contracts will be traded on U.S. contract markets regulated by the CFTC as
well as on foreign exchanges. Depending on the pricing of the option compared
to either the price of the Futures Contract upon which it is based or the
price of the underlying debt securities, it may or may not be less risky than
ownership of the Futures Contract or underlying debt securities. As with the
purchase of Futures Contracts, when the Fund is not fully invested it may
purchase a call Option on a Futures Contract to hedge against a market advance
due to declining interest rates.

The writing of a call Option on a Futures Contract constitutes a partial hedge
against declining prices of the securities which are deliverable upon exercise
of 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 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 constitutes a partial hedge against increasing prices of the
securities which are deliverable upon exercise of 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, less related
transaction costs. 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 writer of an Option on a Futures Contract is subject to the
requirement of initial and variation margin payments. The Fund will cover the
writing of call Options on Futures Contracts through purchases of the
underlying Futures Contract or through ownership of the security, or
securities included in the index, underlying the Futures Contract. The Fund
may also cover the writing of call Options on Futures Contracts through the
purchase of such Options, provided that the exercise price of the call
purchased (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 liquid assets
representing the difference are segregated by the Fund. The Fund may cover the
writing of put Options on Futures Contracts through sales of the underlying
Futures Contract or through segregation of liquid assets in an amount equal to
the value of the security or index underlying the Futures Contract. The Fund
may also cover the writing of put Options on Futures Contracts through the
purchase of such Options, provided that the exercise price of the put
purchased 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 liquid assets
representing the difference are segregated by the Fund. In addition, the Fund
may cover put and call Options on Futures Contracts in accordance with the
requirements of the exchange on which the option is traded and applicable laws
and regulations.

The Fund may also purchase straddles on Options on Futures Contracts in order
to protect against risk of loss arising as a result of anticipated changes in
volatility in the interest rate or fixed income markets. Under such
circumstances, if the anticipated changes in volatility in the market do not
occur, the Fund could be required to forfeit one or both of the premiums paid
for the Options.

The purchase of a put Option on a Futures Contract is similar in some respects
to the purchase of protective put options on portfolio securities. The Fund
will purchase a put Option on a Futures Contract to hedge the Fund's portfolio
against the risk of rising interest rates.

The amount of risk the Fund assumes when it purchases an Option on a Futures
Contract is the premium paid for the Option plus related transaction costs,
although in order to realize a profit it may be necessary to exercise the
Option and close out the underlying Futures Contract. In addition to the
correlation risks discussed above, the purchase of an Option 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 purchased. Transactions in Options
on Futures Contracts for non-hedging purposes involve greater risks, and could
result in losses which are not offset by gains on other portfolio assets.

FORWARD CONTRACTS: The Fund may enter into contractual obligations to purchase
or sell a specific quantity of a given foreign currency for a fixed exchange
rate at a future date ("Forward Contracts") for hedging purposes only. The
Fund may also enter into Forward Contracts for "cross hedging" as noted in the
Prospectus. 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.

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, a customer may be required 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.

The Fund has established procedures 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 segregate liquid assets in an amount equal to
the value of its commitments under Forward Contracts. Alternatively, the Fund
may "cover" its obligations under such contracts through the ownership of the
amount of foreign currency required to be delivered under a Forward Contract,
in the case of a Forward Contract entered into by the Fund to sell such
currency, or through the purchase of a call option, or a call option on a
Futures Contract, on the underlying currency, provided that, if the strike
price of the option is greater than the price established under the Forward
Contract, the Fund will segregate liquid assets with a value equal to the
difference between the strike price of the option and the price of the Forward
Contract. The Fund may cover its obligations under a Forward Contract to
purchase a foreign currency by purchasing a put option, or a put option on a
Futures Contract, on the underlying currency, provided that, if the strike
price of the option is less than the price established under the Forward
Contract, the Fund will segregate liquid assets with a value equal to the
difference between the strike price of the option and the price of the Forward
Contact. The Fund may also cover Forward Contracts in such other manner as may
be in accordance with the requirements of the counter party to the contract
and applicable laws and regulations.

Forward Contracts may limit potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the
Fund than if it had not engaged in such contracts.

OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write options on
foreign currencies for hedging purposes in a manner similar to that in which
Forward Contracts will be utilized. 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 Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the Fund will
have the right to sell such currency for a fixed amount in dollars and will
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 will 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 forego 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 could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs, the option
will most likely not be exercised, and the diminution in value of portfolio
securities will be offset by the amount of the premium received, less related
transaction costs.

Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, the Fund could write
a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium, less related transaction costs. As in
the case of other types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of the premium,
less related transaction costs, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on foreign currencies, the Fund also may be required to forego all or a
portion of the benefits which might otherwise have been obtained from
favorable movements in exchange rates.

Options on foreign currencies written or purchased by the Fund will be traded
over-the-counter or on U.S. or foreign securities exchanges. All options
written on foreign currencies will be covered. A call option written on
foreign currencies by the Fund is "covered" if the Fund owns the underlying
foreign currency covered by the call or has an absolute and immediate right to
acquire that foreign currency without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currency held in its portfolio. A
call option is also covered if the Fund has a call on the same foreign
currency 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 liquid assets in a
segregated account with its custodian. A put option written on foreign
currencies by the Fund is "covered" if the Fund maintains liquid assets with a
value equal to the exercise price in a segregated account with its custodian,
or else holds a put on the same foreign currency 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 liquid assets in a segregated account with its custodian. Options on
foreign currencies written by the 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.

ADDITIONAL RISKS OF INVESTING IN OPTIONS ON SECURITIES, FUTURES CONTRACTS,
OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES: Various additional risks exist with respect to the trading of
options, Futures Contracts and Forward Contracts. For example, the Fund's
ability effectively to hedge all or a portion of its portfolio through
transactions in such instruments will depend on the degree to which price
movements in the underlying index or instrument correlate with price movements
in the relevant portion of the Fund's portfolio. The trading of futures and
options entails the additional risk of imperfect correlation between movements
in the futures or option price and the price of the underlying index or
obligation, while the trading of options also entails the risk of imperfect
correlation between securities used to cover options written and the
securities underlying such options. The anticipated spread between the prices
may be distorted because of various factors, which are set forth under
"Futures Contracts" above. When the Fund purchases or sells Futures Contracts
based on an index of securities, the securities comprising such index will not
be the same as the portfolio securities being hedged, thereby creating a risk
that changes in the value of the index will not correlate with changes in the
value of such portfolio securities. 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.

The liquidity of a secondary market in a Futures Contract or option thereon
may be adversely affected by "daily price fluctuation limits", established by
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limit. In
addition, the exchanges on which futures and options are traded may impose
limitations governing the maximum number of positions on the same side of the
market and involving the same underlying instrument which may be held by a
single investor, whether acting alone or in concert with others (regardless of
whether such contracts are held on the same or different exchanges or held or
written in one or more accounts or through one or more brokers).

Unlike transactions in Futures Contracts entered into by the Fund, options on
foreign currencies and Forward Contracts are not traded on contract markets
regulated by the CFTC or, with the exception of certain foreign currency
options, by the SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to
SEC regulation. Similarly, options on securities may be traded over-the-
counter. In an over-the-counter trading environment, many of the protections
afforded to exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the premium plus
related transaction costs, this entire amount could be lost. Moreover, the
option writer and a trader of Forward Contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities and options traded
on such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all options on securities and on foreign currencies entered into
on a national securities exchange are cleared and guaranteed by the OCC,
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the Fund
to liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing members, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or prohibitions
on exercise.

In addition, Options on securities, Futures Contracts, Options on Futures
Contracts, Forward Contracts and options on foreign currencies may be traded
on foreign exchanges. Such transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(i) other complex foreign, political and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions,
(iii) delays in the Fund's ability to act upon economic events occuring in
foreign markets during non-business hours in the U.S., (iv) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States, and (v) lesser trading volume.

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, Options on Futures Contracts and Options on
Foreign Currencies traded on a CFTC-regulated exchange only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-bona fide
hedging purposes, provided that the aggregate initial margin and premiums
required to establish such non-bona fide hedging positions does not exceed 5%
of the liquidation value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on any such contracts the Fund has
entered into, and excluding, in computing such 5%, the in-the-money amount
with respect to an option that is in-the-money at the time of purchase.

PORTFOLIO TRADING: As described in the Prospectus, The Fund intends to engage
in portfolio trading rather than holding portfolio securities to maturity.
Such trading may involve the selling of securities held for a short time,
ranging from several months to less than a day and may be limited by tax
restrictions.

In trading portfolio securities, the Fund may use the following strategies:

(1) shortening the average maturity of its portfolio in anticipation of a
rise in interest rates so as to minimize depreciation of principal;

(2) lengthening the average maturity of its portfolio in anticipation of a
decline in interest rates so as to maximize appreciation of principal;

(3) changing the average coupon of its portfolio when yield disparities
reflect a change in investment value among securities trading at differing
levels of premiums or discounts;

(4) selling one type of debt security (e.g., industrial bonds) and buying
another (e.g., utility bonds) when disparities arise in the relative values
of each; and

(5) changing from one debt security to an essentially similar debt
security when their respective yields are distorted due to market factors.

These strategies may result in minor temporary increases or decreases in the
Fund's current income available for distribution to its shareholders, and in its
holding debt securities which sell at moderate to substantial premiums or
discounts from face value. If the Fund's expectations of changes in interest
rates or the Fund's evaluation of the normal yield relationship between two
securities proves to be incorrect, the Fund's income, net asset value and
potential capital gain may be reduced or its potential capital loss may be
increased.

Except with respect to the Fund's policy on borrowing and investing in illiquid
securities, the Fund's limitations, policies and rating 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.

INVESTMENT RESTRICTIONS. The Fund has adopted the following restrictions which
are fundamental and cannot be changed without the approval of the holders of a
majority of the shares of the Fund (which, as used in this SAI, 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 if 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 money in an amount 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 an amount of its assets (taken at market
value) in excess of 15% 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) concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of its investment objectives, the
Fund may invest up to 25% of its assets (taken at market value at the time
of each investment) in securities of issuers in any one industry;

(4) purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment
trusts, which deal in real estate or interests therein), or mineral leases,
commodities or commodity contracts (except options, Futures Contracts,
Options on Futures Contracts, Forward 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 or mineral leases,
commodities or commodity contracts (including options, Futures Contracts,
Options on Futures Contracts, Forward Contracts and options on foreign
currencies) acquired as a result of the ownership of securities. The Fund
will not purchase securities for the purpose of acquiring real estate or
mineral leases, commodities or commodity contracts (except options, Futures
Contracts, Options on Futures Contracts, Forward Contracts and options on
foreign currencies);

(5) make loans to other persons. For these purposes, the purchase of
short-term commercial paper, the purchase of a portion or all of an issue of
debt securities in accordance with its investment objectives and policies,
the lending of portfolio securities, or the investment of the Fund's assets
in repurchase agreements, shall not be considered the making of a loan;

(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 cash
items and U.S. Government securities;

(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 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 other registered 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; and,
provided further, that 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 Trust, or is an officer or Director of the
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 or evidences of interest therein on margin,
except to make deposits on margin in connection with options, Futures
Contracts, Options on Futures Contracts, Forward Contracts and options on
foreign currencies, and except that the Fund may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
securities;

(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;

(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 warrants where the grantor of the warrants is the issuer of the
underlying securities or the writing, purchasing and selling of puts, calls
or combinations thereof with respect to securities, Futures Contracts and
foreign currencies; or

(15) invest in securities which are restricted as to disposition under
federal securities laws unless the Board of Trustees has determined that
such securities are liquid based upon trading markets for the specific
security, if more than 10% of the Fund's assets (taken at market value)
would be invested in such securities.

Except with respect to Investment Restrictions (1) and (15), 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.

In addition, the Fund may not invest 25% or more of the market value of its
total assets in securities of issuers in any one industry.

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

TRUSTEES

RICHARD B. BAILEY* (born 9/14/26)
Private Investor; Massachusetts Financial
Services Company, former Chairman (prior to September 30, 1991); Cambridge
Bancorp, Director; Cambridge Trust Company, Director

PETER G. HARWOOD (born 4/3/26)
Private Investor
Address: 211 Lindsay Pond Road,
Concord, Massachusetts

J. ATWOOD IVES (born 5/1/36)
Eastern Enterprises (diversified services company), Chairman, Trustee and Chief
Executive Officer
Address: 9 Riverside Road, Weston, Massachusetts

LAWRENCE T. PERERA (born 6/23/35)
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts

WILLIAM J. POORVU (born 4/10/35)
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (a real estate investment
trust), Director; The Baupost Fund (a registered investment company), Vice
Chairman (since November 1993), Chairman and Trustee (prior to November 1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge, Massachusetts

CHARLES W. SCHMIDT (born 3/18/28)
Private Investor; International Technology Corporation, Director; Mohawk
Paper Company, Director
Address: 30 Colpitts Road, Weston, Massachusetts

ARNOLD D. SCOTT* (born 12/16/42)
Massachusetts Financial Services Company, Senior Executive Vice President,
Secretary and Director

JEFFREY L. SHAMES* (born 6/2/55)
Massachusetts Financial Services Company, Chairman and Chief Executive
Officer

ELAINE R. SMITH (born 4/25/46
Independent Consultant; Brigham and Women's Hospital, Executive Vice
President and Chief Operating Officer (prior to September 1992)
Address: Weston, Massachusetts

DAVID B. STONE (born 9/2/27)
North American Management Corp. (investment adviser), Chairman and Director;
Eastern Enterprises, Director
Address: 10 Post Office Square, Suite 300, Boston, Massachusetts

OFFICERS

W. THOMAS LONDON,* Treasurer (born 3/1/44)
Massachusetts Financial Services Company, Senior Vice President

JAMES O. YOST,* Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Vice President

ELLEN MOYNIHAN,* Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President (since September,
1996); Deloitte & Touche LLP, Senior Manager (until September 1996)

MARK E. BRADLEY,* Assistant Treasurer (born 11/23/59)
Massachusetts Financial Services Company, Vice President (since March,
1997); Putnam Investments, Vice President (from September 1994 until March
1997); Ernst & Young, Senior Tax Manager (until September 1994)

STEPHEN E. CAVAN,* Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary

JAMES R. BORDEWICK, JR.,* Assistant Secretary (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and
Associate General Counsel

GEOFFREY L. KURINSKY,* Vice President (born 7/7/53)
Massachusetts Financial Services Company, Senior Vice President

- - ----------
*"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. Messrs. Shames and Scott, Directors of MFD
and Mr. Cavan, the Secretary of MFD, hold similar positions with certain other
MFS affiliates. Mr. Bailey is a Director of Sun Life Assurance Company of Canada
(U.S.), a subsidiary of Sun Life Assurance Company of Canada ("Sun Life").

The Fund pays the compensation of non-interested Trustees and Mr. Bailey (who
currently receive a fee of $2,500 per year plus $135 per meeting and $100 per
committee meeting attended, together with such Trustee's out-of- pocket
expenses) and has adopted a retirement plan for non-interested Trustees and Mr.
Bailey. 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 Messrs. Scott and Shames.
The Fund will accrue its allocable share of compensation expenses each year to
cover current year's service and amortize past service cost.

Set forth below is certain information concerning the cash compensation paid to
the Trustees and benefits accrued, and estimated benefits payable, under the
retirement plan.

TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL TRUSTEES
FEES FROM
RETIREMENT BENEFIT ESTIMATED FUND AND
TRUSTEES FEE ACCRUED AS PART OF CREDITED YEARS FUND
TRUSTEE FROM FUND(1) FUND'S EXPENSES(1) OF SERVICE(2) COMPLEX(3)
------- ------------ ------------------ ------------- ----------
<S> <C> <C> <C> <C>

Richard B. Bailey ................ $4,455 $1,217 8 $242,022
Peter G. Harwood ................. 4,890 896 5 121,105
J. Atwood Ives ................... 4,320 1,231 17 108,720
Lawrence T. Perera ............... 4,555 2,174 26 127,055
William Poorvu ................... 4,890 2,218 25 121,105
Charles W. Schmidt ............... 4,755 2,212 20 121,105
Arnold D. Scott .................. --0-- --0-- N/A --0--
Jeffrey L. Shames ................ --0-- --0-- N/A --0--
Elaine R. Smith .................. 4,855 1,360 27 132,035
David B. Stone ................... 5,090 2,319 14 127,055
</TABLE>

(1) For fiscal year ended April 30, 1998.
(2) Based on normal retirement age of 73. See the table below for the
estimated annual benefits payable upon retirement by the Fund to a
Trustee based on his or her estimated credited years of service.
(3) For calendar year 1997. All Trustees receiving compensation served as
Trustee of 27 funds within the MFS fund complex (having aggregate net
assets at December 31, 1997, of approximately $28.9 billion) except Mr.
Bailey, who served as Trustee of 69 funds within the MFS fund complex
(having aggregate net assets at December 31, 1997, of approximately
$47.8 billion).

ESTIMATED ANNUAL BENEFITS PAYABLE BY THE FUND UPON RETIREMENT(4)

YEARS OF SERVICE
AVERAGE --------------------------------------------------------
TRUSTEE FEES 3 5 7 10 OR MORE
-------------------------------------------------------------------------

$3,888 $583 $ 972 $1,361 $1,944
4,230 635 1,058 1,481 2,115
4,572 686 1,143 1,600 2,286
4,915 737 1,229 1,720 2,457
5,257 789 1,314 1,840 2,628
5,599 840 1,400 1,960 2,799

- - ----------
(4) Other funds in the MFS fund complex provide similar retirement benefits
to the Trustees.

As of July 31, 1998, all Trustees and officers as a group owned less than 1% of
the outstanding shares of the Fund.

As of July 31, 1998, Merrill Lynch, Pierce, Fenner & Smith, FBO its Customers,
Attention: Fund Administration, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246-6484 was the owner of approximately 10.52%, 9.70%
and 17.64% of Class A, B, and C Shares of the Fund, respectively. As of July 31,
1998, MFS Defined Contribution Plan, MFS 401(K) Plan, and the MFS Pension Plan
c/o Mark Leary, Massachusetts Financial Services, 500 Boylston Street, Boston,
MA 02116-3740, owned 36.89%, 6.94%, and 56.17%, respectively, of the outstanding
Class I 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 liabilities to the Trust or its shareholders, it is finally adjudicated
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 interest of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined pursuant to the Declaration of Trust, that such officers and
Trustees 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.) Financial
Services Holdings, Inc., which in turn is an indirect wholly owned subsidiary
of Sun Life.

The Adviser manages the assets of the Fund pursuant to an Investment Advisory
Agreement, dated December 2, 1985 (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. 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 on
the basis of a formula based upon a percentage of the Fund's average daily net
assets plus a percentage of its gross income (i.e., income other than gains
from the sale of securities, gains from options and futures transactions and
premium income from options written) in each case on an annualized basis for
the Trust's then-current fiscal year. The applicable percentages are reduced
as assets and income reach the following levels:

ANNUAL RATE OF ADVISORY FEE ANNUAL RATE OF ADVISORY FEE
BASED ON AVERAGE DAILY NET ASSETS BASED ON GROSS INCOME
- - -------------------------------------- --------------------------------
.225% of the first $200 million 2.75% of the first $20 million
.191% of average daily net assets in 2.34% of gross income in excess
excess of $200 million of $20 million

For the fiscal years ended 1996, 1997 and 1998, MFS received fees under the
Advisory Agreement of $2,531,652, $2,708,535 and $3,126,075 respectively.

The Fund pays all of the Fund's expenses (other than those assumed by Adviser
or MFD), 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, prospectuses, shareholders' reports, notices, proxy statements
and reports to governmental officers and commissions; brokerage and other
expenses connected with the execution of portfolio security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Fund, including safekeeping of funds and securities, keeping of books and
accounts and calculation of the net asset value of shares of the Fund; and
expenses of shareholders' 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 Trust's Distribution Agreement with MFD requires MFD to pay
for prospectuses that are to be used for sales purposes. Expenses of the Trust
which are not attributable to a specific portfolio are allocated among the
portfolios in a manner believed by management of the Trust to be fair and
equitable. For a list of expenses, including the compensation paid to the
Trustees who are not officers of the Adviser, for the fiscal year ended April
30, 1998, see "Statement of Operations" in the Annual Report to the Fund's
shareholders.

MFS pays the compensation of the officers and of any Trustee who is an officer
of MFS. The Adviser 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 and effecting the
Fund's portfolio transactions.

The Advisory Agreement will remain in effect until August 1, 1999, 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 provides that MFS may render
services to others and 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.

ADMINISTRATOR
MFS provides the Fund with certain financial, legal, compliance, shareholder
communications and other administrative services pursuant to a Master
Administrative Services Agreement dated March 1, 1997 as amended. Under this
Agreement, the Fund pays MFS an administrative fee up to 0.015% per annum of
the Fund's average daily net assets. This fee reimburses MFS for a portion of
the costs it incurs to provide such services. For the period ended April 30,
1997, and the fiscal year ended April 30, 1998 MFS received $17,658 and
$114,043, respectively under the Agreement.

CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of the
Trust'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 as in the best interest
of the Fund and its shareholders custodial arrangements with The Chase
Manhattan Bank for securities of the Fund held outside the U.S.

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, dated December 2, 1985, as amended (the
"Agency Agreement"). The Shareholder Servicing Agent's responsibilities under
the Agency Agreement include administering and performing transfer agent
functions and keeping records in connection with the issuance, transfer and
redemption of each class of the shares of the Fund. For these services, the
Shareholder Servicing Agent will receive a fee calculated as a percentage of
the average daily net assets of each class of shares of the Fund at an
effective annual rate of 0.1125%. 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. The Custodian has
contracted with the Shareholder Servicing Agent to perform certain dividend
disbursing agent functions for the Fund.

DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the
continuous offering of shares of the Fund pursuant to a Distribution
Agreement, dated as of January 1, 1995 (the "Distribution Agreement").

CLASS A SHARES: MFD 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 Class A shares
of the Fund is calculated by dividing the 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 for the benefit of such persons, and also applies to
purchases made under the Right of Accumulation or a Letter of Intent (see
"Investment and Withdrawal Programs" below). A group might qualify to obtain
quantity sales charge discounts (see "Investment and Withdrawal Programs"
below).

Class A shares of the Fund may be sold at their net asset value to certain
persons and 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, MFD and/or the Fund have business relationships, and because
the sales effort, if any, involved in making such sales is negligible.

MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of 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 offering price or as a percentage of the net
amount invested as stated in the Prospectus. In the case of the maximum sales
charge, the dealer retains 4% and MFD retains approximately 3/4 of 1% of the
public offering price. In addition, MFD, 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, CLASS C AND CLASS I SHARES: MFD acts as agent in selling Class B,
Class C and Class I shares of the Fund. The public offering price of Class B,
Class C and Class I shares is their net asset value next computed after the
sale (see "Purchases" in the Prospectus and the Prospectus Supplement Pursuant
to which Class I shares are offered).

GENERAL: Neither MFD nor dealers are permitted to delay placing orders to
benefit themselves by a price change. On occasion, MFD 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. MFD 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 year ended April 30, 1998, MFD received sales charges
of $218,968 and dealers received sales charges of $1,697,831, (as their
concession on gross sales charges of $1,916,799), for selling Class A shares
of the Fund; the Fund received $190,868,778 representing the aggregate net
asset value of such shares. During the Fund's fiscal year ended April 30,
1997, MFD and dealers and certain other financial institutions received sales
charges of $134,341 and $966,450, respectively, (as their concession on gross
sales charges of $1,100,791), for selling Class A shares of the Fund. The Fund
received $138,111,056 representing the aggregate net asset value of such
shares. During the Fund's fiscal year ended April 30, 1996, MFD and dealers
and certain other financial institutions received sales charges of $172,391
and $1,168,867, respectively, (as their concession on gross sales charges of
$1,341,258) for selling Class A shares of the Fund. The Fund received
$120,847,186, representing the aggregate net asset value of such shares.

During the Fund's fiscal years ended April 30, 1996, 1997 and 1998, the
contingent deferred sales charge ("CDSC") imposed on redemption of Class A
shares was $4,707, $38,472 and $36,715, respectively. During the Fund's fiscal
years ended April 30, 1996, 1997 and 1998, the CDSC imposed on redemption of
Class B shares was $217,113, $245,479 and $293,972, respectively. During the
Fund's fiscal years ended April 30, 1996, 1997 and 1998, the CDSC imposed on
redemption of Class C shares was $7, $5,977 and $6331, respectively.

The Distribution Agreement will remain in effect until August 1, 1999, 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 outstanding shares (as defined in "Investment Restrictions")
and, in either case, by a majority of the Trustees who are not interested
persons of any party to the Distribution Agreement. 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 a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. Changes in the Fund's investments are
reviewed by its Board of Trustees. The Fund's portfolio manager may serve
other clients of the Adviser or any subsidiary of the Adviser in a similar
capacity.

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 the broker-dealers through which it seeks this result. 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. 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 unless, in its
opinion, better prices are available elsewhere. Securities firms or futures
commission merchants may receive brokerage commissions on transactions
involving Futures Contracts and Options on Futures Contracts. Subject to the
requirement of seeking execution at the best available price, securities 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 recapture arrangements are in effect.

Consistent with the foregoing primary consideration, the Conduct Rules 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 MFD as a factor in the selection of broker-dealers to execute the
Fund's portfolio transactions.

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 by the Adviser to be equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of
the security as far as the Fund is concerned. In other cases, however, the
Fund believes that its ability to participate in volume transactions will
produce better executions for the Fund.

During the Fund's fiscal year ended April 30, 1998, the Fund owned securities
issued by Lehman Brothers, Inc. which securities had a value of $15,586,000 at
the end of such fiscal year, by Bear Stearns, Inc. which securities had a
value of $6,921,000 at the end of such fiscal year, by Salomon, Inc. which
securities had a value of $6,609,000 at the end of such fiscal year, by
Nationwide Mutual Life Insurance Co. which securities had a value of
$6,435,000 at the end of such fiscal year, by Goldman Sachs Group LP which
securities had a value of $5,510,000 at the end of such fiscal year, by State
Street Bank and Trust which securities had a value of $2,604,000 at the end of
such fiscal year, by Chase Manhattan Corp. which securities had a value of
$1,584,000 at the end of such fiscal year, by PaineWebber which securities had
a value of $1,543,000 at the end of such fiscal year, by First Chicago NBD
which securities had a value of $1,358,000 at the end of such fiscal year, and
by Merrill Lynch which securities had a value of $6,186,000 at the end of such
fiscal year. Each of these entities are regular broker dealers of the Fund.

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 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 any class of MFS Funds or 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 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 MFD 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 MFD
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 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 period 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 Class A, B and C
shares of that shareholder in the MFS Funds or MFS Fixed Fund reaches a
discount level. See "Purchases" in the Prospectus for the sales charges on
quantity purchases. 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 MFD) with
information to verify that the quantity sales charge discount is applicable at
the time the investment is made.

SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-
free at (800) 225-2606. The minimum purchase amount is $50 and the maximum
purchase amount is $100,000. Shareholders wishing to avail themselves of this
telephone purchase privilege must so elect on their Account Application and
designate thereon a bank and account number from which purchases will be made.
If a telephone purchase request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), the purchase will occur at the closing
net asset value of the shares purchased on that day. The Shareholder Servicing
Agent may be liable for any losses resulting from unauthorized telephone
transactions if it does not follow 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.

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 such 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 may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic
payments based upon the value of his account. Such payments under a Systematic
Withdrawal Plan ("SWP") must be at least $100, except in certain limited
circumstances. The aggregate withdrawals of Class B and Class C shares in any
year pursuant to a SWP generally are limited to 10% of the value of the
account at the time of the 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 and Class
C shares will be made in the following order: (i) any "Free Amount"; (ii) to
the extent necessary, any "Reinvested Shares"; 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 and Class C shares
pursuant to a SWP, but will not be waived in the case of SWP redemptions of
Class A shares. 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 dividends 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 $5,000 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 the imposition of a CDSC on certain
redemptions. The shareholder may deposit into his 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 (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, customers of a bank or broker-
dealer, clients of an investment adviser or other similar group; and (4)
agrees to provide certification of membership of those members investing money
in the MFS Funds upon the request of MFD.

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) under the Automatic Exchange Plan,
a dollar cost averaging program. The Automatic Exchange Plan provides for
automatic exchanges 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, exchanges of at least $50 each
may be made to up to six different funds effective on the seventh day of each
month or of every third month, depending on whether monthly or quarterly
exchanges 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 exchange will occur after receipt and processing
by the Shareholder Servicing Agent of an application in good order. Exchanges
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 exchanges.
Additional payments made to a shareholder's account in that Fund will extend
the period that exchanges 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 an exchange is scheduled, such
funds may not be available for exchanges 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 exchanges will be charged in connection with the
Automatic Exchange Plan. However, exchanges 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
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (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 of the Fund 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 exchange.

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 the treatment of
any CDSC, see "Exchange Privilege" below.

REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the
other MFS Funds (except shares of MFS Money Market Fund, MFS Government Money
Market Fund and holders of Class A shares of MFS Cash Reserve Fund in the case
where such shares 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 invested 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 such shares for shares of the same class 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 their initial purchase in
the case of Class B shares or within 12 months of the initial purchase of
Class C shares and 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 consult your tax adviser for further
information.

EXCHANGE PRIVILEGE -- Subject to the requirements set forth below, some or all
of the shares 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 at net asset value (if available for sale and if purchaser
is eligible to purchase the class of shares). Exchanges will be made 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., 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 (except that the minimum is $50 for accounts 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 the Shareholder Servicing Agent) or all the shares in the
account. Each exchange involves the redemption of 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 Fund. Any gain or loss on the
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
account. No more than five exchanges may be made in any one Exchange Request
by telephone.If an Exchange Request is received by the Shareholder Servicing
Agent prior to the close of regular trading on the Exchange the exchange
usually will occur on that day if all 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 Fund, 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 MFD may also communicate a shareholder's Exchange
Request to the Shareholder Servicing Agent by facsimile subject to the
restrictions and requirements set forth above.

No CDSC is imposed on exchanges among 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. Any gain or loss on the
redemption of the shares exchanged is reportable in the shareholder's federal
income tax return, unless such shares were held in a tax-deferred retirement
plan.

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 MFS Fund and consider the
differences in objectives and policies before making any exchange.
Shareholders of the other MFS Funds (except shares 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 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. MFD makes
available, through investment dealers, plans and/or custody agreements, the
following:

Traditional Individual Retirement Accounts (IRAs) (for individuals 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);

Roth Individual Retirement Accounts (Roth IRAs) (for individuals who desire
to make limited contributions to a tax-favored retirement program);

Simplified Employee Pension (SEP-IRA) Plans;

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

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

Other qualified pension and profit-sharing plans.

The plan documents provided by MFD 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 MFD, tax consequences and redemption
information, see the specific documents for that plan. Plan documents other
than those provided by MFD 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.

Investors should consult with their tax advisers before establishing any of
the tax-deferred retirement plans described above.

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 the Shareholder Servicing Agent.

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 Code, by meeting all
applicable requirements of Subchapter M, including requirements as to the
nature of the Fund's gross income, the amount of Fund distributions, and the
composition of the Fund's portfolio assets. Because the Fund intends to
distribute all of its net investment income and net realized capital gains to
its 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 taxable income and Fund distributions
would generally be taxable as ordinary dividend income to the shareholders.

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. Dividends from ordinary income, and any distributions
from net short-term capital gains are taxable to the shareholders as ordinary
income for federal income tax purposes, whether the distributions are paid in
cash or reinvested in additional shares. 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 of net
capital gains (i.e., the excess of net long-term capital gains over net short-
term capital losses), whether paid in cash or reinvested in additional shares,
are taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held their
shares. Any Fund dividend that is declared in October, November, or December
of any calendar year, that is payable to shareholders of record in such a
month, and that is paid the following January will be treated as if received
by the shareholders on December 31 of the year in which the dividend is
declared. The Fund will notify shareholders regarding the federal tax status
of its distributions after the end of each calendar year.

Any Fund distribution will have the effect of reducing the per share net asset
value of shares in the Fund by the amount of the distribution. Shareholders
purchasing shares shortly before the record date of any 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 a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition 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 disposition 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 of any other shares of an MFS Fund generally sold
subject to a sales charge).

The Fund's current dividend and accounting policies will affect the amount,
timing, and character of distributions to shareholders and may, under certain
circumstances, make an economic return of capital taxable to shareholders. Any
investment in zero coupon bonds, deferred interest bonds, payment-in-kind
bonds, certain stripped securities and certain securities purchased at a
market discount will cause the Fund to recognize income prior to the receipt
of cash payments with respect to those securities. In order to distribute 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. An
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 transactions in options, Futures Contracts, Forward Contracts, and
swaps and related transactions will be subject to special tax rules that may
affect the amount, timing, and character of Fund income and 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 that day, and any gain or loss associated with the 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 may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Fund losses, adjustments in the holding periods of Fund securities, and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may 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.

Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses. Use of foreign currencies for non-
hedging purposes and investment, by the Fund in certain "passive foreign
investment companies" may be limited in order to avoid taxes on the Fund. The
Fund may elect to mark to market any investments in "passive foreign
investment companies" on the last day of each year. This election may cause
the Fund to recognize income prior to the receipt of cash payments with
respect to those investments; 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.

Investment income received by the Fund from foreign securities may be subject
to foreign income taxes withheld at the source; the Fund does not expect to be
able to pass through to shareholders foreign tax credits or deductions with
respect to such foreign taxes. The United States has entered into tax treaties
with many foreign countries that may entitle the Fund to a reduced rate of tax
or an exemption from tax on such income; the Fund intends to qualify for
treaty reduced rates where available. It is not possible, however, to
determine the Fund's effective rate of foreign tax in advance since the amount
of the Fund's assets to be invested within various countries is not known.

Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at a rate of 30%. The Fund intends
to withhold U.S. federal income tax at the rate of 30% (or any lower rate
permitted under an applicable treaty) on taxable dividends and other payments
made to Non-U.S. Persons that are subject to such withholding. Any amounts
overwithheld may be recovered by such persons by filing a claim for refund
with the U.S. Internal Revenue Service within the time period appropriate 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
at a rate of 31% on taxable dividends and redemption proceeds 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. Backup withholding will not, however, be applied to payments that
have been subject to 30% withholding.

As long as it qualifies as a regulated investment company under the
Code, the Fund will not be required to pay Massachusetts income or excise
taxes.

Distributions of the Fund 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. The Fund intends to
advise shareholders of the extent, if any, to which its distributions consist
of such interest. Shareholders are urged to consult their tax advisers
regarding the possible exclusion of such portion of their dividends for state
and local income tax purposes as well as regarding the tax consequences of an
investment in the Fund.

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 week day except for the following holidays or the days on which
they are observed: New Year's Day, Martin Luther King, Jr. 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. If acquired, preferred stocks, common stocks and warrants will be
valued at the last sale price on an exchange on which they are primarily
traded or at the last quoted bid price for unlisted securities. Debt
securities (other than short-term obligations) in the Fund's portfolio are
valued on the basis of valuations furnished by pricing services which utilize
both dealer-supplied valuations and electronic data processing techniques
which take into account 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, because such valuations
are believed to reflect more accurately the fair value of such securities. Use
of the pricing services has been approved by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued
based upon dealer supplied valuations. Other short-term obligations are valued
at amortized cost, which constitutes fair value as determined by the Board of
Trustees. Positions in listed options, Futures Contracts and Options on
Futures Contracts will normally be valued at the settlement price on the
exchange on which they are primarily traded. Positions in over-the-counter
options will be valued using dealer supplied valuations. Forward Contracts
will be valued using a pricing model taking into consideration market data
from an external pricing source. Portfolio securities 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.

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 calculate (i) a total return, which
is not reduced by the CDSC (4% maximum for Class B shares and 1% maximum for
Class C shares) 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 current 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.

The Fund offers multiple classes of shares which were initially offered for
sale to, and purchased by, the public on different dates (the class "inception
date"). The calculation of total rate of return for a class of shares which
has a later class inception date than another class of shares of the Fund is
based both on (i) the performance of the Fund's newer class from its inception
date and (ii) the performance of the Fund's oldest class from its inception
date up to the class inception date of the newer class.

As discussed in the Prospectus, the sales charges, expenses and expense
ratios, and therefore the performance, of the Fund's classes of shares differ.
In calculating total rate of return for a newer class of shares in accordance
with certain formulas required by the SEC, the performance will be adjusted to
take into account the fact that the newer class is subject to a different
sales charge than the oldest class (e.g., if the newer class is Class A
shares, the total rate of return quoted will reflect the deduction of the
initial sales charge applicable to Class A shares; if the newer class is Class
B shares, the total rate of return quoted will reflect the deduction of the
CDSC applicable to Class B shares). However, the performance will not be
adjusted to take into account the fact that the newer class of shares bears
different class specific expenses than the oldest shares (e.g., Rule 12b-1
fees). Therefore, the total rate of return quoted for a newer class of shares
will differ from the return that would be quoted had the newer class of shares
been outstanding for the entire period over which the calculation is based
(i.e., the total rate of return quoted for the newer class will be higher than
the return that would have been quoted had the newer class of shares been
outstanding for the entire period over which the calculation is based if the
class specific expenses for the newer class are higher than the class specific
expenses of the oldest class, and the total rate of return quoted for the
newer class will be lower than the return that would be quoted had the newer
class of shares been outstanding for this entire period if the class specific
expenses for the newer class are lower than the class specific expenses of the
oldest class).

Total rate of return quotations for each class are presented in Appendix A
attached hereto under the heading "Performance Quotations."

PERFORMANCE RESULTS: The performance results for Class A shares presented in
Appendix A attached hereto under the heading "Performance Results" assume an
initial investment of $10,000 in Class A shares, and cover the period from
January 1, 1988 to December 31, 1997. It has been assumed that dividends 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 published for other investment
companies or other investment vehicles. Total rate of return reflects the
performance of both principal and income. Current net asset value as well as
account balance information may be obtained by calling 1-800-MFS-TALK
(637-8255).

YIELD: Any yield quotation for a class of shares of the Fund is based on the
annualized net investment income per share of that class for the 30-day
period. The yield for each class of the Fund is calculated by dividing the net
investment income allocated to that class earned during the period by the
maximum offering price per share of that class of the Fund on the last day of
the period. The resulting figure is then annualized. Net investment income per
share of a class is determined by dividing (i) the dividends and interest
allocated to that class during the period, minus accrued expenses of that
class for the period by (ii) the average number of shares of the class
entitled to receive dividends during the period multiplied by the maximum
offering price per share on the last day of the period. The Fund's yield
calculations for Class A shares assume a maximum sales charge of 4.75%. The
yield calculation for Class B and Class C shares assumes no CDSC is paid.
Yield quotations for each class of shares are presented in Appendix A attached
under the heading "Performance Quotations".

CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, 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 12 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 during
the past 12 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%.
Current distribution rate quotations for Class B and Class C shares assume no
CDSC is paid. Current distribution rate quotations for each class of shares
are presented in Appendix A attached hereto under the heading "Performance
Quotations".

GENERAL: From time to time each 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 Securities Corporation, CDA
Wiesenberger, Shearson Lehman and Salomon Bros. Indices, Ibbotson, Business
Week, Lowry Associates, Media General, Investment Company Data, The New York
Times, Your Money, Strangers Investment Advisor, Financial Planning on Wall
Street, Standard and Poor's, Individual Investor, The 100 Best Mutual Funds
You Can Buy, by Gordon K. Williamson, Consumer Price Index, and Sanford C.
Bernstein & Co. Fund performance may also be compared to the performance of
other mutual funds tracked by financial or business publications or
periodicals.

From time to time, the Fund may discuss or quote its current portfolio manager
as well as other investment personnel, including such persons' views on: the
economy; securities markets; portfolio securities and their issuers;
investment philosophies, strategies, techniques and criteria used in the
selection of securities to be purchased or sold for the Fund; the Fund's
portfolio holdings; the investment research and analysis process; the
formulation and evaluation of investment recommendations; and the assessment
and evaluation of credit, interest rate, market and economic risks and similar
or related matters.

The Fund may also quote evaluations mentioned in independent radio or
television broadcasts.

From time to time the Fund may use charts and graphs to illustrate the past
performance of various indices such as those mentioned above and illustrations
using hypothetical rates of return to illustrate the effects of compounding
and tax-deferral.

From time to time the Fund may also discuss or quote the views of its
distributor, its investment adviser and other financial planning, legal, tax,
accounting, insurance, estate planning and other professionals, or from
surveys, regarding individual and family financial planning. Such views may
include information regarding: retirement planning; tax management strategies;
estate planning; general investment techniques (e.g., asset allocation and
disciplined saving and investing); business succession; ideas and information
provided through the MFS Heritage Planningsm program, an inter-generational
financial planning assistance program; issues with respect to insurance (e.g.,
disability and life insurance and Medicare supplemental insurance); issues
regarding financial and health care management for elderly family members; and
other similar or related matters.

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 open-end
mutual fund in America.

-- 1924 -- Massachusetts Investors Trust is the first mutual fund to make
full public disclosure of its operations in shareholder reports.

-- 1932 -- One of the first internal research departments is established to
provide in-house analytical capability for an investment management firm.

-- 1933 -- Massachusetts Investors Trust is the first mutual fund to register
under the Securities Act of 1933 ("Truth in Securities Act" or "Full
Disclosure Act").

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

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

-- 1979 -- Spectrum becomes the first combination fixed/ variable annuity
with no initial sales charge.

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

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

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

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

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

-- 1989 -- MFS(R) Regatta becomes America's first non- qualified
market-value-adjusted fixed/variable annuity.

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

-- 1993 -- MFS(R) World Growth Fund is the first global emerging markets fund
to offer the expertise of two sub-advisers.

-- 1993 -- MFS(R) becomes money manager of MFS(R) Union Standard(R) Equity
Fund, the first fund to invest in companies deemed to be union-friendly by
an Advisory Board of senior labor officials, senior managers of companies
with significant labor contracts, academics and other national labor
leaders or experts.

8. DISTRIBUTION PLAN

The Trustees have adopted a Distribution Plan for Class A, Class B and Class C
shares (the "Distribution Plan") 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 Distribution Plan would benefit the Fund and
each respective class of shareholders. The provisions of the Distribution Plan
are severable with respect to each class of shares offered by the Fund. The
Distribution Plan is 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.

The Distribution Plan is described in the Prospectus under the caption
"Distribution Plan," which is incorporated herein by reference. The following
information supplements this Prospectus discussion.

SERVICE FEES: With respect to Class A Shares, no service fees will be paid:
(i) to any 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 MFD (MFD, however, may
waive this minimum amount requirement from time to time); or (ii) to any
insurance company which has entered into an agreement with the Fund and MFD
that permits such insurance company to purchase Class A 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.

With respect to Class B shares, except in the case of the first year service
fee, no service fees 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 by MFD from time to time. MFD, however, may waive this minimum
amount requirement from time to time. Dealers may from time to time be
required to meet certain other criteria in order to receive service fees.

MFD or its affiliates shall be entitled to receive any service fee payable
under the 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 MFD or its
affiliates for shareholder accounts.

DISTRIBUTION FEES: The purpose of distribution payments to MFD under the
Distribution Plan is to compensate MFD for its distribution services to the
Fund. MFD pays commissions to dealers as well as 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.

DISTRIBUTION AND SERVICE FEES PAID DURING THE FUND'S LAST FISCAL YEAR:During
the fiscal year ended April 30, 1998, the Fund paid the following Distribution
Plan expenses:

Class A Shares $1,854,727 $ 619,459 $1,235,268
Class B Shares $1,518,350 $1,174,800 $ 343,550
Class C Shares $ 276,511 $ 18,313 $ 258,198

GENERAL: The Distribution Plan will remain in effect until August 1, 1999, 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"). The Distribution Plan also
requires that the Fund and MFD 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. The Distribution Plan may be
terminated at any time 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 (as defined in "Investment Restrictions"). All
agreements relating to the Distribution Plan entered into between the Fund or
MFD and other organizations must be approved by the Board of Trustees,
including a majority of the Distribution Plan Qualified Trustees. Agreements
under the Distribution Plan must be in writing, will be terminated
automatically if assigned, and may be terminated at any time without payment
of 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. The Distribution Plan may not 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 not 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 the Distribution Plan or in any related agreement.

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND
LIABILITIES

The Trust's 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 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 the shares of the
Fund into one or more classes. Pursuant thereto, the Trustees have authorized
the issuance of three classes of shares of the Fund, Class A, Class B and
Class C shares as well as Class I shares for this series and one of the
Trust's other series. 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, 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 class of a series would participate equally in the earnings,
dividends and assets allocable to that class of the particular series.

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 under certain circumstances 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
affirmative vote of a majority of the Trust's shares. Shares have no
preemptive or conversion rights (except as described in "Purchases --
Conversion of Class B Shares" in the Prospectus). Shares when issued 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 or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of the
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, its shareholders,
Trustees, officers, employees and agents 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 obli-
gations.

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 willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.

10. INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS

Deloitte & Touche LLP are the Trust's independent auditors providing audit
services, tax preparation, and assistance and consultation with respect to
the preparation of filings with the SEC.

The Portfolio of Investments at April 30, 1998, the Statement of Assets and
Liabilities at April 30, 1998, the Statement of Operations for the year ended
April 30, 1998, the Statement of Changes in Net Assets for each of the two
years in the period ended April 30, 1998, the Notes to Financial Statements
and the Independent Auditors' Report, each of which is included
in the Annual Report to shareholders of the Fund, are incorporated
by reference into this SAI and have been so incorporated in reliance upon
the report of Deloitte & Touche LLP, independent auditors, as experts
in accounting and auditing. A copy of the Annual Report accompanies
this SAI.

<PAGE>
APPENDIX A

PERFORMANCE INFORMATION

The performance results and quotations below 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. See
"Determination of Net Asset Value and Performance" in the SAI.

PERFORMANCE RESULTS -- CLASS A SHARES

VALUE OF VALUE OF VALUE OF
INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
YEAR ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
- - ---------- ---------- ------------- --------- -----

December 31, 1988 $ 9,437 $ 0 $ 882 $10,319
December 31, 1989 9,800 0 1,914 11,714
December 31, 1990 9,666 0 2,896 12,563
December 31, 1991 10,399 0 4,424 14,824
December 31, 1992 10,214 54 5,487 15,756
December 31, 1993 10,088 1,088 6,763 17,940
December 31, 1994 8,978 968 7,192 17,139
December 31, 1995 10,125 1,092 9,602 20,820
December 31, 1996 9,792 1,056 10,792 21,641
December 31, 1997 10,081 1,087 12,712 23,880

Explanatory Notes: The results in the table assume that income dividends and
capital gain distributions were invested in additional shares. The results
also assume that the initial investment in Class A shares was reduced by the
current maximum applicable sales charge. No adjustment has been made for
income taxes, if any, payable by shareholders.

PERFORMANCE QUOTATIONS

All performance quotations are as of April 30, 1998.

<TABLE>
<CAPTION>
ACTUAL
30-DAY 30-DAY
YIELD YIELD
AVERAGE ANNUAL TOTAL RETURNS (INCLUDING (WITHOUT CURRENT
---------------------------- ANY ANY DISTRIBUTION
1 YEAR 5 YEAR 10 YEAR WAIVERS) WAIVERS) RATE
------ ------ ------- -------- -------- ----

Class A Shares with sales charge .......... 6.07% 6.70% 8.78% N/A 4.84% 6.23%
Class A Shares without sales charge ....... 11.36% 7.74% 9.31% N/A N/A N/A
Class B Shares with CDSC .................. 6.52% 6.65%(1) 8.93%(1) N/A N/A N/A
Class B Shares without CDSC ............... 10.52% 6.98%(1) 8.93%(1) N/A 4.39% 5.80%
Class C Shares with CDSC .................. 9.54% 7.07%(2) 8.98%(2) N/A N/A N/A
Class C Shares without CDSC ............... 10.54% 7.07%(2) 8.98%(2) N/A 4.39% 5.83%
Class I Shares ............................ 11.72% 7.85%(3) 9.37%(3) N/A 5.39% 6.87%
</TABLE>

(1) Class B share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of Class B shares on September
7, 1993. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class B shares differ. Class B share
performance has been adjusted to reflect that Class B shares generally are
subject to a CDSC (unless the performance quotation does not give effect
to the CDSC) whereas Class A shares generally are subject to an initial
sales charge. Class B share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class A shares.
(2) Class C share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of Class C shares on January 3,
1994. Sales charges, expenses and expense ratios, and therefore
performance, for Class A and Class C shares differ. Class C share
performance has been adjusted to reflect that Class C shares generally are
subject to a CDSC (unless the performance quotation does not give effect
to the CDSC) whereas Class A shares generally are subject to an initial
sales charge. Class C share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class A shares.
(3) Class I share performance includes the performance of the Fund's Class A
shares for the periods prior to the inception of Class I shares on January
2, 1997. Sales charges, expenses and expense ratios, and therefore
performance for Class I and A shares differ. Class I share performance has
been adjusted to reflect that Class I shares are not subject to an initial
sales charge, whereas Class A shares generally are subject to an initial
sales charge. Class I share performance has not, however, been adjusted to
reflect differences in operating expenses (e.g., Rule 12b-1 fees), which
generally are lower for Class I shares.

<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000

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

CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

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 AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110

MFS(R) BOND FUND

500 Boylston Street
Boston, MA 02116

[LOGO] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
MFB-13-9/98/.5M
<PAGE>

MFS LIMITED MATURITY FUND

SUPPLEMENT TO THE SEPTEMBER 1, 1998 PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION

CLASS I SHARES ARE AVAILABLE FOR PURCHASE ONLY BY CERTAIN INVESTORS AS
DESCRIBED UNDER THE CAPTION "ELIGIBLE PURCHASERS" BELOW.

EXPENSE SUMMARY

SHAREHOLDER TRANSACTION EXPENSES: CLASS I
Maximum Initial Sales Charge Imposed on Purchases of Fund
Shares (as a percentage of offering price)................ None
Maximum Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption proceeds, as
applicable)............................................... None

ANNUAL OPERATING EXPENSES OF THE FUND (AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Management Fees............................................. 0.40%
Rule 12b-1 Fees............................................. None
Other Expenses(1)........................................... 0.33%
Total Operating Expenses.................................... 0.73%

- - ---------
(1) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Fund's expenses). Any such fee reductions are not
reflected under "Other Expenses."

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

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

PERIOD CLASS I
------ -------
1 year........................................ $ 7
3 years....................................... 23
5 years....................................... 41
10 years....................................... 91

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.
<PAGE>

CONDENSED FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS - CLASS I SHARES
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30,1997*
-------------- --------------
Per share data (for a share outstanding
throughout each the period):
Net asset value - beginning of period $ 7.04 $ 7.08
------ ------
Income from investment operations# -
Net investment incomess. $ 0.48 $ 0.15
Net realized and unrealized loss
on investments (0.07) (0.03)
------ ------
Total from investment operations $ 0.41 $ 0.12
------ ------
Less distributions declared to shareholders -
From net investment income $(0.47) $(0.15)
In excess of net investment income -- (0.01)
------ ------
Total distributions declared to shareholders $(0.47) $(0.16)
------ ------
Net asset value - end of period $ 6.98 $ 7.04
------ ------
Total return 5.98% 1.72%++
Ratios (to average net assets)/
Supplemental data(s):
Expenses## 0.74% 1.17%+
Net investment income 6.75% 8.68%+
Portfolio turnover 288% 489%
Net assets at end of period (000 omitted) $1,466 $1,925

- - --------------------------
* For the period from the inception of Class I shares, January 2, 1997 through
April 30, 1997.
+ Annualized
++ Not annualized
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid
indirectly.
(S) The investment adviser did not impose a portion of its management fee for
the periods indicated. Subject to reimbursement by the Fund, the investment
adviser voluntarily agreed to maintain expenses of the Fund, exclusive of
management, distribution, and service fees, at not more than 0.40% of
average daily net assets. If these fees had been incurred by the Fund,
and/or actual expenses were over/under this limitation, the net investment
income per share and the ratios would have been:

Net investment income $ 0.49 $ 0.15
------ ------
Ratios (to average net assets):
Expenses## 0.72% 1.17%+
Net investment income 6.77% 8.68% +

ELIGIBLE PURCHASERS

Class I shares are available for purchase only by the following purchasers
("Eligible Purchasers"):

(i) certain retirement plans established for the benefit of employees of
Massachusetts Financial Services Company ("MFS"), the Fund's investment
adviser, and employees of MFS' affiliates; and

SHARE CLASSES OFFERED BY THE FUND

Four classes of shares of the Fund currently are offered for sale, Class A
shares, Class B shares, Class C shares and Class I shares. Class I shares are
available for purchase only by Eligible Purchasers, as defined above, and are
described in this Supplement. Class A shares, Class B shares and Class C shares
are described in the Fund's Prospectus and are available for purchase by the
general public.

Class A shares are offered at net asset value plus an initial sales charge
up to a maximum of 2.50% of the offering price (or a contingent deferred sales
charge (a "CDSC") upon redemption of 1.00% during the first year in the case of
purchases of $1 million or more and certain purchases by retirement plans), and
are subject to an annual distribution fee and service fee up to a maximum of
0.35% per annum. Class B shares are offered at net asset value without an
initial sales charge but are subject to a CDSC upon redemption (declining from
4.00% during the first year to 0% after six years) and an annual distribution
fee and service fee up to a maximum of 1.00% per annum; Class B shares convert
to Class A shares approximately eight years after purchase. Class C shares are
offered at net asset value without an initial sales charge but are subject to a
CDSC upon redemption of 1.00% during the first year and an annual distribution
fee and service fee up to a maximum of 1.00% per annum. Class I shares are
offered at net asset value without an initial sales charge or CDSC and are not
subject to a distribution or service fee. Class C and Class I shares do not
convert to any other class of shares of the Fund.

OTHER INFORMATION

Eligible Purchasers may purchase Class I shares only directly through MFD.
Eligible Purchasers may exchange Class I shares of the Fund for Class I shares
of any other MFS Fund available for purchase by such Eligible Purchasers at
their net asset value (if available for sale), and may exchange Class I shares
of the Fund for shares of the MFS Money Market Fund (if available for sale), and
may redeem Class I shares of the Fund at net asset value. Distributions paid by
the Fund with respect to Class I shares generally will be greater than those
paid with respect to Class A shares, Class B shares and Class C shares because
expenses attributable to Class A shares, Class B shares and Class C shares
generally will be higher.

The date of this Supplement is September 1, 1998

<PAGE>
MFS(R) LIMITED MATURITY FUND
SEPTEMBER 1, 1998

PROSPECTUS

CLASS A SHARES OF BENEFICIAL INTEREST
CLASS B SHARES OF BENEFICIAL INTEREST
CLASS C SHARES OF BENEFICIAL INTEREST
- - --------------------------------------------------------------------------------

MFS Limited Maturity Fund (the "Fund") is a diversified series of MFS(R)
Series Trust IX (the "Trust"), an open-end management investment company
presently consisting of three series. The primary investment objective of the
Fund is to provide as high a level of current income as is believed to be
consistent with prudent investment risk. The secondary objective of the Fund
is to protect shareholders' capital. See "Investment Objectives and Policies"
below. The minimum initial investment is generally $1,000 per account. See
"Information Concerning Shares of the Fund -- Purchases" below.

This Prospectus sets forth concisely the information concerning the Trust and
the Fund 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 September 1, 1998, as
amended or supplemented from time to time (the "SAI"), which contains more
detailed information about the Trust and the Fund and is incorporated into
this Prospectus by reference.

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.

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

See page 40 for a further description of the information set forth in the SAI.
A copy of the SAI may be obtained without charge by contacting the Shareholder
Servicing Agent (see back cover for address and phone number). The SEC
maintains an Internet World Wide Web site at http://www.sec.gov that contains
the SAI, materials that are incorporated by reference into this Prospectus and
the SAI, and other information regarding the Fund. This Prospectus is
available on the Adviser's Internet World Wide Web site at http://www.mfs.com.

TABLE OF CONTENTS
Page

1. Expense Summary .................................... 3
2. Condensed Financial Information .................... 4
3. The Fund ........................................... 8
4. Investment Objectives and Policies ................. 8
5. Certain Securities and Investment Techniques ....... 9
6. Additional Risk Factors ............................ 16
7. Management of the Fund ............................. 17
8. Information Concerning Shares of the Fund .......... 19
Purchases ...................................... 19
Exchanges ...................................... 26
Redemptions and Repurchases .................... 28
Distribution Plan .............................. 31
Distributions .................................. 34
Tax Status ..................................... 34
Net Asset Value ................................ 35
Description of Shares, Voting Rights and
Liabilities .................................. 35
Performance Information ........................ 36
Expenses ....................................... 37
Provision of Annual and Semiannual Reports ..... 37
9. Shareholder Services ............................... 37
Appendix A -- Waivers of Sales Charges ............. A-1
Appendix B -- Description of Bond Ratings .......... B-1

<PAGE>
1. EXPENSE SUMMARY
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge
Imposed on Purchases of Fund
Shares (as a percentage of
offering price) ................. 2.50% 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% 1.00%

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees ................... 0.40% 0.40% 0.40%
Rule 12b-1 Fees ................... 0.15%(2) 0.96%(3) 1.00%(3)
Other Expenses(4) ................. 0.33% 0.33% 0.33%
----- ----- -----
Total Operating Expenses .......... 0.88% 1.69% 1.73%

- - ------------
(1) Purchases of $1 million or more and certain retirement plans are not
subject to an initial sales charge; however, a contingent deferred sales
charge ("CDSC") of 1% will be imposed on such purchases in the event of
certain redemption transactions within 12 months following such purchases
(see "Information Concerning Shares of the Fund -- Purchases" below).
(2) The Fund has adopted a distribution plan for its shares in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") (the "Distribution Plan"), 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 Class A
shares. Payment of the 0.10% per annum Class A distribution fee will
commence on such date as the Trustees of the Trust may determine. Service
fee payments in the amount of 0.15% of the average daily net assets of the
Fund attributable to Class A shares are currently being paid by the Fund;
payment of the remaining portion of the Class A service fee, equal to
0.10% per annum, will become payable on such date as the Trustees of the
Trust may determine. Distribution expenses paid under this Plan, together
with the initial sales charge, may cause long-term shareholders to pay
more than the maximum sales charge that would have been permissible if
imposed entirely as an initial sales charge. See "Information Concerning
Shares of the Fund -- Distribution Plan" below).
(3) The Fund's Distribution Plan 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 Class B shares and
Class C shares respectively. Except in the case of the 0.25% per annum
Class B service fee paid by the Fund upon the sale of Class B shares in
the first year, the Class B service fee is currently set at 0.15% per
annum and may be increased to a maximum of 0.25% per annum on such date as
the Trustees of the Trust may determine. Distribution expenses paid under
the Distribution Plan with respect to Class B or Class C shares, together
with any CDSC payable upon redemption of Class B shares, may cause long-
term shareholders to pay more than the maximum sales charge that would
have been permissible if imposed entirely as an initial sales charge. See
"Information Concerning Shares of the Fund -- Distribution Plan" below.
(4) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have
the effect of reducing the Fund's expenses). Any such fee reductions are
not reflected under "Other Expenses."
<PAGE>
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):

PERIOD CLASS A CLASS B CLASS C
- - ------ ------- ------- -------
(1) (1)

1 year ................... $ 34 $ 57 $ 17 $ 28 $ 18
3 years .................. 52 83 53 54 54
5 years .................. 73 112 92 94 94
10 years .................. 131 178(2) 178(2) 204 204

- - ------------
(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.

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 of the Prospectus: (i) varying sales
charges on share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases";
(iii) management fees -- "Management of the Fund"; and (iv) Rule 12b-1 (i.e.,
distribution plan) fees -- "Distribution Plan."

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

2. CONDENSED FINANCIAL INFORMATION
The following information has been audited for at least the latest five fiscal
years of the Fund and should be read in conjunction with the financial
statements included in the Fund's Annual Report to shareholders which are
incorporated by reference into the SAI in reliance upon the report of the
Fund's independent auditors, given upon their authority as experts in
accounting and auditing. The Fund's current independent auditors are Deloitte
& Touche, LLP.

FINANCIAL HIGHLIGHTS

- - --------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995 1994 1993 1992*
- - --------------------------------------------------------------------------------------------------------------------
CLASS A
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 7.04 $ 7.12 $ 7.10 $ 7.14 $ 7.46 $ 7.29 $ 7.31
------ ------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.48 $ 0.47 $ 0.48 $ 0.46 $ 0.44 $ 0.48 $ 0.08
Net realized and unrealized
gain (loss) on investments (0.07) (0.06) 0.03 (0.04) (0.32) 0.17(S)(S) (0.02(S)(S)
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.41 $ 0.41 $ 0.51 $ 0.42 $ 0.12 $ 0.65 $ 0.06
------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders(++) -
From net investment income $(0.46) $(0.47) $(0.48) $(0.46) $(0.42) $(0.48) $(0.08)
In excess of net investment
income -- (0.02) (0.01) -- (0.02) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.46) $(0.49) $(0.49) $(0.46) $(0.44) $(0.48) $(0.08)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 6.99 $ 7.04 $ 7.12 $ 7.10 $ 7.14 $ 7.46 $ 7.29
------ ------ ------ ------ ------ ------ ------
Total return(+) 5.97% 5.83% 7.50% 6.09% 1.61% 9.17% 4.98%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.89% 0.94% 0.95% 0.95% 0.85% 0.60% 0.55%+
Net investment income 6.70% 6.57% 6.73% 6.54% 5.99% 6.40% 6.22%+
Portfolio turnover 288% 489% 385% 498% 861% 472% 72%
Net assets at end of period
(000 omitted) $95,342 $91,887 $98,582 $85,773 $100,297 $67,470 $4,924
<CAPTION>
*For the period from the commencement of the Fund's investment operations,
February 26, 1992, through April 30, 1992.
+ Annualized.
#Per share data for the periods subsequent to April 30, 1994, are based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(+)Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
(++)For the year ended April 30, 1993, the per share distribution from net
realized gain on investments was $0.0021.
(S)The investment adviser did not impose a portion of its management fee for
the periods indicated. Subject to reimbursement by the Fund, the
investment adviser voluntarily agreed to maintain expenses of the Fund,
exclusive of management, distribution, and service fees, at not more than
0.40% of average daily net assets. If these fees had been incurred by the
Fund, and/or actual expenses were over/under this limitation, the net
investment income per share and the ratios would have been:

<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income $ 0.48 $ 0.47 $ 0.48 $ 0.46 $ 0.42 $ 0.43 $ 0.07
Ratios (to average net assets):
Expenses## 0.87% 0.89% 0.91% 0.97% 1.07% 1.29% 1.44%+
Net investment income 6.72% 6.62% 6.77% 6.52% 5.77% 5.70% 5.33%+

(S)(S)The per share amount is not in accordance with the net realized and
unrealized gain (loss) for the period because of the timing of sales of
Fund shares and the amount of per share realized and unrealized gains and
losses at such time.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995 1994**
- - --------------------------------------------------------------------------------------------------------------
CLASS B
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.03 $ 7.11 $ 7.10 $ 7.14 $ 7.50
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income(S) $ 0.41 $ 0.41 $ 0.42 $ 0.41 $ 0.21
Net realized and unrealized gain (loss) on
investments (0.07) (0.05) 0.03 (0.05) (0.33)
------- ------- ------- ------- -------
Total from investment operations $ 0.34 $ 0.36 $ 0.45 $ 0.36 $ (0.12)
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.40) $ (0.42) $ (0.42) $ (0.40) $ (0.23)
In excess of net investment income -- (0.02) (0.02) -- (0.01)
------- ------- ------- ------- -------
Total distributions declared to
shareholders $ (0.40) $ (0.44) $ (0.44) $ (0.40) $ (0.24)
------- ------- ------- ------- -------
Net asset value - end of period $ 6.97 $ 7.03 $ 7.11 $ 7.10 $ 7.14
------- ------- ------- ------- -------
Total return 4.98% 4.99% 6.52% 5.20% (1.69)%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.70% 1.78% 1.75% 1.81% 1.74%+
Net investment income 5.80% 5.75% 5.90% 5.73% 4.90%+
Portfolio turnover 288% 489% 385% 498% 861%
Net assets at end of period (000 omitted) $39,229 $34,875 $26,464 $17,334 $12,072

<CAPTION>
**For the period from the inception of Class B, September 7, 1993, through
April 30, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to April 30, 1994, are based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(S)The investment adviser did not impose a portion of its management fee for the
periods indicated. Subject to reimbursement by the Fund, the investment
adviser voluntarily agreed to maintain expenses of the Fund, exclusive of
management, distribution, and service fees, at not more than 0.40% of average
daily net assets. If these fees had been incurred by the Fund, and/or actual
expenses were over/under this limitation, the net investment income per share
and the ratios would have been:
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.41 $ 0.41 $ 0.42 $ 0.41 $ 0.20
Ratios (to average net assets):
Expenses## 1.68% 1.77% 1.77% 1.82% 1.96%+
Net investment income 5.82% 5.76% 5.88% 5.72% 4.68%+

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS

- - -------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 30, 1998 1997 1996 1995***
- - -------------------------------------------------------------------------------------------------
CLASS C
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 7.05 $ 7.13 $ 7.11 $ 7.08
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.41 $ 0.41 $ 0.41 $ 0.37
Net realized and unrealized gain (loss) on
investments (0.07) (0.06) 0.04 (0.01)
------ ------ ------ ------
Total from investment operations $ 0.34 $ 0.35 $ 0.45 $ 0.36
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.40) $(0.41) $(0.41) $(0.33)
In excess of net investment income -- (0.02) (0.02) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.40) $(0.43) $(0.43) $(0.33)
------ ------ ------ ------
Net asset value - end of period $ 6.99 $ 7.05 $ 7.13 $ 7.11
------ ------ ------ ------
Total return 4.94% 5.08% 6.44% 5.25%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.74% 1.80% 1.80% 1.85%+
Net investment income 5.76% 5.80% 5.76% 6.01%+
Portfolio turnover 288% 489% 385% 498%
Net assets at end of period (000 omitted) $20,131 $18,862 $13,842 $4,450

<CAPTION>
***For the period from the inception of Class C, July 1, 1994, through April 30, 1995.
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated
without reduction for fees paid indirectly.
(S)The investment adviser did not impose a portion of its management fee for the periods
indicated. Subject to reimbursement by the Fund, the investment adviser voluntarily
agreed to maintain expenses of the Fund, exclusive of management, distribution, and
service fees, at not more than 0.40% of average daily net assets. If these fees had been
incurred by the Fund, and/or actual expenses were over/under this limitation, the net
investment income per share and the ratios would have been:

<S> <C> <C> <C> <C>
Net investment income $ 0.41 $ 0.41 $ 0.41 $ 0.37
Ratios (to average net assets):
Expenses## 1.72% 1.81% 1.75% 1.88%+
Net investment income 5.78% 5.80% 5.81% 5.98%+

</TABLE>
<PAGE>

3. THE FUND

The Fund is a diversified series of the Trust, an open-end, management
investment company which was organized as a trust under the laws of The
Commonwealth of Massachusetts in 1985. The Trust presently consists of three
series, each of which represents a portfolio with separate investment
policies. Shares of the Fund are continuously sold to the public and the Fund
uses the proceeds to buy securities for its portfolio. Three classes of shares
of the Fund currently are offered for sale to the general public. Class A
shares are offered at net asset value plus an initial sales charge up to a
maximum of 2.50% of the offering price (or a CDSC upon redemption of 1.00%
during the first year in the case of purchases of $1 million or more and
certain purchases by retirement plans) and subject to an annual distribution
and service fee up to a maximum of 0.35% per annum. Class B shares are offered
at net asset value without an initial sales charge but subject to a CDSC upon
redemption (declining from 4.00% during the first year to 0% after six years)
and an annual distribution fee and service fee up to a maximum of 1.00% per
annum. Class B shares will convert to Class A shares approximately eight years
after purchase. Class C shares are offered at net asset value without an
initial sales charge but subject to an annual distribution fee and service fee
up to a maximum of 1.00% per annum. Class C shares do not convert to any other
class of shares of the Fund. In addition, the Fund offers an additional class
of shares, Class I shares, exclusively to certain institutional investors.
Class I shares are made available by means of a separate Prospectus Supplement
provided to institutional investors eligible to purchase Class I shares and
are offered at net asset value without an initial sales charge or CDSC upon
redemption and without an annual distribution and service fee.

The Trust's Board of Trustees provides broad supervision over the affairs of
the Fund. 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 objectives and policies. A majority of the Trustees are not
affiliated with the Adviser. The selection of investments and the way they are
managed depend on the conditions and trends in the economy and the financial
marketplaces. The Fund also offers to buy back (redeem) its shares from its
shareholders at any time at net asset value, less any applicable CDSC.

4. INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES: The Fund's primary investment objective is to provide
as high a level of current income as is believed to be consistent with prudent
investment risk. The Fund's secondary objective is to protect shareholders"
capital. Any investment involves risk and there can be no assurance that the
Fund will achieve its investment objectives. The Fund's investment objectives
and policies are not fundamental and may be changed without shareholder
approval. A change in the Fund's investment objective may result in the Fund
having an investment objective different from the objective which the
shareholder considered appropriate at the time of investment in the Fund.

INVESTMENT POLICIES: In seeking to achieve its investment objectives, the Fund
invests, under normal market conditions, substantially all of its assets in
the following securities:

1. Debt securities (including corporate asset-backed securities and mortgage
pass-through securities discussed below) which have a rating within the
four highest grades as determined by Standard & Poor's Ratings Service
("S&P"), Fitch IBCA ("Fitch") or by Duff & Phelps Credit Rating Co.
("Duff & Phelps") (AAA, AA, A or BBB) or Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, A or Baa) and comparable unrated securities; for a
description of these rating categories, see Appendix B to this
Prospectus;

2. Debt securities issued or guaranteed by the United States ("U.S.")
Government or its agencies, authorities or instrumentalities ("U.S.
Government Securities"); or

3. Commercial paper, repurchase agreements and cash or cash equivalents
(such as certificates of deposit and bankers" acceptances).

The Fund will only invest in securities rated within the four highest grades,
as determined by S&P, Fitch, Duff & Phelps or Moody's, and comparable unrated
securities. In addition, the dollar weighted average quality of the Fund will
be within the three highest grades, as determined by S&P, Fitch, Duff & Phelps
or Moody's (or the Adviser in the case of unrated securities).

Under normal market conditions, substantially all the securities in the Fund's
portfolio will have remaining maturities of five years or less or estimated
remaining average lives of five years or less. In the case of mortgage-backed
and corporate asset-backed securities as well as collateralized mortgage
obligations, the average life is likely to be substantially shorter than
stated final maturity as a result of unscheduled principal prepayments.

For purposes of the foregoing investment policy, securities having a certain
maturity will be deemed to include securities with an equivalent "duration" of
such securities. "Duration" is a commonly used measure of the longevity of a
debt instrument that takes into account the full stream of payments received
on the instrument, including both interest and principal payments, based on
their present values. A debt instrument's duration is derived by discounting
principal and interest payments to their present value using the instrument's
current yield to maturity and taking the dollar-weighted average time until
those payments will be received. Contractual rights to dispose of a security
will be considered in calculating duration because such rights limit the
period during which the Trust bears a market risk with respect to the
security.

5. CERTAIN SECURITIES AND INVESTMENT
TECHNIQUES
Consistent with the Fund's investment objectives and policies, the Fund may
engage in the following securities transactions and investment techniques,
many of which are described more fully in the SAI. See "Investment Objectives,
Policies and Restrictions" in the SAI.

CORPORATE ASSET-BACKED SECURITIES: The Fund may invest in corporate asset-
backed securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and
automobile loan receivables, representing the obligations of a number of
different parties.

Corporate asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing
the balance due. Most issuers of automobile receivables permit the servicers
to retain possession of the underlying obligations. If the servicer were to
sell these obligations to another party, there is a risk that the purchaser
would acquire an interest superior to that of the holders of the related
automobile receivables. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws,
the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
The underlying assets (e.g., loans) are also subject to prepayments which
shorten the securities weighted average life and may lower their return.

Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection; and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection against
losses resulting from ultimate default ensures payment through insurance
policies or letters of credit obtained by the issuer or sponsor from third
parties. The Fund will not pay any additional or separate fees for credit
support. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that anticipated
or failure of the credit support could adversely affect the return on an
investment in such a security.

U.S. GOVERNMENT SECURITIES: The U.S. Government Securities in which the Fund
may invest include (i) U.S. Treasury obligations, all of which are backed by
the full faith and credit of the U.S. Government and (ii) U.S. Government
Securities, some of which are backed by the full faith and credit of the U.S.
Treasury, e.g., direct pass-through certificates of the Government National
Mortgage Association ("GNMA"); some of which are backed only by the credit of
the issuer itself, e.g., obligations of the Student Loan Marketing
Association; and some of which are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations, e.g., obligations of
the Federal National Mortgage Association ("FNMA").

U.S. Government Securities also include interest in trusts or other entities
representing interests in obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities.

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 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 GNMA); or guaranteed by agencies or instrumentalities of the
U.S. Government (such as the FNMA or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations). Mortgage pass-
through securities may also be issued by non-governmental 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.

REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements in order
to earn 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 SAI, the Fund has adopted certain procedures intended to
minimize risk.

LENDING OF SECURITIES: The Fund may seek to increase its income by lending
portfolio securities. Such loans will usually be made to member firms (and
subsidiaries thereof) of the New York Stock Exchange (the "Exchange") and to
member banks of the Federal Reserve System, and would be required to be
secured continuously by collateral in cash, U.S. Government securities or an
irrevocable letter of credit maintained on a current basis at an amount at
least equal to the market value of the securities loaned. The Fund will
continue to collect the equivalent of interest on the securities loaned and
will also receive either interest (through investment of cash collateral) or a
fee (if the collateral is U.S. government securities or an irrevocable letter
of credit). 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 entities
deemed by the Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk.

DOLLAR-DENOMINATED FOREIGN DEBT SECURITIES: The Fund may invest in dollar-
denominated foreign debt securities. Investing in securities of foreign
issuers generally involves risks not ordinarily associated with investing in
securities of domestic issuers. These risks include changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
circumstances in dealings between nations. Special considerations may also
include more limited information about foreign issuers and different
accounting standards. Foreign securities markets may also be less subject to
government supervision than in the U.S. Investments in foreign countries could
be affected by other factors including expropriation, confiscatory taxation
and potential difficulties in enforcing contractual obligations.

EMERGING MARKET SECURITIES: Consistent with the Fund's objectives and
policies, the Fund may invest in dollar-denominated securities of issuers
whose principal activities are located in emerging market countries. Emerging
market countries include any country determined by the Adviser to have an
emerging market economy, taking into account a number of factors, including
whether the country has a low- to middle-income economy according to the
International Bank for Reconstruction and Development, the country's foreign
currency debt rating, its political and economic stability and the development
of its financial and capital markets. The Adviser determines whether an
issuer's principal activities are located in an emerging market country by
considering such factors as its country of organization, the principal trading
market for its securities and the source of its revenues and location of its
assets. The issuer's principal activities generally are deemed to be located
in a particular country if: (a) the security is issued or guaranteed by the
government of that country or any of its agencies, authorities or
instrumentalities; (b) the issuer is organized under the laws of, and
maintains a principal office in, that country; (c) the issuer has its
principal securities trading market in that country; (d) the issuer derives
50% or more of its total revenues from goods sold or services performed in
that country; or (e) the issuer has 50% or more of its assets in that country.

BRADY BONDS: The Fund may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan
debt restructurings have been implemented to date in Argentina, Brazil,
Bulgaria, Costa Rica, Croatia, Dominican Republic, Ecuador, Jordan, Mexico,
Morocco, Nigeria, Panama, Peru, the Philippines, Poland, Slovenia, Uruguay and
Venezuela. Brady Bonds have been issued only recently, and for that reason do
not have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets. U.S.
dollar-denominated, collateralized Brady Bonds, which may be fixed rate bonds
or floating-rate bonds, are generally collateralized in full as to principal
by U.S. Treasury zero coupon bonds having the same maturity as the bonds.
Brady Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments
in Brady Bonds may be viewed as speculative.

ZERO COUPON BONDS: Fixed income securities in which the Fund may invest also
include zero coupon bonds. Zero coupon bonds are debt obligations which are
issued or purchased 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. Zero coupon bonds do not require
the periodic payment of interest. Such investments may experience greater
volatility in market value due to changes in interest rates than debt
obligations which make regular payments of interest.

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.

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 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. 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.

"WHEN-ISSUED" SECURITIES: The Fund may purchase securities on a "when-issued"
or on a "forward delivery" basis, which means that the securities will be
delivered to the Fund at a future date usually beyond customary settlement
time. The commitment to purchase a security for which payment will be made on
a future date may be deemed a separate security. In general, the Fund does not
pay for such securities until received, and does not start earning interest on
the securities until the contractual settlement date. While awaiting delivery
of securities purchased on such bases, the Fund will segregate liquid assets
sufficient to cover its commitments.

INDEXED SECURITIES: The Fund may invest in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indices or other
financial indicators. Most indexed securities are short to intermediate term
fixed-income securities whose values at maturity (i.e., principal value) or
interest rates rise or fall according to changes in the value of one or more
specified underlying instruments. Indexed securities may be positively or
negatively indexed (i.e., their principal value or interest rates may increase
or decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument or
to one or more options on the underlying instrument. Indexed securities may be
more volatile than the underlying instrument itself and could involve the loss
of all or a portion of the principal amount of or interest on the investment.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and
sell futures contracts on fixed income securities or indices of such
securities, including municipal bond indices and any other indices of fixed
income securities which may become available for trading ("Futures
Contracts"). The Fund may also purchase and write options on such Futures
Contracts ("Options on Futures Contracts"). These instruments will be used to
hedge against anticipated future changes in interest rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase
at a later date. Such transactions may also be used for non-hedging purposes
to the extent permitted by applicable law. Should interest rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of the
hedging transactions and may realize a loss.

Futures Contracts and Options on Futures Contracts that are entered into by
the Fund may be traded on U.S. and foreign exchanges.

Although the Fund will enter into certain transactions in Futures Contracts,
for hedging purposes, such transactions nevertheless involve risks. For
example, a lack of correlation between the instrument underlying a 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 SAI contains a further description of Futures Contracts including
a discussion of the risks related to transactions therein. Transactions
entered into for non-hedging purposes involve greater risks and could result
in losses which are not offset by gains on other portfolio assets.

RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933, as amended ("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"). A determination is made, based upon a continuing review of
the trading markets for a specific 144A security, whether such security is
liquid and thus not subject to the Fund's limitation on investing not more
than 15% of its net assets in illiquid investments. 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, retains
oversight of the liquidity determinations, focusing on factors such as
valuation, liquidity and availability of information. Investing in Rule 144A
securities could have the effect of decreasing the level of liquidity in the
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.

PORTFOLIO TRADING: The Fund intends to engage in portfolio trading rather than
holding portfolio securities to maturity. In trading portfolio securities, the
Fund seeks to take advantage of market developments, yield disparities and
variations in the creditworthiness of issuers. For the fiscal year ended April
30, 1998, the Fund had a portfolio turnover rate of over 100%. Transaction
costs incurred by the Fund and the realized capital gains and losses of the
Fund may be greater than that of a fund with a lesser portfolio turnover rate.

The primary consideration in placing portfolio security transactions with
broker-dealers is to obtain, and maintain the availability of, execution at
the most favorable prices. Consistent with the foregoing primary
consideration, the Conduct Rules 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 MFD, as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. From time to
time, the Adviser may direct certain portfolio transactions to broker-dealer
firms which, in 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 SAI includes a discussion of other investment policies and a listing of
specific investment restrictions which govern the Fund's investment policies.
The specific investment restrictions listed in the SAI may be changed without
shareholder approval unless otherwise indicated. (See "Investment
Restrictions" in the SAI). Except with respect to the Fund's policy on
borrowing and investing in illiquid securities, the Fund's limitations,
policies and rating 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.

6. ADDITIONAL RISK FACTORS
The following discussion of additional risk factors supplements the risk
factors described above. Additional information concerning risk factors can be
found under the caption "Investment Objectives, Policies and Restrictions" in
the SAI.

FIXED INCOME SECURITIES: The net asset value of the shares of an open-end
investment company, such as the Fund, which invests primarily in fixed income
securities, changes with the general level of interest rates. When interest
rates decline, the market value of the portfolio can be expected to rise.
Conversely, when interest rates rise, the market value of the portfolio can be
expected to decline.

FIXED INCOME SECURITIES RATED BBB/Baa: The Fund may invest in fixed income
securities rated Baa by Moody's or BBB by S&P or Fitch 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.

EMERGING MARKET SECURITIES: The risks of investing in foreign securities may
be intensified in the case of investments in emerging markets. Securities of
many issuers in emerging markets may be less liquid and more volatile than
securities of comparable domestic issuers. Emerging markets also have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of the Fund is uninvested and no return is earned thereon. The
inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result in losses to the Fund due to subsequent declines in value of the
portfolio security, a decrease in the level of liquidity in the Fund's
portfolio, or, if the Fund has entered into a contract to sell the security,
in possible liability to the purchaser. Certain markets may require payment
for securities before delivery and in such markets, the Fund bears the risk
that the securities will not be delivered and that the Fund's payments will
not be returned. Securities prices in emerging markets can be significantly
more volatile than in the more developed nations of the world, reflecting the
greater uncertainties of investing in less established markets and economies.
In particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions
on foreign ownership, or prohibitions of repatriation of assets, and may have
less protection of property rights than more developed countries. The
economies of countries with emerging markets may be predominantly based on
only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. Securities of issuers located in countries
with emerging markets may have limited marketability and may be subject to
more abrupt or erratic price movements.

Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Fund could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the
application to the Fund of any restrictions on investments.

Investment in certain foreign emerging market debt obligations may be
restricted or controlled to varying degrees. These restrictions or controls
may at times preclude investment in certain foreign emerging market debt
obligations and increase the expenses of the Fund.

7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER: MFS manages the Fund pursuant to an Investment Advisory
Agreement, dated January 8, 1992 (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. James J. Calmas, a Vice President of the Adviser, has been
the Fund's portfolio manager since January 1, 1998 and has been employed as a
portfolio manager by the Adviser since 1988. 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 rate of 0.40% per annum of the Fund's
average daily net assets. For the Fund's fiscal year ended April 30, 1998, MFS
received management fees under the Advisory Agreement of $628,100 (equivalent
to 0.40% of the Fund's average daily net assets).

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Institutional Trust, MFS Variable Insurance Trust, MFS/Sun Life Series
Trust, and seven variable accounts, each of which is a registered investment
company established by Sun Life Assurance Company of Canada (U.S.), a
subsidiary of Sun Life Assurance Company of Canada ("Sun Life"), in connection
with the sale of various fixed/variable annuity contracts. MFS and its wholly
owned subsidiary, MFS Institutional Advisors, Inc. provide 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 $87.8 billion on behalf of approximately 3.3 million accounts as
of July 31, 1998. As of such date, the MFS organization managed approximately
$60.8 billion of assets invested in equity securities and approximately $20.5
billion of assets invested in fixed income securities. Approximately $4.9
billion of the assets managed by MFS are invested in securities of foreign
issuers and non-U.S. dollar denominated securities of U.S. issuers. MFS is a
subsidiary of Sun Life of Canada (U.S.) Financial Service Holdings, Inc.,
which in turn is an indirect wholly owned subsidiary of Sun Life. The
Directors of MFS are Jeffrey L. Shames, John W. Ballen, Arnold D. Scott, Kevin
R. Parke, Thomas J. Cashman, Joseph Dello Russo, William W. Scott, John D.
McNeil and Donald A. Stewart. Mr. Shames is the Chairman and Chief Executive
Officer of MFS, Mr. Ballen is President and Chief Investment Officer of MFS
and Mr. Scott is the Secretary and a Senior Executive Vice President of MFS.
Messrs. McNeil and Stewart are the Chairman and the 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 directly to the Chairman of Sun Life.

Mr. Shames, the Chairman of MFS, is a Trustee of the Trust. W. Thomas London,
Stephen E. Cavan, James R. Bordewick, Jr., Geoffrey L. Kurinsky, James O.
Yost, Ellen Moynihan and Mark E Bradley, all of whom are officers of MFS, are
officers of the Trust.

In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS. Some simultaneous
transactions are inevitable when several clients receive investment advice
from MFS, particularly when the same security is suitable for more than one
client. While in some cases this arrangement could have a detrimental effect
on the price or availability of the security as far as the Fund is concerned,
in other cases, however, it may produce increased investment opportunities for
the Fund.

ADMINISTRATOR: MFS provides the Fund with certain financial, legal,
compliance, shareholder communications and other administrative services
pursuant to a Master Administrative Services Agreement dated March 1, 1997, as
amended. Under this Agreement, the Fund pays MFS an administrative fee up to
0.015% per annum of the Fund's average daily net assets. This fee reimburses
MFS for a portion of the costs it incurs to provide such services.

DISTRIBUTOR: MFD, 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.

8. INFORMATION CONCERNING SHARES OF THE FUND
PURCHASES
Class A, B and C shares of the Fund may be purchased at the public offering
price through any dealer. As used in the Prospectus and any appendices
thereto, the term "dealer" includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner and any
other financial institutions having a selling agreement or other similar
agreement with MFD. Dealers may also charge their customers fees relating to
investments in the Fund.

This prospectus offers Class A, B and C shares, to the general public which
bear sales charges and distribution fees in different forms and amounts, as
described below:

CLASS A SHARES: Class A shares are generally offered at net asset value plus
an initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.

PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at
net asset value plus an initial sales charge as follows:

SALES CHARGE* AS
PERCENTAGE OF:
PERCENTAGE OF: ALLOWANCE
-------------------------- AS A PERCENTAGE
NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE INVESTED PRICE
- - ------------------ -------------- -------- -----
Less Than $50,000 ................ 2.50% 2.56% 2.25%
$50,000 but less than $100,000 ... 2.25 2.30 2.00
$100,000 but less than $250,000 .. 2.00 2.04 1.75
$250,000 but less than $500,000 .. 1.75 1.78 1.50
$500,000 but less than $1,000,000 1.50 1.52 1.25
$1,000,000 or more ............... None** None** See Below**
- - ------------
*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 will apply to such purchases, as discussed below.

MFD 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 2.25% and MFD retains
approximately 1/4 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 other
MFS Funds owned or being purchased, the existence of an agreement to purchase
additional shares during a 13-month period (or 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 Purchase privileges by
which the sales charge may be reduced is set forth in the SAI.

PURCHASES SUBJECT TO A CDSC (but not an initial sales charge). In the
following five circumstances, Class A shares are offered at net asset value
without an initial sales charge, but subject to a CDSC equal to 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividend
and capital gain distributions) or the total cost of such shares, in the event
of a share redemption within 12 months following the purchase:

(i) on investments of $1 million or more in Class A shares;

(ii) on investments in Class A shares by certain retirement plans subject
to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if, prior to July 1, 1996 (a) the Plan had established an
account with the Shareholder Servicing Agent and (b) the sponsoring
organization had demonstrated to the satisfaction of MFD that either
(i) the employer had at least 25 employees or (ii) the aggregate
purchases by the retirement plan of Class A shares of Funds in the
MFS Funds would be in an aggregate amount of at least $250,000
within a reasonable period of time, as determined by MFD in its sole
discretion;

(v) on investments in Class A shares by certain retirement plans subject
to ERISA if: (a) the plan establishes an account with the Shareholder
Servicing Agent on or after July 1, 1997; (b) such plan's records are
maintained on a pooled basis by the Shareholder Servicing Agent; and
(c) the sponsoring organization demonstrates to the satisfaction of
MFD that, at the time of purchase, the employer has at least 200
eligible employees and the plan has aggregate assets of at least
$2,000,000.

In the case of all such purchases, MFD will pay commissions to dealers on new
investments in Class A shares made through such dealers as follows:

COMMISSION PAID BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT
--------------------------------- --------------------------

1.00% On the first $2,000,000, plus
0.80% Over $2,000,000 to $3,000,000, plus
0.50% Over $3,000,000 to $50,000,000, plus
0.25% Over $50,000,000

For purposes of determining the level of commissions to be paid to dealers
with respect to a shareholder's new investment in Class A shares, purchases
for each shareholder account (and certain other accounts for which the
shareholder is a record or beneficial holder) will be aggregated over a 12-
month period (commencing from the date of the first such purchases).

See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" in the
Prospectus for further discussion of the CDSC.

WAIVERS OF INITIAL SALES CHARGE AND CDSC. In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemptions of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus. In addition to these
circumstances, the CDSC imposed upon the redemption of Class A shares is
waived with respect to shares held by certain retirement plans qualified under
Section 401(a) or 403(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), and subject to ERISA, where:

(i) the retirement plan and/or sponsoring organization does not subscribe
to the MFS Participant Recordkeeping System; and

(ii) the retirement plan and/or sponsoring organization demonstrates to
the satisfaction of, and certifies to, the Shareholder Servicing
Agent that the retirement plan has, at the time of certification or
will have pursuant to a purchase order placed with the certification,
a market value of $500,000 or more invested in shares of any class or
classes of the MFS Funds and aggregate assets of at least $10
million;

provided, however, that the CDSC will not be waived (i.e., it will be imposed)
(a) with respect to plans which establish an account with the Shareholder
Servicing Agent on or after November 1, 1997, in the event that the Plan makes
a complete redemption of all of its shares in the MFS Funds, or (b) with
respect to plans which established an account with the Shareholder Servicing
Agent prior to November 1, 1997, in the event that there is a change in law or
regulations which results in a material adverse change to the tax advantaged
nature of the plan, or in the event that the plan and/or sponsoring
organization: (i) becomes insolvent or bankrupt; (ii) is terminated under
ERISA or is liquidated or dissolved; or (iii) is acquired by, merged into, or
consolidated with, any other entity.

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

CONTINGENT
YEAR OF REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- - -------------- ------

First ................................................... 4%
Second .................................................. 4%
Third ................................................... 3%
Fourth .................................................. 3%
Fifth ................................................... 2%
Sixth ................................................... 1%
Seventh and following ................................... 0%

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

Except as described below, MFD will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee payable under the Fund's
Distribution Plan (see "Distribution Plan" below) at a rate equal to 0.25% of
the purchase price of such shares. Therefore, the total amount paid to a
dealer upon the sale of Class B shares is 4% of the purchase price of the
shares (commission rate of 3.75% plus a service fee equal to 0.25% of the
purchase price).

Class B shares purchased by a retirement plan whose sponsoring organization
subscribes to the MFS Participant Recordkeeping System and which has
established its account with the Shareholder Servicing Agent on or after July
1, 1996, will be subject to the CDSC described above, only under limited
circumstances, as explained below under "Waivers of CDSC." With respect to
such purchases, MFD pays an amount to dealers equal to 3.00% of the amount
purchased through such dealers (rather than the 4.00% payment described
above), which is comprised of a commission of 2.75% plus the advancement of
the first year service fee equal to 0.25% of the purchase price payable under
the Fund's Distribution Plan. As discussed above, such retirement plans are
eligible to purchase Class A shares of the Fund at net asset value without an
initial sales charge but subject to a 1% CDSC if the plan has, at the time of
purchase, a market value of $500,000 or more invested in shares of any class
or classes of the MFS Funds. IN THIS EVENT, THE PLAN OR ITS SPONSORING
ORGANIZATION SHOULD INFORM THE SHAREHOLDER SERVICING AGENT THAT THE PLAN IS
ELIGIBLE TO PURCHASE CLASS A SHARES UNDER THIS CATEGORY; THE SHAREHOLDER
SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE WHETHER SUCH A
PLAN QUALIFIES UNDER THIS CATEGORY FOR THE PURCHASE OF CLASS A SHARES.

WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon
redemption of Class B shares is waived. These circumstances are described in
Appendix A to this Prospectus. In addition to these circumstances, the CDSC
imposed upon the redemption of Class B shares is waived with respect to shares
held by a retirement plan whose sponsoring organization subscribes to the MFS
Participant Recordkeeping System and which has established an account with the
Shareholder Servicing Agent on or after July 1, 1996; provided, however, that
the CDSC will not be waived (i.e., it will be imposed) in the event that there
is a change in law or regulations which results in a material adverse change
to the tax advantaged nature of the plan, or in the event that the plan and/or
sponsoring organization: (i) becomes insolvent or bankrupt; (ii) is terminated
under ERISA or is liquidated or dissolved; or (iii) is acquired by, merged
into, or consolidated with, any other entity.

CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain
outstanding for approximately eight years will convert to Class A shares of
the same Fund. 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 Fund's Distribution
Plan. See "Information Concerning Shares of the Fund -- Distribution Plan"
below. 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 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 but are subject to a CDSC upon redemption of 1.00% during
the first year. 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 up to
$1,000,000 per transaction.

Class C shares are not currently available for purchase by any retirement plan
qualified under Sections 401(a) or 403(b) of the Internal Revenue Code of
1986, as amended (the "Code") if the retirement plan and/or the sponsoring
organization subscribe to the MFS FUNDamental 401(k) Plan or another similar
recordkeeping program made available by the Shareholder Servicing Agent.

WAIVER OF CDSC. In certain circumstances, the CDSC imposed upon redemption
of Class C shares is waived. These circumstances are described in Appendix A
to this Prospectus.

GENERAL: The following information applies to purchases of all classes of
the Fund's shares.

MINIMUM INVESTMENT. 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 MFD.
The Fund reserves the right to cease offering its shares at any time.

SUBSEQUENT INVESTMENT BY TELEPHONE. Each shareholder may purchase
additional shares of any MFS Fund by telephoning the Shareholder Servicing
Agent toll-free at (800) 225-2606. The minimum purchase amount is $50 and the
maximum purchase amount is $100,000. Shareholders wishing to avail themselves
of this telephone purchase privilege must so elect on their Account
Application and designate thereon a bank and account number from which
purchases will be made. If a telephone purchase request is received by the
Shareholder Servicing Agent on any business day prior to the close of regular
trading on the Exchange (generally, 4:00 p.m., Eastern time), the purchase
will occur at the closing net asset value of the shares purchased on that day.
The Shareholder Servicing Agent may be liable for any losses resulting from
unauthorized telephone transactions if it does not follow 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.

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. THE FOLLOWING POLICY WILL
REMAIN IN EFFECT UNTIL SEPTEMBER 15, 1998. Purchases and exchanges should be
made for investment purposes only. The Fund and MFD each reserve the right to
reject or restrict any specific purchase or exchange request. Because an
exchange request involves both a request to redeem shares of one fund and to
purchase shares of another fund, the Fund considers the underlying redemption
request conditioned upon the acceptance of the underlying purchase request.
Therefore, in the event that the Fund or MFD rejects an exchange request,
neither the redemption nor the purchase side of the exchange will be
processed.

The Fund is not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Fund defines a "market
timer" as an individual, or organization acting on behalf of one or more
individudals, if (i) the individual or organization makes three or more
exchange requests out of the Fund per calendar year and (ii) any one of such
exchange requests represents shares equal in value to 1/2 of 1% or more of
the Fund's net assets at the time of the request. Accounts under common
ownership or control, including accounts administered by market timers, will
be aggregated for purposes of this definition.

EFFECTIVE SEPTEMBER 15, 1998, THE FUND WILL ADOPT THE FOLLOWING NEW MARKET
TIMING POLICY WHICH WILL REPLACE THE CURRENT POLICY AS DISCLOSED ABOVE:

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserve the
right to reject or restrict any specific purchase or exchange request. Because
an exchange request involves both a request to redeem shares of one fund and
to purchase shares of another fund, the Fund considers the underlying
redemption request conditioned upon the acceptance of the underlying purchase
request. Therefore, in the event that the Fund or MFD rejects an exchange
request, neither the redemption nor the purchase side of the exchange will be
processed.

The MFS Family of Funds is not designed for professional market timing
organizations or other entities using programmed or frequent exchanges. The
MFS Family of Funds defines a "market timer" as an individual or organization
acting on behalf of one or more individuals, if (i) the individual or
organization makes six or more exchange requests among the MFS Family of Funds
or three or more exchange requests out of any of the MFS high yield bond funds
or MFS municipal bond funds per calendar year and (ii) any one of such
exchange requests represents shares equal in value to $1 million or more.
Accounts under common ownership or control, including accounts administered by
market timers, will be aggregated for purposes of this definition.

DEALER CONCESSIONS. Dealers may receive different compensation with
respect to sales of Class A, Class B and Class C shares. In addition, from
time to time, MFD may pay dealers 100% of the applicable sales charge on sales
of Class A shares of certain specified MFS 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 and/or Class C shares of certain specified MFS
Funds sold by such dealer during a specified sales period. In addition, from
time to time, MFD, at its expense, may provide additional commissions,
compensation or promotional incentives ("concessions") to dealers which sell
or arrange for the sale of shares of the Fund. Such concessions provided by
MFD may include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives and other employees, payment for travel expenses, including
lodging, incurred by registered representatives and other employees 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. From time to time, MFD may make expense reimbursements for special
training of a dealer's registered representatives and other employees in group
meetings or to help pay the expenses of sales contests. Other concessions may
be offered to the extent not prohibited by state laws or any self-regulatory
agency, such as the NASD.

RESTRICTIONS ON ACTIVITIES OF NATIONAL BANKS. 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, MFD believes that such Act should not preclude banks
from entering into agency agreements with MFD. 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 in respect of shareholders who invested in the Fund through a
national bank. 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.
--------------------

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 in the MFS Family of Funds (the "MFS Funds") at net
asset value (if available for sale). Shares of one class may not be exchanged
for shares of any other class.

EXCHANGES AMONG MFS FUNDS (EXCLUDING MFS MONEY MARKET FUNDS): No initial
sales charges or CDSC will be imposed in connection with an exchange from
shares of an MFS Fund to shares of any other MFS Fund, except with respect to
exchanges from an MFS money market fund to another MFS Fund which is not an
MFS money market fund (discussed below). With respect to an exchange involving
shares subject to a CDSC, the CDSC will be unaffected by the exchange and the
holding period for purposes of calculating the CDSC will carry over to the
acquired shares.

EXCHANGES FROM AN MFS MONEY MARKET FUND: Special rules apply with respect
to the imposition of an initial sales charge or a CDSC for exchanges from an
MFS money market fund to another MFS Fund which is not an MFS money market
fund. These rules are described under the caption "Exchanges" in the
Prospectuses of those MFS money market funds.

EXCHANGES INVOLVING THE MFS FIXED FUND: Class A shares of any MFS Fund
held by certain qualified retirement plans may be exchanged for units of
participation of the MFS Fixed Fund (a bank collective investment fund) (the
"Units"), and Units may be exchanged for Class A shares of any MFS Fund. With
respect to exchanges between Class A shares subject to a CDSC and Units, the
CDSC will carry over to the acquired shares or Units and will be deducted from
the redemption proceeds when such shares or Units are subsequently redeemed,
assuming the CDSC is then payable (the period during which the Class A shares
and the Units were held will be aggregated for purposes of calculating the
applicable CDSC). In the event that a shareholder initially purchases Units
and then exchanges into Class A shares subject to an initial sales charge of
an MFS Fund, the initial sales charge shall be due upon such exchange, but
will not be imposed with respect to any subsequent exchanges between such
Class A shares and Units with respect to shares on which the initial sales
charge has already been paid. In the event that a shareholder initially
purchases Units and then exchanges into Class A shares subject to a CDSC of an
MFS Fund, the CDSC period will commence upon such exchange, and the
applicability of the CDSC with respect to subsequent exchanges shall be
governed by the rules set forth in this paragraph above.

GENERAL: A shareholder should read the prospectus of the other MFS Fund
into which an exchange is made and consider the differences in objectives,
policies and restrictions before making any exchange. 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 the Shareholder Servicing Agent) or all the shares in the
account. If an 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 (generally, 4:00 p.m., Eastern time) (the "Exchange"), the
exchange will occur on that day if all the requirements set forth above have
been complied with at that time and subject to the Fund's right to reject
purchase orders. 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
dealers or the Shareholder Servicing Agent. 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 timers.

REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the value of his account on
any date on which the Fund is open for business by redeeming shares at their
net asset value (a redemption) or by selling such shares to the Fund through a
dealer (a repurchase). Certain redemptions and repurchases are, however,
subject to a CDSC. See "Contingent Deferred Sales Charge" below. Because the
net asset value of shares of the account fluctuates, 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 up to 15
days from the purchase date in an effort to assure that such check has
cleared. See "Tax Status" below.

REDEMPTION BY MAIL: Each shareholder may 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 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" will 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 in "good order" by the Shareholder Servicing
Agent, 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 such Exchange is restricted or to the extent otherwise
permitted by the 1940 Act if an emergency exists.

REDEMPTION BY TELEPHONE: Each shareholder may redeem an amount from his
account by telephoning the Shareholder Servicing Agent 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 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 and the
amount of any income tax required to be withheld, are mailed by check to the
designated account, without charge if the redemption proceeds do not exceed
$1,000 and are wired in federal funds to the designated account if the
redemption proceeds exceed $1,000. 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.

REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares
through his dealer (a repurchase), the shareholder can place a repurchase
order with his dealer, who may charge the shareholder a fee. IF THE DEALER
RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE
EXCHANGE AND COMMUNICATES IT TO MFD BEFORE THE CLOSE OF BUSINESS ON THE SAME
DAY, 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.

REDEMPTION BY CHECK: Only Class A and Class C shares may be redeemed by
check. A shareholder owning Class A or Class C shares of the Fund may elect to
have a special account with State Street Bank and Trust Company (the "Bank")
for the purpose of redeeming Class A or Class C shares from his or her account
by check. The Bank will provide each Class A or Class C shareholder, upon
request, with forms of checks drawn on the Bank. Only shareholders having
accounts in which no share certificates have been issued will be permitted to
redeem shares by check. Checks may be made payable in any amount not less than
$500. Shareholders wishing to avail themselves of this redemption by check
privilege should so request on their Account Application, must execute
signature cards (for additional information, see the Account Application) with
signature guaranteed in the manner set forth under the caption "Signature
Guarantee" below, and must return any Class A or Class C share certificates
issued to them. Additional documentation will be required from corporations,
partnerships, fiduciaries or other such institutional investors. All checks
must be signed by the shareholder(s) of record exactly as the account is
registered before the Bank will honor them. The shareholders of joint accounts
may authorize each shareholder to redeem by check. The check may not draw on
monthly dividends which have been declared but not distributed. SHAREHOLDERS
WHO PURCHASE CLASS A AND CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS
OR CASHIER'S CHECKS) MAY WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY
HAVE BEEN ON THE FUND'S BOOKS FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO
THE BANK FOR PAYMENT, A SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL
BE REDEEMED TO COVER THE AMOUNT OF THE CHECK, ANY APPLICABLE CDSC AND THE
AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD. IF THE AMOUNT OF THE CHECK,
PLUS ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE
WITHHELD IS GREATER THAN THE VALUE OF CLASS A OR CLASS C SHARES HELD IN THE
SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND THE SHAREHOLDER
MAY BE SUBJECT TO EXTRA CHARGES. TO AVOID DISHONOR OF CHECKS DUE TO
FLUCTUATIONS IN ACCOUNT VALUE, SHAREHOLDERS ARE ADVISED AGAINST REDEEMING ALL
OR MOST OF THEIR ACCOUNT BY CHECK. CHECKS SHOULD NOT BE USED TO CLOSE A FUND
ACCOUNT BECAUSE WHEN THE CHECK IS WRITTEN, THE SHAREHOLDER WILL NOT KNOW THE
EXACT TOTAL VALUE OF THE ACCOUNT ON THE DAY THE CHECK CLEARS. There is
presently no charge to the shareholder for the maintenance of this special
account or for the clearance of any checks, but the Fund and the Bank reserve
the right to impose such charges or to modify or terminate the redemption by
check privilege at any time.

CONTINGENT DEFERRED SALES CHARGE: Investments in Class A, Class B or
Class C shares ("Direct Purchases") will be subject to a CDSC for a period of
(i) with respect to Class A and Class C shares, 12 months (however, the CDSC
on Class A shares is only imposed with respect to purchases of $1 million or
more of Class A shares or purchases by certain retirement plans of Class A
shares) or (ii) with respect to Class B shares, six years. 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 C shares and 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 of shares represented by Direct Purchases
exceeds the sum of the six calendar year aggregations (12 months in the case
of purchases of Class C shares and of purchases of $1 million or more of Class
A shares or purchases by certain retirement plans 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 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 the 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 of shares will be calculated as set forth in
"Purchases" above.

The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except as described in Appendix A hereto.

GENERAL: The following information applies to redemptions and repurchases
of all classes of the Fund's shares.

REINSTATEMENT PRIVILEGE. 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 Class C shares and 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 SAI regarding this privilege.

IN-KIND DISTRIBUTIONS. The Trust agrees to redeem shares of the Fund
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund during any 90-day period for any one shareholder. The Fund has
reserved the right to pay other redemptions, 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 received a distribution in-kind,
the shareholder could incur brokerage or transaction charges when converting
the securities to cash.

INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. 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 if at any time the total investment
in such account drops below $500 because of redemptions or exchanges, except
in the case of accounts being 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 -- General -- Minimum Investment." 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.

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

In certain circumstances, the fees described below may not be imposed or are
being waived. These circumstances, if any, are described below under the
heading "Current Level of Distribution and Service Fees."

FEATURES COMMON TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are common to each class of shares as described below.

SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A, Class B
or Class C shares, as appropriate) (the "Designated Class") annually in order
that MFD may pay expenses on behalf of the Fund relating to the servicing of
shares of the Designated Class. The service fee is used by MFD to compensate
dealers which enter into a sales agreement with MFD in consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to shares of the Designated Class owned by investors for whom
such dealer is the dealer or holder of record. MFD may from time to time
reduce the amount of the service fees paid for shares sold prior to a certain
date. Service fees may be reduced for a dealer that is the holder or dealer of
record for an investor who owns shares of the Fund having an aggregate 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. MFD or
its affiliates are entitled to retain all service fees payable under the
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 MFD or its
affiliates to shareholder accounts.

DISTRIBUTION FEES. The Distribution Plan provides that the Fund may pay
MFD a distribution fee based on the average daily net assets attributable to
the Designated Class as partial consideration for distribution services
performed and expenses incurred in the performance of MFD's obligations under
its distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plan, as does the
use by MFD of such distribution fees. Such amounts and uses are described
below in the discussion of the provisions of the Distribution Plan relating
to each class of shares.

OTHER COMMON FEATURES. Fees payable under the Distribution Plan are
charged to, and therefore reduce, income allocated to shares of the Designated
Class. The provisions of the Distribution Plan relating to operating policies
as well as initial approval, renewal, amendment and termination are
substantially identical as they relate to each class of shares covered by the
Distribution Plan.

FEATURES UNIQUE TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are unique to each class of shares, as described below.

CLASS A SHARES. Class A shares are generally offered pursuant to an
initial sales charge, a substantial portion of which is paid to or retained by
the dealer making the sale (the remainder of which is paid to MFD). See
"Purchases -- Class A Shares" above. In addition to the initial sales charge,
the dealer also generally receives the ongoing 0.25% per annum service fee, as
discussed above.

The distribution fee paid to MFD under the Distribution Plan is equal, on an
annual basis, to 0.10% of the Fund's average daily net assets attributable to
Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commissions to dealers with respect to
purchases of $1 million or more and purchases by certain retirement plans of
Class A shares which are sold at net asset value but which are subject to a 1%
CDSC for one year after purchase). See "Purchases -- Class A Shares" above. In
addition, to the extent that the aggregate service and distribution fees paid
under the Distribution Plan do 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 such distribution-related expenses or other distribution-related
expenses.

CLASS B SHARES. Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class B Shares"
above. MFD will advance to dealers the first year service fee described above
at a rate equal to 0.25% of the purchase price of such shares and, as
compensation therefore, MFD may retain the service fee paid by the Fund with
respect to such shares for the first year after purchase. Dealers will become
eligible to receive the ongoing 0.25% per annum service fee with respect to
such shares commencing in the thirteenth month following purchase.

CLASS C SHARES. Class C shares are offered at net asset value without an
initial sales charge but subject to a CDSC. See "Purchases -- Class C Shares"
above. MFD will pay a commission to dealers of 1.00% of the purchase price of
Class C shares purchased through dealers at the time of purchase. In
compensation for this 1.00% commission paid by MFD to dealers, MFD will retain
the 1.00% per annum Class C distribution and service fees paid by the Fund
with respect to such shares for the first year after purchase, and dealers
will become eligible to receive from MFD the ongoing 1.00% per annum
distribution and service fees paid by the Fund to MFD with respect to such
shares commencing in the thirteenth month following purchase.

This ongoing 1.00% fee is comprised of the 0.25% per annum service fee paid to
MFD under the Distribution Plan (which MFD in turn pays to dealers), as
discussed above, and a distribution fee paid to MFD (which MFD also in turn
pays to dealers) under the Distribution Plan equal, on an annual basis, to
0.75% of the Fund's average daily net assets attributable to Class C shares.

CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class
B and Class C distribution and service fees for its current fiscal year are
0.15%, 0.96% and 1.00% per annum, respectively. Payment of the 0.10% per annum
Class A distribution fee will commence on such date as the Trustees of the
Trust may determine. Service fee payments in the amount of 0.15% of the
average daily net assets of the Fund attributable to Class A shares are
currently being paid by the Fund. Payment of the remaining portion of the
service fee, equal to 0.10% per annum, will become payable on such date as the
Trustees of the Trust may determine. Except in the case of the first year
service fee, the Class B service fee is currently set at 0.15% per annum and
may be increased to a maximum of 0.25% per annum on such date as the Trustees
of the Trust may determine.

DISTRIBUTIONS
The Fund intends to declare dividends daily and pay to its shareholders
substantially all of its net investment income as dividends on a monthly
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 the distribution is made. 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. Because the
Fund intends to distribute all of its net investment income and net realized
capital gains to its 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.

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 reinvested in 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 advisers in
this regard.

Shortly after the end of each calendar year, each shareholder will be sent a
statement setting forth the federal income tax status of all dividends and
distributions for that year, including the portion taxable as ordinary income,
the portion taxable as long-term capital gain (as well as the rate category or
categories under which such gain is taxable), the portion, if any,
representing a return of capital (which is generally free of current taxes but
which results in a basis reduction), the portion representing interest on U.S.
Government obligations, and the amount, if any, of federal income tax
withheld.

Fund distributions will reduce the Fund's net asset value per share.
Shareholders who buy shares shortly before the Fund makes a distribution of
net capital gains or net short-term capital gains may thus pay the full price
for the shares and then effectively receive a portion of the purchase price
back as a taxable distribution.

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

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. This determination is made once
during each such 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 Fund's 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 or other fair value,
as described in the SAI. The net asset value per share of each class of shares
is effective for orders received in "good order" by the dealer prior to its
calculation and received by MFD prior to the close of that business day.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund, one of three series of the Trust, has three classes of shares which
it offers to the general public, entitled Class A, Class B and Class C Shares
of Beneficial Interest (without par value). The Fund also has a class of
shares which it offers exclusively to certain institutional investors,
entitled Class I shares. The Trust 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 shares 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 vote together in
the election of Trustees and selection of accountants. Additionally, each
class of shares of a series will vote separately on any material increases in
the fees under the 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. The Trust does not
intend to hold annual shareholder meetings. The Declaration of Trust provides
that a Trustee may be removed from office in certain instances (see
"Description of Shares, Voting Rights and Liabilities" in the SAI).

Each share of a class of the Fund represents an equal proportionate interest
in the Fund with each other class share, subject to the liabilities of the
particular class. 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 non-assessable. 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 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 (e.g., fidelity bonding and errors and omissions
insurance) existed and the Trust itself was unable to meet its obligations.

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 SAI. For further
information about the Fund's performance for the fiscal year ended April 30,
1998, please see the Fund's Annual Report. A copy of the Annual Report may be
obtained without charge by contacting the Shareholder Servicing Agent (see
back cover for address and phone number). 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.

EXPENSES
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the Fund's expenses such that the Fund's "Other Expenses" which
are defined to include all Fund expenses (after taking into effect any
compensating balance and offset arrangements) except for management fees, Rule
12b-1 fees, taxes, extraordinary expenses, brokerage and transaction costs and
class specific expenses, do not exceed 0.40% per annum of the Fund's average
daily net assets (the "Maximum Percentage"). The payments made by MFS on
behalf of the Fund under this arrangement are subject to reimbursement by the
Fund to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the Fund to MFS computed and paid monthly at a percentage
of its average daily net assets for its then current fiscal year, with a
limitation that immedately after such payment, the Fund's "Other Expenses"
will not exceed the Maximum Percentage. The obligation of MFS to bear the
Fund's other expenses pursuant to this arrangement and the Fund's obligation
to pay the reimbursement fees to MFS terminates on February 28, 2002, provided
that in no event will MFS receive reimbursement fees from the Fund that exceed
the amount of fees borne by MFS on behalf of the Fund.

PROVISION OF ANNUAL AND SEMIANNUAL REPORTS
To avoid sending duplicate copies of materials to households, effective
September 15, 1998, only one copy of each Fund annual and semiannual report
may be mailed to shareholders having the same residential address on the
Fund's records. However, any shareholder may call the Shareholder Servicing
Agent at 1-800-225-2606 to request that copies of such reports be sent
personally to that shareholder.

9. 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.
Cancelled checks, if any, will be sent to shareholders monthly. At the end of
each calendar year, each shareholder will receive income tax information
regarding reportable dividends and capital gain distributions for that year
(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:

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

o Dividends in cash; capital gain distributions reinvested in additional
shares.

o 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 last business day of the month. Dividends and
capital gain distributions in amounts less than $10 will automatically be
reinvested in additional shares of the Fund. 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, or the shareholder does not respond to mailings from the
Shareholder Servicing Agent with regard to uncashed distribution checks, such
shareholder's distribution option will automatically be converted to having
all dividends and other distributions reinvested in additional shares. Any
request to change a distribution option must be received by the Shareholder
Servicing Agent a reasonable time prior to the next business day of the month
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.

LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the SAI) anticipates purchasing $50,000 or more of Class A shares
of the Fund alone or in combination with shares of any class of other MFS
Funds or MFS Fixed Fund (a bank collective investment fund) within a 13-month
period (or 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.

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 any other 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.

DOLLAR COST AVERAGING PROGRAMS
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account on any day of the month. If the
Shareholder does not specify a date, the investment will automatically occur
on the first business day of the month. 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. The Automatic Exchange
Plan provides for automatic monthly or quarterly exchanges 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 if such fund is
available for sale. Under the Automatic Exchange Plan, exchanges of at least
$50 each may be made to up to six different funds. A shareholder should
consider the objectives and policies of a fund and review its prospectus
before electing to exchange money into such fund through the Automatic
Exchange Plan. No transaction fee is imposed in connection with exchange
transactions under the Automatic Exchange Plan. However, exchanges 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, an exchange is treated as a
sale of shares exchanged and, therefore, could result in a capital gain or
loss to the shareholder making the exchange. See the SAI 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 these tax-deferred
retirement plans.

The Fund's SAI, dated September 1, 1998, as amended or supplemented from time
to time, contains more detailed information about the Fund, including, but not
limited to, information related to (i) the Fund's investment objective,
policies and restrictions, (ii) the Trustees, officers and investment adviser,
(iii) portfolio transactions and brokerage commissions, (iv) the method used
to calculate performance quotations, (v) the Fund's Distribution Plan and (vi)
various services and privileges offered by the Fund for the benefit of its
shareholders, including additional information with respect to the exchange
privilege.
<PAGE>
APPENDIX A

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which all applicable
sales charges are waived (Section I), the initial sales charge and the
contingent deferred sales charge ("CDSC") for Class A shares are waived
(Section II), and the CDSC for Class B and Class C shares is waived (Section
III). Some of the following information will not apply to certain Funds in the
MFS Family of Funds, depending on which classes of shares are offered by such
fund. As used in this Appendix, the term "dealer" includes any broker, dealer,
bank (including bank trust departments), registered investment adviser,
financial planner and any other financial institutions having a selling
agreement with MFS Fund Distributors, Inc., ("MFD").

I. WAIVERS OF ALL APPLICABLE SALES CHARGES

In the following circumstances, the initial sales charge imposed on
purchases of Class A shares and the CDSC imposed on certain redemptions of
Class A shares and on redemptions of Class B and Class C shares, as
applicable, are waived:

1. DIVIDEND REINVESTMENT

o Shares acquired through dividend or capital gain reinvestment; and
o Shares acquired by automatic reinvestment of distributions of dividends
and capital gains of any MFS Fund in the MFS Family of Funds ("MFS
Funds") pursuant to the Distribution Investment Program.

2. CERTAIN ACQUISITIONS/LIQUIDATIONS

o Shares acquired on account of the acquisition or liquidation of assets
of other investment companies or personal holding companies.

3. AFFILIATES OF AN MFS FUND/CERTAIN DEALERS. SHARES ACQUIRED BY:

o Officers, eligible directors, employees (including retired employees)
and agents of Massachusetts Financial Services Company ("MFS"), Sun
Life Assurance Company of America ("Sun Life") or any of their
subsidiary companies;
o Trustees and retired trustees of any investment company for which MFD
serves as distributor;
o Employees, directors, partners, officers and trustees of any
sub-adviser to any MFS Fund;

o Employees or registered representatives of dealers;

4. INVOLUNTARY REDEMPTIONS (CDSC WAIVER ONLY)

5. RETIREMENT PLANS (CDSC WAIVER ONLY). Shares redeemed on account of
distributions made under the following circumstances:

INDIVIDUAL RETIREMENT ACCOUNTS ("IRA'S")

o Death or disability of the IRA owner.

SECTION 401(a) PLANS ("401(a) PLANS") AND SECTION 403(b) EMPLOYER
SPONSORED PLANS ("ESP PLANS")

o Death, disability or retirement of 401(a) or ESP Plan participant;

o Loan from 401(a) or ESP Plan (repayment of loans, however, will
constitute new sales for purposes of assessing sales charges);

o Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time);

o Termination of employment of 401(a) or ESP Plan participant (excluding,
however, a partial or other termination of the Plan);

o Tax-free return of excess 401(a) or ESP Plan contributions;

o To the extent that redemption proceeds are used to pay expenses (or
certain participant expenses) of the 401(a) or ESP Plan (e.g.,
participant account fees), provided that the Plan sponsor subscribes to
the MFS FUNDamental 401(k) Plan or another similar recordkeeping system
made available by the Shareholder Servicing Agent; and

o Distributions from a 401(a) or ESP Plan that has invested its assets in
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 such 401(a) or ESP Plan
first invests its assets in one or more of the MFS Funds. The sales
charges will be waived in the case of a redemption of all of the 401(a)
or ESP Plan's shares in all MFS Funds (i.e., all the assets of the
401(a) or ESP Plan invested in the MFS Funds are withdrawn), unless
immediately prior to the redemption, the aggregate amount invested by
the 401(a) or ESP Plan in shares of the MFS Funds (excluding the
reinvestment of distributions) during the prior four years equals 50%
or more of the total value of the 401(a) or ESP Plan's assets in the
MFS Funds, in which case the sales charges will not be waived.

SECTION 403(b) SALARY REDUCTION ONLY PLANS ("SRO PLANS")

o Death or disability of SRO Plan participant.

6. CERTAIN TRANSFERS OF REGISTRATION (CDSC WAIVER ONLY). Shares
transferred:

o To an IRA rollover account from an existing IRA account where any sales
charges with respect to the shares being reregistered would have been
waived had they been redeemed; and

o From a single account maintained for a 401(a) Plan to multiple accounts
maintained by the Shareholder Servicing Agent on behalf of individual
participants of such Plan, provided that the Plan sponsor subscribes to
the MFS FUNDamental 401(k) Plan or another similar recordkeeping system
made available by the Shareholder Servicing Agent.

7. LOAN REPAYMENTS

II. WAIVERS OF CLASS A SALES CHARGES

1. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS

o Shares acquired by investments through certain dealers (including
registered investment advisers and financial planners) which have
established certain operational arrangements with MFD which include a
requirement that such shares be sold for the sole benefit of clients
participating in a "wrap" account, mutual fund "supermarket" account or
a similar program under which such clients pay a fee to such dealer.

2. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS

o Shares acquired by insurance company separate accounts.

3. RETIREMENT PLANS

ADMINISTRATIVE SERVICES ARRANGEMENTS

o Shares acquired by retirement plans or trust accounts whose third party
administrators or dealers have entered into an administrative services
agreement with MFD or one of its affiliates to perform certain
administrative services, subject to certain operational and minimum
size requirements specified from time to time by MFD or one or more of
its affiliates.

REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS

o Shares acquired through the automatic reinvestment in Class A shares of
Class A or Class B distributions which constitute required withdrawals
from qualified retirement plans.

SHARES REDEEMED ON ACCOUNT OF DISTRIBUTIONS MADE UNDER THE FOLLOWING
CIRCUMSTANCES:

IRA'S

o Distributions made on or after the IRA owner has attained the age of 59
1/2 years old; and

o Tax-free returns of excess IRA contributions.

401(a) PLANS

o Distributions made on or after the 401(a) Plan participant has attained
the age of 59 1/2 years old; and

o Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a 401(a) Plan.

ESP PLANS AND SRO PLANS

o Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59 1/2 years old.

4. PURCHASES OF AT LEAST $5 MILLION (CDSC WAIVER ONLY)

o Shares acquired of Eligible Funds (as defined below) if the
shareholder's investment equals or exceeds $5 million in one or more
Eligible Funds (the "Initial Purchase") (this waiver applies to the
shares acquired from the Initial Purchase and all shares of Eligible
Funds subsequently acquired by the shareholder); provided that the
dealer through which the Initial Purchase is made enters into an
agreement with MFD to accept delayed payment of commissions with
respect to the Initial Purchase and all subsequent investments by the
shareholder in the Eligible Funds subject to such requirements as may
be established from time to time by MFD (for a schedule of the amount
of commissions paid by MFD to the dealer on such investments, see
"Purchases -- Class A Shares -- Purchases Subject to a CDSC" in the
Prospectus). The Eligible Funds are all funds included in the MFS
Family of Funds, except for Massachusetts Investors Trust,
Massachusetts Investors Growth Stock Fund, MFS Municipal Bond Fund, MFS
Municipal Limited Maturity Fund, MFS Money Market Fund, MFS Government
Money Market Fund and MFS Cash Reserve Fund.

5. BANK TRUST DEPARTMENTS AND LAW FIRMS

6. INVESTMENT OF PROCEEDS FROM CERTAIN REDEMPTIONS OF CLASS I SHARES

o The initial sales charge imposed on purchases of Class A shares, and
the contingent deferred sales charge imposed on certain redemptions of
Class A shares, are waived with respect to Class A shares acquired of
any of the MFS Funds through the immediate reinvestment of the proceeds
of a redemption of Class I shares of any of the MFS Funds.

III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES

In addition to the waivers set forth in Section I above, in the following
circumstances the CDSC imposed on redemptions of Class B and Class C shares
is waived:

1. SYSTEMATIC WITHDRAWAL PLAN

o Systematic Withdrawal Plan redemptions with respect to up to 10% per
year (or 15% per year, in the case of accounts registered as IRAs where
the redemption is made pursuant to Section 72(t) of the Internal
Revenue Code of 1986, as amended) of the account value at the time of
establishment.

2. DEATH OF OWNER

o Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a living
trust for the benefit of the deceased individual.

3. DISABILITY OF OWNER

4. RETIREMENT PLANS. Shares redeemed on account of distributions made under
the following circumstances:

IRA'S, 401(a) PLANS, AND 403(b) PLANS ESP PLANS AND SRO PLANS

SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS ("SAR-SEP PLANS")

o Distributions made on or after the SAR-SEP Plan participant has
attained the age of 70 1/2 years old, but only with respect to the
minimum distribution under applicable Code rules;

o Death or disability of a SAR-SEP Plan participant
<PAGE>
APPENDIX B

DESCRIPTION OF BOND RATINGS

The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of various debt instruments. It should be emphasized, however, that
ratings are not absolute standards of quality. Consequently, debt instruments
with the same maturity, coupon and rating may have different yields while debt
instruments of the same maturity and coupon with different ratings may have
the same yield.

MOODY'S
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

STANDARD & POOR'S RATING SERVICES

AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is EXTREMELY STRONG.

AA: An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is VERY STRONG.

A: An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still STRONG.

BBB: An obligation rated BBB exhibits ADEQUATE protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment on the
obligation.

Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and
C the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.

BB: An obligation rated BB is LESS VULNERABLE to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

B: An obligation rated B is MORE VULNERABLE to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.

CCC: An obligation rated CCC is CURRENTLY VULNERABLE to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

CC: An obligation rated CC is CURRENTLY HIGHLY VULNERABLE to nonpayment.

C: The C rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this
obligation are being continued.

D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

FITCH IBCA

AAA: Highest credit quality. AAA ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely
to be adversely affected by foreseeable events.

AA: Very high credit quality. AA ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.

A: High credit quality. A ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.

Speculative Grade

BB: Speculative. BB ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.

B: Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.

DDD, DD, D: Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50% -- 90% of such outstandings,
and D the lowest recovery potential, i.e. below 50%.

DUFF & PHELPS CREDIT RATING CO.

AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.

A+, A, A-: Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

BBB+, BBB, BBB-: Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.

BB+, BB, BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.

B+, B, B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.

CCC: Well below investment-grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic/
industry conditions, and/or with unfavorable company developments.

DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/
or interest payments.

DP: Preferred stock with dividend arrearages.

DUFF & PHELPS SHORT-TERM RATINGS

D-1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
Investment Adviser
Massachusetts Financial
Services Company
500 Boylston Street
Boston, MA 02116
(617) 954-5000

Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116
(617) 954-5000

Custodian

State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

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 Auditors

Deloitte & Touche LLP

125 Summer Street
Boston, MA 02110

MLM-1-9/98/111M 36/236/336

<PAGE>
[LOGO] M F S(R)
INVESTMENT MANAGEMENT

MFS(R) LIMITED STATEMENT OF
MATURITY FUND ADDITIONAL INFORMATION

(A Member of the MFS Family of Funds(R)) September 1, 1998
- - --------------------------------------------------------------------------------
Page
1. Definitions ....................................................... 2
2. Investment Objectives, Policies and Restrictions .................. 2
3. Management of the Fund ............................................ 7
Trustees ........................................................ 8
Officers ........................................................ 8
Trustee Compensation Table ...................................... 8
Investment Adviser .............................................. 9
Administrator ................................................... 10
Custodian ....................................................... 10
Shareholder Servicing Agent ..................................... 10
Distributor ..................................................... 10
4. Portfolio Transactions and Brokerage Commissions .................. 11
5. Shareholder Services .............................................. 11
Investment and Withdrawal Programs .............................. 11
Exchange Privilege .............................................. 13
Tax-Deferred Retirement Plans ................................... 14
6. Tax Status ........................................................ 14
7. Determination of Net Asset Value and Performance .................. 15
8. Distribution Plan ................................................. 17
9. Description of Shares, Voting Rights and Liabilities .............. 18
10. Independent Auditors and Financial Statements ..................... 19
Appendix A -- Performance Information ............................. A-1

MFS LIMITED MATURITY FUND
A Series of MFS Series Trust IX
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000

This Statement of Additional Information, as amended or supplemented from time
to time (the "SAI"), sets forth information which may be of interest to
investors but which is not necessarily included in the Fund's Prospectus,
dated September 1, 1998. This SAI should be read in conjunction with the
Prospectus, a copy of which may be obtained without charge by contacting the
Shareholder Servicing Agent (see last page for address and phone number).

THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>

"Fund" -- MFS Limited Maturity Fund, a diversified
series of the Trust. The Fund was known as MFS
Quality Limited Maturity Fund prior to August
3, 1992.

"MFS" or the "Adviser" -- Massachusetts Financial Services Company, a
Delaware corporation.

"MFD" -- MFS Fund Distributors, Inc., a Delaware
corporation.

"Prospectus" -- The Prospectus of the Fund, dated September 1,
1998, as amended or supplemented from time
to time.

2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES. The primary investment objective of the Fund is to
provide as high a level of current income as is believed to be consistent with
prudent investment risk. The secondary objective of the Fund is to protect
shareholders' capital. Any investment involves risk and there can be no
assurance that the Fund will achieve its investment objectives.

INVESTMENT POLICIES. The investment policies of the Fund are described in the
Prospectus. In addition, certain of the Fund's investment policies are
described in greater detail below.

LADDERING: As one way of managing the Fund's exposure to interest rate
fluctuations, the Adviser will engage in a portfolio management strategy known
as "laddering". Under this strategy, the Fund will allocate a portion of its
assets in securities with remaining maturities of less than 1 year, a portion
of its assets in securities with remaining maturities of 1 to 2 years, a
portion of its assets in securities with remaining maturities of 2 to 3 years,
a portion of its assets in securities with remaining maturities of 3 to 4
years and a portion of its assets in securities with remaining maturities of 4
to 5 years. Under normal market conditions, approximately 50% or more of the
assets of the Fund will be devoted to this strategy. The Adviser will actively
manage securities within each rung of the "ladder". "Laddering" does not
require that individual bonds are held to maturity.

The Adviser believes that "laddering" provides additional stability to the
Fund's portfolio by allocating the Fund's assets across a range of securities
with shorter-term maturities. For example, in periods of rising interest rates
and falling bond prices, the bonds with one- and two-year remaining maturities
generally lose less of their value than bonds with four- and five-year
remaining maturities; conversely, in periods of falling interest rates and
corresponding rising bond prices, the principal value of the bonds with four-
and five-year remaining maturities generally increase more than the bonds with
one- and two-year remaining maturities. Furthermore, with the passage of time,
individual bonds held in the Fund's portfolio tend to become less volatile as
the time of their remaining maturity decreases. In addition, bonds with four-
and five-year remaining maturities generally provide higher income than bonds
with one- and two-year remaining maturities.

"Laddering" does not assure profit and does not protect against loss in a
declining market.

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 FHA-insured or
VA-guaranteed mortgages. These guarantees, however, do not apply to the market
value or yield of mortgage pass-though 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.

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.

DOLLAR-DENOMINATED FOREIGN DEBT SECURITIES: The Fund may invest in dollar-
denominated foreign debt securities as discussed in the Prospectus. Investing
in dollar-denominated foreign debt securities generally represents a greater
degree of risk than investing in domestic securities, due to less publicly
available information, less securities regulation, war or expropriation.
Special considerations may include higher brokerage costs and thinner trading
markets. Investments in foreign countries could be affected by other factors
including extended settlement periods.

ZERO COUPON BONDS: As described in the Prospectus, fixed income securities in
which the Fund may invest also include zero coupon bonds. 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. The Fund will accrue income on such investments
for tax and accounting purposes, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Fund's distribution
obligations.

LENDING OF PORTFOLIO SECURITIES: As described in the Prospectus, the Fund may
seek to increase its income by lending portfolio securities. 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). 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.

"WHEN-ISSUED" SECURITIES: As described in the Prospectus, the Fund may
purchase debt securities on a "when-issued" or on a "forward delivery" basis.
When the Fund commits to purchase these securities on such basis, it will set
up procedures consistent with the General Statement of Policy of the
Securities and Exchange Commission (the "SEC") concerning such purchases.
Since that policy currently recommends that an amount of the Fund's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, the Fund will always have liquid assets sufficient to
cover any commitments or to limit any potential risk. Although the Fund does
not intend to make such purchases for speculative purposes and intends to
adhere to the provisions of the SEC policy, purchases of securities on such
bases may involve more risk than other types of purchases. For example, the
Fund may have to sell assets which have been set aside in order to meet
redemptions. Also, if the Fund determines it is necessary to sell the "when-
issued" or "forward delivery" securities before delivery, the Fund may incur a
loss because of market fluctuations since the time the commitment to purchase
such securities was made.

INDEXED SECURITIES: The Fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed securities
typically, but not always, are debt securities or deposits whose value at
maturity (i.e., principal value) or coupon rate is determined by reference to
a specific instrument or statistic. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S. dollar-
denominated securities of equivalent issuers. Currency-indexed securities may
be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign-denominated instrument, or their maturity
value may decline when foreign currencies increase, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of
a number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S. and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent issuers of
indexed securities have included banks, corporations, and certain U.S.
government agencies.

The policies described above and the policies with respect to Futures
Contracts, Options on Futures Contracts, portfolio trading and the lending of
portfolio securities described below are not fundamental and may be changed
without shareholder approval, as may be the Fund's investment objectives.

FUTURES CONTRACTS: The Fund may enter into contracts for hedging purposes for
the future delivery of domestic or foreign fixed income securities or
contracts based on other financial indices including any index of domestic or
foreign fixed income securities, as such contracts become available for
trading ("Futures Contracts"). Such transactions may also be used for non-
hedging purposes, to the extent permitted by applicable law. A "sale" of a
Futures Contract means a contractual obligation to deliver the securities
called for by the contract at a specified price in a fixed delivery month or,
in the case of a Futures Contract, on an index of securities, to make or
receive a cash settlement. A "purchase" of a Futures Contract means a
contractual obligation to acquire the securities called for by the contract at
a specified price in a fixed delivery month or, in the case of a Futures
Contract on an index of securities, to make or receive a cash settlement. U.S.
Futures Contracts have been designed by exchanges which have been designated
as "contract markets" by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Existing
contract markets include the Chicago Board of Trade and the International
Monetary Market of the Chicago Mercantile Exchange. Futures Contracts are
traded on these markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing
members of the exchange. Futures Contracts purchased or sold by the Fund are
also traded on foreign exchanges which are not regulated by the CFTC.

The purpose of the acquisition or sale of a Futures Contract, in the case of a
portfolio such as that of the Fund, which holds or intends to acquire fixed
income securities, is to attempt to protect the Fund from fluctuations in
interest rates without actually buying or selling fixed income securities. For
example, if the Fund owns bonds, and interest rates were expected to increase,
the Fund might enter into Futures Contracts for the sale of debt securities.
Such a sale would have much the same effect as selling an equivalent value of
the long-term bonds owned by the Fund. If interest rates did increase, the
value of the debt securities in the portfolio would decline, but the value of
the Futures Contracts would 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. 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 hedging position without having to
sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to attempt to hedge against anticipated purchases
of bonds at higher prices. Since the fluctuations in the value of Futures
Contracts should be similar to that of bonds, the Fund could take advantage of
the anticipated rise in the value of bonds without actually buying them until
the market had stabilized. At that time, the Futures Contracts could be
liquidated and the Fund could then buy long-term bonds on the cash market. 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 liquid assets from its
portfolio in an amount equal to the difference 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.

In addition, Futures Contracts entail risks. Although the Fund believes that
use of such contracts will benefit the Fund, if the Adviser's investment
judgment about the general direction of interest rates is incorrect, the
Fund's overall performance would 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 which would adversely affect the price of bonds
held in its portfolio and interest rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of its bonds which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have
to sell bonds from its portfolio to meet daily variation margin requirements.
Such sales of bonds may be, but will not necessarily be, at increased prices
which reflect the rising market. The Fund may have to sell securities at a
time when it may be disadvantageous to do so. Transactions in Futures
Contracts for non-hedging purposes involves greater risks, and could result in
losses which are not offset by gains on other portfolio assets.

OPTIONS ON FUTURES CONTRACTS: The Fund intends to purchase and write options
on Futures Contracts ("Options on Futures Contracts") for hedging purposes and
for non-hedging purposes, to the extent permitted by applicable law. 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. Such Options on Futures
Contracts will be traded on U.S. contract markets regulated by the CFTC as
well as on foreign exchanges. Depending on the pricing of the option compared
to either the price of the Futures Contract upon which it is based or the
price of the underlying debt securities, it may or may not be less risky than
ownership of the Futures Contract or underlying debt securities. As with the
purchase of Futures Contracts, when the Fund is not fully invested it may
purchase a call Option on a Futures Contract to hedge against a market advance
due to declining interest rates.

ADDITIONAL RISKS OF INVESTING IN FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS: Various additional risks exist with respect to the trading of
Futures Contracts and Options on Futures Contracts. For example, the Fund's
ability effectively to hedge all or a portion of its portfolio through
transactions in such instruments will depend on the degree to which price
movements in the underlying index or instrument correlate with price movements
in the relevant portion of the Fund's portfolio. The trading of futures
entails the additional risk of imperfect correlation between movements in the
futures and the price of the underlying index or obligation. The anticipated
spread between the prices may be distorted because of various factors, which
are set forth under "Futures Contracts" above. When the Fund purchases or
sells Futures Contracts based on an index of securities, the securities
comprising such index will not be the same as the portfolio securities being
hedged, thereby creating a risk that changes in the value of the index will
not correlate with changes in the value of such portfolio securities.

The Fund's ability to engage in futures strategies will also depend on the
availability of liquid markets in such instruments. The liquidity of a
secondary market in a Futures Contract or option thereon may be adversely
affected by "daily price fluctuation limits", established by exchanges, which
limit the amount of fluctuation in the price of a contract during a single
trading day and prohibit trading beyond such limit. In addition, the exchanges
on which futures are traded may impose limitations governing the maximum
number of positions on the same side of the market and involving the same
underlying instrument which may be held by a single investor, whether acting
alone or in concert with others (regardless of whether such contracts are held
on the same or different exchanges or held or written in one or more accounts
or through one or more brokers).

In addition, Futures Contracts and Options on Futures Contracts may be traded
on foreign exchanges. Such transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(i) other complex foreign, political and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions,
(iii) delays in the Fund's ability to act upon economic events occuring in
foreign markets during non-business hours in the U.S., (iv) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States, and (v) lesser trading volume.

PORTFOLIO TRADING: As described in the Prospectus, the Fund intends to engage
in portfolio trading rather than holding portfolio securities to maturity.
Such trading may involve the selling of securities held for a short time,
ranging from several months to less than a day and may be limited by tax
restrictions.

In trading portfolio securities, the Fund may use the following strategies:

(1) shortening the average maturity of its portfolio in anticipation of a
rise in interest rates so as to minimize depreciation of principal;

(2) lengthening the average maturity of its portfolio in anticipation of a
decline in interest rates so as to maximize appreciation of principal;

(3) changing the average coupon of its portfolio when yield disparities
reflect a change in investment value among securities trading at differing
levels of premiums or discounts;

(4) selling one type of debt security (e.g., industrial bonds) and buying
another (e.g., utility bonds) when disparities arise in the relative values
of each; and

(5) changing from one debt security to an essentially similar debt
security when their respective yields are distorted due to market factors.

These strategies may result in minor temporary increases or decreases in the
Fund's current income available for distribution to its shareholders, and in
its holding debt securities which sell at moderate to substantial premiums or
discounts from face value. If the Fund's expectations of changes in interest
rates or the Fund's evaluation of the normal yield relationship between two
securities proves to be incorrect, the Fund's income, net asset value and
potential capital gain may be reduced or its potential capital loss may be
increased.

Except for Investment Restriction (1) below and the Fund's non-fundamental
restriction regarding investing in illiquid securities, the Fund's
limitations, policies and rating 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.

INVESTMENT RESTRICTIONS. The Fund has adopted the following restrictions which
cannot be changed without the approval of the holders of a majority of the
Fund's shares (which, as used in this SAI, means the lesser of (i) more than
50% of the outstanding shares of the Trust or 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 if the 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 money in an amount in excess of 33 1/3% of its gross assets,
and then only as a temporary measure for extraordinary or emergency
purposes, or pledge, mortgage or hypothecate an amount of its assets (taken
at market value) in excess of 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, foreign currency, forward foreign currency 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;

(4) purchase or sell real estate (including limited partnership interests
but excluding securities of companies, such as real estate investment
trusts, which deal in real estate or interests therein), or mineral leases,
commodities or commodity contracts (except options, Futures Contracts,
Options on Futures Contracts, foreign currency, forward foreign currency
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 or mineral leases, commodities or commodity contracts (including
options, Futures Contracts, Options on Futures Contracts, foreign currency,
forward foreign currency contracts and options on foreign currencies)
acquired as a result of the ownership of securities. The Fund will not
purchase securities for the purpose of acquiring real estate or mineral
leases, commodities or commodity contracts (except options, Futures
Contracts, Options on Futures Contracts, foreign currency, forward foreign
currency contracts and options on foreign currencies);

(6) invest for the purpose of exercising control or management;

(7) purchase any securities or evidences of interest therein on margin,
except to make deposits on margin in connection with options, Futures
Contracts, Options on Futures Contracts, foreign currency, forward foreign
currency contracts and options on foreign currencies, and except that the
Fund may obtain such short-term credit as may be necessary for the clearance
of purchases and sales of securities;

(8) 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

(9) 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 warrants where the grantor of the warrants is the issuer of the
underlying securities or the writing, purchasing and selling of puts, calls
or combinations thereof with respect to securities, Futures Contracts and
foreign currencies.

As a non-fundamental policy, the Fund will not invest in illiquid investments,
including securities subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g., trading in the security
is suspended or, in the case of unaudited securities where no market exists),
unless the Board of Trustees has determined that such securities are liquid
based on trading markets for the specific security, if more than 15% of the
Fund's net assets (taken at market value) would be invested in such
securities.

STATE AND FEDERAL RESTRICTIONS: In order to comply with certain federal and
state statutes and regulatory policies, as a matter of operating policy of the
Fund, the Fund will not: (a) invest more than 5% of the Fund's total assets at
the time of investment in unsecured obligations of issuers which, including
predecessors, controlling persons, sponsoring entities, general partners and
guarantors, have a record of less than three years' continuous business
operation or relevant business experience; (b) 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; (c)
purchase securities issued by any other registered 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 (i) more than 5% of the Fund's total assets (taken at market value) to
be invested in the securities of any one issuer or (ii) more than 10% of the
Fund's total assets (taken at market value) to be invested in the securities
of such issuers or (iii) more than 3% of the outstanding voting securities of
any such issuer to be held by the Fund; and, provided further, that the Fund
shall not purchase securities issued by any open-end investment company; (iv)
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 Trust, or is an officer or Director of the 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.

In addition, as a non-fundamental policy, repurchase agreements maturing in
more than seven days will be deemed to be illiquid for purposes of the Fund's
limitation on investment in illiquid securities. Furthermore, purchases of
warrants will not exceed 5% of the Fund's net assets. Included within that
amount, but not exceeding 2% of the Fund's net assets, may be warrants not
listed on the New York or American Stock Exchange.

In addition, the Fund may not invest 25% or more of the market value of its
total assets in securities of issuers in any one industry.

As a "diversified" investment portfolio under the Investment Company Act of
1940 (the "1940 Act"), the Fund will maintain at least 75% of its assets in
(i) cash, (ii) cash items, (iii) U.S. Government Securities and (iv) other
securities, limited per issuer to blocks of less than 5% of the Fund's total
assets.

The investment policies described under "State and Federal Restrictions" are
not fundamental and may not be changed without shareholder approval.

3. MANAGEMENT OF THE FUND
The Trust's 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 its
operations. The Trustees and officers of the Trust are listed below, together
with their principal occupations during the past five years. (Their titles may
have varied during that period.)

TRUSTEES

RICHARD B. BAILEY* (born 9/14/26)
Private Investor; Massachusetts Financial Services Company, former Chairman
(prior to September 30, 1991); Cambridge Bancorp, Director; Cambridge Trust
Company, Director

PETER G. HARWOOD (born 4/3/26)
Private Investor
Address: 211 Lindsay Pond Road, Concord, Massachusetts

J. ATWOOD IVES (born 5/1/36)
Eastern Enterprises (diversified services company), Chairman, Trustee and
Chief Executive Officer
Address: 9 Riverside Road, Weston, Massachusetts

LAWRENCE T. PERERA (born 6/23/35)
Hemenway & Barnes (attorneys), Partner
Address: 60 State Street, Boston, Massachusetts

WILLIAM J. POORVU (born 4/10/35)
Harvard University Graduate School of Business Administration, Adjunct
Professor; CBL & Associates Properties, Inc. (a real estate investment
trust), Director; The Baupost Fund (a registered investment company), Vice
Chairman (since November 1993), Chairman and Trustee (prior to November
1993)
Address: Harvard Business School, Soldiers Field Road, Cambridge,
Massachusetts

CHARLES W. SCHMIDT (born 3/18/28)
Private Investor; International Technology Corporation Director; Mohawk Paper
Company, Director
Address: 30 Colpitts Road, Weston, Massachusetts

ARNOLD D. SCOTT* (born 12/16/42)
Massachusetts Financial Services Company, Senior Executive Vice President,
Secretary and Director

JEFFREY L. SHAMES* (born 6/2/55)
Massachusetts Financial Services Company, Chairman and Chief Executive Officer

ELAINE R. SMITH (born 4/25/46)
Independent Consultant; Brigham and Women's Hospital, Executive Vice President
and Chief Operating Officer (prior to September 1992)
Address: Weston, Massachusetts

DAVID B. STONE (born 9/2/27)
North American Management Corp. (investment adviser), Chairman and Director;
Eastern Enterprises, Trustee
Address: 10 Post Office Square, Suite 300, Boston, Massachusetts

OFFICERS

W. THOMAS LONDON,* Treasurer (born 3/1/44)
Massachusetts Financial Services Company, Senior Vice President

JAMES O. YOST,* Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Vice President

ELLEN M. MOYNIHAN*, Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President (since September
1996); Deloitte & Touche LLP, Senior Manager (until September 1996).

MARK E. BRADLEY*, Assistant Treasurer (born 11/23/59)
Massachusetts Financial Services Company, Vice President (since March 1997);
Putnam Investments, Vice President (from September 1994 until March 1997);
Ernst & Young, Senior Tax Manager (until September 1994).

STEPHEN E. CAVAN,* Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary

JAMES R. BORDEWICK, JR.,* Assistant Secretary (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and Associate
General Counsel

GEOFFREY L. KURINSKY,* Vice President (born 7/7/53)
Massachusetts Financial Services Company, Senior Vice President

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

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

The Fund pays the compensation of non-interested Trustees and Mr. Bailey (who
currently receive a fee of $1,000 per year plus $65 per meeting and $50 per
committee meeting attended, together with such Trustee's out-of-pocket
expenses) and has adopted a retirement plan for non-interested Trustees and
Mr. Bailey. 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
Messrs. Scott and Shames. The Fund will accrue its allocable share of
compensation expenses each year to cover current year's service and amortize
past service cost.

Set forth below is certain information concerning the cash compensation paid
to the Trustees and benefits accrued, and estimated benefits payable, under
the retirement plan.

<TABLE>
TRUSTEE COMPENSATION TABLE
<CAPTION>

TOTAL TRUSTEES
FEES FROM
RETIREMENT BENEFIT ESTIMATED FUND AND
TRUSTEES FEE ACCRUED AS PART OF CREDITED YEARS FUND
TRUSTEE FROM FUND(1) FUND'S EXPENSES(1) OF SERVICE(2) COMPLEX(3)
- - --------------------------- ---------------- ---------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Richard B. Bailey ......... $1,945 $570 8 $242,022
Peter G. Harwood .......... 2,160 423 5 121,105
J. Atwood Ives ............ 1,880 575 17 108,720
Lawrence T. Perera . 1,995 612 16 127,055
William Poorvu ............ 2,160 628 16 121,105
Charles W. Schmidt . 2,095 625 9 121,105
Arnold D. Scott ........... --0-- --0-- N/A --0--
Jeffrey L. Shames ......... --0-- --0-- N/A --0--
Elaine R. Smith ........... 2,145 535 26 132,035
David B. Stone ............ 2,260 660 9 127,055

- - ------------
(1) For fiscal year ended April 30, 1998.
(2) Based on normal retirement age of 73. See the table below for the estimated annual benefits payable upon
retirement by the Fund to a Trustee based on his or her estimated credited years of service.
(3) For calendar year 1997. All Trustees receiving compensation served as Trustees of 27 funds within the MFS
Fund complex (having aggregate net assets at December 31, 1997, of approximately $28.9 billion) except
Mr. Bailey, who served as Trustee of 69 funds within the MFS Fund complex (having aggregate net assets at
December 31, 1997, of approximately $47.8 billion).

ESTIMATED ANNUAL BENEFITS PAYABLE BY FUND UPON RETIREMENT(4)

YEARS OF SERVICE
AVERAGE ----------------------------------------------------------
TRUSTEE FEES 3 5 7 10 OR MORE
- - ------------------------------------------------------------------------------
$1,692 $254 $423 $592 $ 846
1,851 278 463 648 925
2,010 301 502 703 1,005
2,168 325 542 759 1,084
2,327 349 582 815 1,164
2,486 373 622 870 1,243

(4) Other funds in the MFS Fund complex provide similar retirement benefits to the Trustees.
</TABLE>

As of July 31, 1998, all Trustees and officers as a group owned less than 1%
of the Fund's shares outstanding, not including 296,042 shares (which
represent approximately 1.2% of the outstanding shares of the Fund) owned of
record by certain employee benefit plans of MFS of which Messrs. Scott and
Shames are Trustees.

As of July 31, 1998, Merrill Lynch, Pierce, Fenner & Smith Inc., FBO its
Customers, Attention: Fund Administration, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, Florida 32246-6484 was the owner of approximately 14.77%,
15.19% and 7.45% of Class A, B, and C Shares of the Fund, respectively. As of
July 31, 1998, US Clearing Corp., FBO 862-10016-12, 26 Broadway, New York, New
York 10004-1798 was the owner of approximately 7.21% of Class C Shares of the
Fund. As of July 31, 1998, MFS Defined Contribution Plan, c/o Mark Leary,
Massachusetts Financial Services, 500 Boylston Street, Boston, MA 02116-3740
was the record owner of approximately 100% of the outstanding Class I 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 liabilities to the Trust or its shareholders, it is
finally adjudicated 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
interest of the Trust. In the case of settlement, such indemnification will
not be provided unless it has been determined pursuant to the Declaration of
Trust, that such officers or Trustees have not engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.

The Adviser manages the assets of the Fund pursuant to an Investment Advisory
Agreement, dated January 8, 1992 (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. 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 rate of 0.40% per annum of the Fund's average daily net assets.

For the Fund's fiscal year ended April 30, 1998, MFS received fees under the
Advisory Agreement of $628,100 (equivalent on an annualized basis to 0.40% of
average net assets).

For the Fund's fiscal year ended April 30, 1997, the Fund incurred fees under
the Advisory Agreement of $573,843 (equivalent on an annualized basis to 0.40%
of average net assets).

For the Fund's fiscal year ended April 30, 1996, the Fund received fees under
the Advisory Agreement of $489,030 (equivalent on an annualized basis to 0.40%
of average net assets).

The Fund pays all of the Fund's expenses (other than those assumed by the
Adviser or MFD) including but not limited to: advisory and administrative
services; 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, periodic reports, notices and proxy statements to shareholders
and 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 are borne by the Fund except that the
Fund's Distribution Agreement with MFD requires MFD 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. MFS has agreed
to pay the foregoing expenses of the Fund (except for the fees paid under the
Advisory Agreement and the Distribution Plans) subject to reimbursement by the
Fund as described in the Prospectus. For a list of expenses, including the
compensation paid to the Trustees who are not officers of Adviser, for the
fiscal year ended April 30, 1998, see "Statement of Operations" in the Annual
Report to the Fund's shareholders.

MFS pays the compensation of the Trust's officers and of any Trustee who is an
officer of MFS. The Adviser 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 the Fund's
portfolio transactions.

The Advisory Agreement will remain in effect until August 1, 1999, 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 provides that if MFS ceases to
serve as the Adviser to the Fund, the Fund will change its name so as to
delete the initials "MFS." The Advisory Agreement further provides that MFS
may render services to others. 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.

ADMINISTRATOR
MFS provides the Fund with certain financial, legal, compliance, shareholder
communications and other administrative services pursuant to a Master
Administrative Services Agreement dated March 1, 1997, as amended. Under this
Agreement, the Fund pays MFS an administrative fee up to 0.015% per annum of
the Fund's average daily net assets. This fee reimburses MFS for a portion of
the costs it incurs to provide such services. For the periods ended April 30,
1997 and 1998, MFS received $3,750 and $22,192, respectively, under the
Agreement.

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, dated December 2, 1985, as amended (the
"Agency Agreement"). The Shareholder Servicing Agent's responsibilities under
the Agency Agreement include administering and performing transfer agent
functions and 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 calculated as a percentage of
the average daily net assets of the Fund at an effective annual rate of
0.1125%. 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. The Custodian has contracted with the Shareholder
Servicing Agent to perform certain dividend disbursing agent functions for the
Fund.

DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as distributor for the
continuous offering of shares of the Fund pursuant to a distribution
agreement, dated as of January 1, 1995 (the "Distribution Agreement").

CLASS A SHARES: MFD acts as agent in selling Class A Shares of the Fund to
dealers. The public offering price of the 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 the 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 for the benefit of
such persons, and also applies to purchases made under the Right of
Accumulation or a Letter of Intent (see "Investment and Withdrawal Programs"
below. A group might qualify to obtain quantity sales charge discounts (see
"Investment and Withdrawal Programs" below.

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

MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of 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 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 2 1/4% and MFD retains approximately 1/4 of 1% of
the public offering price. In addition, MFD pays a commission to dealers who
initiate and are responsible for purchases of $1 million or more as described
in the Prospectus.

During the Fund's fiscal year ended April 30, 1998, MFD received sales charges
of $45,875 and dealers received sales charges of $378,277 (as their concession
on gross sales charges of $424,152) for selling Class A shares of the Fund;
the Fund received $30,264,814 representing the aggregate net asset value of
such shares.

During the Fund's fiscal year ended April 30, 1997, MFD received sales charges
of $57,812 and dealers received sales charges of $511,340 (as their concession
on gross sales charges of $569,152) for selling Class A shares of the Fund;
the Fund received $56,979,645 representing the aggregate net asset value of
such shares.

During the Fund's fiscal year ended April 30, 1996, MFD received sales charges
of $40,392 and dealers received sales charges of $361,224 (as their concession
on gross sales charges of $401,616) for selling Class A shares of the Fund;
the Fund received $41,285,343 representing the aggregate net asset value of
such shares.

For the fiscal years ended April 30, 1996, 1997 and 1998, the contingent
deferred sales charge ("CDSC") imposed on the redemption of Class A shares was
$412, $19,436, and $9,603, respectively. For the fiscal years ended April 30,
1996, 1997 and 1998, the contingent deferred sales charge ("CDSC") imposed on
redemptions of Class B shares was $43,291 $60,596, and $92,222, respectively.
For the fiscal years ended 1996, 1997 and 1998, the CDSC imposed on redemption
of Class C shares was $-0-, $13,740, and $21,936, respectively.

The Distribution Agreement will remain in effect until August 1, 1999, 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 Trust's shares (as defined in "Investment Restrictions") and, in either
case, by a majority of the Trustees who are not parties to such 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 a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. Changes in the Fund's investments are
reviewed by its Board of Trustees. The Fund's portfolio manager may serve
other clients of the Adviser or any subsidiary of the Adviser in a similar
capacity.

Consistent with the foregoing primary consideration, the Conduct Rules of 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 MFD as a factor in the selection of broker-dealers to execute the
Fund's portfolio transactions.

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 by the Adviser to be equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of
the security as far as the Fund is concerned. In other cases, however, the
Fund believes that the Fund's ability to participate in volume transactions
will produce better executions for the Fund.

For the fiscal year ended April 30, 1998, the Fund did not acquire or sell
securities issued by regular broker-dealers of the Fund.

LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $50,000 or more of Class A shares of the Fund
alone or in combination with shares of any class of MFS Funds or 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 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 MFD 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 MFD
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.

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 that shareholder's new
investment, together with the current offering price value of all holdings of
Class A, B and C shares of that shareholder in the MFS Funds or MFS Fixed Fund
reaches a discount level. See "Purchases" in the Prospectus for the sales
charges on quantity purchases. For example, if a shareholder owns shares with
a current offering price value of $37,500 and purchases an additional $12,500
of Class A shares of the Fund, the sales charge for the $12,500 purchase would
be at the rate of 2.25% (the rate applicable to single transactions of
$50,000). A shareholder must provide the Shareholder Servicing Agent (or his
investment dealer must provide MFD) with information to verify that the
quantity sales charge discount is applicable at the time the investment is
made.

SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-
free at (800) 225-2606. The minimum purchase amount is $50 and the maximum
purchase amount is $100,000. Shareholders wishing to avail themselves of this
telephone purchase privilege must so elect on their Account Application and
designate thereon a bank and account number from which purchases will be made.
If a telephone purchase request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), the purchase will occur at the closing
net asset value of the shares purchased on that day. The Shareholder Servicing
Agent may be liable for any losses resulting from unauthorized telephone
transactions if it does not follow 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.

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 such 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
contingent deferred sales charge ("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 may direct the Shareholder
Servicing Agent to send him (or anyone he designates) regular periodic
payments based upon the value of his account. Such payments under a Systematic
Withdrawal Plan ("SWP") must be at least $100, except in certain limited
circumstances. The aggregate withdrawals of Class B shares and Class C shares
in any year pursuant to a SWP generally are limited to 10% of the value of the
account at the time of the 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 and Class
C shares will be made in the following order: (i) any "Free Amount"; (ii) to
the extent necessary, any "Reinvested Shares"; (iii) to the extent necessary,
the earliest "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 and Class C shares
pursuant to a SWP but will not be waived in the case of SWP redemptions of
Class A shares. 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 $5,000 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 the imposition of a CDSC on certain
redemptions. The shareholder may deposit into the account additional shares of
the Fund, change the payee or change the 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.

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

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 under the Automatic Exchange Plan, a dollar cost averaging
program (if available for sale). The Automatic Exchange Plan provides for
automatic exchanges 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, exchanges of at least $50 each
may be made to up to six different funds effective on the seventh day of each
month or of every third month, depending whether monthly or quarterly
exchanges 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 exchange will occur after receipt and processing
by the Shareholder Servicing Agent of an application in good order. Exchanges
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 exchanges.
Additional payments made to a shareholder's account will extend the period
that exchanges 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 an exchange is scheduled, such funds
may not be available for exchanges 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 exchanges will be charged in connection with the
Automatic Exchange Plan. However, exchanges 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
exchanged to each fund, the funds to which exchanges are to be made and the
timing of exchanges (monthly or quarterly), or termination of a shareholder's
participation in 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 of the Fund are registered; if by
telephone -- proper account identification is given by the dealer or
shareholder of record). Each Transfer 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 exchange.

A shareholder's right to make additional investments in any of the MFS Funds,
to make exhanges 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 the treatment of
any CDSC, see "Exchange Privilege" below.

REINSTATEMENT PRIVILEGE: Shareholders of the Fund and shareholders of the
other MFS Funds (except shares of MFS Money Market Fund, MFS Government Money
Market Fund and holders of Class A shares of MFS Cash Reserve Fund in the case
where such shares 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 invested 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 of Class C shares
and certain Class A shares, such 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 any 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 in an account 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 and if purchaser is
eligible to purchase the class of shares) 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., 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 (except that the minimum is $50 for accounts 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 the Shareholder Servicing Agent) or all the shares in the
account. Each exchange involves the redemption of 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 Fund. Any gain or loss on the
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
account. No more than five exchanges may be made in any one Exchange Request
by telephone. If an Exchange Request is received by the Shareholder Servicing
Agent prior to the close of regular trading on 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 Fund, 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 MFD 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. Any
gain or loss on the redemption of the shares exchanged is reportable in the
shareholders federal income tax return, unless such shares were held in a tax-
deferred retirement plan.

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 MFS Fund and consider the
differences in objectives and policies before making any exchange.
Shareholders of the other MFS Funds (except holders of shares of MFS Money
Market Fund, MFS Government Money Market Fund and Class A shares of 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 have the right to
except their units (exchange 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 each state-specific series
of MFS Municipal Series Trust may only benefit residents of such states.
Investors should consult with their own tax advisors to be sure that 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 (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. MFD makes
available through investment dealers, plans and/or custody agreements, the
following:

Roth Individual Retirement Accounts (Roth IRAs) (for individuals who desire
to make limited contributions to a tax-favored retirement program);

Simplified Employee Pension (SEP-IRA) Plans;

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

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

Certain other qualified pension and profit-sharing plans.

The plan documents provided by MFD 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 MFD, tax consequences and redemption
information, see the specific documents for that plan. Plan documents and
forms other than those provided by MFD 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.

Investors should consult with their tax advisers 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 Code by meeting all
applicable requirements of Subchapter M, including requirements as to the
nature of the Fund's gross income, the amount of Fund distributions, and the
composition of the Fund's portfolio assets. Because the Fund intends to
distribute all of its net investment income and net realized capital gains to
its 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 taxable income and Fund distributions
would generally be taxable as ordinary dividend income to the shareholders.

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. Dividends from ordinary income and any distributions
from net short-term capital gains, are taxable to shareholders as ordinary
income for federal income tax purposes, whether the distributions are paid in
cash or reinvested in additional shares. 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 of net
capital gains (i.e., the excess of net long-term capital gains over net short-
term capital losses), whether paid in cash or reinvested in additional shares,
are taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time shareholders have held their
shares. Any Fund dividend that is declared in October, November, or December
of any calendar year, that is payable to shareholders of record in such a
month, and that is paid the following January will be treated as if received
by the shareholders on December 31 of the year in which the dividend is
declared. The Fund will notify shareholders regarding the federal tax status
of its distributions after the end of each calendar year.

Any Fund distribution of net capital gains or net short-term capital gains
will have the effect of reducing the per share net asset value of shares in
the Fund by the amount of the distribution. Shareholders purchasing shares
shortly before the record date of any such 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 twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition 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 disposition 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 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 the shareholders.
Any investment in zero coupon bonds and certain securities purchased at a
market discount will cause the Fund to recognize income prior to the receipt
of cash payments with respect to those securities. In order to distribute 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.

An 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 transactions in options and Futures Contracts will be subject to
special tax rules that may affect the amount, timing and character of Fund
income and 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 that day, and any gain or loss
associated with the 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 may constitute "straddles", and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods
of Fund securities and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund will limit its activities in options and Futures Contracts to
the extent necessary to meet the requirements of Subchapter M of the Code.

Special tax considerations apply with respect to foreign investments of the
Fund. Foreign exchange gains and losses realized by the Fund will generally be
treated as ordinary income and losses.

Investment income received by the Fund from foreign securities may be subject
to foreign income taxes withheld at the source; the Fund does not expect to be
able to pass through to shareholders foreign tax credits with respect to such
foreign taxes. The United States has entered into tax treaties with many
foreign countries that may entitle the Fund to a reduced rate of tax or an
exemption from tax on such income; the Fund intends to qualify for treaty
reduced rates where available. It is not possible, however, 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.

Dividends and certain other payments to persons who are not citizens or
residents of the U.S. or U.S. entities ("Non-U.S. Persons") are generally
subject to U.S. tax withholding at a rate of 30%. The Fund intends to withhold
U.S. federal income tax at the rate of 30% (or any lower rate permitted under
an applicable treaty) on taxable dividends and other payments to Non-U.S.
Persons that are subject to such withholding. Any amounts overwithheld may be
recovered by such persons by filing a claim for refund with the U.S. Internal
Revenue Service within the time period appropriate 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 jurisdiction. The Fund is also required in
certain circumstances to apply backup withholding at the rate of 31% on
taxable dividends and redemption proceeds paid to any shareholder (including a
Non-U.S. Person) who does not furnish to the Fund certain information and
certifications or who is otherwise subject to backup withholding. Backup
withholding will not, however, be applied to payments that have been subject
to 30% withholding.

As long as it qualifies as a regulated investment company under the Code, the
Fund will not be required to pay Massachusetts income or excise taxes.
Distributions of the Fund 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. The Fund intends to
advise shareholders of the extent, if any, to which its distributions consist
of such interest. Shareholders are urged to consult their tax advisers
regarding the possible exclusion of such portion of their dividends for state
and local income tax purposes as well as regarding the tax consequences of an
investment in the Fund.

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 SAI, 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,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.) This
determination is made once during each such day as of the close of regular
trading on such 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 that class
outstanding. If acquired, preferred stocks, common stocks and warrants will be
valued at the last sale price on an exchange on which they are primarily
traded or at the last quoted bid price for unlisted securities. Debt
securities (other than short-term obligations) in the Fund's portfolio are
valued on the basis of valuations furnished by pricing services which utilize
both dealer-supplied valuations and electronic data processing techniques
which take into account 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, because such valuations
are believed to reflect more accurately the fair value of such securities. Use
of the pricing service has been approved by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued
based upon dealer supplied valuations. Other short-term obligations are valued
at amortized cost, which constitutes fair value as determined by the Board of
Trustees. Positions in listed options, Futures Contracts and Options on
Futures Contracts will normally be valued at the settlement price on the
exchange on which they are primarily traded. Portfolio securities 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.

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 calculate (i) a total return, which
is not reduced by the CDSC (4% maximum for Class B shares and 1% maximum for
Class C shares) 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 current maximum sales charge (currently 2.50%) 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. The Fund offers multiple
classes of shares which were initially offered for sale to, and purchased by,
the public on different dates (the class "inception date"). The calculation of
total rate of return for a class of shares which has a later class inception
date than another class of shares of the Fund is based both on (i) the
performance of the Fund's newer class from its inception date and (ii) the
performance of the Fund's oldest class from its inception date up to the class
inception date of the newer class.

Total rate of return quotations for each class are presented in Appendix A
attached hereto under the heading "Performance Quotations."

PERFORMANCE RESULTS: The performance results for Class A shares presented in
Appendix A attached hereto under the heading "Performance Results" assume an
initial investment of $10,000 in Class A shares, and cover the period from
February 26, 1992 to December 31, 1997. It has been assumed that dividends and
capital gain distributions were reinvested in additional shares. These
performance results, including any yield or total rate of return quotations
provided by the Fund should not be considered as representative of the
performance of the Fund in the future since the net asset value 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 published for other investment companies or other investment
vehicles. Total rate of return reflects the performance of both principal and
income. Current net asset value as well as account balance information may be
obtained by calling 1-800-MFS-TALK (637-8255).

YIELD: Any yield quotation for a class of shares of the Fund is based on the
annualized net investment income per share of that class over a 30-day period.
The yield for a class is calculated by dividing the net investment income per
share of that class earned during the period by the maximum offering price per
share 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 that class during the period, minus accrued
expenses for the period by (ii) the average number of shares of that class
entitled to receive dividends during the period multiplied by the maximum
offering price per share on the last day of the period. The Fund's yield
calculations for Class A shares assume a maximum sales charge of 2.50%. The
yield calculation for Class B and Class C shares assumes no CDSC is paid.
Yield quotations for each class of shares are presented in Appendix A attached
hereto under the heading "Performance Quotations."

CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, 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 12 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 during
the past 12 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 from 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 2.50%.
Current distribution rate quotations for each class of shares are presented in
Appendix A attached hereto under the heading "Performance Quotations."

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 Securities Corporation, Inc.,
CDA Wiesenberger, Shearson Lehman and Salomon Bros. Indices, Ibbotson,
Business Week, Lowry Associates, Media General, Investment Company Data, The
New York Times, Your Money, Strangers Investment Advisor, Financial Planning
on Wall Street, Standard and Poor's, Individual Investor, The 100 Best Mutual
Funds You Can Buy, by Gordon K. Williamson, Consumer Price Index, and Sanford
C. Bernstein & Co. Fund performance may also be compared to the performance of
other mutual funds tracked by financial or business publications or
periodicals. The Fund may also quote evaluations mentioned in independent
radio or television broadcasts and may use charts and graphs to illustrate the
past performance of various indices such as those mentioned above and
illustrations using hypothetical rates of return to illustrate the effects of
compounding and tax-deferral. The Fund may advertise examples of the effects
of periodic investment plans, including the principle of dollar cost
averaging. In such a program, an investor invests a fixed dollar amount in a
fund at periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does not
assure a profit or guard against a loss in a declining market, the investor's
average cost per share can be lower than if fixed numbers of shares are
purchased at the same intervals.

The Fund may also quote evaluations mentioned in independent radio or
television broadcasts.

MFS FIRSTS: MFS has a long history of innovations.

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

-- 1924 -- Massachusetts Investors Trust is the first mutual fund to
make full public disclosure of its operations in shareholder reports.

-- 1932 -- One of the first internal research departments is established
to provide in-house analytical capability for an investment
management firm.

-- 1933 -- Massachusetts Investors Trust is the first mutual fund to
register under the Securities Act of 1933 ("Truth in Securities Act"
or "Full Disclosure Act").

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

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

-- 1979 -- Spectrum becomes the first combination fixed/ variable
annuity with no initial sales charge.

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

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

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

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

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

-- 1989 -- MFS(R) Regatta becomes America's first non- qualified
market-value-adjusted fixed/variable annuity.

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

-- 1993 -- MFS(R) World Growth Fund is the first global emerging markets
fund to offer the expertise of two sub-advisers.

-- 1993 -- MFS becomes money manager of MFS(R) Union Standard(R) Equity
Fund, the first fund to invest in companies deemed to be
union-friendly by an Advisory Board of senior labor officials, senior
managers of companies with significant labor contracts, academics and
other national labor leaders or experts.

8. DISTRIBUTION PLAN
The Trustees have adopted a Distribution Plan for Class A, Class B and Class C
shares (the "Distribution Plan") 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 Distribution Plan would benefit the Fund and
each respective class of shareholders. The provisions of the Distribution Plan
are severable with respect to each class of shares offered by the Fund. The
Distribution Plan is 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.

SERVICE FEES:
With respect to Class A shares, no service fees will be paid: (i) to any
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 MFD (MFD, however, may waive
this minimum amount requirement from time to time); or (ii) to any insurance
company which has entered into an agreement with the Fund and MFD that permits
such insurance company to purchase Class A 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.

DISTRIBUTION FEES:
The purpose of distribution payments to MFD under the Distribution Plan is to
compensate MFD for its distribution services to the Fund. MFD pays commissions
to dealers as well as 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.

DISTRIBUTION AND SERVICE FEES PAID DURING THE FUND'S LAST FISCAL YEAR: During
the fiscal year ended April 30, 1998, the Fund paid the following Distribution
Plan expenses:

AMOUNT OF AMOUNT OF AMOUNT OF
DISTRIBUTION DISTRIBUTION DISTRIBUTION
AND SERVICE AND SERVICE AND SERVICE
FEES PAID FEES RETAINED FEES RECEIVED
CLASS OF SHARES BY FUND BY MFD BY DEALERS
- - --------------- ------------- ------------- --------------
Class A Shares $142,807 $ 26,500 $116,307
Class B Shares $374,751 $300,597 $ 74,154
Class C Shares $209,344 $ 1,421 $207,923

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's 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 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 the shares of the
Fund into one or more classes. Pursuant thereto, the Trustees have authorized
the issuance of three classes of shares of the Trust's three series, Class A
shares, Class B shares and Class C shares as well as Class I shares for this
Fund and one of the Trust's other series. 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 class would participate equally in the
earnings, dividends and assets allocable to that class of the particular
series.

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 under certain circumstances 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
affirmative vote of the holders of a majority of the Trust's shares. Shares
have no pre-emptive or conversion rights (except as described 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 or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of the Trust property for
any shareholder held personally liable for the obligations of the Trust. The
Declaration of Trust also provides that it shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance)
for the protection of the Trust, its shareholders, Trustees, officers,
employees and agents 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 willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.

10. INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Trust's independent auditors providing audit
services, tax preparation, and assistance and consultation with respect to the
preparation of filings with the SEC.

The Portfolio of Investments at April 30, 1998, the Statement of Assets and
Liabilities at April 30, 1998, the Statement of Operations for the year ended
April 30, 1998, the Statement of Changes in Net Assets for the two years ended
April 30, 1998, the Notes to Financial Statements and the Independent
Auditors' Report, each of which is included in the Annual Report to
shareholders of the Fund, are incorporated by reference into this SAI and have
been so incorporated in reliance upon the report of Deloitte & Touche LLP,
independent auditors, as experts in accounting and auditing. A copy of the
Annual Report accompanies this SAI.

<PAGE>

APPENDIX A

PERFORMANCE INFORMATION

<TABLE>
PERFORMANCE RESULTS -- CLASS A SHARES
<CAPTION>

VALUE OF VALUE OF VALUE OF
INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
YEAR ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
---------- ---------- ------------- --------- -----
<S> <C> <C> <C> <C>
December 31, 1992* $9,826 $2 $ 549 $10,377
December 31, 1993 9,826 2 1,213 11,041
December 31, 1994 9,266 2 1,798 11,066
December 31, 1995 9,666 2 2,686 12,354
December 31, 1996 9,453 2 3,503 12,958
December 31, 1997 9,319 2 4,331 13,654

* For the period from the commencement of investment operations, February 26, 1992, to December 31, 1992.
</TABLE>

Explanatory Notes: The results assume that the initial investment in Class A
shares was reduced by the current maximum applicable sales charge. No
adjustment has been made for income taxes, if any, payable by shareholders.

PERFORMANCE QUOTATIONS

All performance quotations are as of April 30, 1998.

<TABLE>
<CAPTION>
ACTUAL
30-DAY 30-DAY
AVERAGE ANNUAL TOTAL RETURNS* YIELD YIELD
(INCLUDING (WITHOUT CURRENT
ANY ANY DISTRIBUTION
1 YEAR 5 YEAR LIFE OF FUND WAIVERS) WAIVERS) RATE
------ ------ ------------ -------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Class A Shares with sales charge ........ 3.32% 4.85% 5.54%(1) N/A 6.28% 6.37%
Class A Shares without sales charge ..... 5.97% 5.38% 5.97%(1) N/A N/A N/A
Class B Shares with CDSC ................ 1.02% 4.19%(2) 5.31%(2) N/A N/A N/A
Class B Shares without CDSC ............. 4.98% 4.53%(2) 5.31%(2) N/A 5.49% 5.69%
Class C Shares with CDSC ................ 3.95% 4.68%(3) 5.40%(3) N/A N/A N/A
Class C Shares without CDSC ............. 4.94% 4.68%(3) 5.40%(3) N/A 5.46% 5.67%
Class I Shares .......................... 5.98% 5.39%(4) 5.99%(4) N/A 6.44% 6.68%(4)

(1) From the initial public offering date of the Fund on February 26, 1992.
(2) Class B share performance includes the performance of the Fund's Class A shares for periods prior to the inception of Class
B shares on September 7, 1993. Sales charges, expenses and expense ratios, and therefore performance, for Class A and Class
B shares differ. Class B share performance has been adjusted to reflect that Class B shares generally are subject to a CDSC
(unless the performance quotation does not give effect to the CDSC) whereas Class A shares generally are subject to an
initial sales charge. Class B share performance has not, however, been adjusted to reflect differences in operating expenses
(e.g., Rule 12b-1 fees), which generally are lower for Class A shares.
(3) Class C share performance includes the performance of the Fund's Class A shares for periods prior to the inception of Class
C shares on July 1, 1994. Sales charges, expenses and expense ratios, and therefore performance, for Class A and Class C
shares differ. Class C share performance has been adjusted to reflect that Class C shares generally are subject to a CDSC
(unless the performance quotation does not give effect to the CDSC) whereas Class A shares generally are subject to an
initial sales charge. Class C share performance has not, however, been adjusted to reflect differences in operating expenses
(e.g., Rule 12b-1 fees), which generally are lower for Class A shares.
(4) Class I share performance includes the performance of the Fund's Class A shares for the periods prior to the inception of
Class I shares on January 2, 1997. Sales charges, expenses and expense ratios, and therefore performance for Class I and A
shares differ. Class I share performance has been adjusted to reflect that Class I shares are not subject to an initial
sales charge, whereas Class A shares generally are subject to an initial sales charge. Class I share performance has not,
however, been adjusted to reflect differences in operating expenses (e.g., Rule 12b-1 fees), which generally are lower for
Class I shares.
* Total rate of return figures would have been lower if an expense limitation was not in place.
</TABLE>

<PAGE>

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

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

CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

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 AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110

MFS(R) LIMITED
MATURITY FUND

500 BOYLSTON STREET
BOSTON, MA 02116

[LOGO] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)

MLM-13-9/98/.5M 36/236/336
<PAGE>
MFS(R) MUNICIPAL LIMITED MATURITY FUND
SEPTEMBER 1, 1998

PROSPECTUS

CLASS A SHARES OF BENEFICIAL INTEREST
CLASS B SHARES OF BENEFICIAL INTEREST
CLASS C SHARES OF BENEFICIAL INTEREST
- - --------------------------------------------------------------------------------

MFS Municipal Limited Maturity Fund (the "Fund") is a diversified series of
MFS(R) Series Trust IX (the "Trust"), an open-end investment company presently
consisting of three series. The investment objective of the Fund is to provide
as high a level of current income exempt from federal income taxes as is
considered consistent with prudent investing while seeking protection of
shareholders' capital. See "Investment Objective and Policies" below. The
minimum initial investment generally is $1,000 per account. See "Information
Concerning Shares of the Fund -- Purchases" below.

This Prospectus sets forth concisely the information concerning the Trust and
the Fund 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 September
1, 1998, as amended or supplemented from time to time (the "SAI"), which
contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference.

See page 38 for a further description of the information set forth in the SAI.
A copy of the SAI may be obtained without charge by contacting the Shareholder
Servicing Agent (see back cover for address and phone number). The SEC
maintains an Internet World Wide Web site at http://www.sec.gov that contains
the SAI, materials that are incorporated by reference into this Prospectus and
the SAI, and other information regarding the Fund. This Prospectus is
available on the Adviser's Internet World Wide Web site at http://www.mfs.com.

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

TABLE OF CONTENTS
Page

1. Expense Summary ..................................... 3
2. Condensed Financial Information ..................... 5
3. The Fund ............................................ 8
4. Investment Objective and Policies ................... 9
5. Certain Securities and Investment Techniques ........ 10
6. Additional Risk Factors ............................. 13
7. Management of the Fund .............................. 14
8. Information Concerning Shares of the Fund ........... 16
Purchases ........................................ 16
Exchanges ........................................ 24
Redemptions and Repurchases ...................... 25
Distribution Plan ................................ 29
Distributions .................................... 31
Tax Status ....................................... 32
Net Asset Value .................................. 33
Description of Shares, Voting Rights and
Liabilities .................................... 33
Performance Information .......................... 34
Expenses ......................................... 35
Provision of Annual and Semiannual Reports ....... 35
9. Shareholder Services ................................ 36
Appendix A -- Waivers of Sales Charges .............. A-1
Appendix B -- Tax Equivalent Yield Table ............ B-1
Appendix C -- Description of Municipal Bonds and
Ratings ........................................... C-1

<PAGE>

1. EXPENSE SUMMARY

CLASS A CLASS B CLASS C
------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on
Purchases of Shares (as a percentage of
offering price) ......................... 2.50% None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) ............................. See Below(2) 4.00% 1.00%

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees (after expense limitation)(1) 0.30% 0.30% 0.30%
Rule 12b-1 Fees ........................... 0.15%(3) 0.92%(4) 1.00%(4)
Other Expenses (after expense
limitation)(5)(6) ....................... 0.40% 0.40% 0.40%
---- ---- ----
Total Operating Expenses (after expense
limitations)(5)(6) ...................... 0.85% 1.62% 1.70%

- - ------------
(1) Effective July 1, 1997, the Adviser has reduced its advisory fee to 0.30%
per annum of the Fund's average daily net assets. This temporary fee
reduction may be rescinded by the Adviser, without notice to
shareholders, with the consent of the Fund's Board of Trustees. Absent
this reduction, management fees would have been 0.40%.

(2) Purchases of $1 million or more and certain retirement plans are not
subject to an initial sales charge; however, a contingent deferred sales
charge ("CDSC") of 1% will be imposed on such purchases made in the event
of certain redemption transactions within 12 months following such
purchases (see "Information Concerning Shares of the Fund -- Purchases"
below).

(3) The Fund has adopted a distribution plan for its shares in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") (the "Distribution Plan"), 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 Class A
shares. Payment of the 0.10% per annum Class A distribution fee will
commence on such date as the Trustees of the Trust may determine. A
portion of the Class A service fee, equal to 0.15% of the average daily
net assets of the Fund attributable to Class A shares, is currently being
paid by the Fund; payment of the remaining portion of the Class A service
fee, equal to 0.10% per annum, will become payable on such date as the
Trustees of the Trust may determine. Distribution expenses paid under this
Plan, together with the initial sales charge, may cause long-term
shareholders to pay more than the maximum sales charge that would have
been permissible if imposed entirely as an initial sales charge. See
"Information Concerning Shares of the Fund -- Distribution Plan" below.

(4) The Fund's Distribution Plan 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
and Class C shares, respectively. Except in the case of the 0.25% per
annum Class B service fee paid by the Fund upon the sale of Class B shares
in the first year, the Class B service fee is currently set at 0.15% per
annum and may be increased to a maximum of 0.25% per annum on such date as
the Trustees of the Trust may determine. Distribution expenses paid under
the Distribution Plan with respect to Class B or Class C shares together
with the CDSC payable upon redemption of Class B or Class C shares, may
cause long-term shareholders to pay more than the maximum sales charge
that would have been permissible if imposed entirely as an initial sales
charge. See "Information Concerning Shares of the Fund -- Distribution
Plan" below.

(5) The Adviser has agreed to bear the Fund's expenses, subject to
reimbursement by the Fund, such that "Other Expenses" do not exceed 0.40%
per annum of the Fund's average daily net assets during the current fiscal
year. Otherwise, "Other Expenses" for the Fund would be 0.45%, 0.45% and
0.45% per annum for Class A, B and C shares, respectively. Absent the fee
reduction and expense reimbursement arrangements described above, "Total
Operating Expenses" would have been 1.00%, 1.77% and 1.85% per annum for
Class A, B and C shares, respectively. See "Information Concerning Shares
of the Fund -- Expenses."

(6) The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have
the effect of reducing the Fund's expenses). Any such fee reductions are
not reflected under "Other Expenses."

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):

PERIOD CLASS A CLASS B CLASS C
- - ------ -------- --------- ---------
(1) (1)
1 year .......................... $ 9 $ 56 $ 16 $ 27 $ 17
3 years ......................... 27 81 51 54 54
5 years ......................... 47 108 88 92 92
10 years ......................... 105 171(2) 171(2) 201 201

- - ------------
(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.

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 of the Prospectus: (i) varying sales
charges on share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases";
(iii) management fees -- "Management of the Fund", and (iv) Rule 12b-1 (i.e.,
distribution plan) fees -- "Distribution Plan."

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.

2. CONDENSED FINANCIAL INFORMATION
The following information has been audited for at least the latest five fiscal
years of the Fund and should be read in conjunction with the financial
statements included in the Fund's Annual Report to Shareholders, which are
incorporated by reference into the SAI in reliance upon the report of the
Fund's independent auditors, given upon their authority, as experts in
accounting and auditing. The Fund's independent auditors are Deloitte &
Touche LLP.

<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------------------------------
1998 1997 1996 1995
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $ 7.50 $ 7.53 $ 7.45 $ 7.47
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.30 $ 0.29 $ 0.30 $ 0.28
Net realized and unrealized gain (loss) on
investments 0.07 (0.03) 0.08 (0.02)
------ ------ ------ ------
Total from investment operations $ 0.37 $ 0.26 $ 0.38 $ 0.26
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.30) $(0.29) $(0.30) $(0.28)
In excess of net investment income(++) -- -- -- (0.00)
------ ------ ------ ------
Total distributions declared to shareholders $(0.30) $(0.29) $(0.30) $(0.28)
------ ------ ------ ------
Net asset value - end of period $ 7.57 $ 7.50 $ 7.53 $ 7.45
------ ------ ------ ------
Total return(+) 5.02% 3.51% 5.11% 3.55%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses 0.87% 0.95% 0.95% 0.95%
Net investment income 3.97% 3.86% 4.00% 3.74%
PORTFOLIO TURNOVER 51% 78% 43% 50%
NET ASSETS AT END OF PERIOD (000 OMITTED) $37,595 $40,953 $50,387 $64,329
# Per share data for the periods subsequent to April 30, 1994, are based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
(++) For the year ended April 30, 1995, the per share distributions in excess of the net investment income were $0.002.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund,
exclusive of management, distribution, and service fees, at not more than 0.40% of average daily net assets. In
addition, the investment adviser voluntarily waived a portion of its management fee and the distributor did not
impose a portion of its service fee. If these fees had been incurred by the Fund, and if other expenses had not been
limited to 0.40%, the net investment income per share and the ratios would have been:

Net investment income $ 0.30 $ 0.29 $ 0.30 $ 0.28
Ratios (to average net assets):
Expenses## 1.01% 1.02% 0.99% 0.95%
Net investment income 3.85% 3.79% 3.96% 3.74%

</TABLE>
<PAGE>

<TABLE>
FINANCIAL HIGHLIGHTS -- CONTINUED
<CAPTION>

EIGHT MONTHS YEAR ENDED
ENDED AUGUST 31,
APRIL 30, ----------------------------
1994 1993 1992*
----------------------------------------------
CLASS A
----------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $ 7.72 $ 7.43 $ 7.31
------ ------ ------
Income from investment operations -
Net investment income(S) $ 0.19 $ 0.31 $ 0.15
Net realized and unrealized gain (loss) on investments (0.22) 0.30 0.12
------ ------ ------
Total from investment operations $(0.03) $ 0.61 $ 0.27
------ ------ ------
Less distributions declared to shareholders -
From net investment income(+++) $(0.19) $(0.31) $(0.15)
From net realized gain on investments -- (0.01) --
In excess of net investment income(++) (0.00) -- --
In excess of net realized gain on investments (0.03) -- --
------ ------ ------
Total distributions declared to shareholders $(0.22) $(0.32) $(0.15)
------ ------ ------
Net asset value - end of period $ 7.47 $ 7.72 $ 7.43
------ ------ ------
Total return(+) (0.59)%+ 8.47% 8.26%+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses 0.89%+ 0.68% 0.55%+
Net investment income 3.72%+ 4.04% 4.25%+
PORTFOLIO TURNOVER 48% 69% 8%
NET ASSETS AT END OF PERIOD (000 OMITTED) $83,367 $87,192 $21,312
* For the period from the commencement of the Fund's investment operations, March 17, 1992, through August
31, 1992.
+ Annualized.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
(++) For the eight months ended April 30, 1994, the per share distributions in excess of the net investment
income were $0.002.
(+++) For the year ended August 31, 1992, the per share distributions from net investment income includes a per
share distribution from paid-in capital of $0.0007.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of
the Fund, exclusive of management, distribution, and service fees, at not more than 0.40% of average daily
net assets. In addition, the investment adviser voluntarily waived a portion of its management fee and the
distributor did not impose a portion of its service fee. If these fees had been incurred by the Fund, and
if other expenses had not been limited to 0.40%, the net investment income per share and the ratios would
have been:
Net investment income $ 0.18 $ 0.28 $ 0.13
Ratios (to average net assets):
Expenses 1.12%+ 1.16% 1.16%+
Net investment income 3.49%+ 3.57% 3.64%+

</TABLE>
<PAGE>

<TABLE>
FINANCIAL HIGHLIGHTS -- CONTINUED
<CAPTION>

YEAR ENDED APRIL 30,
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994**
-----------------------------------------------------------------------------
CLASS B
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $ 7.49 $ 7.52 $ 7.44 $ 7.46 $ 7.75
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.24 $ 0.23 $ 0.25 $ 0.21 $ 0.14
Net realized and unrealized gain (loss) on
investments 0.07 (0.03) 0.07 (0.02) (0.26)
------ ------ ------ ------ ------
Total from investment operations $ 0.31 $ 0.20 $ 0.32 $ 0.19 $(0.12)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.23) $(0.24) $(0.21) $(0.13)
In excess of net investment income(++) -- -- -- (0.00) (0.01)
In excess of net realized gain on
investments -- -- -- -- (0.03)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.24) $(0.23) $(0.24) $(0.21) $(0.17)
------ ------ ------ ------ ------
Net asset value - end of period $ 7.56 $ 7.49 $ 7.52 $ 7.44 $ 7.46
------ ------ ------ ------ ------
Total return 4.22% 2.71% 4.34% 2.67% (2.37)%+
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA(S):
Expenses 1.64% 1.73% 1.70% 1.80% 1.74%+
Net investment income 3.20% 3.08% 3.25% 2.88% 2.79%+
PORTFOLIO TURNOVER 51% 78% 43% 50% 48%
NET ASSETS AT END OF PERIOD (000 OMITTED) $7,618 $6,503 $7,749 $7,792 $7,415
** For the period from the inception of Class B, September 7, 1993, through April 30, 1994.
+ Annualized.
# Per share data for the periods subsequent to April 30, 1994, are based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(++) For the year ended April 30, 1995, the per share distributions in excess of the net investment income were $0.001.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund,
exclusive of management, distribution, and service fees, at not more than 0.40% of average daily net assets. In addition,
the investment adviser voluntarily waived a portion of its management fee and the distributor did not impose a portion of
its service fee. If these fees had been incurred by the Fund, and if other expenses had not been limited to 0.40%, the
net investment income per share and the ratios would have been:
Net investment income $ 0.24 $ 0.23 $ 0.25 $ 0.21 $ 0.12
Ratios (to average net assets):
Expenses## 1.78% 1.80% 1.74% 1.80% 2.05%+
Net investment income 3.08% 3.01% 3.21% 2.88% 2.48%+

</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS -- CONTINUED
<CAPTION>

YEAR ENDED APRIL 30,
----------------------------------------------------------------
1998 1997 1996 1995***
----------------------------------------------------------------
CLASS C
---------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $ 7.50 $ 7.53 $ 7.45 $ 7.45
----- ----- ----- -----
Income from investment operations# -
Net investment income(S) $ 0.23 $ 0.23 $ 0.23 $ 0.21
Net realized and unrealized gain (loss) on
investments 0.08 (0.03) 0.08 (0.02)
----- ----- ----- -----
Total from investment operations $ 0.31 $ 0.20 $ 0.31 $ 0.19
----- ----- ----- -----
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.23) $(0.23) $(0.19)
In excess of net investment income(++) -- -- -- (0.00)
----- ----- ----- -----
Total distributions declared to shareholders $(0.24) $(0.23) $(0.23) $(0.19)
----- ----- ----- -----
Net asset value - end of period $ 7.57 $ 7.50 $ 7.53 $ 7.45
----- ----- ----- -----
Total return 4.13% 2.64% 4.23% 2.53%+
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA(S):
Expenses 1.72% 1.80% 1.80% 1.79%+
Net investment income 3.11% 3.03% 3.16% 2.77%+
PORTFOLIO TURNOVER 51% 78% 43% 50%
NET ASSETS AT END OF PERIOD (000 OMITTED) $3,250 $3,297 $3,013 $1,934
*** For the period from the inception of Class C, July 1, 1994, through April 30, 1995.
+ Annualized.
# Per share data for the periods subsequent to April 30, 1994, are based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
(++) For the period ended April 30, 1995, the per share distributions in excess of the net investment income were
$0.001.
(S) Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the Fund,
exclusive of management, distribution, and service fees, at not more than 0.40% of average daily net assets. In
addition, the investment adviser voluntarily waived a portion of its management fee and the distributor did not
impose a portion of its service fee. If these fees had been incurred by the Fund, and if other expenses had not
been limited to 0.40%, the net investment income per share and the ratios would have been:
Net investment income $ 0.23 $ 0.22 $ 0.23 $ 0.21
Ratios (to average net assets):
Expenses## 1.86% 1.87% 1.84% 1.79%+
Net investment income 2.99% 2.96% 3.12% 2.77%+

</TABLE>

3. THE FUND
The Fund is a diversified series of the Trust, an open-end management
investment company which was organized as a business trust under the laws of
The Commonwealth of Massachusetts in 1985. The Trust presently consists of
three series, each of which represents a portfolio with separate investment
policies. Shares of the Fund are continuously sold to the public and the Fund
uses the proceeds to buy securities for its portfolio. Three classes of shares
of the Fund currently are offered for sale to the general public. Class A
shares are offered at net asset value plus an initial sales charge up to a
maximum of 2.50% of the offering price (or a CDSC upon redemption of 1.00%
during the first year in the case of purchases of $1 million or more and
certain purchases by retirement plans) and subject to an annual distribution
and service fee up to a maximum of 0.35% per annum. Class B shares are offered
at net asset value without an initial sales charge but subject to a CDSC upon
redemption (declining from 4.00% during the first year to 0% after six years)
and an annual distribution and service fee up to a maximum of 1.00% per annum;
Class B shares will convert to Class A shares approximately eight years after
purchase. Class C shares are offered at net asset value without an initial
sales charge but subject to an annual distribution fee and service fee up to a
maximum of 1.00% per annum. 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 Trust and the Fund. A majority of the Trustees of the Trust are not
affiliated with the 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. The selection of
investments and the way they are managed depend on the conditions and trends
in the economy and the financial marketplaces. The Fund also offers to buy
back (redeem) its shares from its shareholders at any time at net asset value,
less any applicable CDSC.

4. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE: The Fund's investment objective is to provide as high a
level of current income exempt from federal income taxes as is considered
consistent with prudent investing and protection of shareholders' capital. Any
investment involves risk and there can be no assurance that the Fund will
achieve its investment objective. The Fund's investment objective and policies
are not fundamental and may be changed without shareholder approval. A change
in the Fund's investment objective may result in the Fund having an investment
objective different from the objective which the shareholder considered
appropriate at the time of investment in the Fund.

INVESTMENT POLICIES: The Fund's policy, under normal conditions, is to invest
substantially all (i.e., at least 80%) of its assets in debt securities issued
by or on behalf of states, territories and possessions of the United States
and the District of Columbia and their political subdivisions, agencies or
instrumentalities, the interest on which is exempt from federal income tax
("Municipal Bonds" or "tax-exempt securities"). The interest income on certain
of these obligations may be subject to an alternative minimum tax, which is
considered to be tax-exempt for purposes of the 80% test described above. As a
defensive measure during times of adverse market conditions, up to 50% of the
Fund's assets may be temporarily invested in short-term investments described
in items 3 and 4 below.

Substantially all of the Fund's total assets will be invested in:

(1) Tax-exempt securities which are rated AAA, AA, A or BBB by Standard &
Poor's Ratings Services ("S&P"), Fitch IBCA ("Fitch") or by Duff &
Phelps Credit Rating Co. ("Duff & Phelps"), or are rated Aaa, Aa, A or
Baa by Moody's Investors Service, Inc. ("Moody's") (and comparable
unrated securities);

(2) Notes of issuers having an issue of outstanding Municipal Bonds rated
AAA, AA, A or BBB by S&P, Fitch or by Duff & Phelps, or Aaa, Aa, A or
Baa by Moody's (or issues of comparable quality) or which are
guaranteed by the U.S. Government;

(3) Obligations issued or guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities; and

(4) Commercial paper, obligations of banks (including certificates of
deposit and bankers' acceptances) with $1 billion or more of assets,
and cash.

Under normal market conditions, the dollar weighted average maturity of the
Fund's portfolio will not exceed 5 years and substantially all of the
securities held by the Fund will have remaining maturities of 10 years or
less.

Interest income from the short-term investments described in items 3 and 4
above will be taxable to shareholders as ordinary income. For a comparison of
yields on Municipal Bonds and taxable securities, see the Taxable Equivalent
Yield Table in Appendix B to this Prospectus. For a general discussion of
Municipal Bonds and descriptions of short-term investments permitted as
investments and the ratings of S&P, Fitch, Duff & Phelps and Moody's for
Municipal Bonds, see Appendix C to this Prospectus.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Bonds. For the effect of current federal tax law on this
exemption, see the "Tax Status" section of this Prospectus.

5. CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
Consistent with the Fund's investment objective and policies, the Fund may
engage in the following securities transactions and investment techniques,
many of which are described more fully in the SAI. See "Investment Objective,
Policies and Restrictions" in the SAI.

"WHEN-ISSUED" OR "FORWARD DELIVERY" SECURITIES: Some tax-exempt securities may
be purchased on a "when-issued" or on a "forward delivery" basis, which means
that the securities will be delivered to the Fund at a future date, often
beyond customary settlement time. The commitment to purchase a security for
which payment will be made on a future date may be deemed a separate security.
The Fund does not pay for the securities until received and does not start
earning interest on them until the contractual settlement date. While awaiting
delivery of securities purchased on such bases, the Fund will segregate liquid
assets sufficient to cover its commitments. Although the Fund does not intend
to make such purchases for speculative purposes, purchases of securities on
such bases may involve more risk than other types of purchases.

ZERO COUPON BONDS: Municipal Bonds in which the Fund may invest also include
zero coupon bonds. Zero coupon bonds are debt obligations which are issued at
a significant discount from face value and do not require the periodic payment
of interest. The discount approximates the total amount of interest the bonds
will accrue and compound over the period until maturity or the first interest
payment date at a rate of interest reflecting the market rate of the security
at the time of issuance. Zero coupon bonds 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, as required, which
is distributable to shareholders and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy the Fund's distribution obligations.

RESTRICTED SECURITIES: The Fund may also purchase securities that are not
registered under the Securities Act of 1933 ("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"). A determination is made, based upon a continuing review of the
trading markets for a specific Rule 144A security, whether such security is
liquid and thus not subject to the Fund's limitation on investing not more
than 15% of its net assets in illiquid investments. 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, retains
oversight of the liquidity determinations, focusing on factors such as
valuation, liquidity and availability of information. Investing in Rule 144A
securities could have the effect of decreasing the level of liquidity in the
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.

OPTIONS: The Fund may write (sell) "covered" put and call options on fixed
income securities. Call options written by the Fund give the holder the right
to buy the underlying securities from the Fund at a fixed exercise price up to
a stated expiration date or, in the case of certain options, on such date. Put
options written by the Fund give the holder the right to sell the underlying
securities to the Fund during the term of the option at a fixed exercise price
up to a stated expiration date or, in the case of certain options, on such
date. Call options are "covered" by the Fund, for example, when it owns the
underlying securities, and put options are "covered" by the Fund, for example,
when it has established a segregated account of liquid assets which can be
liquidated promptly to satisfy any obligation of the Fund to purchase the
underlying securities. The Fund may also write straddles (combinations of puts
and calls on the same underlying security). The writing of straddles generates
additional premium income but may present greater risk.

The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised
or is closed out at a profit. The amount of the premium will reflect, among
other things, the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the option,
supply and demand and interest rates. By writing a call option, 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 higher than its then-current market
value, resulting in a potential capital loss unless the security subsequently
appreciates in value.

The Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which it purchases an
option having the same terms as the option written. It is possible, however,
that illiquidity in the options markets may make it difficult from time to
time for the Fund to close out its written option positions.

The Fund may also purchase put or call options in anticipation of changes in
interest rates which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. The
premium paid for a put or call 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 changes sufficiently to result in
exercise, the option may expire without value to the Fund.

In addition, the Fund may purchase warrants on fixed income securities. A
warrant on a fixed income security is a long-dated (i.e., long term) call
option conveying to the holder of the warrant the right, but not the
obligation, to purchase a fixed income security of a specific description
(from the issuer) on a certain date or dates (the exercise date) at a fixed
exercise price.

The Fund intends to write and purchase options on securities primarily for
hedging purposes and also in an effort to increase current income. Options on
securities, including warrants, that are written or purchased by the Fund will
be traded on U.S. securities exchanges and in the over-the-counter market.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and
sell futures contracts on fixed income securities or indices of such
securities, including Municipal Bond indices and any other indices of fixed
income securities which may become available for trading ("Futures
Contracts"). The Fund may also purchase and write options on such Futures
Contracts ("Options on Futures Contracts"). These instruments will be used to
hedge against anticipated future changes in interest rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase
at a later date. Should interest rates move in an unexpected manner, the Fund
may not achieve the anticipated benefits of the hedging transactions and may
realize a loss. Such investments may also be used for non-hedging purposes, to
the extent permitted by applicable law.

ADDITIONAL POLICIES 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, Options on Futures Contracts and
Options on Foreign Currencies traded on a CFTC-regulated exchange only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for non-
bona fide hedging purposes, provided that the aggregate initial margin and
premiums required to establish such non-bona fide hedging positions does not
exceed 5% of the liquidation value of the Fund's assets after taking into
account unrealized profits and unrealized losses on any such contracts the
Fund has entered into, and excluding, in computing such 5%, the in-the-money
amount with respect to an option that is in-the-money at the time of purchase.

Futures Contracts and Options on Futures Contracts that are entered into by
the Fund will be traded on U.S. commodities exchanges.

6. ADDITIONAL RISK FACTORS
The following discussion of additional risk factors supplements the risk
factors described above. Additional information concerning risk factors can be
found under the caption "Investment Objectives, Policies and Restrictions" in
the SAI.

FIXED INCOME SECURITIES: The net asset value of the shares of an open-end
investment company such as the Fund, which invests primarily in fixed income
tax-exempt securities, changes as the general levels of interest rates
fluctuate. When interest rates decline, the market value of the portfolio can
be expected to rise. Conversely, when interest rates rise, the market value of
the portfolio can be expected to decline.

SECURITIES RATED BBB/Baa: As noted above, the Fund may invest in tax-exempt
securities rated Baa by Moody's or BBB by S&P or Fitch (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 tax-exempt securities. If a security purchased by the Fund is
subsequently downgraded to below BBB by S&P or Fitch or Baa by Moody's or
comparable standards for unrated securities, the security will be sold only if
the Adviser believes it is advantageous to do so.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS: Although the Fund will
enter into certain transactions in Futures Contracts and Options on Futures
Contracts for hedging purposes, such transactions nevertheless involve 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 such
investments for other than hedging purposes, 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, 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.

Transactions in options may be entered into on U.S. exchanges regulated by the
SEC and in the over-the-counter market, while Futures Contracts and Options on
Futures Contracts may be entered into on U.S. commodities exchanges regulated
by the CFTC. Over-the-counter transactions involve certain risks which may not
be present in exchange-traded transactions.

Gains recognized from options and futures transactions engaged in by the Fund
are taxable income to shareholders upon distributions.

PORTFOLIO TRADING: The Fund intends to engage in buying and selling
securities, as well as holding securities to maturity. In buying and selling
portfolio securities, the Fund seeks to take advantage of market developments,
yield disparities and variations in the creditworthiness of issuers. For a
description of the strategies which may be used by the Fund in buying and
selling portfolio securities, see the SAI.

The primary consideration in placing portfolio security transactions with
broker-dealers is to obtain, and maintain the availability of, execution at
the most favorable prices. Consistent with the foregoing primary
consideration, the Conduct Rules 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 MFD as a factor in the selection of
broker-dealers to execute the portfolio transactions. From time to time, the
Adviser 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 SAI includes a discussion of other investment policies and a listing of
specific investment restrictions which govern the Fund's investment policies.
The specific investment restrictions listed in the SAI may be changed without
shareholder approval unless otherwise indicated (see "Investment Restrictions"
in the SAI). Except with respect to the Fund's policy on borrowing and
investing in illiquid securities, 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.

7. MANAGEMENT OF THE FUND
INVESTMENT ADVISER: The Adviser manages the Fund pursuant to an Investment
Advisory Agreement dated September 1, 1993 (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. John P. Kihn is the portfolio manager of the Fund. Mr.
Kihn, a Vice President of the Adviser, has been employed as a portfolio
manager with the Adviser since October, 1997. From 1996 to 1997, he worked as
a Senior Quantitative Analyst and Vice President of Putnam Investment
Management, Inc.; from 1992 to 1996, he attended the London School of
Economics where he was awarded a doctorate in Finance; and from 1994 to 1995,
he was an associate portfolio manager with Colonial Management Associates,
Inc. 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 rate of
0.40% per annum of the Fund's average daily net assets. For the fiscal year
ended April 30, 1998, MFS received management fees under the Advisory
Agreement of $194,231, equivalent to 0.40% of the Fund's average daily net
assets (before a reduction of $40,574). Effective July 1, 1997 the Adviser has
reduced its right to receive the fee set forth in the Advisory Agreement to a
maximum of 0.30% of the average daily net assets of the Fund. This temporary
reduction may be rescinded without notice to shareholders by the Adviser with
the consent of the Fund's Board of Trustees.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), to MFS Municipal Income Trust, MFS Government
Markets Income Trust, MFS Multimarket Income Trust, MFS Intermediate Income
Trust, MFS Charter Income Trust, MFS Special Value Trust, MFS Institutional
Trust, MFS Variable Insurance Trust, MFS/Sun Life Series Trust and seven
variable accounts, each of which is a registered investment company established
by Sun Life Assurance Company of Canada (U.S.), a subsidiary of Sun Life
Assurance Company of Canada ("Sun Life"), in connection with the sale of various
fixed/variable annuity contracts. MFS and its wholly owned subsidiary, MFS
Institutional Advisors, Inc., provide 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 $87.8 billion on behalf of approximately 3.3 million accounts as
of July 31, 1998. As of such date, the MFS organization managed approximately
$60.8 billion of assets in equity portfolios and approximately $20.5 billion
of assets invested in fixed income portfolios. Approximately $4.9 billion of
the assets managed by MFS are invested in securities of foreign issuers and
non-U.S. dollar denominated securities of U.S. issuers. MFS is a subsidiary of
Sun Life of Canada (U.S.) Financial Services Holdings, Inc., which in turn is
an indirect wholly owned subsidiary of Sun Life. The Directors of MFS are
Jeffrey L. Shames, John W. Ballen, Arnold D. Scott, Kevin R. Parke, Thomas J.
Cashman, Joseph Dello Russo, William W. Scott, John D. McNeil and Donald A.
Stewart. Mr. Shames is the Chairman and Chief Executive Officer of MFS, Mr.
Ballen is President and Chief Investment Officer of MFS, and Mr. Scott is the
Secretary and a Senior Executive Vice President of MFS. Messrs. McNeil and
Stewart are the Chairman and the 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.

Mr. Shames, the Chairman of MFS, is a Trustee of the Trust. Geoffrey L.
Kurinsky, Stephen E. Cavan, W. Thomas London, James R. Bordewick, Jr., James
O. Yost, Ellen Moynihan and Mark E. Bradley, all of whom are officers of MFS,
are officers of the Trust.

In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS. Some simultaneous
transactions are inevitable when several clients receive investment advice
from MFS, particularly when the same security is suitable for more than one
client. While in some cases this arrangement could have a detrimental effect
on the price or availability of the security as far as the Fund is concerned,
in other cases, however, it may produce increased investment opportunities for
the Fund.

ADMINISTRATOR: MFS provides the Fund with certain financial, legal,
compliance, shareholder communications and other administrative services
pursuant to a Master Administrative Services Agreement dated March 1, 1997, as
amended. Under this Agreement, the Fund pays MFS an administrative fee up to
0.015% per annum of the Fund's average daily net assets. This fee reimburses
MFS for a portion of the costs it incurs to provide such services.

DISTRIBUTOR: MFD, 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 certain other services for the Fund.

8. INFORMATION CONCERNING SHARES OF THE FUND

PURCHASES
Class A, B and C shares of the Fund may be purchased at the public offering
price through any dealer. As used in the Prospectus and any appendices
thereto, the term "dealer" includes any broker, dealer, bank (including bank
trust departments), registered investment adviser, financial planner and any
other financial institutions having a selling agreement or other similar
agreement with MFD. Dealers may also charge their customers fees relating to
investments in the Fund.

This Prospectus offers Class A, B and C shares, which bear sales charges and
distribution fees in different forms and amounts, as described below:

CLASS A SHARES: Class A shares are generally offered at net asset value plus
an initial sales charge, but in certain cases are offered at net asset value
without an initial sales charge but subject to a CDSC.

PURCHASES SUBJECT TO INITIAL SALES CHARGE. Class A shares are offered at
net asset value plus an initial sales charge as follows:
<TABLE>
<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 $50,000 .............................. 2.50% 2.56% 2.25%
$50,000 but less than $100,000 ................. 2.25 2.30 2.00
$100,000 but less than $250,000 ................ 2.00 2.04 1.75
$250,000 but less than $500,000 ................ 1.75 1.78 1.50
$500,000 but less than $1,000,000 .............. 1.50 1.52 1.25
$1,000,000 or more ............................. None** None** See Below**

- - ------------
* 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 will apply to such purchases, as discussed below.
</TABLE>

MFD 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 2.25% and MFD retains
approximately 1/4 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 other
MFS Funds owned or being purchased, the existence of an agreement to purchase
additional shares during a 13-month period (or 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 Purchase privileges by
which the sales charge may be reduced is set forth in the SAI.

PURCHASES SUBJECT TO A CDSC (but not an initial sales charge). In the
following five circumstances, Class A shares are offered at net asset value
without an initial sales charge, but subject to a CDSC equal to 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividend
and capital gain distributions) or the total cost of such shares, in the event
of a share redemption within 12 months following the purchase:

(i) on investments of $1 million or more in Class A shares;

(ii) on investments in Class A shares by certain retirement plans subject
to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if prior to July 1, 1996: (a) the Plan had established an
account with the Shareholder Servicing Agent and (b) the sponsoring
organization has demonstrated to the satisfaction of MFD that either
(i) the employer had at least 25 employees or (ii) the aggregate
purchases by the retirement plan of Class A shares of Funds in the
MFS Funds would be in an aggregate amount of at least $250,000
within a reasonable period of time, as determined by MFD in its sole
discretion;

In the case of all such purchases, MFD will pay commissions to dealers on new
investments in Class A shares made through such dealers as follows:

COMMISSION PAID BY MFD TO DEALERS CUMULATIVE PURCHASE AMOUNT
--------------------------------- --------------------------
1.00% On the first $2,000,000, plus
0.80% Over $2,000,000 to $3,000,000, plus
0.50% Over $3,000,000 to $50,000,000, plus
0.25% Over $50,000,000

See "Redemptions and Repurchases -- Contingent Deferred Sales Charge" in the
Prospectus for further discussion of the CDSC.

WAIVERS OF INITIAL SALES CHARGE AND CDSC. In certain circumstances, the
initial sales charge imposed upon purchases of Class A shares and the CDSC
imposed upon redemption of Class A shares is waived. These circumstances are
described in Appendix A to this Prospectus. In addition to these
circumstances, the CDSC imposed upon the redemption of Class A shares is
waived with respect to shares held by certain retirement plans qualified under
Section 401(a) or 403(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), and subject to ERISA, where:

(i) the retirement plan and/or sponsoring organization does not subscribe
to the MFS Participant Recordkeeping System; and

provided, however, that the CDSC will not be waived (i.e., it will be imposed)
(a) with respect to plans which establish an account with the Shareholder
Servicing Agent on or after November 1, 1997, in the event that the Plan makes
a complete redemption of all of its shares in the MFS Funds, or (b) with
respect to plans which established an account with the Shareholder Servicing
Agent prior to November 1, 1997, in the event that there is a change in law or
regulations which results in a material adverse change to the tax advantaged
nature of the plan, or in the event that the plan and/or sponsoring
organization: (i) becomes insolvent or bankrupt; (ii) is terminated under
ERISA or is liquidated or dissolved; or (iii) is acquired by, merged into, or
consolidated with, any other entity.

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

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

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

Except as described below, MFD will pay commissions to dealers of 3.75% of the
purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee payable under the Fund's
Distribution Plan (see "Distribution Plan" below) at a rate equal to 0.25% of
the purchase price of such shares. Therefore, the total amount paid to a
dealer upon the sale of Class B shares is 4% of the purchase price of the
shares (commission rate of 3.75% plus a service fee equal to 0.25% of the
purchase price).

Class B shares purchased by a retirement plan whose sponsoring organization
subscribes to the MFS Participant Recordkeeping System and which has
established its account with the Shareholder Servicing Agent on or after July
1, 1996, will be subject to the CDSC described above, only under limited
circumstances, as explained below under "Waivers of CDSC." With respect to
such purchases, MFD pays an amount to dealers equal to 3.00% of the amount
purchased through such dealers (rather than the 4.00% payment described
above), which is comprised of a commission of 2.75% plus the advancement of
the first year service fee equal to 0.25% of the purchase price payable under
the Fund's Distribution Plan. As discussed above, such retirement plans are
eligible to purchase Class A shares of the Fund at net asset value without an
initial sales charge but subject to a 1% CDSC if the plan has, at the time of
purchase, a market value of $500,000 or more invested in shares of any class
or classes of the MFS Funds. IN THIS EVENT, THE PLAN OR ITS SPONSORING
ORGANIZATION SHOULD INFORM THE SHAREHOLDER SERVICING AGENT THAT THE PLAN IS
ELIGIBLE TO PURCHASE CLASS A SHARES UNDER THIS CATEGORY; THE SHAREHOLDER
SERVICING AGENT HAS NO OBLIGATION INDEPENDENTLY TO DETERMINE WHETHER SUCH A
PLAN QUALIFIES UNDER THIS CATEGORY FOR THE PURCHASE OF CLASS A SHARES.

WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon
redemption of Class B shares is waived. These circumstances are described in
Appendix A to this Prospectus. In addition to these circumstances, the CDSC
imposed upon the redemption of Class B shares is waived with respect to shares
held by a retirement plan whose sponsoring organization subscribes to the MFS
Participant Recordkeeping System and which has established an account with the
Shareholder Servicing Agent on or after July 1, 1996; provided, however, that
the CDSC will not be waived (i.e., it will be imposed) in the event that there
is a change in law or regulations which results in a material adverse change
to the tax advantaged nature of the plan, or in the event that the plan and/or
sponsoring organization: (i) becomes insolvent or bankrupt; (ii) is terminated
under ERISA or is liquidated or dissolved; or (iii) is acquired by, merged
into, or consolidated with, any other entity.

CONVERSION OF CLASS B SHARES. Class B shares of the Fund that remain
outstanding for approximately eight years will convert to Class A shares of
the same Fund. 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 Fund's Distribution
Plan . See "Information Concerning Shares of the Fund -- Distribution Plan"
below. 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 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 but are subject to a CDSC upon redemption of 1.00% during
the first year. 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 up to
$1,000,000 per transaction.

Class C shares are not currently available for purchase by any retirement plan
qualified under Sections 401(a) or 403(b) of the Internal Revenue Code of
1986, as amended (the "Code") if the retirement plan and/or the sponsoring
organization subscribe to the MFS FUNDamental 401(k) Plan or another similar
recordkeeping program made available by the Shareholder Servicing Agent.

WAIVERS OF CDSC. In certain circumstances, the CDSC imposed upon
redemption of Class C shares is waived. These circumstances are described in
Appendix A to this Prospectus.

GENERAL: The following information applies to purchases of all classes of
the Fund's shares.

MINIMUM INVESTMENT. 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 MFD.
The Fund reserves the right to cease offering its shares at any time.

SUBSEQUENT INVESTMENT BY TELEPHONE: Each shareholder may purchase additional
shares of any MFS Fund by telephoning the Shareholder Servicing Agent toll-
free at (800) 225-2606. The minimum purchase amount is $50 and the maximum
purchase amount is $100,000. Shareholders wishing to avail themselves of this
telephone purchase privilege must so elect on their Account Application and
designate thereon a bank and account number from which purchases will be made.
If a telephone purchase request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange
(generally, 4:00 p.m., Eastern time), the purchase will occur at the closing
net asset value of the shares purchased on that day. The Shareholder Servicing
Agent may be liable for any losses resulting from unauthorized telephone
transactions if it does not follow 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.

The Fund is not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Fund defines a "market
timer" as an individual, or organization acting on behalf of one or more
individudals, if (i) the individual or organization makes three or more
exchange requests out of the Fund per calender year and (ii) any one of such
exchange requests represents shares equal in value to 1/2 of 1% or more of
the Fund's net assets at the time of the request. Accounts under common
ownership or control, including accounts administered by market timers, will
be aggregated for purposes of this definition.

As noted above, the Fund and MFD each reserves the right to reject or restrict
any specific purchase and exchange request and, in addition, may impose
specific limitations with respect to market timers, including delaying for up
to seven days the purchase side of an exchange request by market timers or
specifically rejecting or otherwise restricting purchase or exchange requests
by market timers. In the event that any individual or entity is determined
either by the Fund or MFD in its sole discretion, to be a market timer with
respect to any calendar year, the Fund and/or MFD will reject all exchange
requests into the Fund during the remainder of that calendar year. Other funds
in the MFS Family of Funds may have different and/or more restrictive policies
with respect to market timers than the Fund. These policies are disclosed in
the prospectuses of these other MFS Funds.

EFFECTIVE SEPTEMBER 15, 1998, THE FUND WILL ADOPT THE FOLLOWING NEW MARKET
TIMING POLICY WHICH WILL REPLACE THE CURRENT POLICY AS DISCLOSED ABOVE:

RIGHT TO REJECT PURCHASE ORDERS/MARKET TIMING. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserve the
right to reject or restrict any specific purchase or exchange request. Because
an exchange request involves both a request to redeem shares of one fund and
to purchase shares of another fund, the Fund considers the underlying
redemption request conditioned upon the acceptance of the underlying purchase
request. Therefore, in the event that the Fund or MFD rejects an exchange
request, neither the redemption nor the purchase side of the exchange will be
processed.

The MFS Family of Funds is not designed for professional market timing
organizations or other entities using programmed or frequent exchanges. The
MFS Family of Funds defines a "market timer" as an individual or organization
acting on behalf of one or more individuals, if (i) the individual or
organization makes six or more exchange requests among the MFS Family of Funds
or three or more exchange requests out of any of the MFS high yield bond funds
or MFS municipal bond funds per calendar year and (ii) any one of such
exchange requests represents shares equal in value to $1 million or more.
Accounts under common ownership or control, including accounts administered by
market timers, will be aggregated for purposes of this definition.

DEALER CONCESSIONS. Dealers may receive different compensation with
respect to sales of Class A, Class B and Class C shares. In addition, from
time to time, MFD may pay dealers 100% of the applicable sales charge on sales
of Class A shares of certain specified MFS 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 and/or Class C shares of certain specified MFS
Funds sold by such dealer during a specified sales period. In addition, from
time to time, MFD, at its expense, may provide additional commissions,
compensation or promotional incentives ("concessions") to dealers which sell
or arrange for the sale of shares of the Fund. Such concessions provided by
MFD may include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives and other employees, payment for travel expenses, including
lodging, incurred by registered representatives and other employees 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. From time to time, MFD may make expense reimbursements for special
training of a dealer's registered representatives and other employees in group
meetings or to help pay the expenses of sales contests. Other concessions may
be offered to the extent not prohibited by state laws or any self-regulatory
agency, such as the NASD.

RESTRICTIONS ON ACTIVITIES OF NATIONAL BANKS. 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, MFD believes that such Act should not preclude banks
from entering into agency agreements with MFD. 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 in respect of shareholders who invested in the Fund through a
national bank. 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.

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

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 in the MFS Family of Funds (the "MFS Funds") at net
asset value (if available for sale). Shares of one class may not be exchanged
for shares of any other class.

EXCHANGES AMONG MFS FUNDS (EXCLUDING MFS MONEY MARKET FUNDS): No initial
sales charges or CDSC will be imposed in connection with an exchange from
shares of an MFS Fund to shares of any other MFS Fund, except with respect to
exchanges from an MFS money market fund to another MFS Fund which is not an
MFS money market fund (discussed below). With respect to an exchange involving
shares subject to a CDSC, the CDSC will be unaffected by the exchange and the
holding period for purposes of calculating the CDSC will carry over to the
acquired shares.

EXCHANGES FROM AN MFS MONEY MARKET FUND: Special rules apply with respect
to the imposition of an initial sales charge or a CDSC for exchanges from an
MFS money market fund to another MFS Fund which is not an MFS money market
fund. These rules are described under the caption "Exchanges" in the
Prospectuses of those MFS money market funds.

EXCHANGES INVOLVING THE MFS FIXED FUND: Class A shares of any MFS Fund
held by certain qualified retirement plans may be exchanged for units of
participation of the MFS Fixed Fund (a bank collective investment fund) (the
"Units"), and Units may be exchanged for Class A shares of any MFS Fund. With
respect to exchanges between Class A shares subject to a CDSC and Units, the
CDSC will carry over to the acquired shares or Units and will be deducted from
the redemption proceeds when such shares or Units are subsequently redeemed,
assuming the CDSC is then payable (the period during which the Class A shares
and the Units were held will be aggregated for purposes of calculating the
applicable CDSC). In the event that a shareholder initially purchases Units
and then exchanges into Class A shares subject to an initial sales charge of
an MFS Fund, the initial sales charge shall be due upon such exchange, but
will not be imposed with respect to any subsequent exchanges between such
Class A shares and Units with respect to shares on which the initial sales
charge has already been paid. In the event that a shareholder initially
purchases Units and then exchanges into Class A shares subject to a CDSC of an
MFS Fund, the CDSC period will commence upon such exchange, and the
applicability of the CDSC with respect to subsequent exchanges shall be
governed by the rules set forth in this paragraph above.

GENERAL: A shareholder should read the prospectus of the other MFS Fund
into which an exchange is made and consider the differences in objectives,
policies and restrictions before making any exchange. 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 the Shareholder Servicing Agent) or all the shares in the
account. If an 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 (generally, 4:00 p.m., Eastern time) (the "Exchange"), the
exchange will occur on that day if all the requirements set forth above have
been complied with at that time and subject to the Fund's right to reject
purchase orders. 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
dealers or the Shareholder Servicing Agent. 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 timers.

REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the value of his account on
any date on which the Fund is open for business by redeeming shares at their
net asset value (a redemption) or by selling such shares to the Fund through a
dealer (a repurchase). Certain redemptions and repurchases are, however,
subject to a CDSC. See "Contingent Deferred Sales Charge" below. Because the
net asset value of shares of the account fluctuates, 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 up to 15
days from the purchase date in an effort to assure that such check has
cleared. See "Tax Status" below.

REDEMPTION BY MAIL: Each shareholder may 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 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" will 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 in "good order" by the Shareholder Servicing
Agent, 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 such Exchange is restricted or to the extent otherwise
permitted by the 1940 Act if an emergency exists.

REDEMPTION BY TELEPHONE: Each shareholder may redeem an amount from his
account by telephoning the Shareholder Servicing Agent 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 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 and the
amount of any income tax required to be withheld, are mailed by check to the
designated account, without charge, if the redemption proceeds do not exceed
$1,000, and are wired in federal funds to the designated account if the
redemption proceeds exceed $1,000. 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.

REPURCHASE THROUGH A DEALER: If a shareholder desires to sell his shares
through his dealer (a repurchase), the shareholder can place a repurchase
order with his dealer, who may charge the shareholder a fee. IF THE DEALER
RECEIVES THE SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE
EXCHANGE AND COMMUNICATES IT TO MFD BEFORE THE CLOSE OF BUSINESS ON THE SAME
DAY, 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.

REDEMPTION BY CHECK: Only Class A and Class C shares may be redeemed by
check. A shareholder owning Class A or Class C shares of the Fund may elect to
have a special account with State Street Bank and Trust Company (the "Bank")
for the purpose of redeeming Class A or Class C shares from his or her account
by check. The Bank will provide each Class A or Class C shareholder, upon
request, with forms of checks drawn on the Bank. Only shareholders having
accounts in which no share certificates have been issued will be permitted to
redeem shares by check. Checks may be made payable in any amount not less than
$500. Shareholders wishing to avail themselves of this redemption by check
privilege should so request on their Account Application, must execute
signature cards (for additional information, see the Account Application) with
signature guaranteed in the manner set forth under the caption "Signature
Guarantee" below, and must return any Class A or Class C share certificates
issued to them. Additional documentation will be required from corporations,
partnerships, fiduciaries or other such institutional investors. All checks
must be signed by the shareholder(s) of record exactly as the account is
registered before the Bank will honor them. The shareholders of joint accounts
may authorize each shareholder to redeem by check. The check may not draw on
monthly dividends which have been declared but not distributed. SHAREHOLDERS
WHO PURCHASE CLASS A AND CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS
OR CASHIER'S CHECKS) MAY WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY
HAVE BEEN ON THE FUND'S BOOKS FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO
THE BANK FOR PAYMENT, A SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL
BE REDEEMED TO COVER THE AMOUNT OF THE CHECK, ANY APPLICABLE CDSC AND THE
AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD. IF THE AMOUNT OF THE CHECK,
PLUS ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE
WITHHELD IS GREATER THAN THE VALUE OF CLASS A OR CLASS C SHARES HELD IN THE
SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND THE SHAREHOLDER
MAY BE SUBJECT TO EXTRA CHARGES. TO AVOID DISHONOR OF CHECKS DUE TO
FLUCTUATIONS IN ACCOUNT VALUE, SHAREHOLDERS ARE ADVISED AGAINST REDEEMING ALL
OR MOST OF THEIR ACCOUNT BY CHECK. CHECKS SHOULD NOT BE USED TO CLOSE A FUND
ACCOUNT BECAUSE WHEN THE CHECK IS WRITTEN, THE SHAREHOLDER WILL NOT KNOW THE
EXACT TOTAL VALUE OF THE ACCOUNT ON THE DAY THE CHECK CLEARS. There is
presently no charge to the shareholder for the maintenance of this special
account or for the clearance of any checks, but the Fund and the Bank reserve
the right to impose such charges or to modify or terminate the redemption by
check privilege at any time.

At the time of a redemption, the amount by which the value of a shareholder's
account for a particular class of shares represented by Direct Purchases
exceeds the sum of the six calendar year aggregations (12 months in the case
of purchases of Class C shares and of purchases of $1 million or more of Class
A shares or purchases by certain retirement plans 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 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 the 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 of shares will be calculated as set forth in
"Purchases" above.

The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except as described in Appendix A hereto.

GENERAL: The following information applies to redemptions and repurchases
of all classes of the Fund's shares.

REINSTATEMENT PRIVILEGE. 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 Class C shares and 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 SAI regarding this privilege.

IN-KIND DISTRIBUTIONS. The Trust agrees to redeem shares of the Fund
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund during any 90-day period for any one shareholder. The Fund has
reserved the right to pay other redemptions, 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 received a distribution in-kind,
the shareholder could incur brokerage or transaction charges when converting
the securities to cash.

INVOLUNTARY REDEMPTIONS/SMALL ACCOUNTS. 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 if at any time the total investment
in such account drops below $500 because of redemptions or exchanges, except
in the case of accounts being 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 -- General -- Minimum Investment." 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.

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

FEATURES COMMON TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are common to each class of shares, as described below.

SERVICE FEES. The Distribution Plan provides that the Fund may pay MFD a
service fee of up to 0.25% of the average daily net assets attributable to the
class of shares to which the Distribution Plan relates (i.e., Class A, Class B
or Class C shares, as appropriate) (the "Designated Class") annually in order
that MFD may pay expenses on behalf of the Fund relating to the servicing of
shares of the Designated Class. The service fee is used by MFD to compensate
dealers which enter into a sales agreement with MFD in consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to shares of the Designated Class owned by investors for whom
such dealer is the dealer or holder of record. MFD may from time to time
reduce the amount of the service fees paid for shares sold prior to a certain
date. Service fees may be reduced for a dealer that is the holder or dealer of
record for an investor who owns shares of the Fund having an aggregate 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. MFD or
its affiliates are entitled to retain all service fees payable under the
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 MFD or its
affiliates to shareholder accounts.

DISTRIBUTION FEES. The Distribution Plan provides that the Fund may pay
MFD a distribution fee based on the average daily net assets attributable to
the Designated Class as partial consideration for distribution services
performed and expenses incurred in the performance of MFD's obligations under
its distribution agreement with the Fund. See "Management of the Fund --
Distributor" in the SAI. The amount of the distribution fee paid by the Fund
with respect to each class differs under the Distribution Plan, as does the
use by MFD of such distribution fees. Such amounts and uses are described
below in the discussion of the provisions of the Distribution Plan relating to
each class of shares.

OTHER COMMON FEATURES. Fees payable under the Distribution Plan are
charged to, and therefore reduce, income allocated to shares of the Designated
Class. The provisions of the Distribution Plan relating to operating policies
as well as initial approval, renewal, amendment and termination are
substantially identical as they relate to each class of shares covered by the
Distribution Plan.

FEATURES UNIQUE TO EACH CLASS OF SHARES: There are certain features of the
Distribution Plan that are unique to each class of shares, as described below.

CLASS A SHARES. Class A shares are generally offered pursuant to an
initial sales charge, a substantial portion of which is paid to or retained by
the dealer making the sale (the remainder of which is paid to MFD). See
"Purchases -- Class A Shares" above. In addition to the initial sales charge,
the dealer also generally receives the ongoing 0.25% per annum service fee, as
discussed above.

The distribution fee paid to MFD under the Distribution Plan is equal, on an
annual basis, to 0.10% of the Fund's average daily net assets attributable to
Class A shares. As noted above, MFD may use the distribution fee to cover
distribution-related expenses incurred by it under its distribution agreement
with the Fund, including commissions to dealers and payments to wholesalers
employed by MFD (e.g., MFD pays commission to dealers with respect to
purchases of $1 million or more and purchases by certain retirement plans of
Class A shares which are sold at net asset value but which are subject to a 1%
CDSC for one year after purchase). See "Purchases -- Class A Shares" above. In
addition, to the extent that the aggregate service and distribution fees paid
under the Distribution Plan do 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 such distribution-related expenses or other distribution-related
expenses.

CLASS B SHARES PLAN. Class B shares are offered at net asset value without
an initial sales charge but subject to a CDSC. See "Purchases -- Class B
Shares" above. MFD will advance to dealers the first year service fee
described above at a rate equal to 0.25% of the purchase price of such shares
and, as compensation therefore, MFD may retain the service fee paid by the
Fund with respect to such shares for the first year after purchase. Dealers
will become eligible to receive the ongoing 0.25% per annum service fee with
respect to such shares commencing in the thirteenth month following purchase.

CLASS C SHARES PLAN. Class C shares are offered at net asset value without
an initial sales charge but subject to a CDSC. See "Purchases -- Class C
Shares" above. MFD will pay a commission to dealers of 1.00% of the purchase
price of Class C shares purchased through dealers at the time of purchase. In
compensation for this 1.00% commission paid by MFD to dealers, MFD will retain
the 1.00% per annum Class C distribution and service fees paid by the Fund
with respect to such shares for the first year after purchase, and dealers
will become eligible to receive from MFD the ongoing 1.00% per annum
distribution and service fees paid by the Fund to MFD with respect to such
shares commencing in the thirteenth month following purchase.

This ongoing 1.00% fee is comprised of the 0.25% per annum service fee paid to
MFD under the Distribution Plan (which MFD in turn pays to dealers), as
discussed above, and a distribution fee paid to MFD (which MFD also in turn
pays to dealers) under the Distribution Plan equal, on an annual basis, to
0.75% of the Fund's average daily net assets attributable to Class C shares.

CURRENT LEVEL OF DISTRIBUTION AND SERVICE FEES: The Fund's Class A, Class B
and Class C distribution and service fees for its current fiscal year are
0.15%, 0.92% and 1.00% per annum, respectively. Payment of the 0.10% per annum
Class A distribution fee will commence on such date as the Trustees of the
Trust may determine. A portion of the Class A service fee, equal to 0.15% of
the average daily net assets of the Fund attributable to Class A shares, is
currently being paid by the Fund. Payment of the remaining portion of the
service fee, equal to 0.10% per annum, will become payable on such date as the
Trustees of the Trust may determine. Except in the case of the first year
service fee, the Class B service fee is currently set at 0.15% per annum and
may be increased to a maximum of 0.25% per annum on such date as the Trustees
of the Trust may determine.

DISTRIBUTIONS
The Fund intends to declare dividends daily and pay to its shareholders
substantially all of its net investment income as dividends on a monthly basis
(dividends will only accrue on shares for which payment has been received.)
Dividends generally are distributed on the first business day of the following
month. The Fund will make one or more distributions during the calendar year
to its shareholders from any long-term capital gains, and may also 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. 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. Because the
Fund intends to distribute all of its net investment income and net realized
capital gains to its 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.

The Fund expects that none of its distributions will be eligible for the
dividends received deduction for corporations. The Fund expects that dividends
paid to shareholders from interest on Municipal obligations will be exempt
from federal income tax because the Fund intends to satisfy certain
requirements of the Code. One such requirement is that at the close of each
quarter of its taxable year, at least 50% of the value of the Fund's total
assets consists of obligations whose interest is exempt from federal income
tax. Distributions of income from capital gains, from investments in taxable
securities and from certain other transactions, including options and futures
transactions, will be taxable to the shareholders, whether the distribution is
paid in cash or reinvested in additional shares.

Interest on indebtedness incurred by shareholders to purchase or carry shares
of the Fund will not be deductible for federal income tax purposes. Exempt-
interest dividends are taken into account in calculating the amount of social
security and railroad retirement benefits that may be subject to federal
income tax, and certain distributions of exempt-interest dividends may also be
a tax preference item for purposes of the federal individual and corporate
alternative minimum tax. All exempt-interest dividends may affect a corporate
shareholder's alternative minimum tax liability. Depending on the nature of
the distribution and the residence of the shareholder, certain Fund
distributions may be subject to state and local income taxes. Entities or
persons who are "substantial users" (or persons related to "substantial
users") of facilities financed by private activity bonds should consult their
tax advisers before purchasing shares of the Fund.

Shortly after the end of each calendar year, each shareholder will be sent a
statement setting forth the federal income tax status of all dividends and
distributions for that year, including the portion exempt from federal income
taxes as "exempt-interest dividends," the portion, if any, that is a tax
preference item under the federal alternative minimum tax, the portion, if
any, taxable as ordinary income, the portion taxable as long term capital gain
(as well as the rate category or categories under which such gain is taxable),
the portion, if any, representing a return of capital (which is generally free
of current taxes but which 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% (or
any lower rate permitted under an applicable treaty) on taxable 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. The Fund is also
required in certain circumstances to apply backup withholding at the rate of
31% on taxable dividends and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. Backup withholding will not,
however, be applied to payments that have been subject to 30% withholding.
Prospective investors should read the Fund's Account Application for
additional information regarding backup withholding of federal income tax and
should consult their own tax advisers as to the tax consequences to them of an
investment in the Fund.

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 during each such 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 the shares of the class
outstanding. Assets in the Fund's portfolio are valued on the basis of
valuations furnished by a pricing service or at their fair value as determined
by the Board of Trustees, as described in the SAI. 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 in "good order" by MFD prior to the
close of that business day.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund, one of three series of the Trust, has three classes of shares which
it offers to the general public, entitled Class A, Class B and Class C Shares
of Beneficial interest (without par value). The Trust has reserved the right
to create and issue additional series and classes of shares in which case the
shares of each class of each series participate equally in the earnings,
dividends and assets attributable to that class of the particular series.
Shareholders are entitled to one vote for each share held. Shares of each
series are entitled to vote separately to approve investment advisory
agreements or changes in investment restrictions, but shares of all series
vote together in the election of Trustees and ratification of selection of
accountants. Additionally, each class of shares of a series will vote
separately on any material increases in the fees under the 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. The Trust does not intend to hold annual shareholder meetings.
The Declaration of Trust provides that a Trustee may be removed from office in
certain instances (see "Description of Shares, Voting Rights and Liabilities"
in the SAI).

Each share of a class of the Fund represents an equal proportionate interest
in the Fund with each other class, subject to the liabilities of the
particular class. Shares of the Fund have no pre-emptive or conversion rights
(except as set forth in "Purchase -- Conversion of Class B Shares" above).
Shares of the Fund are fully paid and nonassessable. Should the Fund be
liquidated, shareholders of each class of the Fund would be entitled to share
pro rata in the net assets of the Fund 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 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 (e.g. fidelity bonding and errors and omissions
insurance) existed and the Trust itself was unable to meet its obligations.

PERFORMANCE INFORMATION
From time to time, the Fund will provide yield, tax-equivalent yield, current
distribution rate and total rate of return quotations for each class and may
also quote fund rankings in the relevant fund category from various sources,
such as the Lipper Analytical Securities Corporation and Wiesenberger
Investment Companies Service. Yield and tax-equivalent yield quotations are
based on the annualized net investment income per share of each class over a
30-day period stated as a percent of the maximum public offering price of that
class on the last day of that period. Yield calculations for Class B and Class
C 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 12 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 and Class C shares assume no CDSC is paid. The
current distribution rate differs from the yield and tax-equivalent yield
calculations 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 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 the shares of that class with all distributions reinvested
and which will give effect to the imposition of any applicable CDSC assessed
upon redemptions of the Fund's Class B and Class C shares. Such total rate of
return quotations may be accompanied by quotations which do not reflect the
reduction in value of the initial investment due to the sales charge or the
deduction of the CDSC, and which will thus be higher. The Fund offers multiple
classes of shares which were initially offered for sale to, and purchased by,
the public on different dates (the class "inception date"). The calculation of
total rate of return for a class of shares which has a later class inception
date than another class of shares of the Fund is based both on (i) the
performance of the Fund's newer class from its inception date and (ii) the
performance of the Fund's oldest class from its inception date up to the class
inception date of the newer class. See the SAI for further information on the
calculation of total rate of return for share classes with different class
inception dates. All performance quotations are based on historical
performance and are not intended to indicate future performance. Yield and
tax-equivalent yield reflect 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. All
performance 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, tax-equivalent
yield, current distribution rate and total rate of return, see the SAI. For
further information about the Fund's performance for the fiscal year ended
April 30, 1998, please see the Fund's Annual Report. A copy of the Annual
Report may be obtained without charge by contacting the Shareholder Servicing
Agent (see back cover for address and phone number). 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.

EXPENSES
Subject to termination or revision at the sole discretion of MFS, MFS has
agreed to bear the Fund's expenses such that the Fund's "Other Expenses" which
are defined to include all Fund expenses (after taking into effect any
compensating balance and offset arrangements) except for management fees, Rule
12b-1 fees, taxes, extraordinary expenses, brokerage and transaction costs, do
not exceed 0.40% per annum of the Fund's average daily net assets (the
"Maximum Percentage"). The payments made by MFS on behalf of the Fund under
this arrangement are subject to reimbursement by the Fund to MFS, which will
be accomplished by the payment of an expense reimbursement fee by the Fund to
MFS computed and paid monthly at a percentage of its average daily net assets
for its then current fiscal year, with a limitation that immediately after
such payment, the Fund's "Other Expenses" will not exceed the Maximum
Percentage. The obligation of MFS to bear the Fund's other expenses pursuant
to this arrangement and the Fund's obligation to pay the reimbursement fees to
MFS terminates on February 28, 2002, provided that in no event will MFS
receive reimbursement fees from the Fund that exceed the amount of fees borne
by MFS on behalf of the Fund.

PROVISION OF ANNUAL AND SEMIANNUAL REPORTS
To avoid sending duplicate copies of materials to households, effective
September 15, 1998, only one copy of each Fund annual and semiannual report
may be mailed to shareholders having the same residential address on the
Fund's records. However, any shareholder may call the Shareholder Servicing
Agent at 1-800-225-2606 to request that copies of such reports be sent
personally to that shareholder.

9. 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 activity in the account. Cancelled
checks, if any, will be sent to shareholders monthly.

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

o Dividends in cash; capital gain distributions reinvested in additional
shares.

o 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 last business day of the month. Dividends and
capital gain distributions in amounts less than $10 will automatically be
reinvested in additional shares of the Fund. 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, or the shareholder does not respond to mailings from the
Shareholder Servicing Agent with regard to uncashed distribution checks, such
shareholder's distribution option will automatically be converted to having
all dividends and other distributions reinvested in additional shares. Any
request to change a distribution option must be received by the Shareholder
Servicing Agent a reasonable time prior to the next business day of the month
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.

LETTER OF INTENT: If a shareholder (other than a group purchaser as
described in the SAI) anticipates purchasing $50,000 or more of Class A shares
of the Fund alone or in combination with any class of other MFS Funds or MFS
Fixed Fund (a bank collective investment Fund) within a 13-month period (or
36-month period for purchases of $1 million or more), the shareholder may
obtain such shares of the Fund 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.

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 distributions of dividends and capital gain
distributions from the same class of any other MFS Fund. Furthermore,
distributions made by the Fund may be automatically invested at net asset
value (and without any applicable CDSC) in the same class of shares of another
MFS Fund, if shares of the fund are available for sale.

SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send to him (or any one he designates) regular periodic
payments 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 and Class C shares in any
year pursuant to a SWP will not be subject to a CDSC and generally are 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 PROGRAM
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account on any day of the month. If the
shareholder does not specify a date, the investment will automatically occur
on the first business day of the month. 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. The Automatic Exchange
Plan provides for automatic monthly or quarterly exchanges 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 if such fund is
available for sale. Under the Automatic Exchange Plan, exchanges of at least
$50 each may be made to up to six different funds. A shareholder should
consider the differences in objectives and policies of a fund and review its
prospectus before electing to exchange money into the fund through the
Automatic Exchange Plan. No transaction fee is imposed in connection with
exchange transactions under the Automatic Exchange Plan. However, exchanges 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. For federal and (generally) state income tax purposes, an exchange is
treated as a sale of the shares exchanged and, therefore, could result in a
capital gain or loss to the shareholder making the exchange. See the SAI for
further information concerning the Automatic Exchange Plan. Investors should
consult their tax adviser for information regarding the potential capital gain
and loss consequences of transactions under the Automatic Exchange Plan.

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 advisers before establishing any of the tax-deferred retirement
plans described above.
--------------------

The Fund's SAI, dated September 1, 1998, as amended or supplemented from time
to time, contains more detailed information about the Fund, including, but not
limited to, information related to (i) the Fund's investment objective,
policies and restrictions, (ii) its Trustees, officers and investment adviser,
(iii) portfolio transactions and brokerage commissions, (iv) the method used
to calculate performance quotations of the Fund, (v) the Fund's Distribution
Plan and (vi) various services and privileges provided by the Fund for the
benefit of its shareholders, including additional information with respect to
the exchange privilege.

<PAGE>

APPENDIX A

WAIVERS OF SALES CHARGES

This Appendix sets forth the various circumstances in which all applicable
sales charges are waived (Section I), the initial sales charge and the
contingent deferred sales charge ("CDSC") for Class A shares are waived
(Section II), and the CDSC for Class B and Class C shares is waived (Section
III). Some of the following information will not apply to certain funds in the
MFS Family of Funds depending on which classes of shares are offered by such
fund. As used in this Appendix, the term "dealer" includes any broker, dealer,
bank (including bank trust departments), registered investment adviser,
financial planner and any other financial institutions having a selling
agreement or other similar agreement with MFS Fund Distributors, Inc. ("MFD").

I. WAIVERS OF ALL APPLICABLE SALES CHARGES

1. DIVIDEND REINVESTMENT

o Shares acquired through dividend or capital gain reinvestment; and

o Shares acquired by automatic reinvestment of distributions of
dividends and capital gains of any MFS Fund in the MFS Family of Funds
("MFS Funds") pursuant to the Distribution Investment Program.

2. CERTAIN ACQUISITIONS/LIQUIDATIONS

o Shares acquired on account of the acquisition or liquidation of assets
of other investment companies or personal holding companies.

3. AFFILIATES OF AN MFS FUND/CERTAIN DEALERS. Shares acquired by:

o Trustees and retired trustees of any investment company for which MFD
serves as distributor;

o Employees, directors, partners, officers and trustees of any
sub-adviser to any MFS Fund;

o Employees or registered representatives of dealers;

o Institutional Clients of MFS or MFS Institutional Advisors, Inc.
("MFSI").

4. INVOLUNTARY REDEMPTIONS (CDSC WAIVER ONLY)

5. RETIREMENT PLANS (CDSC WAIVER ONLY). Shares redeemed on account of
distributions made under the following circumstances:

INDIVIDUAL RETIREMENT ACCOUNTS ("IRA'S")

o Death or disability of the IRA owner.

SECTION 401(a) PLANS ("401(a) PLANS") AND SECTION 403(b) EMPLOYER
SPONSORED PLANS ("ESP PLANS")

o Death, disability or retirement of Plan 401(a) or ESP participant;

o Loan from 401(a) or ESP Plan;

o Financial hardship (as defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time);

o Termination of employment of 401(a) or ESP Plan participant
(excluding, however, a partial or other termination of the Plan);

o Tax-free return of excess 401(a) or ESP Plan contributions;

SECTION 403(b) SALARY REDUCTION ONLY PLANS ("SRO PLANS")

o Death or disability of SRO Plan participant.

6. CERTAIN TRANSFERS OF REGISTRATION (CDSC WAIVER ONLY). Shares
transferred:

o To an IRA rollover account where any sales charges with respect to the
shares being reregistered would have been waived had they been
redeemed; and

7. LOAN REPAYMENTS

II. WAIVERS OF CLASS A SALES CHARGES

1. WRAP ACCOUNT AND FUND "SUPERMARKET" INVESTMENTS

2. INVESTMENT BY INSURANCE COMPANY SEPARATE ACCOUNTS

o Shares acquired by insurance company separate accounts.

3. RETIREMENT PLANS

ADMINISTRATIVE SERVICES ARRANGEMENTS

REINVESTMENT OF DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS.

o Shares acquired through the automatic reinvestment in Class A shares
of Class A or Class B distributions which constitute required
withdrawals from qualified retirement plans.

SHARES REDEEMED ON ACCOUNT OF DISTRIBUTIONS MADE UNDER THE FOLLOWING
CIRCUMSTANCES:

IRA'S

o Distributions made on or after the IRA owner has attained the age of
59 1/2 years old; and

o Tax-free returns of excess IRA contributions.

401(a) PLANS

o Distributions made on or after the 401(a) Plan participant has
attained the age of 59 1/2 years old; and

o Certain involuntary redemptions and redemptions in connection with
certain automatic withdrawals from a 401(a) Plan.

ESP PLANS AND SRO PLANS

o Distributions made on or after the ESP or SRO Plan participant has
attained the age of 59 1/2 years old.

4. PURCHASES OF AT LEAST $5 MILLION (CDSC WAIVER ONLY)

5. BANK TRUST DEPARTMENTS AND LAW FIRMS

6. INVESTMENT OF PROCEEDS FROM CERTAIN REDEMPTIONS OF CLASS I SHARES

o The initial sales charge imposed on purchases of Class A shares, and
the contingent deferred sales charge imposed on certain redemptions of
Class A shares, are waived with respect to Class A shares acquired of
any of the MFS Funds through the immediate reinvestment of the
proceeds of a redemption of Class I shares of any of the MFS Funds.

III. WAIVERS OF CLASS B AND CLASS C SALES CHARGES

In addition to the waivers set forth in Section I above, in the following
circumstances the CDSC imposed on redemptions of Class B and Class C shares
is waived:

1. SYSTEMATIC WITHDRAWAL PLAN

2. DEATH OF OWNER

o Shares redeemed on account of the death of the account owner if the
shares are held solely in the deceased individual's name or in a
living trust for the benefit of the deceased individual.

3. DISABILITY OF OWNER

4. RETIREMENT PLANS. Shares redeemed on account of distributions made under
the following circumstances:

IRA'S, 401(a) PLANS, ESP PLANS AND SRO PLANS

SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS ("SAR-SEP PLANS")

o Distributions made on or after the SAR-SEP Plan participant has
attained the age of 70 1/2 years old, but only with respect to the
minimum distribution under applicable Code rules;

o Death or disability of a SAR-SEP Plan participant.
<PAGE>

APPENDIX B

TAXABLE EQUIVALENT YIELD TABLE*

(UNDER FEDERAL INCOME TAX LAW AND RATES FOR 1998)

The table below shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields from 3.0% to 8.0% under federal income tax laws that
apply in 1998. (Such yields may differ under the laws applicable to subsequent
years.) Separate calculations, showing the applicable taxable income brackets,
are provided for investors who file joint returns and for those investors who
file individual returns.

<TABLE>
<CAPTION>
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- - ----------------------- -------------------- TAX ----------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET** 3% 4% 5% 6% 7% 8%
- - --------------------------------------------- ------------ ----------------------------------------------------------------------
1998 1998 EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 25,350 $ 0-$ 42,350 0.15% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41%
$ 25,350-$ 61,400 $ 42,350-$102,300 0.28 4.17 5.56 6.94 8.33 9.72 11.11
$ 61,400-$128,100 $102,300-$155,950 0.31 4.35 5.80 7.25 8.70 10.14 11.59
$128,100-$278,450 $155,950-$278,450 0.36 4.69 6.25 7.81 9.38 10.94 12.50
$278,450 & Over $278,450 & Over 0.396 4.97 6.62 8.28 9.93 11.59 13.25

* Net amount subject to Federal income tax after deductions and exemptions.
** Effective federal tax bracket.
</TABLE>
<PAGE>

APPENDIX C

DESCRIPTION OF MUNICIPAL BONDS

Municipal Bonds include debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities such as bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for which
Municipal Bonds may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses, and obtaining funds to loan to
other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public authorities
to obtain funds to provide privately-operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port
or parking facilities, air or water pollution control facilities for water
supply, gas, electricity or sewage or solid waste disposal. Such obligations
are included in the term Municipal Bonds if the interest paid thereon
qualifies as exempt from federal income tax. Other types of industrial
development bonds, the proceeds of which are used for the construction,
equipment, repair or improvement of privately operated industrial or
commercial facilities, may constitute Municipal Bonds, although the current
federal tax laws place substantial limitations on the size of such issues.
Municipal Bonds also include debt obligations secured by student loan
obligations.

The two principal classifications of Municipal Bonds are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's
pledge of its good faith, credit and taxing power for the payment of principal
and interest. The payment of such bonds may be dependent upon an appropriation
by the issuer's legislative body. The characteristics and enforcement of
general obligation bonds vary according to the law applicable to the
particular issuer. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities, or, in some cases, from the
proceeds of a special excise or other specific revenue source. Industrial
development bonds which are Municipal Bonds are in most cases revenue bonds
and do not generally constitute the pledge of the credit of the issuer of such
bonds. Municipal Bonds also include participations in municipal leases. These
are undivided interests in a portion of an obligation in the form of a lease
or installment purchase which is issued by state and local governments to
acquire equipment and facilities. Municipal leases frequently have special
risks not normally associated with general obligation or revenue bonds. Leases
and installment purchase or conditional sale contracts (which normally provide
for title to the leased asset to pass eventually to the governmental issuer)
have evolved as a means for governmental issuers to acquire property and
equipment without meeting the constitutional and statutory requirements for
the issuance of debt. The debt-issuance limitations are deemed to be
inapplicable because of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis. Although the obligations will be secured by the
leased equipment or facilities, the disposition of the property in the event
of non-appropriation or foreclosure might, in some cases, prove difficult. In
light of these concerns, the Trust has adopted and follows procedures for
determining whether municipal lease securities purchased by the Fund are
liquid and for monitoring the liquidity of municipal lease securities held in
the Fund's portfolio. The procedures require that a number of factors be used
in evaluating the liquidity of a municipal lease security, including, the
frequency of trades and quotes for the security, the number of dealers willing
to purchase or sell the security and the number of other potential purchasers,
the willingness of dealers to undertake to make a market in the security, the
nature of the marketplace in which the security trades, the credit quality of
the security, and other factors which the Adviser may deem relevant. There
are, of course, variations in the security of Municipal Bonds, both within a
particular classification and between classifications, depending on numerous
factors.

The yields on Municipal Bonds are dependent on a variety of factors, including
general money market conditions, supply and demand and general conditions of
the Municipal Bond market, size of a particular offering, the maturity of the
obligation and rating of the issue.

DESCRIPTION OF OTHER INVESTMENTS

U.S. GOVERNMENT OBLIGATIONS -- are issued by the Treasury and include
bills, certificates of indebtedness, notes, and bonds. Agencies and
instrumentalities of the U.S. Government are established under the authority
of an act of Congress and include, but are not limited to, the Government
National Mortgage Association, the Tennessee Valley Authority, the Bank for
Cooperatives, the Farmers Home Administration, Federal Home Loan Banks,
Federal Intermediate Credit Banks, Federal Land Banks, and the Federal
National Mortgage Association.

CERTIFICATES OF DEPOSIT -- are certificates issued against funds deposited
in a commercial bank, are for a definite period of time, earn a specified rate
of return, and are normally negotiable.

BANKERS' ACCEPTANCES -- are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.

COMMERCIAL PAPER -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs.

DESCRIPTION OF BOND RATINGS

The ratings of Moody's, S&P, Fitch and Duff & Phelps represent their opinions
as to the quality of various debt instruments. It should be emphasized,
however, that ratings are not absolute standards of quality. Consequently,
debt instruments with the same maturity, coupon and rating may have different
yields while debt instruments of the same maturity and coupon with different
ratings may have the same yield.

MOODY'S

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.