MASSACHUSETTS INVESTORS TRUST, 485BPOS, 1998-04-30

MASSACHUSETTS INVESTORS TRUST
485BPOS, 1998-04-30

Previous: LSB INDUSTRIES INC, 10-K/A, 1998-04-30

Next: MCGRAW-HILL COMPANIES INC, 8-K, 1998-04-30

<PAGE>

As filed with the Securities and Exchange Commission on April 30, 1998

1933 Act File No. 2-11401
1940 Act File No. 811-203

================================================================================

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

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 75

AND

REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 26

MASSACHUSETTS INVESTORS 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 Co.,
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 April 30, 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>
MASSACHUSETTS INVESTORS TRUST

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) * *

(d) Condensed Financial Information *

4 (a) Front Cover Page; The Fund; *
Investment Objectives and
Policies

(b), (c) Investment Objectives and Policies; *
Investment Techniques and Risk
Factors
5 (a) The Fund; Management of the *
Fund - Investment Adviser

(b) Front Cover Page; Management *
of the Fund - Investment
Adviser; Back Cover Page

(d) Management of the Fund - Management of the Fund
Administrator Administrator

(e) Management of the Fund - *
Shareholder Servicing Agent;
Back Cover Page

(f) Information Concerning the *
Fund - Expenses; Condensed

Financial Information;
Expense Summary

(g) Additional Risk Factors - *
Portfolio Trading

(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; 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) The Fund *

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;
Information Concerning Shares
of the Fund - Shareholder Services

(d) Front Cover Page; Information *
Concerning Shares of the Fund -
Purchases; Shareholder Services

(e) Information Concerning Shares *
of the Fund - Distribution Plan;
Purchases; Expense Summary

(f) Information Concerning Shares *
of the Fund - Distribution Plan

(g) Expense Summary; Information *
Concerning Shares of the Fund -
Purchases; Information
Concerning Shares of the Fund -
Exchanges; Information Concerning
Shares of the Fund; Redemptions
and Repurchases; Information
Concerning Shares of the Fund -
Distribution Plan; Information
Concerning Shares of the Fund -
Distributions; Information
Concerning Shares of the Fund -
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, PARTB PROSPECTUS CAPTION INFORMATION CAPTION

<S> <C> <C>
10 (a), (b) * Front Cover Page

11 * Front Cover Page

12 * Definitions

13 (a), (b), (c) * Investment Objectives, Policies
and Restrictions

(d) * *

14 (a), (b) * Management of the Fund -
Trustees and Officers

15 (a) * *

(b), (c) * Management of the Fund -
Trustees; Management of the
Fund - Officers

16 (a) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser;
Management of the Fund -
Trustees; Management of the
Fund - Officers

(b) Management of the Fund - Management of the Fund -
Investment Adviser Investment Adviser

(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), * Portfolio Transactions and
(c), (d), (e) 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 of
Information Concerning Shares Net Asset Value and
of the Fund - Purchases Performance - Net Asset Value

20 * Tax Status

21 (a), (b) * Management of the Fund -
Distributor; Distribution Plan

22 (a) * *

(b) * Determination of Net Asset
Value and Performance;
Appendix A

23 * Independent Auditors and
Financial Statements
</TABLE>

- --------------------------
* Not Applicable
** Contained in Annual Report

<PAGE>

MASSACHUSETTS INVESTORS TRUST

SUPPLEMENT TO THE MAY 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 MAY 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...................................................... 0.19%
Rule 12b-1 Fees...................................................... None
Other Expenses(1).................................................... 0.22%
-----
Total Operating Expenses............................................. 0.41%

- ---------
(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........................................ $ 4
3 years....................................... 13
5 years....................................... 23
10 years...................................... 52

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
PERIOD ENDED
DECEMBER 31, 1997***
--------------------

Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 14.33
-------

Income from investment operations# -
Net investment income $ 0.26
Net realized and unrealized gain on investments
and foreign currency transactions 4.44
-------
Total from investment operations $ 4.70
-------

Less distributions declared to shareholders-
From net investment income $ (0.23)
From net realized gain on investments and
foreign currency transactions (1.27)
In excess of net investment income (0.01)
-------
Total distributions declared to shareholders $ (1.51)
-------

Net asset value - end of period $ 17.52
-------
Total return 33.30%++
Ratios (to average net assets)/ Supplemental data:
Expenses## 0.41%+
Net investment income 1.42%+
Portfolio turnover 44%
Average Commission Rate $0.0573
Net assets at end of period
(000 omitted) $22,555

- -------------
*** For the period from the inception of Class I shares, January 2, 1997 through
December 31, 1997.
# Per share data are based on average shares outstanding.
## The Trust's expenses are calculated without reduction for fees paid
indirectly.
+ Annualized
++ Not annualized

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
of 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 5.75% 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 and Class B shares and Class C shares
because expenses attributable to Class A shares and Class B shares and Class C
shares generally will be higher.

THE DATE OF THIS SUPPLEMENT IS MAY 1, 1998.

<PAGE>
PROSPECTUS

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

America's First Open-End Investment Company, Organized March 21, 1924 as a
Common Law Trust under the Laws of The Commonwealth of Massachusetts.

Massachusetts Investors Trust (the "Fund") is an open-end diversified investment
company. The Fund's investment objectives are to provide reasonable current
income and long-term growth of capital and income. See "Investment Objectives
and Policies." The minimum initial investment is generally $1,000 per account
(see "Information Concerning Shares of the Fund -- Purchases").

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.

(continued on next page)

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>

This Prospectus sets forth concisely the information concerning the Fund that a
prospective investor ought to know before investing. The Fund has filed with the
Securities and Exchange Commission (the "SEC") a Statement of Additional
Information, dated May 1, 1998, as amended or supplemented from time to time
(the "SAI"), which contains more detailed information about 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 (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. Management of the Fund ............................. 17
6. Information Concerning Shares of the Fund .......... 19
Purchases ...................................... 19
Exchanges ...................................... 26
Redemptions and Repurchases .................... 27
Distribution Plan .............................. 30
Distributions .................................. 32
Tax Status ..................................... 33
Net Asset Value ................................ 34
Description of Shares, Voting Rights and
Liabilities .................................. 34
Performance Information ........................ 35
7. Shareholder Services ............................... 36
Appendix A ......................................... A-1

<PAGE>

1. EXPENSE SUMMARY

SHAREHOLDER TRANSACTION EXPENSES:

CLASS A CLASS B CLASS C

Maximum Initial Sales Charge Imposed on
Purchases of Fund Shares (as a
percentage of offering price) ......... 5.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) ........................... See Below(1) 4.00% 1.00%

ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):

Management Fees ......................... 0.19% 0.19% 0.19%
Rule 12b-1 Fees ......................... 0.33%(2) 1.00%(3) 1.00%(3)
Other Expenses(4) ....................... 0.22% 0.22% 0.22%(5)
---- ---- ----
Total Operating Expenses ................ 0.74% 1.41% 1.41%

- ------------
(1) Purchases of $1 million or more and certain purchases by retirement plans
are not subject to an initial sales charge; however, a contingent deferred
sales charge (a "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 the Class
A shares. The Fund is currently paying distribution fees in the amount of
0.075%. Payment of the remaining portion of the 0.10% per annum
distribution fee equal to 0.025% per annum will commence on such date as
the Trustees of the Fund may determine. The 0.25% per annum, service fee
is reduced to 0.15% per annum for shares purchased prior to January 2,
1991. 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 1.00% per annum of the average daily net
assets attributable to Class B and Class C shares, respectively.
Distribution expenses paid under the Distribution Plan, with respect to
Class B or Class C shares, together with any CDSC, 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."

(5) "Other Expenses" is based on Class A expenses incurred during the fiscal
year ended December 31, 1997.

EXAMPLE OF EXPENSES

------------------
An investor would pay the following dollar amounts of expenses on a $1,000
investment in the Fund, assuming (a) 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 ...................... $ 65 $ 54 $ 14 $ 24 $ 14
3 years ..................... 80 75 45 45 45
5 years ..................... 96 97 77 77 77
10 years ..................... 151 151
144 (2) (2) 169 169
- ------------

(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 "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>

2. CONDENSED FINANCIAL INFORMATION
The following information has been audited for at least the latest five years
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 auditors
are Deloitte & Touche LLP.

FINANCIAL HIGHLIGHTS--CLASS A, CLASS B AND CLASS C SHARES

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------

PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):

<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 14.46 $ 12.71 $ 10.07 $ 11.50
-------- -------- -------- --------
Income from investment operations# -
Net investment income $ 0.18 $ 0.21 $ 0.25 $ 0.25
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 4.33 3.07 3.67 (0.36)
-------- -------- -------- --------
Total from investment operations $ 4.51 $ 3.28 $ 3.92 $ (0.11)
-------- -------- -------- --------

Less distributions declared to shareholders -

From net investment income $ (0.17) $ (0.21) $ (0.46) $ (0.25)
From net realized gain on investments and foreign
currency transactions (1.27) (1.32) (0.82) (1.05)
In excess of net investment income+ (0.01) -- -- 0.00
In excess of net realized gain on investments and
foreign currency transactions -- -- -- (0.02)
-------- -------- -------- --------
Total distributions declared to shareholders $ (1.45) $ (1.53) $ (1.28) $ (1.32)
-------- -------- -------- --------
Net asset value - end of period $17.52 $ 14.46 $ 12.71 $ 10.07
-------- -------- -------- --------
Total return(+) 31.69% 25.90% 39.34% (1.02)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.74% 0.74% 0.70% 0.71%
Net investment income 1.09% 1.51% 2.13% 2.20%
PORTFOLIO TURNOVER 44% 47% 54% 87%
AVERAGE COMMISSION RATE### $0.0573 $0.0520 -- --
NET ASSETS AT END OF PERIOD (000,000 OMITTED) $ 4,323 $ 2,678 $ 2,074 $ 1,535
</TABLE>

#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Trust's expenses
are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for the Trust for fiscal years
beginning on or after September 1, 1995.
(+)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 December 31, 1994, the per share distribution in
excess of net investment income was $.0004.

<PAGE>

FINANCIAL HIGHLIGHTS - continued
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $12.31 $13.87 $12.28 $13.55 $11.22 $11.26
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.39 $ 0.32 $ 0.38 $ 0.43 $ 0.45 $ 0.40
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.86 0.69 2.95 (0.45) 3.56 0.76
------ ------ ------ ------ ------ ------
Total from investment operations $ 1.25 $ 1.01 $ 3.33 $(0.02) $ 4.01 $ 1.16
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.39) $(0.33) $(0.39) $(0.43) $(0.45) $(0.39)
From net realized gain on investments
and foreign currency transactions (1.67) (2.22) (1.32) (0.82) (1.22) (0.81)
In excess of net realized gain on
investments and foreign currency
transactions++ -- -- 0.00 -- -- --
From paid-in capital+++ -- (0.02) (0.03) -- (0.01) 0.00
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.06) $(2.57) $(1.74) $(1.25) $(1.68) $(1.20)
------ ------ ------ ------ ------ ------
Net asset value - end of period $11.50 $12.31 $13.87 $12.28 $13.55 $11.22
------ ------ ------ ------ ------ ------
Total return(+) 10.03% 7.68% 27.41% (0.33)% 35.80% 10.12%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses 0.68% 0.62% 0.62% 0.47% 0.50% 0.55%
Net investment income 3.04% 2.30% 2.73% 3.28% 3.40% 3.39%
PORTFOLIO TURNOVER 41% 46% 44% 26% 20% 19%
NET ASSETS AT END OF PERIOD (000,000
OMITTED) $1,626 $1,548 $1,530 $1,265 $1,382 $1,139
</TABLE>

#Per share data for the periods subsequent to December 31, 1992, are
based on average shares outstanding.
(+)Total returns for Class A shares do not include the applicable sales
charge (except for reinvested dividends prior to January 2, 1991). If
the charge had been included, the results would have been lower.
++For the year ended December 31, 1991, the per share distribution in
excess of net realized gain on investments was $.0041.
+++For the year ended December 31, 1988, the per share distribution from
paid-in capital was $.0001.

<PAGE>

<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $14.36 $12.63 $10.03 $11.48 $13.02
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.07 $ 0.10 $ 0.15 $ 0.15 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 4.28 3.06 3.64 (0.36) 0.32
------ ------ ------ ------ ------
Total from investment operations $ 4.35 $ 3.16 $ 3.79 $(0.21) $ 0.36
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.08) $(0.11) $(0.37) $(0.17) $(0.23)
From net realized gain on investments and
foreign currency transactions (1.27) (1.32) (0.82) (1.05) (1.67)
In excess of net investment income 0.00+++ -- -- 0.00++ --
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.02) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.35) $(1.43) $(1.19) $(1.24) $(1.90)
------ ------ ------ ------ ------
Net asset value - end of period $17.36 $14.36 $12.63 $10.03 $11.48
------ ------ ------ ------ ------
Total return 30.75% 25.05% 38.05% (1.88)% 2.62%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.41% 1.54% 1.56% 1.61% 1.56%+
Net investment income 0.42% 0.72% 1.25% 1.37% 1.05%+
PORTFOLIO TURNOVER 44% 47% 54% 87% 41%
AVERAGE COMMISSION RATE### $0.0573 $0.0520 -- -- --
NET ASSETS AT END OF PERIOD (000,000 OMITTED) $ 1,522 $ 437 $ 165 $ 69 $ 15
</TABLE>
+Annualized.
*For the period from the inception of Class B, September 7, 1993,
through December 31, 1993.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Trust's expenses
are calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for the Trust for fiscal years
beginning on or after September 1, 1995.
++For the year ended December 31, 1994, the per share distribution in
excess of net investment income was $.0003.
+++For the year ended December 31, 1997, the per share distribution in
excess of net investment income was $0.003.

<PAGE>

FINANCIAL HIGHLIGHTS - continued
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996**
- ---------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):

<S> <C> <C>
Net asset value - beginning of period $14.33 $13.93
------ ------
Income from investment operations# -
Net investment income $ 0.07 $ 0.05
Net realized and unrealized gain on investments and foreign
currency transactions 4.27 1.76
------ ------
Total from investment operations $ 4.34 $ 1.81
------ ------
Less distributions declared to shareholders -
From net investment income $(0.10) $(0.09)
From net realized gain on investments and foreign currency
transactions (1.27) (1.32)
In excess of net investment income+++ 0.00 --
------ ------
Total distributions declared to shareholders $(1.37) $(1.41)
------ ------
Net asset value - end of period $17.30 $14.33
------ ------
Total return 30.76% 12.74%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.41% 1.49%+
Net investment income 0.42% 0.77%+
PORTFOLIO TURNOVER 44% 47%
AVERAGE COMMISSION RATE $0.0573 $0.0520
NET ASSETS AT END OF PERIOD (000,000 OMITTED) $ 211 $ 12
</TABLE>
+Annualized.
++Not annualized.
**For the period from the inception of Class C, July 2, 1996, through
December 31, 1996. #Per share data are based on average shares
outstanding.
##The Trust's expenses are calculated without reduction for fees paid
indirectly.
+++For the year ended December 31, 1997, the per share distribution in
excess of net investment income was $0.004.

<PAGE>

3. THE FUND
The Fund is an open-end, diversified management investment company which was
organized as a common law trust under the laws of The Commonwealth of
Massachusetts in 1924. Shares of the Fund are continuously sold to the public,
and the Fund uses the proceeds to buy securities (common stocks and other
instruments) 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 5.75% of the
offering price (or a CDSC of 1.00% upon redemption 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 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 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 of 1.00% upon redemption during the first year and 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 Fund'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 Fund are responsible for its operations. The Adviser manages the
portfolio from day to day in accordance with the Fund's investment objectives
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 OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES -- The Fund's investment objectives are to provide
reasonable current income and long-term growth of capital and income. Any
investment involves risk and there can be no assurance that the Fund will
achieve its investment objectives.

INVESTMENT POLICIES -- The Fund is believed to constitute a conservative medium
for that portion of an investor's capital which he wishes to have invested in
securities considered to be of high or improving investment quality. The term
"conservative medium" indicates that the Fund attempts to exercise prudence,
discretion and intelligence in the selection of investments with due regard for
both probable income and probable safety of capital. The words "high investment
quality" reflect the intention of the Fund to avoid the acquisition of
speculative securities or those of doubtful character even if immediate
prospects are tempting.

The assets of the Fund are normally invested in equity securities. The Fund may
invest in all types of equity securities, including the following: common
stocks, preferred stocks and preference stocks; securities such as bonds,
warrants or rights that are convertible into stocks; and depository receipts for
those securities. These securities may be listed on securities exchanges, traded
in various over-the-counter markets or have no organized markets. However, the
Fund may hold its assets in cash or invest in commercial paper, repurchase
agreements or other forms of debt securities either to provide reserves for
future purchases of securities or as a temporary defensive measure in certain
economic environments. Since shares of the Fund represent an investment in
securities with fluctuating market prices, shareholders should understand that
the value of shares of the Fund will vary as the aggregate value of the Fund's
portfolio securities increases or decreases. Moreover, the amount of dividends
the Fund pays to its shareholders will vary in relation to the amount of
dividends and interest the Fund receives from its portfolio securities.

FOREIGN SECURITIES: The Fund may invest up to 35% (and expects generally to
invest between 0% and 15%) of its total assets in foreign securities which are
not traded on a U.S. exchange (not including American Depositary Receipts
("ADRs")). Investing in securities of foreign issuers generally involves risks
not ordinarily associated with investing in securities of domestic issuers.
These include changes in currency rates, exchange control regulations,
governmental administration or economic or monetary policy (in the United States
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 United States. 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.

AMERICAN DEPOSITARY RECEIPTS: The Fund may invest in ADRs, which are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. Because ADRs trade on U.S. securities exchanges,
the Adviser does not treat them as foreign securities. However, they are subject
to many of the risks of foreign securities such as changes in exchange rates and
more limited information about foreign issuers. See the SAI for further
discussion of foreign securities and the holding of foreign currency, as well as
the associated risks.

EMERGING MARKET SECURITIES: Consistent with the Fund's objectives 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 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.

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 either 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, presenting the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions on 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.

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 PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans will usually be made to member firms (and subsidiaries thereof) of
the New York Stock Exchange (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. 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. If the Adviser determines to make securities loans, it is
intended that the value of the securities loaned would not exceed 25% of the
value of the net assets of the Fund.

RESTRICTED SECURITIES: The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933, as amended (the
"1933 Act"), but can be offered and sold to "qualified institutional buyers"
under Rule 144A under the 1933 Act ("Rule 144A"). A determination is made, based
upon a continuing review of the trading markets for the 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 has delegated to the Adviser the daily
function of determining and monitoring liquidity of restricted securities
available pursuant to Rule 144A. 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 144A securities. 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, the judgment of the Adviser may at times
play a greater role in valuing these securities than in the case of unrestricted
securities.

"WHEN-ISSUED" SECURITIES: In order to help ensure the availability of suitable
securities for its portfolio, 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. In general, the Fund does not pay for such securities until received and
does not start earning interest or dividends 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. See the SAI for a further discussion of the nature of such
transactions and risks associated therewith.

ZERO COUPON BONDS: The Fund may also invest in securities which are convertible
into 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 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.

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

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

OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put options
and purchase call and put options on stock indices. The Fund may write options
on stock indices for the purpose of increasing its gross income and to protect
its portfolio against declines in the value of securities it owns or increases
in the value of securities to be acquired. When the Fund writes an option on a
stock index, and the value of the index moves adversely to the holder's
position, the option will not be exercised, and the Fund will either close out
the option at a profit or allow it to expire unexercised. The Fund will thereby
retain the amount of the premium, which will increase its gross income and
offset part of the reduced value of portfolio securities or the increased cost
of securities to be acquired. Such transactions, however, will constitute only
partial hedges against adverse price fluctuations, since any such fluctuations
will be offset only to the extent of the premium received by the Fund for the
writing of the option. In addition, if the value of an underlying index moves
adversely to the Fund's option position, the option may be exercised, and the
Fund will experience a loss which may only be partially offset by the amount of
the premium received.

The Fund may also purchase put or call options on stock indices in order,
respectively, to hedge its investments against a decline in value or to attempt
to reduce the risk of missing a market or industry segment advance. The Fund's
possible loss in either case will be limited to the premium paid for the option,
plus related transaction costs.

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

FUTURES CONTRACTS: The Fund may enter into stock index and foreign currency
futures contracts (collectively, "Futures Contracts"). Such transactions may be
entered into for hedging purposes, in order to protect the Fund's current or
intended investments from the effects of changes in exchange rates or declines
in the stock market, and for non-hedging purposes subject to applicable law. The
Fund will incur brokerage fees when it purchases and sells Futures Contracts,
and will be required to maintain margin deposits. In addition, Futures Contracts
entail risks. Although the Adviser believes that use of such contracts will
benefit the Fund, if its investment judgment about the general direction of
exchange rates or the stock market is incorrect, the Fund's overall performance
may be poorer than if it had not entered into any such contract and the Fund may
realize a loss.

OPTIONS ON FUTURES CONTRACTS: The Fund may purchase and write options on Futures
Contracts ("Options on Futures Contracts") in order to protect against declines
in the values of portfolio securities or against increases in the cost of
securities to be acquired and for non-hedging purposes, subject to applicable
law, which involves greater risk and may result in losses which are not offset
by gains on other portfolio assets. Purchases of Options on Futures Contracts
may present less risk in hedging the Fund's portfolio than the purchase or sale
of the underlying Futures Contracts since the potential loss is limited to the
amount of the premium plus related transaction costs, although it may be
necessary to exercise the option to realize any profit, which results in the
establishment of a futures position. The writing of Options on Futures
Contracts, however, does not present less risk than the trading of Futures
Contracts and will constitute only a partial hedge, up to the amount of the
premium received. In addition, if an option is exercised, the Fund may suffer a
loss on the transaction.

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 Commodity Futures
Trading Commission (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-hedging purposes,
provided that the aggregate initial margin and premiums required to establish
such 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.

FORWARD CONTRACTS ON FOREIGN CURRENCY: The Fund may enter into forward foreign
currency exchange contracts for the purchase or sale of a fixed quantity of a
foreign currency at a future date ("Forward Contracts"). The Fund may enter into
Forward Contracts for hedging purposes as well as for non-hedging purposes
(i.e., speculative purposes). By entering into transactions in Forward Contracts
for hedging purposes, the Fund may be required to forego the benefits of
advantageous changes in exchange rates and, in the case of Forward Contracts
entered into for non-hedging purposes, the Fund may sustain losses which will
reduce its gross income. Such transactions, therefore, could be considered
speculative. Forward Contracts are traded over-the-counter and not on organized
commodities or securities exchanges. As a result, Forward Contracts operate in a
manner distinct from exchange-traded instruments, and their use involves certain
risks beyond those associated with transactions in Futures Contracts or options
traded on exchanges. The Fund may choose to, or be required to, receive delivery
of the foreign currencies underlying Forward Contracts into which it has
entered. 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 may also enter into a Forward Contract on one currency 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 has established procedures consistent with
statements of the SEC and its staff regarding the use of Forward Contracts by
registered investment companies, which requires the use of segregated assets or
"cover" in connection with the purchase and sale of such contracts. See
"Investment Objective and Policies -- Foreign Securities" in the SAI for
information on the risks associated with holding foreign currency.

RISKS OF OPTIONS, FUTURES CONTRACTS AND 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, such transactions nevertheless involve certain risks. For
example, a lack of correlation between the instrument underlying an option or
Futures Contract and the assets being hedged, or unexpected adverse price
movements, could render the Fund's hedging strategy unsuccessful and could
result in losses. The Fund also may enter into transactions in such instruments
for other than hedging purposes, subject to applicable law, which involves
greater risk. In particular, such transactions may result in losses for the Fund
which are not offset by gains on other portfolio positions, thereby reducing
gross income. In addition, foreign currency markets may be extremely volatile
from time to time. There also can be no assurance that a liquid secondary market
will exist for any contract purchased or sold, and the Fund may be required to
maintain a position until exercise or expiration, which could result in losses.
The SAI contains a description of the nature and trading mechanics of options,
Futures Contracts, Options on Futures Contracts, Forward Contracts and Options
on Foreign Currencies, and includes a discussion of the risks related to
transactions therein.

Transactions in 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, Futures Contracts and
Options on Futures Contracts traded by the Fund will include both domestic and
foreign securities.

PORTFOLIO TRADING: The primary consideration in placing portfolio security
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. 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). For a
further discussion of portfolio trading, see "Portfolio Transactions and
Brokerage Commissions" in the SAI.

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

The investment objectives and policies described above are not fundamental and
may be changed without shareholder approval.

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 indicated otherwise (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 and policies are
adhered to at the time of purchase or utilization of assets; a subsequent change
in circumstances will not be considered to result in a violation of policy.

5. MANAGEMENT OF THE FUND

INVESTMENT ADVISER -- The Adviser manages the Fund pursuant to an Investment
Advisory Agreement, dated May 20, 1982 (the "Advisory Agreement"). Under the
Advisory Agreement, the Adviser provides the Fund with overall investment
advisory services. Kevin R. Parke, an Executive Vice President of the Adviser,
and John D. Laupheimer, Jr., a Senior Vice President of the Adviser, have been
the Fund's portfolio managers since 1992. Mitchell D. Dynan, a Vice President of
the Adviser, has also been a portfolio manager of the Fund since March, 1995.
Messrs. Parke, Dynan and Laupheimer have been employed as portfolio managers by
the Adviser since 1985, 1986 and 1981, respectively. 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 the Fund's gross income
(i.e., income other than gains from the sale of securities), in each case on an
annualized basis for the Fund's then-current fiscal year. The applicable
percentages are reduced as assets and income reach the following levels:

ANNUAL RATE OF MANAGEMENT FEE ANNUAL RATE OF MANAGEMENT FEE
BASED ON AVERAGE DAILY NET ASSETS BASED ON GROSS INCOME
-------------------- ----------------
0.30% of the first $200 million 6.67% of the first $6 million
0.24% of the next $300 million 5.33% of the next $9 million
0.12% of average daily net assets in excess 2.67% of gross income in excess
of $500 million of $15 million

For the Fund's fiscal year ended December 31, 1997, MFS received management fees
under the Advisory Agreement of $8,764,265, equivalent on an annualized basis to
0.19% of the Fund's average daily net assets (excluding the payment attributable
to certain property described below). Management fees received by MFS for the
Fund's fiscal year ended December 31, 1997 were comprised of $6,178,779 based on
average daily net asset and $2,585,486 based on gross investment income.
However, the Advisory Agreement provides that the compensation of the Adviser
will be reduced by an annual sum representing the Fund's share of the fair value
of the use of office furniture, furnishings and equipment purchased over the
years with funds furnished by the Fund and Massachusetts Investors Growth Stock
Fund as part of shared expenses. The total annual use value of this property for
the period ending December 31, 1997 has been determined pursuant to a formula
devised by an independent supplier to be $95,243 for the Fund, which amount was
transferred to the Fund by the Adviser.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds"), to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS Intermediate
Income Trust, MFS Charter Income Trust, MFS 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 Fund as the first mutual fund in the United States. Net assets
under the management of the MFS organization were approximately $82.2 billion
on behalf of approximately 3.1 million investor accounts as of March 31, 1998.
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, Arnold D. Scott, John W. Ballen,
Donald A. Stewart and John D. McNeil. Mr. Shames is the Chairman, Chief
Executive Officer and President of MFS and Mr. Scott is the Secretary and a
Senior Executive Vice President and Mr. Ballen is an Executive Vice President
and Chief Equity Officer of MFS. Messrs. McNeil and Stewart are the Chairman
and President, respectively, of Sun Life. Sun Life, a mutual life insurance
company, is one of the largest international life insurance companies and has
been operating in the United States since 1895, establishing a headquarters
office here in 1973. The executive officers of MFS report to the Chairman of
Sun Life.

Mr. Shames, the Chairman of MFS is a Trustee of the Fund. W. Thomas London,
Stephen E. Cavan, James O. Yost and James R. Bordewick, Jr., all of whom are
officers of MFS, are officers of the Fund.

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 adminstrative 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. ("Shareholder Servicing
Agent"), a wholly owned subsidiary of MFS, performs transfer agency, certain
dividend disbursing agency and other services for the Fund.

6. INFORMATION CONCERNING SHARES OF THE FUND

PURCHASES

Class A, Class B and Class C shares of the Fund may be purchased at the public
offering price through any securities dealer. As used in the Prospectus and any
appendices hereto, the term "dealers" includes any brokers, 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 an investment in the Fund.

This Prospectus offers to the general public Class A, Class B and Class 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 ............................ 5.75% 6.10% 5.00%
$50,000 but 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 5% 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 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;

(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; and

(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, as amended, 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 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

(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.
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
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
"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 bears 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 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 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 Class A, Class B
and Class C shares of the Fund.

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. Purchases and exchanges
should be made for investment purposes only. The Fund and MFD each reserves the
right to reject any specific purchase order or to restrict any specific purchase
or exchange request. 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
individuals, 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 or 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 and exchange requests
by markets timers. Other funds in the MFS 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.

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 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 above in this
paragraph.

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.

CONTINGENT DEFERRED SALES CHARGE: Investments in Class A, Class B and 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 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 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 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 or Class B
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 provision of the Distribution Plan relating to each Class
of shares. While the amount of compensation received by MFD in the form of
distribution fees during any year may be more or less than the expense incurred
by MFD under its distribution agreement with the Fund, the Fund is not liable to
MFD for any losses MFD may incur performing services under its distribution
agreement with the Fund.

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
therefor, 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
inital 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 0.33%,
1.00% and 1.00% per annum, respectively. Payment of a portion of the 0.10% per
annum Class A distribution fee, equal to 0.025% per annum, will commence on such
date as the Trustees of the Fund may determine. The 0.25% per annum Class A
service fee is reduced to 0.15% per annum for shares purchased prior to January
2, 1991.

DISTRIBUTIONS
The Fund intends to pay shareholders substantially all of its net investment
income as dividends on a quarterly basis. In determining the net investment
income available for distributions, the Fund may rely on projections of its
anticipated net investment income over a longer term, rather than its actual net
investment income for the period. In addition, the Fund may make one or more
distributions during the calendar year to its shareholders from any long-term
capital gains and may make one or more distributions during the calendar year to
its shareholders from short-term capital gains. Shareholders may elect to
receive dividends and capital gain distributions in either cash or additional
shares of the same class with respect to which a distribution is made. 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
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.
A portion of the dividends received from the Fund (but none of the Fund's
capital gains distributions) may qualify for the dividends received deduction
for corporations. 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 basis reduction), 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
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 Fund's
assets attributable to the class and dividing the difference by the number of
shares of the class outstanding. Equity securities in the Fund's portfolio are
valued at their market value. For a discussion of the manner in which values of
these and other assets in the Fund's portfolio are determined, see 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 by MFD prior to the
close of that business day.

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund has three classes of shares which it offers to the general public,
entitled Class A, Class B and Class C shares of Beneficial Interest. The
Trustees have fixed the par value at $0.33 1/3 per share. The Fund also has a
class of shares which if offers exclusively to certain institutional investors,
entitled Class I Shares. The Fund has reserved the right to create and issue
additional classes of shares, in which case each class of shares of the Fund
would participate equally in the earnings, dividends and assets attributable to
that class of shares of the Fund. 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. Additionally, each class of shares of the
Fund will vote separately on any material increase in the fees under the
Distribution Plan or on any other matter that solely affects that class of
shares, but will otherwise vote together with all other classes of shares of the
Fund on all other matters. The Fund does not intend to hold annual meetings. The
Fund's Declaration of Trust provides that a Trustee may be removed from office
in certain instances.

Each share of a class 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 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 Declaration of Trust has no provision for annual meetings. New Trustees are
appointed by the remaining Trustees (not the shareholders) subject to the
written assent of more than 50% of the shares voting on each appointment.
Shareholders therefore have limited non-cumulative voting rights and holders of
more than 50% of the shares voting may accept or reject each appointment while
holders of less than 50% are not able to reject any appointment. Amendments to
the Declaration of Trust require written consent of the holders of a majority of
the shares. The 1940 Act confers additional voting rights on the shareholders.

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
Analytical Securities Corporation and Wiesenberger Investment Companies Service.
All performance quotations are based on historical performance and are not
intended to indicate future performance. Yield calculations 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 twelve months and is
computed by dividing the amount of such dividends by the maximum public offering
price of that class at the end of such period. Current distribution rate
calculations for Class B 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 a CDSC, and which will thus be higher. Total
rate of return reflects all components of investment over 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.

The Fund offers multiple classes of shares which were initially offered for sale
to, and purchase 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 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 December 31, 1997, please read 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
holdings available to investors upon request.

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

ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder will receive
confirmation statements showing the transaction activity in his account. At
the end of each calendar year, each shareholder will receive income tax
information regarding reportable dividends and 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:

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

-- Dividends in cash; capital gain distributions reinvested in additional
shares;

-- Dividends and capital gain distributions in cash.

Reinvestments (net of any tax withholding) will be made in additional full and
fractional shares of the same class of shares at the net asset value in effect
at the close of business on the record date. Dividends and capital gains
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 $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.

RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together
with the current offering price value of all holdings of Class A, Class B and
Class C shares of that shareholder in the MFS Funds or MFS Fixed Fund (a bank
collective investment 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 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 the other MFS Funds 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. 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 transfer 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 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 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 -- 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 certain other qualified 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 May 1, 1998 contains more detailed information about the
Fund, including information related to: }i{ investment policies and
restrictions; (ii) Trustees, officers and investment adviser; (iii) portfolio
transactions and brokerage commissions; (iv) the Distribution Plan; and }v{
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 CDSC for Class
RA shares are waived (Section II), and the CDSC for Class B and Class C shares
is waived (Section III). 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 institution having a selling agreement or other similar agreement with
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, is 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 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 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;

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 Institutional 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 401(a) or
ESP 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 is 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 includes
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.

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>

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

Shareholder Servicing Agent
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Toll-free: (800) 225-2606

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

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

MIT-1-5/98/1.2MM 12/212/312

<PAGE>

[Logo]
MFS(SM)
INVESTMENT MANAGEMENT

MASSACHUSETTS STATEMENT OF
INVESTORS TRUST ADDITIONAL INFORMATION

(A member of the MFS Family of Funds(R)) May 1, 1998

- ---------------------------------------------------------------------------
Page

1. Definitions ......................................... 2
2. Investment Objectives, Policies and Restrictions .... 2
3. Management of the Fund .............................. 9
Trustees ......................................... 9
Officers ......................................... 9
Trustees Compensation Table ...................... 10
Investment Adviser ............................... 10
Administrator .................................... 11
Custodian ........................................ 11
Shareholder Servicing Agent ...................... 11
Distributor ...................................... 11
4. Portfolio Transactions and Brokerage Commissions .... 12
5. Shareholder Services ................................ 13
Investment and Withdrawal Programs ............... 13
Exchange Privilege ............................... 15
Tax-Deferred Retirement Plans .................... 16
6. Tax Status .......................................... 16
7. Determination of Net Asset Value and Performance .... 17

8. Distribution Plan ................................... 20

9. Independent Auditors and Financial Statements ....... 20
Appendix A .......................................... 21

MASSACHUSETTS INVESTORS TRUST
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 Prospectus, dated May 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>

1. DEFINITIONS

"Fund" -- Massachusetts Investors Trust, a
common law trust organized under
the laws of The Commonwealth of
Massachusetts.

"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
May 1, 1998, as amended or
supplemented from time to time.

2. INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS

INVESTMENT OBJECTIVES. The Fund's investment objectives are to provide
reasonable current income and long-term growth of capital and income. Any
investment involves risk and there can be no assurance that the Fund will
achieve its investment objectives.

INVESTMENT POLICIES. The Fund is believed to constitute a conservative medium
for that portion of an investor's capital which he wishes to have invested in
securities considered to be of high or improving investment quality. The term
"conservative medium" indicates that the Fund attempts to exercise prudence,
discretion and intelligence in the selection of investments with due regard for
both probable income and probable safety of capital. The words "high investment
quality" reflect the intention of the Fund to avoid the acquisition of
speculative securities or those of doubtful character even if immediate
prospects are tempting.

The assets of the Fund are normally invested in common stocks or securities
convertible into common stocks. However, the Fund may hold its assets in cash or
invest in commercial paper, repurchase agreements or other forms of debt
securities either to provide reserves for future purchases of common stock or as
a defensive measure in certain economic environments. Since shares of the Fund
represent an investment in securities with fluctuating market prices,
shareholders should understand that the value of shares of the Fund will vary as
the aggregate value of the Fund's portfolio securities increases or decreases.
Moreover, the amount of dividends the Fund pays to its shareholders will vary in
relation to the amount of dividends and interest the Fund receives from its
portfolio securities.

REPURCHASE AGREEMENTS: 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 U.S. Government securities, the values
of which are equal to or greater than the repurchase price agreed to be paid by
the seller. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a standard rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the U.S. Government securities.

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

LENDING OF PORTFOLIO SECURITIES: The Fund may seek to increase its income by
lending portfolio securities to entities deemed creditworthy by the Adviser.
Such loans would be required to be secured continuously by collateral in cash,
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 would have the right to call a loan and obtain the securities
loaned at any time on customary industry settlement notice (which will usually
not exceed five days). During the existence of a loan, the Fund would continue
to receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned. The Fund would also receive a fee from the borrower or
compensation based on investment of the 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 would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of their
consent on a material matter affecting the investment. As with other extensions
of credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the Adviser to be of good standing,
and when, in the judgment of the Adviser, the consideration which could be
earned currently from securities loans of this type justifies the attendant
risk. If the Adviser determines to make securities loans, it is not intended
that the value of the securities loaned would exceed 25% of the value of the
Fund's net assets.

FOREIGN SECURITIES: The Fund may invest up to 35% (and expects generally to
invest between 0% and 15%) of its total assets in foreign securities (not
including American Depositary Receipts) considered to be of high or improving
investment quality. 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 also hold foreign currency in
anticipation of purchasing foreign securities.

AMERICAN DEPOSITARY RECEIPTS: American Depositary Receipts ("ADRs") are
certificates issued by a U.S. depository (usually a bank) and represent a
specified quantity of shares of an underlying non-U.S. stock on deposit with a
custodian bank as collateral. ADRs may be sponsored or unsponsored. A sponsored
ADR is issued by a depository which has an exclusive relationship with the
issuer of the underlying security. An unsponsored ADR may be issued by any
number of U.S. depositories. Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
depository of an unsponsored ADR, on the other hand, is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through voting rights to ADR holders in respect of the
deposited securities. The Fund may invest in either type of ADR. Although the
U.S. investor holds a substitute receipt of ownership rather than direct stock
certificates, the use of the depositary receipts in the United States can reduce
costs and delays as well as potential currency exchange and other difficulties.
The Fund may purchase securities in local markets and direct delivery of these
ordinary shares to the local depository of an ADR agent bank in the foreign
country. Simultaneously, the ADR agents create a certificate which settles at
the Fund's custodian in five days. The Fund may also execute trades on the U.S.
markets using existing ADRs. A foreign issuer of the security underlying an ADR
is generally not subject to the same reporting requirements in the United States
as a domestic issuer. Accordingly, the information available to a U.S. investor
will be limited to the information the foreign issuer is required to disclose in
its own country and the market value of an ADR may not reflect undisclosed
material information concerning the issuer of the underlying security. ADRs may
also be subject to exchange rate risks if the underlying foreign securities are
denominated in foreign currency.

"WHEN-ISSUED" SECURITIES: The Fund may purchase securities on a "when-issued" or
on a "forward delivery" basis. It is expected that, under normal circumstances,
the Fund will take delivery of such securities. When the Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it will
set up procedures consistent with Securities and Exchange Commission ("SEC")
policies concerning such purchases. Since those policies currently recommend
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. However, although the Fund does not intend to make such purchases for
speculative purposes and the Fund does intend to adhere to the provisions of SEC
policies, purchases of securities on such basis 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
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.

It is not the Fund's policy to invest for the purpose of exercising control or
management or with a view to making short-term trading profits. This operating
policy is not fundamental and may be changed without shareholder approval.

OPTIONS ON SECURITIES: The Fund may write (sell) covered call and put options on
securities and purchase call and put options on securities. The Fund may write
options on securities for the purpose of increasing its return on such
securities and for hedging purposes.

A call option written by the Fund is covered if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire such
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 a 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 (i) is equal to or greater than the exercise
price of the put written or (ii) is less than the exercise price of the put
written if 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 on which, or the counterparty
with which, the option is traded, and applicable laws and regulations.

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 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
proceeds from the concurrent sale of any securities subject to the option to be
used for other investments of the Fund, provided that another option on such
security is not written. If the Fund desires to sell a particular security from
its portfolio on which it has written a call option, it will effect a closing
transaction in connection with the option prior to or concurrent with the sale
of the security.

The Fund will realize a profit from a closing transaction if the premium paid in
connection with the closing of an option written by the Fund is less than the
premium received from writing the option, or if the premium received in
connection with the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, the Fund will suffer a loss
if the premium paid or received in connection with a closing transaction is more
or less, respectively, than the premium received or paid in establishing the
option position. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the closing out of a call option previously written by the
Fund is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.

The Fund may write options in connection with buy-and-write transactions; that
is, the Fund may purchase a security and then write a call option against that
security. The exercise price of the call option the Fund determines to write
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, less related
transaction costs. 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 could be used by the
Fund in the same market environments that call options would be 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.

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 above its
then current market value, resulting in a capital loss unless the security
subsequently appreciates in value. The writing of options on securities will be
undertaken by the Fund for purposes in addition to hedging, and could involve
certain risks which are not present in the case of hedging transactions.
Moreover, even where options are written for hedging purposes, such transactions
will constitute only a partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be acquired, up to
the amount of the premium.

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

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- 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.

OPTIONS ON STOCK INDICES: The Fund may write (sell) covered call and put options
on stock indices and purchase call and put options on stock indices for the
purpose of increasing its gross income and to protect its portfolio against
declines in the value of securities it owns or increases in the value of
securities to be acquired.

The Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of the Adviser, are expected to be similar to
those of the index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration segregated by the Fund) upon conversion or exchange of other
securities in its portfolio. Nevertheless, where the Fund covers a call option
on a stock index through ownership of securities, such securities may not match
the composition of the index and, in that event, the Fund will not be fully
covered and could be subject to risk of loss in the event of adverse changes in
the value of the index. A Fund may also cover call options on stock indices by
holding a call on the same index 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. The Fund may cover put options on stock indices by segregating
liquid assets with a value equal to the exercise price, or else by holding a put
on the same stock index 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 on stock indices written by the Fund may also be
covered in such other manner as may be in accordance with the rules of the
exchange on which, or the counterparty with which, the option is traded, and
applicable laws and regulations.

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. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
the Fund's stock investments. By writing a put option, the Fund assumes the risk
of a decline in the index. To the extent that the price changes of securities
owned by a Fund correlate with changes in the value of the index, writing
covered put options on indices will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.

The purchase of call options on stock indices may be used by the Fund to attempt
to reduce the risk of missing a broad market advance, or an advance in an
industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, the Fund will also bear the risk of losing all or a portion of the
premium paid, and related transaction costs, if the value of the index does not
rise. The purchase of call options on stock indices when the Fund is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing calls on securities
the Fund owns.

The Fund also may purchase put options on stock indices to hedge its investments
against a decline in value. By purchasing a put option on a stock index, the
Fund will seek to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option, plus related
transaction costs. The success of this strategy will largely depend on the
accuracy of the correlation between the changes in value of the index and the
changes in value of the Fund's security holdings.

OPTIONS ON FOREIGN CURRENCIES: The Fund may purchase and write put and call
options on foreign currencies ("Options on Foreign Currencies") for the purpose
of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to be
acquired. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put Options on the Foreign Currency. If the value of the
currency did decline, the Fund would have the right to sell such currency for a
fixed amount in dollars and would thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Fund deriving from purchases of Options on Foreign Currencies
would be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Fund could sustain losses on transactions in Options on
Foreign Currencies 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 may, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurred, the option would most likely not be
exercised, and the diminution in value of portfolio securities would be offset
by the amount of the premium received less related transaction costs. As in the
case of other types of options, therefore, the writing of Options on Foreign
Currencies will constitute only a partial hedge.

FUTURES CONTRACTS: The Fund may enter into stock index and foreign currency
futures contracts ("Futures Contracts"). A Futures Contract is a bilateral
agreement providing for the purchase and sale of a specified type and amount of
a financial instrument, or foreign currency, or for the making and acceptance of
a cash settlement, at a stated time in the future for a fixed price. By its
terms, a Futures Contract provides for a specified settlement date on which, in
the case of the majority of foreign currency futures contracts, the currency or
the contract are delivered by the seller and paid for by the purchaser, or on
which, in the case of stock index futures contracts and certain foreign currency
futures contracts, the difference between the price at which the contract was
entered into and the contract's closing value is settled between the purchaser
and seller in cash. Futures contracts differ from options in that they are
bilateral agreements, with both the purchaser and the seller equally obligated
to complete the transaction. Futures Contracts call for settlement only on the
expiration date and cannot be "exercised" at any other time during their term.

The purchase or sale of a Futures Contract differs from the purchase or sale of
a security or the purchase of an option in that no purchase price is paid or
received. Instead, an amount of cash or cash equivalents, which varies but may
be as low as 5% or less of the value of the contract, must be deposited with the
broker as "initial margin." Subsequent payments to and from the broker, referred
to as "variation margin," are made on a daily basis as the value of the index or
instrument underlying the Futures Contract fluctuates, making positions in the
Futures Contract more or less valuable -- a process known as "marking to the
market".

Purchases or sales of stock index futures contracts may be used to attempt to
protect a Fund's current or intended stock investments from broad fluctuations
in stock prices. For example, a Fund may sell stock index futures contracts in
anticipation of or during a market decline to attempt to offset the decrease in
market value of the Fund's securities portfolio that might otherwise result. If
such decline occurs, the loss in value of portfolio securities may be offset, in
whole or part, by gains on the futures position. When a Fund is not fully
invested in the securities market and anticipates a significant market advance,
it may purchase stock index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Fund intends to purchase. As such purchases are made, the
corresponding positions in stock index futures contracts will be closed out. In
a substantial majority of these transactions, the Fund will purchase such
securities upon termination of the futures position, but under unusual market
conditions, a long futures position may be terminated without a related purchase
of securities. Stock index futures may also be used for non- hedging purposes,
subject to applicable law.

As noted in the Prospectus, a Fund may purchase and sell foreign currency
futures contracts for hedging purposes, to attempt to protect its current or
intended investments from fluctuations in currency exchange rates, and for
non-hedging purposes, subject to applicable law. Such fluctuations could reduce
the dollar value of portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be acquired, even if the
value of such securities in the currencies in which they are denominated remains
constant. A Fund may sell futures contracts on a foreign currency, for example,
where it holds securities denominated in such currency and it anticipates a
decline in the value of such currency relative to the dollar. In the event such
decline occurs, the resulting adverse effect on the value of foreign-denominated
securities may be offset, in whole or in part, by gains on the futures
contracts.

Conversely, a Fund could protect against a rise in the dollar cost of foreign-
denominated securities to be acquired by purchasing futures contracts on the
relevant currency, which could offset, in whole or in part, the increased cost
of such securities resulting from a rise in the dollar value of the underlying
currencies. Where a Fund purchases futures contracts under such circumstances,
however, and the prices of securities to be acquired instead decline, the Fund
will sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.

OPTIONS ON FUTURES CONTRACTS: The Fund may write or purchase options to buy or
sell Futures Contracts ("Options on Futures Contracts"). The writing of a call
Option on a Futures Contract constitutes a partial hedge against declining
prices of the securities or other instruments required to be delivered under the
terms 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, less related transaction costs, which provides a partial hedge against
any decline that may have occurred in the Fund's portfolio holdings. The writing
of a put Option on a Futures Contract constitutes a partial hedge against
increasing prices of the securities or other instruments required to be
delivered under the terms 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. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing Options on Futures Contracts may to
some extent be reduced or increased by changes in the value of portfolio
securities.

The Fund may cover the writing of call Options on Futures Contracts (a) through
purchases of the underlying Futures Contract, (b) through ownership of the
instrument, or instruments included in the index, underlying the Futures
Contract, or (c) through the holding of a call on the same Futures Contract and
in the same principal amount as the call written where the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written if the difference is
segregated by the Fund in liquid assets. The Fund may cover the writing of put
Options on Futures Contracts (a) through sales of the underlying Futures
Contract, (b) through segregation of liquid assets in an amount equal to the
value of the security or index underlying the Futures Contract, or (c) through
the holding of a put on the same Futures Contract and in the same principal
amount as the put written where the exercise price of the put held (i) is equal
to or greater than the exercise price of the put written or (ii) is less than
the exercise price of the put written if the difference is segregated by the
Fund. Put and Call Options on Futures Contracts written by the Fund may also be
covered in such other manner as may be in accordance with the rules of the
exchange on which, or the counterparty with which, the option is traded, and
applicable laws and regulations. Upon the exercise of a call Option on a Futures
Contract written by the Fund, the Fund will be required to sell the underlying
Futures Contract which, if the Fund has covered its obligation through the
purchase of such Contract, will serve to liquidate its futures position.
Similarly, where a put Option on a Futures Contract written by the Fund is
exercised, the Fund will be required to purchase the underlying Futures Contract
which, if the Fund has covered its obligation through the sale of such Contract,
will close out its futures position.

The Fund may purchase Options on Futures Contracts for hedging purposes as an
alternative to purchasing or selling the underlying Futures Contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or changes in interest or exchange
rates, the Fund could, in lieu of selling Futures Contracts, purchase put
options thereon. In the event that such decrease occurs, it may be offset, in
whole or part, by a profit on the option. Conversely, where it is projected that
the value of securities to be acquired by the Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call Options on Futures Contracts, rather than
purchasing the underlying Futures Contracts. The Fund may also use Options on
Futures Contracts for non-hedging purposes subject to applicable law.

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

The Fund has established procedures concerning the use of Forward Contracts by
registered investment companies. Since that policy currently recommends that an
amount of the Fund's assets equal to the amount of the commitment be held aside
or segregated for "cover" to be used to pay for the commitment, the Fund will
always have liquid assets available sufficient to cover any commitments under
contracts to purchase or sell foreign currencies or to limit any potential risk.
The segregated assets will be marked to market on a daily basis. While these
contracts are not presently requlated by the Commodity Futures Trading
Commission (the "CFTC"), the CFTC may in the future assert authority to regulate
Forward Contracts. In such event, the Fund's ability to utilize Forward
Contracts in the manner set forth above may be restricted.

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 the Fund will segregate liquid assets, which will be marked to market
on a daily basis, in an amount equal to the value of its commitments under
Forward Contracts entered into by the Fund. 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 Contract. 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.

RISK FACTORS: IMPERFECT CORRELATION OF HEDGING INSTRUMENTS WITH THE FUND'S
PORTFOLIO -- The Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in options, Futures Contracts, and Forward
Contracts will depend on the degree to which price movements in the underlying
index or instrument correlate with price movements in the relevant portion of
the Fund's portfolio. Because the securities in the Fund's portfolio will most
likely not be the same as those securities underlying a stock index, the
correlation between movements in the portfolio and in the securities underlying
the index will not be perfect. The trading of Futures Contracts 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. The
anticipated spread between the prices may be distorted due to the differences in
the nature of the markets, such as differences in margin requirements, the
liquidity of such markets and the participation of speculators in such markets.
In this regard, trading by speculators in options and Futures Contracts has in
the past occasionally resulted in market distortions, which may be difficult or
impossible to predict, particularly near the expiration of such contracts. It
should be noted that Futures Contracts or options based upon a narrower index of
securities, such as those of a particular industry group, may present greater
risk than options or Futures Contracts based on a broad market index, because a
narrower index is more susceptible to rapid and extreme fluctuations as a result
of changes in the value of a small number of securities. The trading of Options
on Futures Contracts also entails the risk that changes in the value of the
underlying Futures Contracts will not be fully reflected in the value of the
option. Further, with respect to options on securities, options on stock indices
and Options on Futures Contracts, the Fund is subject to the risk of market
movements between the time that the option is exercised and the time of
performance thereunder. In writing a covered call option on a security, index or
Futures Contract, the Fund also incurs the risk that changes in the value of the
instruments used to cover the position will not correlate closely with changes
in the value of the option or underlying index or instrument.

The Fund will invest in a hedging instrument only if, in the judgment of its
Adviser, there would be expected to be a sufficient degree of correlation
between movements in the value of the instrument and movements in the value of
the relevant portion of the Fund's portfolio for such hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.

It should also be noted that the Fund may purchase and sell options, Futures
Contracts, Options on Future Contracts, Forward Contracts and Options on Foreign
Currencies not only for hedging purposes, but for the purpose of increasing its
return on portfolio securities subject to applicable law. As a result, in the
event of adverse market movements, the Fund might be subject to losses, which
would not be offset by increases in the value of portfolio securities or
declines in the cost of securities to be acquired. In addition, the method of
covering an option employed by the Fund may not fully protect it against risk of
loss and, in any event, the Fund could suffer losses on the option position
which might not be offset by corresponding portfolio gains.

With respect to the writing of straddles on securities, the Fund incurs the risk
that the price of the underlying security will not remain stable, that one of
the options written will be exercised and that the resulting loss will not be
offset by the amount of the premiums received.

POTENTIAL LACK OF A LIQUID SECONDARY MARKET: Prior to exercise or expiration, a
futures or option position can only be terminated by entering into a closing
purchase or sale transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was entered into.
While the Fund will enter into options or futures positions only if there
appears to be a liquid secondary market therefor, there can be no assurance that
such a market will exist for any particular contracts at any specific time. In
that event, it may not be possible to close out a position held by the Fund, and
the Fund could be required to purchase or sell the instrument underlying an
option, make or receive a cash settlement or meet ongoing variation margin
requirements. Under such circumstances, if the Fund had insufficient cash
available to meet margin requirements, it might be necessary to liquidate
portfolio securities at a time when it would be disadvantageous to do so. The
inability to close out options and futures positions, therefore, could have an
adverse impact on the Fund's ability effectively to hedge its portfolios, and
could result in trading losses. The liquidity of a secondary market in a Futures
Contract or options thereon may also 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. The trading
of Futures Contracts and options is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.

MARGIN: Because of low initial margin deposits made upon the opening of a
futures position and the writing of an option, such transactions involve
substantial leverage. As a result, relatively small movements in the price of
the contract can result in substantial unrealized gains or losses. Where the
Fund engages in the purchase or sale of such instruments for hedging purposes,
any losses incurred in connection therewith should, if the hedging strategy is
successful, be offset, in whole or in part, by increases in the value of
securities held by the Fund or decreases in the prices of securities the Fund
intends to acquire. Where the Fund uses such instruments for other than hedging
purposes, the margin requirements associated with such transactions could expose
the Fund to greater risk.

TRADING AND POSITION LIMITS: The exchanges on which Futures Contracts 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). In addition, the CFTC and the various contract markets have
established limits referred to as "speculative position limits" on the maximum
net long or net short position which any person may hold or control in a
particular futures or option contract. An exchange may order the liquidation of
positions found to be in violation of these limits and it may impose other
sanctions or restrictions. The Adviser does not believe that these trading and
position limits will have any adverse impact on the strategies for hedging the
portfolio of the Fund.

RISK OF OPTIONS ON FUTURES CONTRACTS: 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. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to liquidate the
underlying Futures Contract, subject to the risks of the availability of a
liquid offset market described herein. The writer of an Option on a Futures
Contract is subject to the risks of commodity futures trading, including the
requirement of initial and variation margin payments, as well as the additional
risk that movements in the price of the option may not correlate with movements
in the price of the underlying index or Futures Contract.

ADDITIONAL RISKS OF TRANSACTIONS NOT CONDUCTED ON EXCHANGES: Transactions in
Forward Contracts are subject to all of the correlation, liquidity and other
risks outlined above. In addition, however, such transactions are subject to the
risk of governmental actions affecting trading in or the prices of currencies
underlying such contracts, which could restrict or eliminate trading and could
have a substantial adverse effect on the value of positions held by the Fund. In
addition, the value of such positions could be adversely affected by a number of
other complex political and economic factors applicable to the countries issuing
the underlying currencies. Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale information with
respect to the foreign currencies underlying contracts thereon. As a result, the
available information on which trading systems will be based may not be as
complete as the comparable data on which the Fund makes investment and trading
decisions in connection with other transactions. Moreover, because the foreign
currency market is a global, twenty-four hour market, events could occur on that
market which would not be reflected in the forward markets until the following
day, thereby preventing the Fund from responding to such events in a timely
manner. Settlements of exercises of Forward Contracts generally must occur
within the country issuing the underlying currency, which in turn requires
traders to accept or make delivery of such currencies in conformity with any
United States or foreign restrictions and regulations regarding the maintenance
of foreign banking relationships, fees, taxes or other charges.

Forward Contracts, and over-the-counter options on securities, are not traded on
exchanges regulated by the CFTC or the SEC, but through financial institutions
acting as market-makers. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. In
addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Fund's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund. Where
no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of over-the-counter contracts, and the Fund could be required to retain options
purchased or written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's ability to profit
from open positions or to reduce losses experienced, and could result in greater
losses. Further, over-the-counter transactions are not subject to the
performance guarantee of an exchange clearing house, and the Fund will therefore
be subject to the risk of default by, or the bankruptcy of, the financial
institution serving as its counterparty.

While Forward Contracts are not presently subject to regulation by the CFTC, the
CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, the Fund's ability to utilize Forward Contracts in
the manner set forth above could be restricted.

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 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.

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 Fund (or a class, as applicable) or (ii) 67% or
more of the outstanding shares of the Fund (or a class, as applicable), present
at a meeting if holders of more than 50% of the outstanding shares of the Fund
(or a class, as applicable) are represented at such meeting in person or by
proxy):

The Fund may not, except temporarily in case of a merger, purchase securities of
any issuer if such purchase would cause more than 5% of its total assets (taken
at market value) to be invested in the securities of such issuer (exclusive of
U.S. or Canadian Government obligations), or if such purchase would cause more
than 10% of any class of securities of an issuer to be held by the Fund. The
Fund may not invest more than 5% of its assets in the securities of an issuer
which, including predecessors, has not been in continuous operation for at least
three years. The Fund may not purchase securities issued by investment companies
except in the open market or in connection with a plan of consolidation or
merger, nor may the Fund purchase or retain securities of a company if one or
more of its Trustees and officers own 1/2 of 1% each and such persons
collectively own more than 5% of that company's securities. The Fund may borrow
money up to 10% of its gross assets (taken at cost) or its net assets (taken at
market value), whichever is less, but only temporarily for extraordinary or
emergency purposes and subject to a 300% asset coverage requirement and may
pledge up to 15% of its gross assets (taken at cost) (for the purpose of this
restriction collateral arrangements with respect to Options on Securities, Stock
Indexes and Foreign Currencies, Future Contracts, Options on Future Contracts
and Forward Contracts, and payments of initial and variation margin in
connection therewith are not considered a pledge of assets). The Fund has
reserved freedom of action to underwrite securities in limited cases, but has
not done so since 1940, and the amount of any one underwriting commitment may
not exceed 5% of its net assets. It is not the Fund's policy to concentrate more
than 25% of its assets in any one industry or to purchase or sell real estate,
commodities or commodity contracts except for Options on Securities, Stock
Indexes and Foreign Currencies, Future Contracts, Options on Future Contracts
and Forward Contracts. The Fund may not 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 the Fund's 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.

As a matter of non-fundamental policy, the Fund may not invest more than 5% of
the value of the Fund's net assets, valued at the lower of cost or market, in
warrants. Included in such amount, but not to exceed 2% of the Fund's net
assets, may be warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by the Fund in units or attached to securities may
be deemed to be without value. The Fund also may not purchase or sell interests
in oil, gas or mineral leases in the ordinary course of the business of the Fund
(the Fund reserves the freedom of action to hold and sell real estate acquired
as a result of the ownership of securities). The Fund also may not sell any
security which it 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.

Except with respect to the Fund's investment restriction on borrowings and
investing in illiquid securities, these investment restrictions are adhered to
at the time of purchase or utilization of assets; a subsequent change in
circumstances will not be considered to result in a violation of policy.

3. MANAGEMENT OF THE FUND

The Fund'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 Fund are responsible for its operations. The Trustees and
officers are listed below, together with their principal occupations during the
past five years. (Their titles may have varied during that period.)

TRUSTEES

RICHARD B. BAILEY* (born 9/14/26)
Private investor; Massachusetts Financial Services Company former Chairman and
Director (prior to September 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 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, Massa-
chusetts

CHARLES W. SCHMIDT (born 3/18/28)
Private investor; OHM 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 and
Secretary

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

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

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)

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)

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

- ----------

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

Each Trustee and officer hold 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.) ("Sun Life of Canada (U.S.)"), a subsidiary of SunLife Assurance
Company of Canada ("SunLife").

The Fund pays the compensation of non-interested Trustees and Mr. Bailey (who
currently receive a retainer of $5,500 per year, $225 per committee meeting and
$250 for attendance at each meeting plus certain out-of-pocket expenses, as
incurred) 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 5 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 Fund for Messrs. Scott and Shames.
The Fund will accrue compensation expenses each year to cover current year's
service and amortize past service cost.

TRUSTEE COMPENSATION TABLE

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

Richard B. Bailey $ 9,200 $1,981 8 $283,647
Peter G. Harwood 9,875 $1,451 5 $121,105
J. Atwood Ives $ 8,950 $2,058 17 $108,720
Lawrence T. Perera $10,325 $3,362 26 $127,055
William J. Poorvu $ 9,875 $3,594 25 $121,105
Charles W. Schmidt $ 9,875 $3,509 20 $121,105
Arnold D. Scott 0 0 N/A 0
Jeffrey L. Shames 0 0 N/A 0
Elaine R. Smith $10,725 $2,105 27 $132,035
David B. Stone $10,325 $3,682 14 $127,055
</TABLE>

(1) For fiscal year ended December 31, 1997.
(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) Information provided is 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
$28,978,922,263) 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 $47,848,672,538).

ESTIMATED ANNUAL BENEFITS PAYABLE BY
FUND UPON RETIREMENT(4)
<TABLE>
<CAPTION>

YEARS OF SERVICE
------------------------------------------------------------------------------------
AVERAGE TRUSTEE FEES 3 5 7 10 OR MORE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8,055 $1,208 $2,014 $2,819 $4,028
$ 8,804 $1,321 $2,201 $3,081 $4,402
$ 9,552 $1,433 $2,388 $3,343 $4,776
$10,301 $1,545 $2,575 $3,605 $5,150
$11,049 $1,651 $2,762 $3,867 $5,525
$11,798 $1,770 $2,949 $4,129 $5,899
</TABLE>

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

As of March 31, 1998, all Trustees and officers owned of record less than 1% of
the outstanding shares of the Fund.

As of March 31, 1998, Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake
Drive, Jacksonville, Florida, for the sole benefit of its customers, owned of
record approximately 8.5% of the outstanding Class A shares of the Fund.

The Declaration of Trust provides that the Fund will indemnify its officers and
Trustees against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Fund, unless, as
to liability to the Fund 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 Fund. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition or by reasonable determination by disinterested Trustees or in a
written opinion of independent counsel based upon a review of readily available
facts, that such officers or 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 Fund pursuant to an Investment Advisory Agreement, dated
May 20, 1982, as amended (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 other than gains from the sale of securities, in
each case on an annualized basis for the Fund's then-current fiscal year. The
applicable percentages are reduced as assets and income reach the following
levels:

ANNUAL RATE OF MANAGEMENT FEE ANNUAL RATE OF MANAGEMENT FEE
BASED ON AVERAGE DAILY NET ASSETS BASED ON GROSS INCOME
- ------------------------------------ --------------------------------
0.30% of the first $200 million 6.67% of the first $6 million
0.24% of the next $300 million 5.33% of the next $9 million
0.12% of average daily net assets in 2.67% of gross income in excess
excess of $500 million of $15 million

Under the Advisory Agreement, MFS received management fees of $8,764,265,
$5,982,062 and $4,973,977 for fiscal years ended December 31, 1997, 1996 and
1995, respectively.

The Advisory Agreement provides that the compensation of the Adviser will be
reduced by an annual sum representing the Fund's share of the fair value of the
use of office furniture, furnishings and equipment purchased over the years with
funds furnished by the Fund and Massachusetts Investors Growth Stock Fund as
part of shared expenses. The total annual use value of this property for the
period ended December 31, 1997 has been determined pursuant to a formula devised
by an independent supplier to be $95,243, which amount was transferred to the
Fund by the Adviser. This determination has been approved by the Trustees who
are not affiliated with the Adviser. This amount and amounts so determined and
approved in subsequent years will be credited 24% to Massachusetts Investors
Growth Stock Fund and 76% to the Fund, being the average of their proportionate
contributions to shared expenses over the ten-year period ended December 31,
1968.

The Fund pays all of its expenses (other than those assumed by MFS or MFD),
including: Trustees fees discussed above; governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the
Fund; fees and expenses of independent auditors, of legal counsel, and of any
transfer agent, registrar or dividend disbursing agent of the Fund; expenses of
repurchasing and redeeming shares; expenses of preparing, printing and mailing
share certificates, shareholder reports, notices, proxy statements and reports
to governmental officers and commissions; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security transactions;
insurance premiums; fees and expenses of State Street Bank and Trust Company,
the Fund's custodian, for all services to the Fund, including safekeeping of
funds and securities and maintaining required books and accounts; expenses of
calculating the net asset value of shares of the Fund; and expenses of
shareholder meetings. Expenses relating to the issuance, registration and
qualification of shares of the Fund and the preparation, printing and mailing of
prospectuses for such purposes are borne by the Fund except that its
Distribution Agreement with MFD requires MFD to pay for prospectuses that are to
be used for sales purposes. For a list of the Fund's expenses, including the
compensation paid to the Trustees who are not officers of MFS, during the Fund's
fiscal year ended December 31, 1997, see "Statement of Operations" in the Fund's
Annual Report to shareholders incorporated by reference into this SAI. Payment
by the Fund of brokerage commissions for brokerage and research services of
value to the Adviser in serving its clients is discussed under the caption
"Portfolio Transactions and Brokerage Commissions."

MFS pays the compensation of the Fund'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 its portfolio
transactions.

The Advisory Agreement will remain in effect until August 1, 1998, 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 further 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 March 1, 1997 to
December 31, 1997, MFS received fees under the master Administrative Service
Agreement of $292,240.

CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian of each
Fund's assets. The Custodian's responsibilities include safekeeping and
controlling each Fund's cash and securities, handling the receipt and delivery
of securities, determining income and collecting interest and dividends on each
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 each Fund. The Custodian does not
determine the investment policies of each Fund or decide which securities a Fund
will buy or sell. Each Fund may, however, invest in securities of the Custodian
and may deal with the Custodian as principal in securities transactions. The
Custodian also acts as the dividend disbursing agent of each Fund. The Custodian
has contracted with the Adviser for the Adviser to perform certain accounting
functions related to options transactions for which the Adviser receives
remuneration on a cost basis.

SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc. (the "Shareholder Servicing Agent"), a wholly owned
subsidiary of MFS, is the Fund's shareholder servicing agent, pursuant to a
Shareholder Servicing Agent Agreement, dated August 1, 1985, as amended (the
"Agency Agreement"), with the Fund. 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 the Fund at an effective annual
rate of 0.1125%. State Street Bank and Trust Company, the dividend and
distribution disbursing agent of the Fund, has contracted with the Shareholder
Servicing Agent to administer and perform certain dividend and distribution
disbursing 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
January 1, 1995 (the "Distribution Agreement"), with the Fund. Prior to January
1, 1995, MFS Financial Services, Inc. ("FSI"), another wholly-owned subsidiary
of MFS, was the Fund's distributor. Where this SAI refers to MFD in relation to
the receipt or payment of money with respect to a period or periods prior to
January 1, 1995, such reference shall be deemed to include FSI, as the
predecessor in interest to MFD.

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 Rights of Accumulation), by any person,
including members of a family unit (e.g., husband, wife and minor children) and
bona fide trustees, and also applies to purchases made under the Right of
Accumulation or a Letter of Intent (see "Investment and Withdrawal Programs" in
this SAI). A group might qualify to obtain quantity sales charge discounts (see
"Investment and Withdrawal Programs" in this SAI).

Class A shares of the Fund may be sold at their net asset value to certain
persons or in certain instances as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others with
whom MFS, 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 the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The commission paid
to the distributor is the difference between the total amount invested and the
sum of (a) the net proceeds to the Fund and (b) the dealer commission. 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 5% 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 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 December 31, 1997, MFD received sales
charges of $2,535,298 and dealers received sales charges of $17,474,513 (as
their concession on gross sales charges of $20,009,811) for selling Class A
shares of the Fund; the Fund received $974,344,631, representing the aggregate
net asset value of such shares.

During the Fund's fiscal year ended December 31, 1996, MFD received sales
charges of $852,527 and dealers received sales charges of $5,772,387 (as their
concession on gross sales charges of $6,624,914) for selling Class A shares of
the Fund; the Fund received $320,514,447, representing the aggregate net asset
value of such shares. During the Fund's fiscal year ended December 31, 1995, MFD
received sales charges of $388,820 and dealers received sales charges of
$2,937,684 (as their concession on gross sales charges of $3,326,504) for
selling Class A shares of the Fund; the Fund received $183,211,268 representing
the aggregate net asset value of such shares.

During the Fund's fiscal years ended December 31, 1997, 1996 and 1995, the CDSC
imposed on the redemption of Class A shares was $42,452, $39,432 and $18,908,
respectively. During the Fund's fiscal years ended December 31, 1997, 1996 and
1995, the CDSC imposed on the redemption of Class B shares was $1,061,596,
$325,303 and $157,607, respectively. During the fiscal year ended December 31,
1997 and during the period from July 2, 1996 to December 31, 1996, the CDSC
imposed on the redemption of Class C shares was $36,084 and $550.

The Distribution Agreement will remain in effect until August 1, 1998, and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustess or by vote of a majority of the
Fund's shares (as defined in "Investment Restrictions") and, in either case, by
a majority of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party. The Distribution Agreement terminates
automatically if it is assigned and may be terminated without penalty by either
party on not more than 60 days' nor less than 30 days' notice.

4. PORTFOLIO TRANSACTIONS AND BROKERAGE
COMMISSIONS

Specific decisions to purchase or sell securities for the Fund are made by 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 the Board of Trustees. The Fund's portfolio manager may serve other
clients of the Adviser and any subsidiary of the Adviser in a similar capacity.

The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the general level of their
brokerage commissions. In the case of securities traded in the over-the-counter
market (where no stated commissions are paid but the prices include a dealer's
markup or markdown), the Adviser normally seeks to deal directly with the
primary market makers, unless in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
Adviser on the tender of the Fund's portfolio securities in so-called tender or
exchange offers. Such soliciting dealer fees are in effect recaptured for the
Fund by the Adviser. At present no other recapture arrangements are in effect.

Consistent with the foregoing primary consideration, the Conduct Rules of the
National Association of Securities Dealers, Inc. ("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.

Under the Advisory Agreement and as permitted by Section 28(e) of the Securities
Exchange Act of 1934, the Adviser may cause the Fund to pay a broker-dealer
which provides brokerage and research services to the Adviser an amount of
commission for effecting a securities transaction for the Fund in excess of the
amount other broker-dealers would have charged for the transaction if the
Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
the Adviser's overall responsibilities to the Fund or to its other clients. Not
all of such services are useful or of value in advising the Fund.

The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto, such as clearance and settlement.

Although commissions paid on every transaction will, in the judgment of the
Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Fund and the Adviser's other clients in part for providing advice as to the
availability of securities or of purchasers or sellers of securities and
services in effecting securities transactions and performing functions
incidental thereto, such as clearance and settlement.

Broker-dealers may be willing to furnish statistical, research and other factual
information or services ("Research") to the Adviser for no consideration other
than brokerage or underwriting commissions. Securities may be bought or sold
from time to time through such broker-dealers on behalf of the Fund. The
Trustees of the Fund (together with the Trustees of the other MFS Funds) have
directed the Adviser to allocate a total of $54,160 of commission business from
the MFS Funds to the Pershing Division of Donaldson, Lufkin & Jenrette as
consideration for the annual renewal of certain publications provided by Lipper
Analytical Securities Corporation (which provides information useful to the
Trustees in reviewing the relationship between the Fund and the Adviser).

The Adviser's investment management personnel attempt to evaluate the quality of
Research provided by brokers. The Adviser sometimes uses evaluations resulting
from this effort as a consideration in the selection of brokers to execute
portfolio transactions. However, the Adviser is unable to quantify the amount of
commissions set forth below which were paid as a result of such Research because
a substantial number of transactions were effected through brokers which provide
Research but which were selected principally because of their execution
capabilities.

The management fee that the Fund pays to the Adviser will not be reduced as a
consequence of the Adviser's receipt of brokerage and research services. To the
extent the Fund's portfolio transactions are used to obtain brokerage and
research services, the brokerage commissions paid by the Fund will exceed those
that might otherwise be paid for such portfolio transactions, or for such
portfolio transactions and research, by an amount which cannot be presently
determined. Such services would be useful and of value to the Adviser in serving
both the Fund and other clients and, conversely, such services obtained by the
placement of brokerage business of other clients would be useful to the Adviser
in carrying out its obligations to the Fund. While such services are not
expected to reduce the expenses of the Adviser, the Adviser would, through use
of the services, avoid the additional expenses which would be incurred if it
should attempt to develop comparable information through its own staff.

During the Fund's fiscal years ended December 31, 1997, 1996 and 1995, the Fund
paid total brokerage commissions of $6,431,721, $2,905,736 and $3,459,699,
respectively, on total transactions of $10,005,890,044, $2,209,064,543 and
$2,184,943,228, respectively.

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.

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 $50,000 or more of Class A shares of the Fund
alone or in combination with shares of all classes of other 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 Fund's Account Application or filing a
separate Letter of Intent application (available from the Shareholder Servicing
Agent) within 90 days of the commencement of purchases. Subject to acceptance by
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, Class B and
Class C shares of that shareholder in the MFS Funds or, MFS Fixed Fund (a bank
collective investment fund) reaches a discount level. See "Purchases" in the
Prospectus for the sales charges on quantity discounts. For example, if a
shareholder owns shares valued at $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 4.75% (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.

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

SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder Servicing
Agent to send him (or anyone 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 generally are limited to 10% of the value of the account at the time of
establishment of the SWP. SWP payments are drawn from the proceeds of share
redemptions (which would be a return of principal and, if reflecting a gain,
would be taxable). Redemptions of Class B 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 which are subject to a
CDSC. To the extent that redemptions for such periodic withdrawals exceed
dividend income reinvested in the account, such redemptions will reduce and may
eventually exhaust the number of shares in the shareholder's account. All
dividend and capital gain distributions for an account with a SWP will be
reinvested in additional full and fractional shares of the Fund at the net asset
value in effect at the close of business on the record date for such
distributions. To initiate this service, shares generally 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 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 groups; 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
the other MFS Funds (if available for sale) under the Automatic Exchange Plan.
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 transfer 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 the Automatic Exchange Plan will be made after instructions in
writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing -- signed by the
record owner(s) exactly as shares are registered; if by telephone -- proper
account identification is given by the dealer or shareholder of record). Each
Exchange Change Request (other than termination of participation in the program)
must involve at least $50. Generally, if an Exchange Change Request is received
by telephone or in writing before the close of business on the last business day
of a month, the Exchange Change Request will be effective for the following
month's exchanges.

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 MFS Money Market Fund, MFS Government Money Market Fund
and holders of Class A shares of MFS Cash Reserve Fund in the case where the
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 reinvested in
shares of MFS Money Market Fund, MFS Government Money Market Fund and Class A
shares of MFS Cash Reserve Fund, the shareholder has the right to exchange the
acquired shares for shares of another MFS Fund at net asset value pursuant to
the exchange privilege described below. Such a reinvestment must be made within
a certain period of time 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 12
months of the initial purchase in the case 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 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 of the same class in an account with the Fund for which payment has
been received by the Fund (i.e. an established account) may be exchanged for
shares of the same class of any of the other MFS Funds (if available for sale
and if the 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., 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 or all the shares in the account ($50 in the case of retirement
plan participants whose sponsoring organizations subscribe to the MFS
FUNDamental 401(k) Plan or another similar 401(k) recordkeeping system made
available by MFS Service Center, Inc.). Each exchange involves the redemption of
the shares of the Fund to be exchanged and the purchase at net asset value
(i.e., without a sales charge) of shares of the same class of the other MFS
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 New
York Stock Exchange (the "Exchange"), the exchange usually will occur on that
day if all the requirements set forth above have been complied with at that
time. However, payment of the redemption proceeds by the Fund, and thus the
purchase of shares of the other MFS 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 MFD by facsimile
subject to the requirements set forth above.

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

Additional information with respect to any of the MFS Funds, including a copy of
its current prospectus, may be obtained from investment dealers or the
Shareholder Servicing Agent. A shareholder considering an exchange should obtain
and read the prospectus of the other fund and consider the differences in
objectives and policies before making any exchange. Shareholders of the other
MFS Funds (except 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 (a bank collective investment Fund) have the right to exchange their
units (except units acquired through direct purchases) for shares of the Fund,
subject to the conditions, if any, imposed upon such unitholders by the MFS
Fixed Fund.

Any state income tax advantages for investment in shares of each state- specific
series of MFS Municipal Series Trust may only benefit residents of such states.
Investors should consult 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: 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, for 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);

Simplified Employee Pension (SEP-IRA) Plans;

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

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 corporate 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 adviser before establishing any of the
tax-deferred retirement plans described above.

6. TAX STATUS

The Fund has elected to be treated and intends to qualify each year as a
"regulated investment company" under Subchapter M of the 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
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. A portion of the Fund's ordinary income
dividends is normally eligible for the dividends-received deduction for
corporations if the recipient otherwise qualifies for that deduction with
respect to its holding of Fund shares. Availability of the deduction for
particular corporate shareholders is subject to certain limitations, and
deducted amounts may be subject to the alternative minimum tax or result in
certain basis adjustments. 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. Such capital gains will
generally be taxable to shareholders as if the shareholders had directly
realized gains from the same sources from which they were realized by the Fund.
Any Fund dividend that is declared in October, November or December of any
calender 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 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 short-term capital gain or loss; a long
term capital gain realized by an individual, estate or trust may be eligible for
reduced tax rates if the shares were held for more than eighteen months.
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 shares of the Fund within ninety 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 shareholders. Any
investment in zero coupon bonds or 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.

The Fund's transactions in options, Futures Contracts and Forward Contracts will
be subject to special tax rules that may affect the amount, timing, and
character of 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 and
Forward 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. 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 a tax 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 taxes; the Fund does not expect to be able to pass through to
shareholders foreign tax credits and 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 the 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 jurisdictions. 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.

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 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 assets
attributable to the class and dividing the difference by the number of shares of
the class outstanding. Forward Contracts will be valued using a pricing model
taking into consideration data from an external pricing source. Use of the
pricing services has been approved by the Fund's Board of Trustees. All other
securities, futures contracts and options in the Fund's portfolio (other than
short-term obligations) for which the principal market is one or more securities
or commodities exchanges (whether domestic or foreign) will be valued at the
last reported sale price or at the settlement price prior to the determination
(or if there has been no current sale, at the closing bid price) on the primary
exchange on which such securities, futures contracts or options are traded; but
if a securities exchange is not the principal market for securities, such
securities will, if market quotations are readily available, be valued at
current bid prices, unless such securities are reported on the Nasdaq stock
market, in which case they are valued at the last sale price or, if no sales
occurred during the day, at the last quoted bid price.

Bonds and other fixed income securities, including listed issues, in the Fund's
portfolio are valued on the basis of valuations furnished by a pricing service
which utilizes both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as institution-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 exchange or over-the-counter prices, since such valuations are
believed to reflect the fair value of such securities. Use of the pricing
service has been approved by the Fund's 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. 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 rate of 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 on Class A shares since the value of the initial account
will not be reduced by the maximum sales charge (currently 5.75% on Class A
shares) 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 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 class of 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 through 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 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 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 total rates of
return should be considered when comparing the total rate of return of the Fund
to total rates of return published for other investment companies or other
investment vehicles. Total rate of return reflects the performance of both
principal and income. Current net asset value and 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 5.75%. 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 hereto under the heading
"Performance Quotations."

CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the Securities and Exchange Commission, is not indicative of the
amounts which were or will be paid to the Fund's shareholders. Amounts paid to
shareholders of each class are reflected in the quoted "current distribution
rate" for that class. The current distribution rate for a class is computed by
dividing the total amount of dividends per share paid by the Fund to
shareholders of that class during the past twelve months by the maximum public
offering price of that class at the end of such period. Under certain
circumstances, such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might be appropriate
to annualize the dividends paid over the period such policies were in effect,
rather than using the dividends during the past twelve months. The current
distribution rate differs from the yield computation because it may include
distributions to shareholders from sources other than dividends and interest,
such as premium income for option writing, short-term capital gains and return
of invested capital, and is calculated over a different period of time. 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 Services, 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.

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 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.

The Fund was established by three securities executives -- L. Sherman Adams,
Charles H. Learoyd and Alston L. Carr. The Fund began operation in 1924 and
established its own in-house research department in 1932. From 1932 to 1953, the
Fund was managed by Merrill Griswold, its Chairman. Mr. Griswold helped to
change the U.S. tax law in order to permit income and capital gains to be passed
along to mutual fund shareholders without a separate tax at the fund level. In
1936, the Fund began offering shareholders the ability to take capital gain
distributions in cash or additional shares. The Fund issued shareholders full,
periodic reports disclosing portfolio holdings, fees and expenses a decade
before it was required to do so under the Securities Act of 1933, as amended.
The fund has been actively managed for the last 70 years responding to major
historical events which have affected the stock market (such as the Great
Depression, World War II, the post-war economic boom, the 1970s' oil crisis and
inflationary periods, and the "boom market" of the 1980s).

In 1969, the Fund's Trustees created a management company, MFS, to externalize
the investment management function and to permit the firm to offer additional
funds. MFS introduced several mutual funds in 1970 and hired the former chairman
of MFS, A. Keith Brodkin, as a bond fund portfolio manager.

As of March 31, 1998, the Fund had total net assets of approximately
$72,228,032,327 billion and had approximately 5,959,602,068 shareholders.

From time to time, MFD, may, as appropriate, quote Fund-related comments from
existing shareholders.

MFS FIRSTS: MFS has a long history of innovations.

-- 1924 -- Massachusetts Investors Fund 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 (the "Truth in
Securities Act" or the "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 in 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 Fund is the first closed-end,
high-yield municipal bond fund traded on the New York Stock
Exchange.

-- 1987 -- MFS(R) Multimarket Income Fund 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 managers of MFS(R) Union Standard(R)
Equity Fund, the first fund to invest solely 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 each of the Fund's 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 December 31, 1997, 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
CLASSES OF SHARES BY FUND BY MFD BY DEALERS
- ----------------- ------------ ------------- -------------

Class A Shares $11,384,974 $4,593,471 $6,791,503
Class B Shares $ 9,366,400 $7,836,469 $1,529,931
Class C Shares $ 987,846 $ 2,106 $ 985,740

GENERAL: The Distribution Plan will remain in effect until August 1, 1998, 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 of
such Plan ("Distribution Plan Qualified Trustees"). The Distribution Plan also
requires that the Fund and MFD each shall provide 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. INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS

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

The Portfolio of Investments at December 31, 1997, the Statement of Assets and
Liabilities at December 31, 1997, the Statement of Operations for the year ended
December 31, 1997, the Statement of Changes in Net Assets for each of the
two-year period ended December 31, 1997, 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

<TABLE>
<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, 1988.................... $ 9,389 $ 692 $ 318 $10,400
December 31, 1989.................... 11,338 2,000 818 14,157
December 31, 1990.................... 10,276 2,697 1,170 14,143
December 31, 1991.................... 11,606 4,671 1,778 18,057
December 31, 1992.................... 10,301 7,094 1,994 19,390
December 31, 1993.................... 9,623 9,271 2,440 21,335
December 31, 1994.................... 8,426 10,131 2,559 21,117
December 31, 1995.................... 10,635 14,545 4,245 29,426
December 31, 1996.................... 12,100 19,340 5,606 37,047
December 31, 1997.................... 14,661 26,720 7,406 48,788
</TABLE>

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 any income
taxes, if any, payable by shareholders.

PERFORMANCE QUOTATIONS

All performance quotations are as of December 31, 1997.

AVERAGE ANNUAL TOTAL RETURNS CURRENT
----------------------------------- DISTRIBUTION
1 YEAR 5 YEAR 10 YEAR RATE
------ ------ ------- -------------
<S> <C> <C> <C> <C>
Fund Class A shares with sales charge ............... 24.14% 18.85% 17.18% 0.47%
Fund Class A shares without sales charge ............ 31.69% 20.27% 17.87%
Fund Class B shares with CDSC ....................... 26.75% 19.24%(1) 17.46%(1)
Fund Class B shares without CDSC .................... 30.75% 30.75%(1) 17.46%(1) 0.34%
Fund Class C shares with CDSC ....................... 29.76% 19.87%(2) 17.68%(2)
Fund Class C shares without CDSC .................... 30.76% 30.76%(2) 17.68%(2) 0.35%
Fund Class I shares ................................. 30.30%(3) 20.34%(3) 17.91%(3) 0.58%(3)
</TABLE>

(1) Class B share performance includes the performance of the Fund's Class A
shares for periods prior to the inception of offering 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 offering of Class C shares on
July 2, 1996. 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 Clas
A shares.

(3) Class I share performance includes the performance of the Fund's Class A
shares for the periods prior to the commencement of offering 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. The current
distribution rate for Class I shares is calculated by annualizing the last
dividend.

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

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

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

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

[GRAPHIC OMITTED]
MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)

MASSACHUSETTS INVESTORS TRUST
500 Boylston Street
Boston, MA 02116

MIT-13-5/98/.5M 12/212/312

<PAGE>
PART C

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
For the ten years ended December 31, 1997:
Financial Highlights

FINANCIAL STATEMENTS INCLUDED IN PART B:
At December 31, 1997:
Portfolio of Investments*
Statement of Assets and Liabilities*

For the two years ended December 31, 1997:
Statement of Changes in Net Assets*

For the year ended December 31, 1997:
Statement of Operations*

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

* Incorporated herein by reference to the Trust's Annual Report to
shareholders dated December 31, 1997, filed with the SEC via EDGAR on
March 9, 1998.

(B) EXHIBITS

1 (a) Agreement and Declaration of Trust, dated March 21, 1924,
as amended through September 29, 1994. (3)

(b) Certification of Amendment to the Agreement and
Declaration of Trust dated May 15, 1996. (8)

(d) Certification of Amendment to the Agreement and
Declaration of Trust, dated December 19, 1996. (16)

2 Not Applicable.

3 Not Applicable.

4 Form of Share Certificate for Classes of Shares. (9)

5 Investment Advisory Agreement, dated May 20, 1982. (6)

6 (a) Distribution Agreement dated January 1, 1995. (3)

(b) Dealer Agreement between MFS Fund Distributors, Inc.
("MFD") and a dealer and The Mutual Fund Agreement between
MFD and a bank or NASD affiliate, as amended on April 11,
1997. (15)

7 Retirement Plan for Non-Interested Person Trustees, dated
January 1, 1991. (6)

8 (a) Custodian Agreement, dated December 6, 1934. (6)

(b) Amendment to Custodian Agreement, dated February 22, 1978.
(6)

(d) Amendment to Custodian Agreement, dated October 1, 1989.
(6)

(e) Amendment to Custodian Agreement, dated October 21,
1993. (6)

(f) Amendment to Custodian Agreement, dated December 15,
1993. (3)

9(a) Shareholder Servicing Agent Agreement, dated August 1,
1985. (6)

(b) Amendment to Shareholder Servicing Agreement, dated
January 1, 1998; filed herewith.

(d) Dividend Disbursing Agency Agreement, dated February 1,
1986. (4)

(e) Loan Agreement Among MFS Borrowers and the First National
Bank of Boston, as of February 21, 1995. (2)

(f) Third Amendment dated February 14, 1997 to Loan Agreement
dated February 21, 1995 by and among the Banks named
therein and The First National Bank of Boston. (14)

(g) Master Administrative Services Agreement, dated March 1,
1997, as amended. (11)

10 Opinion and Consent of Counsel; filed herewith.

11 Consent of Deloitte & Touche LLP; filed herewith.

12 Not Applicable.

13 Not Applicable.

14 (a) Forms for Individual Retirement Account Disclosure
Statement as currently in effect. (5)

(b) Forms for MFS 403(b) Custodial Account Agreement as
currently in effect. (5)

(d) Forms of Roth Individual Retirement Account Disclosure
Statement and Trust Agreement. (13)

15 (a) Master Distribution Plan pursuant to 12b-1 under the
Investment Company Act of 1940, effective January 1,
1997. (12)

(b) Exhibits as revised October 15, 1997 to Master
Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 to replace those exhibits
to the Master Distribution Plan contained in Exhibit 15(a)
above. (7)

16 Schedule for Computation of Performance Quotations -
Average Annual Total Rate of Return, Aggregate Total Rate
of Return and Standardized Yield. (1)

17 Financial Data Schedules; filed herewith.

18 Plan pursuant to Rule 18f-3(d) under the Investment
Company Act of 1940. (9)

Power of Attorney, dated September 21, 1994. (3)
Power of Attorney, dated February 19, 1998; filed
herewith.

- -----------------------------
(1) Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915
and 811-4096) Post-Effective Amendment No. 26, filed with the SEC via EDGAR
on February 22, 1995.

(2) Incorporated by reference to Amendment No. 8 on Form N-2 for MFS Municipal
Income Trust (File No. 811-4841) filed with the SEC via EDGAR on February
28, 1995.
(3) Incorporated by reference to Post-Effective Amendment No. 68 to the Trust's
Registration Statement on Form N-1A, filed with the SEC via EDGAR on April
28, 1995.
(4) Incorporated by reference to MFS Municipal Series Trust (File Nos. 2-92915
and 811-4096) Post-Effective Amendment No. 28, filed with the SEC via EDGAR
on July 28, 1995.
(5) Incorporated by reference to MFS Series Trust IX (File Nos. 2-50409 and
811-2464) Post-Effective Amendment No. 32, filed with the SEC via EDGAR on
August 28, 1995.
(6) Incorporated by reference to Post-Effective Amendment No. 69 to the Trust's
Registration Statement on Form N-1A, filed with the SEC via EDGAR on
October 13, 1995.

(7) Incorporated by reference to Massachusetts Investors Growth Stock Fund
(File Nos. 2-14677 and 811-859) Post-Effective Amendment No. 64, filed with
the SEC via EDGAR on October 29, 1997.

(8) Incorporated by reference to Post-Effective Amendment No. 71 to the Trust's
Registration Statement on Form N-1A, filed with the SEC via EDGAR on May
28, 1996.
(9) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and
811-4777) Post-Effective Amendment No. 25 to the Trust's Registration
Statement on Form N-1A, filed with the SEC via EDGAR on August 27, 1996.
(10) Incorporated by reference to Post-Effective Amendment No. 72 to the Trust's
Registration Statement on Form N-1A, filed with the SEC via EDGAR on August
29, 1996.

(11) Incorporated by reference to Massachusetts Investors Growth Stock Fund
(File Nos. 2-14677 and 811-859) Post-Effective Amendment No. 65, filed with
the SEC via EDGAR on March 30, 1998.

(12) Incorporated by reference to MFS Series Trust IV (File Nos. 2-54607 and
811-2594) Post-Effective Amendment No. 30, filed with the SEC via EDGAR on
December 27, 1996.

(13) Incorporated by reference to MFS Series Trust VIII (File Nos. 33-37972 and
811-5262) Post-Effective Amendment No. 14, filed with the SEC via EDGAR on
February 26, 1998.
(14) Incorporated by reference to MFS Series Trust I (File Nos. 33-7638 and
811-4777) Post-Effective Amendment No. 28, filed with the SEC via EDGAR on
June 26, 1997.
(15) Incorporated by reference to MFS Series Trust III (File Nos. 2-60491 and
811-2794) Post-Effective Amendment No.24, filed with the SEC via EDGAR on
June 26, 1997.
(16) Incorporated by reference to Registrant's Post-Effective Amendment No. 74,
filed with the SEC via EDGAR on April 30, 1997.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Not applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS

Class A Shares of Beneficial Interest 190,966
($0.33 1/3 par value) (as of March 31, 1998)

Class B Shares of Beneficial Interest 149,452
($0.33 1/3 par value) (as of March 31, 1998)

Class C Shares of Beneficial Interest 15,413
($0.33 1/3 par value) (as of March 31, 1998)

Class I Shares of Beneficial Interest 19
($0.33 1/3 par value) (as of March 31, 1998)

ITEM 27. INDEMNIFICATION

Reference is hereby made to (a) Section VI of the Trust's
Declaration of Trust, incorporated by reference to the Registrant's
Post-Effective Amendment No. 68, filed with the SEC on April 28, 1995 and (b)
Section 9 of the Shareholder Servicing Agent Agreement, incorporated by
reference to Registrant's Post-Effective Amendment No. 69, filed with the SEC
via EDGAR on October 13, 1995.

The Trustees and officers of the Registrant and the personnel
of the Registrant's investment adviser and distributor are insured under an
errors and omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule 17g-1 under
the Investment Company Act of 1940.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

MFS serves as investment adviser to the following open-end
Funds comprising the MFS Family of Funds (except the Vertex Funds mentioned
below): Massachusetts Investors Trust, Massachusetts Investors Growth Stock
Fund, MFS Growth Opportunities Fund, MFS Government Securities Fund, MFS
Government Limited Maturity Fund, MFS Series Trust I (which has thirteen series:
MFS Managed Sectors Fund, MFS Cash Reserve Fund, MFS World Asset Allocation
Fund, MFS Strategic Growth Fund, MFS Research Growth and Income Fund, MFS Core
Growth Fund, MFS Equity Income Fund, MFS Special Opportunities Fund, MFS
Convertible Securities Fund, MFS Blue Chip Fund, MFS New Discovery Fund, MFS
Science and Technology Fund and MFS Research International Fund), MFS Series
Trust II (which has three series: MFS Emerging Growth Fund, MFS Large Cap Growth
Fund and MFS Intermediate Income Fund), MFS Series Trust III (which has two
series: MFS High Income Fund and MFS Municipal High Income Fund), MFS Series
Trust IV (which has four series: MFS Money Market Fund, MFS Government Money
Market Fund, MFS Municipal Bond Fund and MFS Mid Cap Growth Fund), MFS Series
Trust V (which has six series: MFS Total Return Fund, MFS Research Fund, MFS
International Opportunities Fund, MFS International Strategic Growth Fund, MFS
International Value Fund and MFS Asia Pacific Fund), MFS Series Trust VI (which
has three series: MFS World Total Return Fund, MFS Utilities Fund and MFS World
Equity Fund), MFS Series Trust VII (which has two series: MFS World Governments
Fund and MFS Value Fund), MFS Series Trust VIII (which has two series: MFS
Strategic Income Fund and MFS World Growth Fund), MFS Series Trust IX (which has
three series: MFS Bond Fund, MFS Limited Maturity Fund and MFS Municipal Limited
Maturity Fund), MFS Series Trust X (which has eight series: MFS Government
Mortgage Fund, MFS/Foreign & Colonial Emerging Markets Equity Fund, MFS
International Growth Fund, MFS International Growth and Income Fund, MFS Real
Estate Investment Fund, MFS Strategic Value Fund, MFS Small Cap Value Fund and
MFS Emerging Markets Debt Fund), MFS Series Trust XI (which has six series: MFS
Union Standard Equity Fund, Vertex All Cap Fund, Vertex Research All Cap Fund,
Vertex Growth Fund, Vertex Discovery Fund and Vertex Contrarian Fund (the Vertex
Funds are expected to be declared effective April 28, 1998)), and MFS Municipal
Series Trust (which has 16 series: MFS Alabama Municipal Bond Fund, MFS Arkansas
Municipal Bond Fund, MFS California Municipal Bond Fund, MFS Florida Municipal
Bond Fund, MFS Georgia Municipal Bond Fund, MFS Maryland Municipal Bond Fund,
MFS Massachusetts Municipal Bond Fund, MFS Mississippi Municipal Bond Fund, MFS
New York Municipal Bond Fund, MFS North Carolina Municipal Bond Fund, MFS
Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond Fund, MFS
Tennessee Municipal Bond Fund, MFS Virginia Municipal Bond Fund, MFS West
Virginia Municipal Bond Fund and MFS Municipal Income Fund) (the "MFS Funds").
The principal business address of each of the MFS Funds is 500 Boylston Street,
Boston, Massachusetts 02116.

MFS also serves as investment adviser of the following open-end Funds:
MFS Institutional Trust ("MFSIT") (which has seven series) and MFS Variable
Insurance Trust ("MVI") (which has thirteen series). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.

In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the MFS Closed-End Funds is 500 Boylston
Street, Boston, Massachusetts 02116.

Lastly, MFS serves as investment adviser to MFS/Sun Life Series Trust
("MFS/SL") (which has 26 series), Money Market Variable Account, High Yield
Variable Account, Capital Appreciation Variable Account, Government Securities
Variable Account, World Governments Variable Account, Total Return Variable
Account and Managed Sectors Variable Account (collectively, the "Accounts"). The
principal business address of MFS/SL is 500 Boylston Street, Boston,
Massachusetts 02116. The principal business address of each of the
aforementioned Accounts is One Sun Life Executive Park, Wellesley Hills,
Massachusetts 02181.

Vertex Investment Management, Inc., a Delaware corporation and a
wholly owned subsidiary of MFS, whose principal business address is 500 Boylston
Street, Boston, Massachusetts 02116 ("Vertex"), serves as investment adviser to
Vertex All Cap Fund, Vertex Research All Cap Fund, Vertex Growth Fund, Vertex
Discovery Fund and Vertex Contrarian Fund, each a series of MFS Series Trust XI.
The principal business address of the aforementioned Funds is 500 Boylston
Street, Boston, Massachusetts 02116.

MFS International Ltd. ("MIL"), a limited liability company organized
under the laws of Bermuda and a subsidiary of MFS, whose principal business
address is Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda, serves as
investment adviser to and distributor for MFS American Funds (which has six
portfolios: MFS American Funds-U.S. Equity Fund, MFS American Funds-U.S.
Emerging Growth Fund, MFS American Funds-U.S. High Yield Bond Fund, MFS American
Funds - U.S. Dollar Reserve Fund, MFS American Funds-Charter Income Fund and MFS
American Funds-U.S. Research Fund) (the "MIL Funds"). The MIL Funds are
organized in Luxembourg and qualify as an undertaking for collective investments
in transferable securities (UCITS). The principal business address of the MIL
Funds is 47, Boulevard Royal, L-2449 Luxembourg.

MIL also serves as investment adviser to and distributor for MFS
Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Governments Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund, MFS Meridian World Total
Return Fund, MFS Meridian U.S. Equity Fund, MFS Meridian Research Fund, MFS
Meridian U.S. High Yield Fund, MFS Meridian Emerging Markets Debt Fund, MFS
Meridian Strategic Growth Fund and MFS Meridian World Asset Allocation Fund
(collectively the "MFS Meridian Funds"). Each of the MFS Meridian Funds is
organized as an exempt company under the laws of the Cayman Islands. The
principal business address of each of the MFS Meridian Funds is P.O. Box 309,
Grand Cayman, Cayman Islands, British West Indies.

MFS International (U.K.) Ltd. ("MIL-UK"), a private limited company
registered with the Registrar of Companies for England and Wales whose current
address is 4 John Carpenter Street, London, England ED4Y 0NH, is involved
primarily in marketing and investment research activities with respect to
private clients and the MIL Funds and the MFS Meridian Funds.

MFS Institutional Advisors (Australia) Ltd. ("MFSI-Australia"), a
private limited company organized under the Corporations Law of New South Wales,
Australia whose current address is Level 37, Governor Phillip Tower, One Farrer
Place, Sydney, N5W2000, Australia, is involved primarily in investment
management and distribution of Australian superannuation unit trusts and acts as
an investment adviser to institutional accounts.

MFS Holdings Australia Pty Ltd. ("MFS Holdings Australia"), a private
limited company organized pursuant to the Corporations Law of New South Wales,
Australia whose current address is Level 37, Governor Phillip Tower, One Farrer
Place, Sydney, NSW2000 Australia, and whose function is to serve primarily as a
holding company.

MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary of MFS,
serves as distributor for the MFS Funds, MVI and MFSIT.

MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary of MFS,
serves as shareholder servicing agent to the MFS Funds, the MFS Closed-End
Funds, MFSIT and MVI.

MFS Institutional Advisors, Inc. ("MFSI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.

MFS Retirement Services, Inc. ("RSI"), a wholly owned subsidiary of
MFS, markets MFS products to retirement plans and provides administrative and
record keeping services for retirement plans.

MFS

The Directors of MFS are Jeffrey L. Shames, Arnold D. Scott, John W.
Ballen, Donald A. Stewart and John D. McNeil. Mr. Shames is the Chairman, Chief
Executive Officer and President, Mr. Scott is a Senior Executive Vice President
and Secretary, William W. Scott, Jr., Patricia A. Zlotin, John W. Ballen, Thomas
J. Cashman, Jr., Joseph W. Dello Russo and Kevin R. Parke are Executive Vice
Presidents, Stephen E. Cavan is a Senior Vice President, General Counsel and an
Assistant Secretary, Robert T. Burns is a Senior Vice President, Associate
General Counsel and an Assistant Secretary of MFS, and Thomas B. Hastings is a
Vice President and Treasurer of MFS.

MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS SERIES TRUST VI
MFS SERIES TRUST X
MFS GOVERNMENT LIMITED MATURITY FUND

Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer,
James O. Yost, Ellen M. Moynihan and Mark E. Bradley, Vice Presidents of MFS,
are the Assistant Treasurers, James R. Bordewick, Jr., Senior Vice President and
Associate General Counsel of MFS, is the Assistant Secretary.

MFS SERIES TRUST II

Leslie J. Nanberg, Senior Vice President of MFS, is a Vice President,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost, Ellen M. Moynihan and Mark E. Bradley are the Assistant Treasurers, and
James R. Bordewick, Jr. is the Assistant Secretary.

MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST

MFS SERIES TRUST III

James T. Swanson, Robert J. Manning and Joan S. Batchelder, Senior
Vice Presidents of MFS, and Bernard Scozzafava, Vice President of MFS, are Vice
Presidents, Sheila Burns-Magnan, Assistant Vice President of MFS, and Daniel E.
McManus, Vice President of MFS, are Assistant Vice Presidents, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M.
Moynihan and Mark E. Bradley are the Assistant Treasurers, and James R.
Bordewick, Jr. is the Assistant Secretary.

MFS SERIES TRUST IV
MFS SERIES TRUST IX

Robert A. Dennis and Geoffrey L. Kurinsky, Senior Vice Presidents of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.

MFS SERIES TRUST VII

Leslie J. Nanberg and Stephen C. Bryant, Senior Vice Presidents of
MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.

MFS SERIES TRUST VIII

Jeffrey L. Shames, Leslie J. Nanberg and James T. Swanson and John D.
Laupheimer, Jr., a Senior Vice President of MFS, are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen
M. Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.

MFS MUNICIPAL SERIES TRUST

Robert A. Dennis is Vice President, David B. Smith and Geoffrey L.
Schechter, Vice Presidents of MFS, are Vice Presidents, Daniel E. McManus, Vice
President of MFS, is an Assistant Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is
the Assistant Secretary.

MFS VARIABLE INSURANCE TRUST
MFS SERIES TRUST XI
MFS INSTITUTIONAL TRUST

Jeffrey L. Shames is the President and Chairman, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M.
Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.

MFS MUNICIPAL INCOME TRUST

Robert J. Manning is Vice President, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M. Moynihan
and Mark E. Bradley are the Assistant Treasurers and James R. Bordewick, Jr. is
the Assistant Secretary.

MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST

Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen
M. Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.

MFS SPECIAL VALUE TRUST

MFS/SUN LIFE SERIES TRUST

John D. McNeil, Chairman and Director of Sun Life Assurance Company of
Canada, is the Chairman, Stephen E. Cavan is the Secretary, W. Thomas London is
the Treasurer, James O. Yost, Ellen M. Moynihan and Mark E. Bradley are the
Assistant Treasurers and James R. Bordewick, Jr. is the Assistant Secretary.

MONEY MARKET VARIABLE ACCOUNT
HIGH YIELD VARIABLE ACCOUNT
CAPITAL APPRECIATION VARIABLE ACCOUNT
GOVERNMENT SECURITIES VARIABLE ACCOUNT
TOTAL RETURN VARIABLE ACCOUNT
WORLD GOVERNMENTS VARIABLE ACCOUNT
MANAGED SECTORS VARIABLE ACCOUNT

John D. McNeil is the Chairman, Stephen E. Cavan is the Secretary, and
James R. Bordewick, Jr. is the Assistant Secretary.

VERTEX

Jeffrey L. Shames and Arnold D. Scott are the Directors, Jeffrey L.
Shames is the President, Kevin R. Parke and John W. Ballen are Executive Vice
Presidents, John F. Brennan, Jr., and John D. Laupheimer are Senior Vice
Presidents, Brian E. Stack is a Vice President, Joseph W. Dello Russo is the
Treasurer, Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is
the Secretary and Robert T. Burns is the Assistant Secretary.

MIL

Arnold D. Scott, Jeffrey L. Shames and Thomas J. Cashman, Jr. are
Directors, Stephen E. Cavan is a Director, Senior Vice President and the Clerk,
Robert T. Burns is an Assistant Clerk, Joseph W. Dello Russo, Executive Vice
President and Chief Financial Officer of MFS, is the Treasurer and Thomas B.
Hastings is the Assistant Treasurer.

MIL-UK

Thomas J. Cashman, Jr. is President and a Director, Arnold D. Scott
and Jeffrey L. Shames are Directors, Stephen E. Cavan is a Director and the
Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer and Robert T. Burns is the Assistant Secretary.

MFSI - AUSTRALIA

Thomas J. Cashman, Jr. is President and a Director, Graham E. Lenzer,
John A. Gee and David Adiseshan are Directors, Stephen E. Cavan is the
Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, and Robert T. Burns is the Assistant Secretary.

MFS HOLDINGS - AUSTRALIA

Jeffrey L. Shames is the President and a Director, Arnold D. Scott,
Thomas J. Cashman, Jr., and Graham E. Lenzer are Directors, Stephen E. Cavan is
the Secretary, Joseph W. Dello Russo is the Treasurer, Thomas B. Hastings is the
Assistant Treasurer, and Robert T. Burns is the Assistant Secretary.

MIL FUNDS

Richard B. Bailey, John A. Brindle, Richard W. S. Baker, Arnold D.
Scott, Jeffrey L. Shames and William F. Waters are Directors, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Ellen M.
Moynihan and Mark E. Bradley are the Assistant Treasurers and James R.
Bordewick, Jr. is the Assistant Secretary.

MFS MERIDIAN FUNDS

Richard B. Bailey, John A. Brindle, Richard W. S. Baker, Arnold D.
Scott, Jeffrey L. Shames and William F. Waters are Directors, Stephen E. Cavan
is the Secretary, W. Thomas London is the Treasurer, James R. Bordewick, Jr. is
the Assistant Secretary and James O. Yost, Ellen M. Moynihan and Mark E. Bradley
are the Assistant Treasurers.

MFD

Arnold D. Scott and Jeffrey L. Shames are Directors, William W. Scott,
Jr., an Executive Vice President of MFS, is the President, Stephen E. Cavan is
the Secretary, Robert T. Burns is the Assistant Secretary, Joseph W. Dello Russo
is the Treasurer, and Thomas B. Hastings is the Assistant Treasurer.

MFSC

Arnold D. Scott and Jeffrey L. Shames are Directors, Joseph A.
Recomendes, a Senior Vice President and Chief Information Officer of MFS, is
Vice Chairman and a Director, Janet A. Clifford is the President, Joseph W.
Dello Russo is the Treasurer, Thomas B. Hastings is the Assistant Treasurer,
Stephen E. Cavan is the Secretary, and Robert T. Burns is the Assistant
Secretary.

MFSI

Jeffrey L. Shames, and Arnold D. Scott are Directors, Thomas J.
Cashman, Jr., is the President and a Director, Leslie J. Nanberg is a Senior
Vice President, a Managing Director and a Director, Kevin R. Parke is the
Executive Vice President and a Managing Director, George F. Bennett, Jr., John
A. Gee, Brianne Grady, Joseph A. Kosciuszek and Joseph J. Trainor are Senior
Vice Presidents and Managing Directors, Joseph W. Dello Russo is the Treasurer,
Thomas B. Hastings is the Assistant Treasurer and Robert T. Burns is the
Secretary.

RSI

Arnold D. Scott is the Chairman and a Director, Martin E. Beaulieu is
the President, William W. Scott, Jr. is a Director, Joseph W. Dello Russo is the
Treasurer, Thomas B. Hastings is the Assistant Treasurer, Stephen E. Cavan is
the Secretary and Robert T. Burns is the Assistant Secretary.

In addition, the following persons, Directors or officers of
MFS, have the affiliations indicated:

Donald A. Stewart President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Stewart is also an
officer and/or Director of various
subsidiaries and affiliates of Sun
Life)

John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada
(Mr. McNeil is also an officer and/or
Director of various subsidiaries and
affiliates of Sun Life)

Joseph W. Dello Russo Director of Mutual Fund Operations,
The Boston Company, Exchange Place,
Boston, Massachusetts (until August,
1994)

ITEM 29. DISTRIBUTORS

(a) Reference is hereby made to Item 28 above.

(b) Reference is hereby made to Item 28 above; the principal
business address of each of these persons is 500 Boylston Street, Boston,
Massachusetts 02116.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The accounts and records of the Registrant are located, in
whole or in part, at the office of the Registrant at the following locations:

NAME ADDRESS

Massachusetts Financial Services 500 Boylston Street
Company (investment adviser) Boston, MA 02116

MFS Funds Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116

State Street Bank and Trust Company State Street South
(custodian) 5 - West
North Quincy, MA 02171

MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116

ITEM 31. MANAGEMENT SERVICES

Not Applicable.

ITEM 32. UNDERTAKINGS

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
upon request and without charge.

(d) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 27 of
this Part C, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being Registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

<PAGE>

POWER OF ATTORNEY

Massachusetts Investors Trust

The undersigned officer of Massachusetts Investors Trust (the
"Registrant") hereby severally constitutes and appoints Jeffrey L. Shames,
Arnold D. Scott, W. Thomas London, and James R. Bordewick, Jr., and each of them
singly, as true and lawful attorneys, with full power to them and each of them
to sign for the undersigned, in the name of, and in the capacity indicated
below, any Registration Statement and any and all amendments thereto and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission for the purpose of registering the
Registrant as a management investment company under the Investment Company Act
of 1940 and/or the shares issued by the Registrant under the Securities Act of
1933 granting unto my said attorneys, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary or desirable to be done in the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys or any of them may lawfully do or cause to be
done by virtue thereof.

In WITNESS WHEREOF, the undersigned has hereunto set his hand on this
19th day of February, 1998.

Signature Title

STEPHEN E. CAVAN Principal Executive Officer
------------------------
Stephen E. Cavan

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 27th day of April, 1998.

MASSACHUSETTS INVESTORS TRUST

By: JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
Title: Assistant Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on April 27, 1998.

SIGNATURE TITLE

STEPHEN E. CAVAN* Principal Executive Officer
- ------------------------------
Stephen E. Cavan

W. THOMAS LONDON* Treasurer (Principal Financial Officer
- ------------------------------ and Principal Accounting Officer)
W. Thomas London

RICHARD B. BAILEY* Trustee
- ------------------------------
Richard B. Bailey

PETER G. HARWOOD* Trustee
- ------------------------------
Peter G. Harwood

J. ATWOOD IVES* Trustee
- ------------------------------
J. Atwood Ives

LAWRENCE T. PERERA* Trustee
- ------------------------------
Lawrence T. Perera

WILLIAM J. POORVU* Trustee
- ------------------------------
William J. Poorvu

CHARLES W. SCHMIDT* Trustee
- ------------------------------
Charles W. Schmidt

ARNOLD D. SCOTT* Trustee
- ------------------------------
Arnold D. Scott

JEFFREY L. SHAMES* Trustee
- ------------------------------
Jeffrey L. Shames

ELAINE R. SMITH* Trustee
- ------------------------------
Elaine R. Smith

DAVID B. STONE* Trustee
- ------------------------------
David B. Stone

*By: JAMES R. BORDEWICK, JR. Name:
James R. Bordewick, Jr. as
Attorney-in-fact

Executed by James R. Bordewick, Jr. on
behalf of those indicated pursuant to
(i) a Power of Attorney dated
September 21, 1994, incorporated by
reference to the Registrant's Post-
Effective Amendment No. 68 filed with
the Securities and Exchange Commission
on April 28, 1995 and (ii) a Power of
Attorney dated February 19, 1998;
filed herewith.

<PAGE>

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.

9 (b) Amendment to Shareholder Servicing
Agreement, dated January 1, 1998.

10 Opinion and Consent of Counsel.

11 Consent of Deloitte & Touche LLP.

17 Financial Data Schedules.

Power of Attorney, dated February 19, 1998.

<PAGE>
EXHIBIT NO. 99.9(b)

MASSACHUSETTS INVESTORS TRUST
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS o 02116
(617) o 954-5000

January 1, 1998

MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116

Dear Sir/Madam:

This will confirm our understanding that Exhibit B to the Shareholder Servicing
Agent Agreement between us, dated August 1, 1985, as amended, is hereby amended,
effective immediately, to read in its entirety as set forth on Attachment 1
hereto.

Please indicate your acceptance of the foregoing by signing below.

Sincerely,

MASSACHUSETTS INVESTORS TRUST

By: W. THOMAS LONDON
------------------------
W. Thomas London
Treasurer

Accepted and Agreed:

MFS SERVICE CENTER, INC.

By: JOSEPH W. DELLO RUSSO
---------------------------
Joseph W. Dello Russo
Treasurer
<PAGE>

ATTACHMENT 1
January 1, 1998

EXHIBIT B TO THE SHAREHOLDER
SERVICING AGENT AGREEMENT BETWEEN
MFS SERVICE CENTER, INC. ("MFSC")
AND MASSACHUSETTS INVESTORS TRUST (THE "FUND")

The fees to be paid by the Fund on behalf of its series with respect to all
shares of each series of the Fund to MFSC, for MFSC's services as shareholder
servicing agent, shall be 0.1125% of the average daily net assets of the Fund.

<PAGE>

EXHIBIT NO. 99.10

MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116-3741
(617) 954-5182/FACSIMILE (617) 954-7760 [email protected]

JAMES R. BORDEWICK, JR.
Senior Vice President and
Associate General Counsel

April 30, 1998

Massachusetts Investors Trust
500 Boylston Street
Boston, MA 02116

Gentlemen:

I am a Senior Vice President and Associate General Counsel of
Massachusetts Financial Services Company, which serves as investment adviser to
Massachusetts Investors Trust (the "Fund"). I am admitted to practice law in The
Commonwealth of Massachusetts. The Fund is a trust created under a written
Agreement and Declaration of Trust dated March 21, 1994, as amended and restated
through September 24, 1994, executed and delivered in Boston, Massachusetts (the
"Declaration of Trust"). The beneficial interest thereunder is represented by
transferable shares without par value. The Trustees have the powers set forth in
the Agreement and Declaration of Trust, as modified by various amendments,
subject to the terms, provisions and conditions therein provided.

I am of the opinion that the legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.

Under Article III, Section 1(i), the Trustees are empowered in their
absolute and uncontrolled discretion from time to time to sell shares of the
Fund either for cash or for property, whenever and in such amounts as the
Trustees may deem desirable, except that under Article VIII, Section 5, no
shares may be sold to net the Trust (before taxes and expenses exclusive of
sales charge or commission) less than the net asset value in effect at the time
of the sale. Under Article VIII, Section 5, it is provided that the number of
shares shall be fixed from time to time by the Trustees, and such number may be
increased or reduced by them, and the Trustee shall have the right to sell
additional shares without offering them to the holders of the then outstanding
shares.

The Fund has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 (the "Shares").

I am of the opinion that all necessary Fund action precedent to the
issue of all the authorized but unissued Shares of the Fund has been duly taken,
and that all the Shares were legally and validly issued, and when sold, will be
fully paid and non-assessable, assuming the receipt by the Fund of the cash
consideration therefor in accordance with Article VIII, Section 5. I express no
opinion as to compliance with the Securities Act of 1933, the Investment Company
Act of 1940, or applicable state "Blue Sky" or securities laws in connection
with the sale of the Shares.

The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under the Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Fund
or the Trustees. The Declaration of Trust provides for indemnification out of
the Fund property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.

I consent to your filing this opinion with the Securities and Exchange
Commission.

Very truly yours,

JAMES R. BORDEWICK, JR.
James R. Bordewick, Jr.

<PAGE>

EXHIBIT NO. 99.11

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Post-Effective Amendment
No. 75 to Registration Statement No. 2-11401 of Massachusetts Investors Trust of
our report dated February 6, 1998, appearing in the annual report to
shareholders for the year ended December 31, 1997 and to the references to us
under the headings "Condensed Financial Information" in the Prospectus and
"Independent Auditors and Financial Statements" in the Statement of Additional
Information, both of which are part of such Registration Statement.

DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Boston, Massachusetts
April 28, 1998

<PAGE>
<ARTICLE> 6
<CIK> 0000063091
<NAME> MASSACHUSETTS INVESTORS TRUST
<SERIES>
<NUMBER> 011
<NAME> MASSACHUSETTS INVESTORS TRUST-CLASS A
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2236374957
<INVESTMENTS-AT-VALUE> 3168112281
<RECEIVABLES> 24726967
<ASSETS-OTHER> 77466
<OTHER-ITEMS-ASSETS> 525646
<TOTAL-ASSETS> 3193442360
<PAYABLE-FOR-SECURITIES> 1045892
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65746735
<TOTAL-LIABILITIES> 66792627
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2194207300
<SHARES-COMMON-STOCK> 185126301
<SHARES-COMMON-PRIOR> 163272441
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (98132)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (216416)
<ACCUM-APPREC-OR-DEPREC> 932756981
<NET-ASSETS> 3126649733
<DIVIDEND-INCOME> 54073802
<INTEREST-INCOME> 5534841
<OTHER-INCOME> (522645)
<EXPENSES-NET> 21613288
<NET-INVESTMENT-INCOME> 37472710
<REALIZED-GAINS-CURRENT> 264646010
<APPREC-INCREASE-CURRENT> 311795896
<NET-CHANGE-FROM-OPS> 613914616
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2257259)
<DISTRIBUTIONS-OF-GAINS> (36115432)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40132064
<NUMBER-OF-SHARES-REDEEMED> (31823640)
<SHARES-REINVESTED> 13545436
<NET-CHANGE-IN-ASSETS> 887265916
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (75463)
<OVERDIST-NET-GAINS-PRIOR> (1230776)
<GROSS-ADVISORY-FEES> 5982062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21875804
<AVERAGE-NET-ASSETS> 2638097187
<PER-SHARE-NAV-BEGIN> 12.71
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 3.07
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (1.32)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.46
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000063091
<NAME> MASSACHUSETTS INVESTORS TRUST
<SERIES>
<NUMBER> 012
<NAME> MASSACHUSETTS INVESTORS TRUST-CLASS B
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2236374957
<INVESTMENTS-AT-VALUE> 3168112281
<RECEIVABLES> 24726967
<ASSETS-OTHER> 77466
<OTHER-ITEMS-ASSETS> 525646
<TOTAL-ASSETS> 3193442360
<PAYABLE-FOR-SECURITIES> 1045892
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65746735
<TOTAL-LIABILITIES> 66792627
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2194207300
<SHARES-COMMON-STOCK> 30404176
<SHARES-COMMON-PRIOR> 13049907
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (98132)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (216416)
<ACCUM-APPREC-OR-DEPREC> 932756981
<NET-ASSETS> 3126649733
<DIVIDEND-INCOME> 54073802
<INTEREST-INCOME> 5534841
<OTHER-INCOME> (522645)
<EXPENSES-NET> 21613288
<NET-INVESTMENT-INCOME> 37472710
<REALIZED-GAINS-CURRENT> 264646010
<APPREC-INCREASE-CURRENT> 311795896
<NET-CHANGE-FROM-OPS> 613914616
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2257259)
<DISTRIBUTIONS-OF-GAINS> (36115432)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18025772
<NUMBER-OF-SHARES-REDEEMED> (3152904)
<SHARES-REINVESTED> 2481401
<NET-CHANGE-IN-ASSETS> 887265916
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (75463)
<OVERDIST-NET-GAINS-PRIOR> (1230776)
<GROSS-ADVISORY-FEES> 5982062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21875804
<AVERAGE-NET-ASSETS> 2638097187
<PER-SHARE-NAV-BEGIN> 12.63
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 3.06
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> (1.32)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.36
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000063091
<NAME> MASSACHUSETTS INVESTORS TRUST
<SERIES>
<NUMBER> 013
<NAME> MASSACHUSETTS INVESTORS TRUST-CLASS C
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2236374957
<INVESTMENTS-AT-VALUE> 3168112281
<RECEIVABLES> 24726967
<ASSETS-OTHER> 77466
<OTHER-ITEMS-ASSETS> 525646
<TOTAL-ASSETS> 3193442360
<PAYABLE-FOR-SECURITIES> 1045892
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65746735
<TOTAL-LIABILITIES> 66792627
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2194207300
<SHARES-COMMON-STOCK> 870531
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (98132)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (216416)
<ACCUM-APPREC-OR-DEPREC> 932756981
<NET-ASSETS> 3126649733
<DIVIDEND-INCOME> 54073802
<INTEREST-INCOME> 5534841
<OTHER-INCOME> (522645)
<EXPENSES-NET> 21613288
<NET-INVESTMENT-INCOME> 37472710
<REALIZED-GAINS-CURRENT> 264646010
<APPREC-INCREASE-CURRENT> 311795896
<NET-CHANGE-FROM-OPS> 613914616
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (41906)
<DISTRIBUTIONS-OF-GAINS> (967699)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 849655
<NUMBER-OF-SHARES-REDEEMED> (35125)
<SHARES-REINVESTED> 56001
<NET-CHANGE-IN-ASSETS> 887265916
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (75463)
<OVERDIST-NET-GAINS-PRIOR> (1230776)
<GROSS-ADVISORY-FEES> 5982062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21875804
<AVERAGE-NET-ASSETS> 2638097187
<PER-SHARE-NAV-BEGIN> 13.93
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.76
<PER-SHARE-DIVIDEND> (0.09)
<PER-SHARE-DISTRIBUTIONS> (1.32)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.33
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>